An Illinois federal judge on Monday tossed a proposed class action against Abbott Laboratories over its alleged failure to properly alert the U.S. Food and Drug Administration to battery problems in some implantable defibrillators, saying the class hadn't shown why its suit should proceed in Illinois.
U.S. District Judge Sharon Johnson Coleman granted a motion to dismiss filed by Abbott and St. Jude Medical LLC, which manufactured the devices and later merged with the Illinois-based health care company. She agreed that the court had no general or specific jurisdiction over the suit, largely because the target for most of the class' claims, St. Jude, is headquartered in Minnesota and incorporated in Delaware.
Citing Delaware law, Judge Coleman said there was not enough to support the argument from lead plaintiff Alaska State Employees Association/American Federation of State, County and Municipal Employees Local 52 Health Benefits Trust — a third-party health care payor — that St. Jude has acted as Abbott's alter ego since their merger in 2017.
ASEA/AFSCME argued that Abbott claimed responsibility for the ultimate recall of the devices in question and has issued updates about them.
"Absent more, however, the allegations do not suggest that unfairness or injustice has resulted from the relationship between St. Jude and Abbott, as would be necessary to justify piercing the corporate veil under Delaware law," Judge Coleman wrote.
The proposed class of third-party payors sued Abbott and St. Jude in September, claiming they were forced to cover the cost of the defective defibrillators and the cost of removing and replacing them.
The products at issue, implantable cardioverter defibrillators and cardiac resynchronization therapy defibrillators, ran on lithium batteries, according to the suit. In 2011, the maker of the batteries alerted St. Jude that the batteries could suddenly fail, ASEA/AFSCME claimed.
But St. Jude did not rush to report the issues to the FDA, the suit said. The company did more than 40 product analysis reports between 2011 and 2014, which repeatedly showed that the batteries were not properly functioning. One person died as a result of the problem, the suit claimed.
Still, St. Jude didn't tell its own management review and medical advisory boards about the problems and didn't alert the FDA. In 2015, the company began discussing a possible merger with Abbott, according to the suit, which pushed St. Jude to investigate the problem, the suit claims.
In August 2016, St. Jude decided the products should be recalled. In October 2016, the FDA issued the recall of more than 250,000 St. Jude products made before May 2015, the proposed class said. Following the recall, St. Jude offered to reimburse patients for their out-of-pocket costs for removal and replacement but would not pay third-party payors anything, the suit claims.
Abbott and St. Jude moved to dismiss the suit, arguing that it improperly sought to hold the companies liable for violations of FDA regulations and that the alleged conduct took place long before Abbott got involved.
"In an effort to skirt around this issue, plaintiff claims that Abbott is liable for St. Jude's conduct under an unprecedented, pre-merger alter ego theory," the companies said in their motion.
Judge Coleman solely addressed the jurisdiction issue, saying in part that in order for Abbott to be held responsible for St. Jude's actions there would have to be a showing that Abbott used St. Jude to defraud investors.
The proposed class says Abbott totally took over St. Jude, running the facility where the devices were made and telling the public that St. Jude is now Abbott. But to claim that Abbott is St. Jude's alter ego in order to establish general jurisdiction, the proposed class needed to claim that Abbott misled investors about St. Jude's capitalization or solvency, Judge Coleman said.
And with specific jurisdiction, there are no claims that ASEA/AFSCME paid for a device in Illinois or that one of its beneficiaries had one implanted in the state, the judge said.
She dismissed the suit without prejudice.
Adam J. Levitt of Dicello Levitt & Casey LLC, counsel for the class, told Law360 that Judge Coleman clearly indicated that the case belongs in Minnesota. "We are evaluating our options and will proceed accordingly," he said.
A representative for Abbott did not immediately respond to request for comment on Tuesday.
Abbott is represented by Andrew Kassof, Barry Fields, James Hileman and Whitney Becker of Kirkland & Ellis LLP.
The proposed class is represented by Adam Levitt and Amy Keller of Dicello Levitt & Casey LLC, and Kim Stephens, Jason Dennett and Cecily Shiel of Tousley Brain Stephens PLLC.
The case is ASEA/AFSCME Local 52 Health Benefits Trust et al. v. Abbott Laboratories et al., case number 1:17-cv-06704, in the U.S. District Court for the Northern District of Illinois.
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