Abbott Laboratories has won dismissal of a shareholder lawsuit alleging that the company misled investors over its responsibility for the 2022 recall of Similac, Alimentum and EleCare powdered infant formula.
U.S. District Judge Steven Seeger dismissed the case in Chicago on July 24. He found that shareholders led by two European asset managers had not adequately shown that Abbott intended to deceive investors and inflated its share price in connection with the February 2022 recall of products manufactured at the company’s plant in Sturgis, Michigan.
Abbott closed the plant following reports of severe bacterial infections in infants and after investigators found traces of potentially deadly bacteria. The recall and plant closure worsened a national shortage of baby formula that had begun during the COVID-19 pandemic. Abbott’s share of the U.S. infant formula market exceeded 40% before the recall.
The shareholders alleged that Abbott waited too long to disclose the contamination, including to the U.S. Food and Drug Administration, and concealed poor conditions at the Sturgis plant. They also challenged statements made by Abbott about regulatory compliance and its commitment to providing safe products.
In his 141-page decision, Seeger concluded that the 217-page complaint at most described mishandling of the Sturgis plant and the FDA inspection. That alleged mismanagement, however serious, was not sufficient on its own to establish securities fraud. He also found that many of Abbott’s statements about safety and product quality were too general to support liability.
The decision separates allegations of operational failure from the legal requirements of a shareholder fraud claim. The shareholders needed to establish more than poor plant management, delayed disclosure allegations and broad corporate assurances. They also needed sufficient allegations that Abbott intended to deceive investors and inflated its share price.
That distinction defines the current financial and litigation significance of the ruling. General statements about product safety and regulatory compliance were not enough to create liability on the complaint presented, while allegations concerning the plant and the FDA inspection did not establish fraudulent intent. The evidential connection between Abbott’s conduct, its public statements and the alleged investor deception therefore remains central to whether the case can continue.
Seeger permitted the shareholders to attempt to amend their complaint, but indicated that its existing length and detail made it difficult to envisage additional allegations changing the outcome. The next procedural development will depend on whether the shareholders submit a revised complaint despite that assessment.
