In re Recalled Abbott Infant Formula Prods. Liab. Litig.

• Decision Date: 22 May 2023
• Docket Number: MDL 3037,22 C 4148
• Parties: IN RE RECALLED ABBOTT INFANT FORMULA PRODUCTS LIABILITY LITIGATION This document relates to All cases
• Court: U.S. District Court — Northern District of Illinois

1

IN RE RECALLED ABBOTT INFANT FORMULA PRODUCTS LIABILITY LITIGATION This document relates to All cases

MDL No. 3037

No. 22 C 4148

United States District Court, N.D. Illinois, Eastern Division

May 22, 2023

CASE MANAGEMENT ORDER NO. 11 (MEMORANDUM OPINION AND ORDER ON MOTIONS TO DISMISS ECONOMIC LOSS COMPLAINTS)

MATTHEW F. KENNELLY, District Judge:

This multidistrict litigation proceeding (MDL) involves lawsuits by numerous plaintiffs who allege that they have suffered injuries caused by infant formula manufactured by Abbott Laboratories. The Judicial Panel on Multidistrict Litigation consolidated the cases before this Court for pretrial proceedings. The cases in the MDL involve two categories of claims: (1) individual claims seeking recovery for personal injuries allegedly caused by Abbott's formula and (2) putative class claims premised on alleged economic losses from purchases of Abbott's formula.

This opinion addresses Abbott's motion to dismiss the consolidated amended complaint filed by the plaintiffs solely alleging economic losses. The plaintiffs allege that Abbott failed to disclose that its infant formula risked containing harmful bacteria. In their consolidated amended complaint they assert claims on behalf of a nationwide class and twenty state classes for violations of state consumer fraud acts unjust enrichment, breach of the implied warranty of merchantability, and negligent misrepresentation.

Abbott has moved to dismiss all the claims under Federal Rule of Civil Procedure 12(b)(1) for lack of standing and Rule 12(b)(6) for failure to state a claim. On May 1, 2023, the Court held a hearing on Abbott's motion to dismiss. For the reasons stated below, the Court grants Abbott's Rule 12(b)(1) motion.

Background

Abbott is a leading supplier of infant formula in the United States. It sells its formula to consumers on its website and to major retailers who in turn sell it to consumers. The plaintiffs purchased Abbott's Similac, Alimentum, and EleCare brand powdered infant formula products between September 2019 and June 2022. The products the plaintiffs purchased were manufactured at Abbott's Sturgis, Michigan facility.

In their consolidated amended complaint, the plaintiffs outline a long history of quality control problems at the Sturgis facility. In September 2021, the FDA issued an Establishment Inspection Report, reporting that Abbott received at least sixteen complaints regarding Salmonella and Cronobacter in its powdered infant formula manufactured at Sturgis between September 2019 and September 2021. The report also identified Cronobacter in two batches of Abbott's infant formula and five environmental samples. After three reports of Cronobacter and one of Salmonella in infants since September 2021, on February 17, 2022, the FDA and CDC warned consumers not to use certain Abbott infant formulas. In February 2022, Abbott also issued a recall of those products manufactured at Sturgis labeled with specific lot codes, offering a refund to consumers who possessed the products. An FDA report issued on March 18, 2022 again documented several quality control failures. And on October 19 2021, a whistleblower reported Abbott's failure to maintain sanitary conditions and perform adequate product testing and that Abbott had concealed its practices from regulators.

Salmonella and Cronobacter infections can be fatal. Cronobacter infections "can cause severe, life-threatening infections (sepsis) or meningitis (an inflammation of the membranes that protect the brain and spine)." Consol. Am. Compl. ¶ 82. Symptoms of Cronobacter infection include "poor feeding, irritability, temperature changes, jaundice, grunting, and abnormal body movements." Id. ¶ 84. Symptoms of Salmonella infection include "diarrhea, fever[,] and abdominal cramps" in most cases and "a high fever, aches, headaches, lethargy, a rash, [and] blood in the urine or stool," in more severe cases. Id. ¶ 90.

Abbott's product labels do not warn of the risk of Salmonella or Cronobacter contamination. The plaintiffs allege that this omission misled consumers about the safety of Abbott's products. The consolidated amended complaint also identifies several statements from Abbott's website and product labels that the plaintiffs allege misrepresent that the products were safe. The plaintiffs allege that they "would not have paid the purchase price for the products had they known the products were at substantial risk of being contaminated with Cronobacter sakazakii, Salmonella, and/or other harmful bacteria at the time of purchase." Id. ¶ 15.

