A federal judge dismissed a shareholder suit alleging Abbott Laboratories committed securities fraud over its 2022 infant formula recall. The court found no intent to deceive investors. Abbott's Alpha Score: 41/100.
Alpha Score of 46 reflects weak overall profile with moderate momentum, weak value, weak quality, moderate sentiment.
A federal judge on July 24 threw out a shareholder lawsuit accusing Abbott Laboratories of defrauding investors over the 2022 recall of its powdered infant formula. U.S. District Judge Steven Seeger in Chicago ruled the plaintiffs, two European asset managers, failed to show Abbott intended to deceive the market or artificially prop up its stock price.
The litigation centered on the February 2022 recall of Similac, Alimentum and EleCare produced at Abbott's Sturgis, Michigan plant. Abbott shut the facility after reports of severe bacterial infections in infants and after inspectors found traces of potentially deadly bacteria. The recall and plant closure deepened a national baby formula shortage that had already started during the pandemic.
Shareholders argued that Abbott waited too long to alert the U.S. Food and Drug Administration about the contamination and concealed poor conditions at the plant. They also challenged the company's public statements about its regulatory compliance and commitment to product safety.
Seeger rejected those claims. In a 141-page decision, he wrote that the complaint “at best” alleged Abbott mishandled the Sturgis plant and the subsequent FDA inspection. “Mismanaging a plant that makes infant formula is bad,” Seeger wrote. “It's not securities fraud.”
The judge also found many of Abbott's statements too vague to create liability. “If you asked Corporate America for a show of hands, and asked CEOs whether they make safe and high-quality products, not a lot of executives would sit still,” he wrote.
Abbott's U.S. market share for infant formula topped 40% before the recall, according to court papers. Seeger said shareholders could try to amend their 217-page complaint, though he called it “hard to imagine that plaintiffs withheld anything that could change the outcome.”
Lawyers for the shareholders did not respond to requests for comment. Abbott and its legal team also did not respond.
Abbott carries an Alpha Score of 41 out of 100, a Mixed rating. ABT stock page
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