CHICAGO (Legal Newsline) - The maker of contaminated infant formula is fighting a lawsuit over a drop in its stock price, saying class action lawyers' reliance on "confidential sources" isn't enough to sustain their case.
Abbott Laboratories filed a motion to dismiss June 20 in Chicago federal court in the shareholder lawsuit brought by the Pembroke Pines Firefighters & Police Officers Pension Fund, which is represented by Bernstein Litowitz and Klausner Kaufman.
The suit alleges Abbott misled investors with public statements regarding its dedication to safety. Formula from its Sturgis, Mich., facility possibly tainted with the bacteria Cronobacter Sakazakii was subject to a recall, though ultimately the CDC found samples from patients weren't closely genetically related to the multiple strains of Cronobacter found in the environmental samples from Sturgis.
The facility was shut down, and a recall of products like Similac, Alimentum and EleCare was announced. From the time an investigation was announced in February 2022 to the June 2022 recall, Abbott's stock dropped about $8 per share to $112.71.
Abbott's motion to dismiss says the plaintiff fails to show Abbott and its executives knew about safety concerns at the Sturgis.
"Plaintiffs rely on five so-called 'confidential sources', but four of those supposed sources do not even purport to have information aout what Defendants knew, and the fifth just speculates what Defendants 'would have' known, which does not satisfy Plaintiffs' heightened pleading burden," the motion says.
Pembroke Pines says it has testimony from five former Abbott employees, three of whom are plant-level workers from Sturgis. A fifth, alleged to be a senior level executive in the media relations department, will testify regarding what Abbott "would have" known about the Sturgis contamination.
Form 483 reports regarding positive tests would have been sent to one of the defendant executives, that confidential source called FE2 says.
But the U.S. Court of Appeals for the Seventh Circuit has criticized the use of confidential sources in securities cases, the motion says. That court wrote that withholding the names of witnesses "obstruct[s] the judiciary's ability to implement the (Private Securities Litigation Reform Act."
"In any event, a plaintiff relying on a confidential source 'must... describe the source with sufficient particularity to support the probability that a person in the position occupied by the source would possess the information alleged,'" the motion says.
"Plaintiffs fail to provide that information. They do not allege FE2's job in media relations had anything to do with OSHA complaints or that FE2 ever saw or was involved in Abbott's response to any OSHA complaint, much less the one in question."
Plus, FE2 left Abbott in November 2021, so he had no role in responding to media inquiries regarding the recall, the motion says.
"And Plaintiffs do not allege FE2 knew of problems at Sturgis before leaving Abbott, which supports an inference that Defendants also lacked such knowledge, given FE2's supposedly 'senior' role within the company."
Abbott also resists the assertion that Form 483s from FDA inspectors sent in 2019 and 2021 to the Sturgis site director made their way to executives. Lori Randall, then the vice president of quality assurance was copied on responses to the forms, allegedly.
"Plaintiffs assert Defendants must have received the 483s because an FDA manual instructs that 'a copy of the Form 483 should be sent to the top management of the firm,'" the motion says.
"But that instruction is to FDA inspectors, not companies receiving Form 483s. And regardless of what the manual instructs, the Form 483s show who the FDA inspectors actually sent them to - and they did not send them to any Defendant."