Overview
On October 16, 2023, Cohen Milstein and Scott & Scott, court-appointed Lead Counsel, filed a consolidated complaint in In re Abbott Laboratories Infant Formula Shareholder Derivative Litigation before the United States District Court for the Northern District of Illinois on behalf of the International Brotherhood of Teamsters Local No. 710 Pension Fund (Teamsters Local No. 710 Pension Fund) and Southeastern Pennsylvania Transportation Authority (SEPTA).
Plaintiffs bring this derivative lawsuit against Abbott Laboratories’ Board of Directors for breaching their fiduciary duties related to the company’s manufacture and sale of infant formula products, prompting a major recall and nationwide infant formula shortage and allegedly causing billions of dollars of damage to Abbott.
Plaintiffs also allege claims of insider trading, corporate waste, and unjust enrichment, as well as violations of the federal securities laws.
Important Decisions
- On November 12, 2024, Honorable Sunil R. Harjani of the United States District Court for the Northern District of Illinois denied Abbott’s motion to reconsider its August 7, 2024 motion to dismiss.
- On August 7, 2024, the court denied Abbott’s motion to dismiss, ruling that Count II: Violations of Section 10(b) of the Exchange Act and SEC Rule 10b-5 and Count III: Breach of Fiduciary Duty Against the Director Defendants can move forward.
- On September 18, 2023, the court appointed Cohen Milstein and Scott & Scott as Lead Counsel and Teamsters Local No. 710 Pension Fund and SEPTA as Lead Plaintiffs.
Case Background
Abbott, an Illinois corporation, is one of the primary manufacturers of infant formula products in the U.S., previously producing 40% of all infant formula products consumed in the U.S. It is also the nation’s leading provider of infant formula to low-income families through the U.S. government’s Special Supplemental Nutrition Program for Women, Infants, and Children (“WIC”) program. On February 15, 2022, Abbott closed its Sturgis, Michigan infant formula manufacturing facility due to the FDA’s concerns about contaminated baby formula. Two days later, on February 17, 2022, Abbott announced a “voluntary” recall of infant formula products manufactured at the Sturgis plant. The consequences were devastating. A nationwide shortage of baby formula ensued as the facility remained shut down for several months.
Additionally, Abbott’s business suffered hundreds of millions in lost sales and profits and costs to remediate the facility and upgrade food safety compliance, risk management systems, and internal controls. The company’s business and reputation were badly tarnished as it came under regulatory, criminal, and Congressional scrutiny. The company is now exposed to numerous lawsuits, including wrongful death personal injury, and whistleblower actions, as well as consumer and investor class actions.
In addition to their oversight failures, Plaintiffs allege that certain directors also caused Abbott to file false and misleading proxy statements with the SEC from 2021 through 2023, failing to disclose that, among other things: (1) the Company manufactured and sold its infant formula products in the U.S. in violation of federal health and safety laws and regulations; and (2) the seriously deficient internal risk management controls that allowed those unsafe and illegal conditions to proliferate at Abbott, exposing Abbott to significant regulatory, reputational, and legal risks. In addition, Plaintiffs allege that certain directors and officers violated Section 10(b) of the Securities and Exchange Act of 1934 (“Exchange Act”), by authorizing the Company to engage in billions of dollars in stock repurchases while Abbott’s stock was artificially inflated due to false and misleading statements regarding Abbott’s production and manufacture of infant formula products in the US., with certain defendants benefiting personally from insider stock sales before the truth started to leak out.
Case name: In re Abbott Laboratories Infant Formula Shareholder Derivative Litigation, Case No. 22 CV 5513, United States District Court for Northern District of Illinois