Gene Davis was in his 50s when he could no longer ignore the pain in his knee. He worked two jobs he loved in Stamford, Connecticut – he and his brothers were all firefighters, and they also ran a real estate business together. It meant a lot of walking up stairs. Finally, in July 2019, Davis got his knee replaced with an implant. At first, he was recovering fine. Then, the pain got worse.
An X-ray revealed that bits of the implant had begun to splinter into his leg. He assumed it was bad luck. After a second surgery to get a new version of the same device, manufactured by a Florida-based company called Exactech, things just got worse. “Here we go again,” he thought, “I’m haemorrhaging a lot of blood … and I’m wondering why.” Eventually, Davis, who had always been conscientious about his health and, at 60, still fit into his marine uniform, had to leave his job at the fire department.
In April 2022, less than a year after his second surgery, Davis received a letter from his surgeon, saying that pieces of both implants had been recalled. Problems with the way the implants were packaged left components vulnerable to oxidation, potentially causing them to fragment after surgery, the Food and Drug Administration (FDA) said in a statement about the recall. Davis was actually relieved. “I’m finally going to get better, and it isn’t my fault,” he thought. But after receiving his third implant in August 2022, Davis woke up in the night to find his leg had swollen to double the size. He had to drag himself to the bathroom. His doctor said the leg was infected. It was now scarred and damaged beyond repair.
In 2023, Davis sued the two companies he believed were responsible for his pain, Exactech and the multibillion-dollar firm that owned the company, a publicly listed private equity behemoth, which currently has $251bn in assets, called TPG. The firm, founded in Texas, was famous for its 2002 acquisition of Burger King and other high-profile Wall Street deals.
Davis’s claim was one of more than 2,500 personal injury lawsuits against Exactech which, by 2024, had recalled more than 650,000 devices due to the defective packaging that could cause potential oxidation and fragmentation.
But Davis’s legal pursuits faced significant hurdles.
In March 2024, a New York district judge dismissed TPG, the private equity firm Davis had sued alongside Exactech, from personal injury lawsuits related to the alleged defects in Exactech’s implants. Plaintiffs who had sued TPG had not adequately shown, the judge found, that TPG had “requisite control” over Exactech. “TPG plausibly had a large influence in Exactech’s business strategy, including surrounding the decision to recall its products.” But, he said, “that is not enough” to show that TPG had the “dominance and control” over Exactech legally required to pursue litigation against them.
In July 2024, a special committee formed by Exactech began evaluating possible restructuring options, including bankruptcy.
Then in October 2024, just weeks before plaintiffs’ cases were scheduled for trial, Exactech filed for bankruptcy, essentially freezing thousands of lawsuits against it. It was another blow to Davis’s pursuit of legal claims.
He was not alone. A Guardian investigation found that legal claims like those brought by Davis against private-equity-backed healthcare companies are increasingly being delayed or obstructed in bankruptcy court. Bankruptcies among private-equity-backed healthcare companies have spiked in recent years. As a result, experts say, private equity firms may be able to avoid liability for healthcare investments.
TPG Capital is one of the 10 richest private equity firms in the world. After Exactech filed for bankruptcy in Delaware, a committee of unsecured creditors (UCC), which represents everyone who is owed money by Exactech, including personal injury claims like Davis’s, filed a motion that, if granted, would allow personal injury claimants and other creditors to pursue their claims in any forum, despite the bankruptcy freeze. The UCC’s legal filings contain allegations against both TPG and Exactech, including claims that TPG was seeking to “bury” and “undermine” the lawsuits in the bankruptcy court. In their objection to the UCC’s fillings, TPG has disputed the claim, saying in court documents that the UCC has not shown that claimants would have a better outcome outside the bankruptcy court.
In a statement to the Guardian, Ellen Relkin, a partner at Weitz & Luxenberg who is representing claimants against TPG and Exactech, pointed a finger of blame at TPG, which she alleges had control over Exactech’s actions sufficient to make it responsible for them. They deny that claim, referencing the judge’s dismissal of the suits against TPG. Plaintiffs, Relkin said, were prepared to ask that judge to essentially correct his ruling dismissing TPG from Exactech personal injury claims. In her statement, Relkin said: “The trial court dismissed TPG without affording the Plaintiffs any discovery from TPG,” and that she believes the trial court will reverse TPG’s dismissal once the judge has seen the new evidence.
