(Bloomberg) -- Royal Philips NV’s $1.1 billion settlement of US lawsuits targeting 5.5 million recalled sleep-apnea devices resolves only current cases and doesn’t set aside funds for potential future cancer claims over the machines.

The Dutch company has set aside €982 million ($1.1 billion) to fund a settlement of allegations that the faulty sleep-aiding machines pose a cancer risk because of deteriorating sound-dampening foam. The deal also provides money to cover doctors’ bills as users monitor their future health. 

The accord seeks to resolve about 60,000 US suits over so-called continuous positive airway pressure, or CPAP, devices, which were targeted by US regulators in 2021. But it sets aside no funds for future illnesses allegedly caused by the recalled machines, Philips officials acknowledged.

Cancers some researchers have linked to the degraded polyurethane can take many years to develop. Philips officials deny that the machines pose “any appreciable harm” to users. 

“Philips is confident that the agreement to resolve the personal injury litigation and the medical monitoring class action in the US will end the uncertainty associated with litigation in the US,” said Philips spokesperson Steve Klink in response to Bloomberg’s question about possible future cases. 

Bigger Estimate

Philips touted the deal as corralling the US CPAP litigation. It amounts to about 22% of the nearly $5 billion in exposure stock analysts estimated that the company could face. Its shares soared when it was announced, sending them to the highest level in two years. They were down 1% in late-afternoon trading Thursday in Amsterdam.

“What can happen is that an individual can still come forward,” Philips CEO Roy Jakobs said in response to Bloomberg’s questions about whether the company may still face cases after a six-month opt-in period for plaintiffs. But that “individual would have to meet quite high thresholds before he can put in a claim,” he said.

Legal experts predict the Dutch manufacturer could be dealing with CPAP suits well beyond that time frame. “This litigation is not over by a long shot,” said Carl Tobias, a University of Richmond law professor. “Anyone who thinks Philips can wash their hands of this case with a $1.1 billion settlement is fooling themselves.” 

The US Food and Drug Administration ordered Philips to pull the CPAPs with the crumbling foam off the market after ordering the most serious recall the agency can demand. FDA officials said in January that they received 561 reports of deaths possibly linked to malfunctioning machines. Earlier this year, Philips was also ordered to suspend sales of the devices in the US after an agreement with the FDA. 

In court filings, injured CPAP users allege Philips executives – both in the Netherlands and in the US – knew about problems with noise-dampening foam at least three years before issuing a safety recall for the devices.

No Cases Heard

The settlement of the cases, consolidated in federal court in Pittsburgh, comes before any were heard by US juries. That raises questions about how individual injury claims will be properly valued, said Elizabeth Burch, a University of Georgia law professor who specializes in mass-tort law.

The health-monitoring part of the accord, which is structured as a class-action case, remains subject to approval by US District Judge Joy Flowers Conti. The rest of the settlement covers individual personal-injury suits. Conti already has approved a separate $479 million class-action settlement of cases brought by CPAP users who bought or rented one of the 16 lines of recalled machines.

“I worry about mass-tort cases like this that settle without vetting the merits through” test trials, Burch said. “Given the number of death claims and the low settlement value relative to what financial analysts predicted, one wonders if plaintiffs’ counsel settled on the cheap.” 

Under the deal’s terms, plaintiffs’ lawyers leading consolidated CPAP suits will decide how much injured users get. 

“The math is harsh,” Ronald Miller, a Baltimore lawyer representing consumers, said on his website Thursday. Assuming 59,000 claims are submitted, that would provide an average per-claim recovery of about $18,000, Miller noted. “There will be cases that go far above the average, and there will be cases where the victim receives nothing or close to nothing.”

Plaintiffs’ lawyers backing the settlement counter the CPAP cases faced serious procedural hurdles and Philips — or one of its units — could have potentially been forced into bankruptcy by the overwhelming financial exposure to the suits. Other companies facing mass litigation have taken such a step.

Conti was weighing whether one of Philips’ US units, Pennsylvania-based Respironics Inc., was the only company that could be legally held liable for the malfunctioning machines when the accord was announced. That would limit the pot of money injured consumers could target to the assets of Respironics, estimated to be more than $500 million. 

Perry Weitz, a veteran plaintiffs’ lawyer based in New York who wasn’t part of the CPAP settlement negotiations, said sometimes MDL attorneys are forced to seek settlements before early trials can test the value of alleged claims. “Sometimes, you have to get what you can get,” Weitz said. 

Six Months

Public disclosures about the accord show injured consumers have six months to accept Philips’ offer, take their case to trial before Flowers or refile the suit in US state courts. Philips can walk away from the deal if 95% of all CPAP users with current claims don’t sign on, according to the disclosures. Consumers who opt for trial must shoulder the costs of investigating the case rather than rely on information gathered by MDL lawyers.

Klink said the number of recalled CPAP devices and injured consumers “is finite” even if there are future claims. The company says some claims will be knocked out by state laws governing how long injured consumers can wait before suing.

The company also said in the disclosures that it faces suits outside the US in places such as Australia, Canada, Israel and Chile. “The complaints variously allege economic loss, personal injury and, in some cases, the need for medical monitoring,” according to the documents. Philips hasn’t disclosed how many cases are pending in other countries. 

“It’s very hard to close a case like this when you’re talking about possible long-term consequences,” said Mark de Hek, a Netherlands-based lawyer focused on personal injury claims. De Hek, who represents a little over 1,000 Dutch patients affected by the sleep apnea recall, said he expects “to deal with the case for many years to come, as long as these consequences remain unclear.”

The case is IN RE Philips Recalled CPAP, Bi-Level PAP and Mechanical Ventilator Products Liability Litigation, 21-MD-3014, US District Court, Western District of Pennsylvania (Pittsburgh).

(Updates with shares in second section and Miller’s remarks in third.)

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