A federal judge has capped off one of a group of class action lawsuits that attempted to force the makers of Similac baby formula to pay for allegedly not doing enough to head off a nationwide formula shortage and accompanying price spikes, allegedly all precipitated by contamination at its largest formula plant.
On April 12, U.S. District Judge Matthew F. Kennelly sided with Abbott Laboratories in the class action accusing the company of ignoring warnings of problems at its plant in Sturgis, Michigan, which ultimately led to a shutdown at the plant and a resulting crunch in formula supply throughout the U.S. in 2022.
The plaintiffs, led by named plaintiffs Stephanie Sampsell, of National City, California; April James, of Wheelersburg, Ohio; and Brittany Clark, of Mapleton, Utah, filed suit in 2022. They are represented in the case by attorneys E. Samuel Geisler, of the firm of Aylstock Witkin Kreis & Overholtz, of Pensacola, Florida; and Kiley Grombacher, Marcus J. Bradley and Lirit A. King, of the firm of Bradley Grombacher LLP, of Westlake Village, California.
U.S. District Judge Matthew Kennelly
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The lawsuit centered on claims that Abbott allegedly wrongly profited from price hikes that occurred when the supply of baby formula dropped after Abbott recalled large amounts of baby formula and closed its Sturgis plant in the wake of revelations of bacterial contamination allegedly found in the formula produced at the Sturgis plant.
The complaint leveled only a count of unjust enrichment. Plaintiffs sought damages, including a court order directing Abbott to "disgorge any ill-gotten benefits received" from the alleged "increased formula prices that resulted from Defendant’s inability to comply with its lawful obligations."
According to the complaint, plaintiffs claimed the "Sturgis facility has an extensive historuy of quality control failures, as well as unsafe and unsanitary manufacturing practices that were not properly addressed and that led to a shutdown of the facility in February 2022."
The complaint further asserted Abbott allegedly knew about a complaint filed in February 2021 with federal regulators by a whistleblower concerning bacterial contamination at the Sturgis plant.
In the months that followed, federal regulators received reports of infants sickened with Salmonella or Cronobacter bacteria, allegedly caused by baby formula from the Sturgis plant, leading to a consumer advisory and a federal investigation.
Abbott then voluntarily recalled baby formula from the plant and stopped production at the plant.
Abbott produces as much as 40% of the nation's supply of baby formula.
After Abbott's actions, the supply of formula dropped quickly, resulting in "out-of-stock rates" of 74% to 90% or more at various spots throughout the U.S.
Infant formula prices then spiked by an average of 11% in 2022 and parents were allegedly forced to pay the higher prices, because they allegedly had no other options amid the shortage.
Amid such conditions, lawsuits piled into courts across the country, accusing Abbott of allegedly causing the shortage and ignoring its alleged duties. Federal courts assigned all of those cases to Judge Kennelly in the U.S. District Court for the Northern District of Illinois.
Judge Kennelly, however, said their lawsuit fails to demonstrate why or how Abbott Labs should have been expected to "maintain particular levels of formula production and supply or otherwise ensure stable formula prices."
Further, with Abbott's production capability hobbled, it is "likely - given the alleged shortfall in supply - that overall sales revenues during the pertinent period were way down and thus that net profits (as opposed to the percentage profit margin) dropped during that period," despite higher prices, the judge said.
"The plaintiffs' generalized allegations on this point are insufficient to satisfy the 'enrichment' component of unjust enrichment, even if the plaintiffs could satisfy the 'unjust' component," Kennelly wrote. "As discussed earlier, they cannot do so, as they have not plausibly alleged that Abbott was under any obligation to them to continue producing formula, maintain a particular supply level, or keep prices down."
The judge dismissed the lawsuit, but gave plaintiffs until May 3 to try again to present a complaint "with at least one viable claim."
Abbott has been represented in the action by attorneys James F. Hurst, Andrew A. Kassof, Mark R. Filip, Michael A. Glick, Katherine R. Katz, Joseph C. Schroeder, Erin E. Cady and Brad Masters, of the firm of Kirkland & Ellis, of Chicago, Washington, D.C., and Salt Lake City.