‘Protect the TPG investments at all costs’
What Gene Davis did not know back in 2019, as he headed into the operating room to have his first knee replacement surgery, was that questions about Exactech’s products had allegedly been flagged at Exactech years before.
TPG acquired Exactech in 2018, which added the Florida company to TPG’s existing portfolio of healthcare companies. Reuters reported at the time that TPG would play an “advisory role” to the company. Three TPG employees were appointed to Exactech’s board after the deal. TPG also appointed Jeffrey Binder, one of its own advisers, as co-executive chairman of Exactech, according to court documents filed by the UCC. Binder would later go on to become CEO of Exactech.
In legal documents, the UCC has claimed that “Exactech and certain officers and directors” had allegedly been made aware of product defects since 2005. The creditors allege Exactech “engaged in a pattern of practices designed to hide the defects”, including by “providing inaccurate and misleading information to the FDA”. The UCC has also alleged in court documents that “TPG and Mr Binder became aware of the full scope of product defect issues with the Exactech devices and the regulatory issues facing the company” after the 2018 acquisition closed. They alleged Binder received “multiple warnings” about Exactech’s device problems in March 2019.
The UCC also alleged in court documents that a surgeon advised Exactech in April 2019 about “device failures for at least 17 surgeries he had performed using an Exactech product”.
An August 2019 performance report described Binder as having “day-to-day control of all commercial activities at Exactech”, according to a UCC court motion.
“TPG’s motivation was apparent: to protect the TPG investment at all costs … all at the expense of the ultimate victims of such a scheme,” according to a UCC motion in the bankruptcy case.
Those allegations are disputed. In responses filed in the bankruptcy court, Exactech and its TPG affiliates said the UCC was merely speculating that directors and officers had acted “with an actual intent to violate law or act in dereliction of their duties”.
TPG said in a statement to the Guardian that it was “categorically false” that the private equity firm had any “prior knowledge of the packaging nonconformance”.
Further details about those alleged warnings, and who sent them, have been redacted by the court. The question over who knew what – and when – is a central issue in the ongoing legal proceedings, because creditors have argued that TPG itself ought to be on the hook for some personal injury claims.
TPG and its affiliates have said in legal filings that Exactech and TPG maintained “clearly separate businesses” and that Exactech is just one of 300-plus companies in TPG’s portfolio.
The Guardian reached out to Binder, who served as chairman of Exactech from 2018 to 2024, as chief executive officer from 2022-2023, and has had a consulting relationship with TPG from 2015 to the present. In an emailed statement, Binder said orthopaedic medical device makers “regularly receive product complaints, including reports of revision surgeries, and conduct investigations into these complaints so that we may take appropriate corrective action”.
“Exactech’s investigation of product complaints led us to discover in 2021 a packaging non-conformity that had been undetected since 2008, many years prior to TPG’s ownership of Exactech and to my tenure with the company,” he said. “When we at Exactech discovered the non-conformance we reported it to FDA in a timely fashion and initiated a product recall.”
The Guardian sent both Exactech and TPG questions about allegations that Exactech and TPG were aware of defects with Exactech’s products before 2019. Exactech did not respond to the Guardian’s request for comment.
TPG also said the packaging issues at the company predated its ownership of Exactech, and that they had only learned about the issues in 2021. “TPG supported the company as it immediately launched an investigation, initiated a voluntary recall, and provided support programs for physicians and patients,” TPG said.
Exactech has also said in court disclosures that it initiated recalls “in an abundance of caution” but that the faulty packaging did not lead to overall higher rates of what is called revision surgeries – when patients have to repeat surgeries – beyond industry averages. The company claims its position is supported by scientific and clinical data.
In its recall notice, the FDA said some of the recalled devices were associated with an “increased risk of revision surgeries and bone loss related to excessive device wear/failure”. In addition, annual reports from the Australian Orthopedics Association National Joint Replacement Registry between 2011-2018 identified Exactech devices – which were made in US facilities – as having “higher than anticipated” revision rates. For example, their 2016 annual report found that the Optetrak Ps prosthesis had a 10-year revision rate over four times higher than overall industry rates.
‘Lives have been devastated’
Mass lawsuits are more or less inevitable when private equity and healthcare mix, according to Martin Kenney, a distinguished professor at UC Davis’s department of human ecology and author of Private Equity and the Demise of the Local. The private equity playbook, he says, revolves around cutting costs as much as possible, which can be dangerous when it comes to healthcare. “They push these companies so close to the margin,” Kenney suggested.