Discussion

The plaintiffs assert claims for violations of state consumer fraud acts, unjust enrichment, breach of the implied warranty of merchantability, and negligent misrepresentation. All the claims are based on the same theory of harm: economic loss from the products' risk of bacterial contamination. Abbott moves to dismiss the claims for lack of standing under Rule 12(b)(1) and failure to state a claim under Rule 12(b)(6). Because Article III standing is a necessary component of federal jurisdiction, the Court addresses it first. See Kithongo v. Garland, 33 F.4th 451, 454 (7th Cir. 2022) ("The 'first and fundamental question' our court must answer 'is that of jurisdiction.'" (quoting Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998))).

"Article III of the Constitution limits federal judicial power to certain 'cases' and 'controversies,' and the 'irreducible constitutional minimum' of standing contains three elements." Silha v. ACT, Inc., 807 F.3d 169, 172-73 (7th Cir. 2015) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 559-60 (1992)). Only the first element is relevant here, which is that the plaintiff must have suffered an "'injury in fact' that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical." Friends of the Earth, Inc. v. Laidlaw Env't Servs. (TOC), Inc., 528 U.S. 167, 180 (2000). "As the party invoking federal jurisdiction, a plaintiff bears the burden of establishing the elements of Article III standing." Silha, 807 F.3d at 173.

"In evaluating a challenge to subject matter jurisdiction, the court must first determine whether a factual or facial challenge has been raised." Id. There are "two forms of standing challenges." Flynn v. FCA U.S. LLC, 39 F.4th 946, 952 (7th Cir. 2022). "A facial challenge attacks standing on the pleadings, arguing that the plaintiff lacks standing even if the well-pleaded allegations in the complaint are taken as true. A factual challenge, by contrast, asserts that there is in fact no standing." Id. (citation omitted).

Abbott purports to "advance[] both such challenges here." See Def.'s Opening Mem. at 8. However, rather than point to "external facts" that "call[] the court's jurisdiction into question," Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 444 (7th Cir. 2009), Abbott contends that the plaintiffs did not "adequately plead standing," Def.'s Reply Br. at 3. This indicates a facial challenge, not a factual challenge.

"[I]n evaluating whether a complaint adequately pleads the elements of standing, courts apply the same analysis used to review whether a complaint adequately states a claim: 'Courts must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party.'" Silha, 807 F.3d at 173 (alterations accepted) (quoting Warth v. Seldin, 422 U.S. 490, 501 (1975)). "[W]hen evaluating a facial challenge to subject matter jurisdiction under Rule 12(b)(1), a court should use Twombly-Iqbal s 'plausibility' requirement, which is the same standard used to evaluate facial challenges to claims under Rule 12(b)(6)." Id. at 174; see also Reinoehl v. Centers for Disease Control & Prevention, No. 22-1401, 2022 WL 14461946, at *3 (7th Cir. Oct. 25, 2022) ("At the pleading stage, standing is evaluated under the same analysis used to review whether a complaint adequately states a claim.") (internal quotation marks omitted).

The plaintiffs contend that they have suffered an economic injury, alleging that they "would not have paid the purchase price for the products had they known the products were at substantial risk of being contaminated with Cronobacter sakazakii, Salmonella, and/or other harmful bacteria at the time of purchase." Consol. Am. Compl. ¶ 15. Although the plaintiffs phrase this theory of harm in a few ways in their complaint, they have contended in their briefing and at the motion hearing that they suffered "economic loss emanating from a 'benefit of the bargain theory.'" Pls.' Resp. Br. at 15 ("Put another way, the difference between what the formula cost Plaintiffs, and what benefit it actually provided, represents a tangible loss sufficient to trigger standing.").

Abbott does not contest that a loss of the benefit of the bargain can be a cognizable injury. See In re Aqua Dots Prod. Liab. Litig., 654 F.3d 748, 751 (7th Cir. 2011) ("The plaintiffs' loss is financial: they paid more for the toys than they would have, had they known of the risks the beads posed to children. A financial injury creates standing."); In re Evenflo Co., Inc., Mktg., Sales Pracs. & Prod. Liab. Litig., 54 F.4th 28, 35 (1st Cir. 2022) ("This court has repeatedly recognized overpayment as a cognizable form of Article III injury."); In re Johnson & Johnson Talcum Powder Prod. Mktg., Sales Pracs. & Liab. Litig., 903 F.3d 278, 283 (3d Cir. 2018) ("Under the benefit of the bargain theory, a plaintiff might successfully plead an economic injury by alleging that she bargained for a product worth a given value but received a product worth less than that value.").

Rather Abbott contends that the plaintiffs have not lost the benefit of the bargain in this...