The Guardian’s investigation found that an increasing number of bankruptcy filings are coming from private-equity-backed healthcare companies facing lawsuits. Bankruptcies automatically freeze all lawsuits against the defendant filing for bankruptcy protection, and can also limit how much money goes to settle legal claims. Between 2023 and 2024, at least 25 private-equity-backed health companies filed for bankruptcy in the US while facing lawsuits in federal court, according to the Guardian’s analysis of S&P Global data and federal court records. That was more than such filings from 2010 to 2022 combined. Some of the lawsuits were filed by investors over misleading medical claims, while others, like Davis’s, involved products and services that ultimately endangered patients.
Relkin, who is representing claimants against TPG and Exactech, said she believed it was a “travesty” that private equity giants can “misuse the bankruptcy system” so that companies they own can avoid liability, to the detriment of thousands of people who have received recalled devices.
“Many lives have been devastated, some clients now need to use assistive devices to walk and many can no longer do their jobs,” Relkin said.
TPG said in a statement to the Guardian that it was “categorically false” to allege that TPG “encouraged or engineered a bankruptcy filing to protect itself from liability”.
In a media report about the bankruptcy published in October 2024, Reuters reported that Exactech said that high interest payments and litigation expenses began cutting into the company’s cashflow in mid-2023, threatening to derail an otherwise-strong business. It said it had spent $20m on recalls and litigation expenses in the previous year.
‘Heads I win, tails you lose’
A proposal by debtors including TPG in the bankruptcy court, would allow TPG to dispense with its liabilities, including personal injury claims, for $10m. The proposal cites a special committee investigation that found $10m to be a fair price for the release.
The proposal by debtors also includes a plan to sell Exactech’s assets for an undisclosed amount.
The UCC has criticized the special committee report, alleging that critical issues “do not appear to have been investigated” and that “key witnesses were not interviewed”. The UCC has claimed in legal documents that the full value of personal injury claims against Exactech probably amount to more than $1bn.
TPG declined to comment on the Guardian’s questions about the special committee investigation.
In their objection to the UCC’s complaint, the debtors including TPG say the UCC “has offered no cost-benefit analysis of any kind, let alone one demonstrating that continued litigation would produce greater recoveries and otherwise better results” than “those provided under the plan”.
On 28 May, a hearing will begin to determine whether the bankruptcy court will approve TPG’s plan to sell Exactech and obtain a release from liability for $10m. If that plan is approved, Relkin fears claimants like Davis will probably get nothing. Meanwhile, TPG could still get some money back from Exactech, as repayments for loans they leveraged to help fund restructuring.
TPG declined to comment on the Guardian’s questions about those loans.
Samir Parikh, a Wake Forest University law professor who specializes in bankruptcy, said loans like this were commonly seen in private equity bankruptcy proceedings. “It’s frustrating,” he said. Kenney, the UC professor, compared it to a “Heads I win, tails you lose” coin toss.
According to Parikh, it is common for private equity investors to acquire portfolio companies and immediately layer them with debt so they can start earning money on their investments right away in the form of loan interest and fees – while also ensuring that the portfolio company operates on as slim a margin as possible. That also means the companies have fewer assets left to pay off legal liabilities. Courts can’t force companies to pay settlements with money they don’t have.
Parikh said it was “somewhat palatable” for a variety of industries to adopt such business practices, “but in healthcare, it’s just not right”. When investors take on life and death responsibilities, “it’s no longer acceptable to just say, ‘oh, sorry, this entity is now bankrupt.’”
Cynthia Camp, a 66-year-old resident of Supply, North Carolina, hopes she won’t need her recalled hip implant removed – again. Like Davis, she had one faulty Exactech device replaced with another, and the damage of both has permanently disabled her – she sued Exactech in 2022. “My husband and I do not make love,” she said. When she recently learned a part of her replacement device had also been recalled, “I almost died on the table,” she said, “Y’all done been in there twice. God, don’t tell me they got to go in there again.”
Davis finds it especially infuriating that he received not one but three Exactech implants, each one putting more money in the company’s pocket, as they were all covered by Davis’s insurance. Because his bone had been shaped to conform to Exactech devices, Davis says he could only receive Exactech devices in revision surgeries. For this reason, Davis will always have a body part manufactured by the company he claims is responsible for his injury.
“I’m in bed with my abuser,” he said.
