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The Estate of Elizabeth Elaine Rath v. Abbott Laboratories

May 1, 2012


Appeal from the Circuit Court of St. Clair County. No. 04-L-44 Honorable Michael J. O'Malley, Judge, presiding.

The opinion of the court was delivered by: Justice Goldenhersh

NOTICE The text of this decision may be changed or corrected prior to the filing of a Petition for Rehearing or the disposition of the same.

JUSTICE GOLDENHERSH delivered the judgment of the court, with opinion. Justice Stewart concurred in the judgment and opinion.

Justice Spomer specially concurred, with opinion.


¶ 1 Plaintiff, the estate of Elizabeth Elaine Rath, a disabled adult, individually and on behalf of all others similarly situated, filed suit against defendant, Abbott Laboratories, Inc. (Abbott Laboratories or Abbott), in the circuit court of St. Clair County, Illinois. Defendant filed a motion based on forum non conveniens to transfer to Lake County. The circuit court denied the motion. On appeal, defendant raises issues as to (1) whether the trial court erred as a matter of law in denying the motion to transfer and (2) whether the trial court abused its discretion in denying the motion. We affirm.


¶ 3 In the late 1990s, the United States Attorney for the Southern District of Illinois began an investigation into sales and marketing in the enteral nutrition products industry. The investigation was titled "Operation Headwaters." The investigation included the creation of a fictitious undercover company named Southern Medical Distributors (Southern). Southern solicited sales and marketing information from enteral nutrition products suppliers, including Abbott. The office for Southern was located in Swansea, St. Clair County, Illinois.

¶ 4 On January 21, 2004, plaintiff filed her original complaint in the circuit court of St. Clair County. Plaintiff labeled her pleading a class action complaint. Plaintiff asserted that she brought the suit individually and as part of a class. Plaintiff labeled count I consumer fraud act (815 ILCS 505/1 (West 2004)) and count II unjust enrichment. In her complaint, plaintiff referred to the investigation by the United States Attorney and subsequent settlement agreement and stipulation of facts described below.

¶ 5 Defendant asserts that Abbott Laboratories is an Illinois corporation with its principal place of business being in Lake County, Illinois, and that Abbott Laboratories, Inc., is a Delaware corporation with Lake County, Illinois, as its principal place of business. CG Nutritionals, Inc., is a wholly owned subsidiary of Abbott. Following the Operation Headwaters investigation, CG Nutritionals, Inc., pled guilty to a count of obstruction of a criminal health care offense. Ross Products Division (Ross) is a division of Abbott Laboratories with its principal place of business in Columbus, Ohio. Ross sells therapeutic equipment, including enteral nutrition products.

¶ 6 Enteral nutrition products are for health care patients who are unable to ingest meals through normal eating. Enteral nutrition products deliver nutrients directly to the digestive system and stomach. The enteral nutritional system has three basic components. The first component is the nutritional liquid food itself. The second component is the tubing that delivers the liquid food from a plastic container to the digestive system and stomach, which component is often referred to as "pump sets" or "plastics." The third component is an electronic pump that pushes food through the pump sets at a regulated rate. During the relevant time frame, Medicare reimbursed for enteral products using a "reasonable charge" approach.

¶ 7 On June 20, 2003, Abbott, on behalf of Ross, entered into a settlement agreement with the Office of Inspector General for United States Department of Health and Human Services and the United States Attorney for the Southern District of Illinois. In the agreement, Abbott admitted that Ross marketed infusion pumps for enteral nutrition using a purchasing document that was called the "Always Lease." Under the terms of the Always Lease, Ross provided infusion pumps and, in return, suppliers agreed to buy a set amount of entire pump sets. Ross also told suppliers that they could bill Medicare for the pump sets as well as the infusion pump. According to the settlement agreement, Ross gave monetary incentives and discounts to suppliers that signed written contracts, calling the incentives "signing bonuses." In the agreement, Abbott admitted that the suppliers Ross had provided enteral nutrition infusion pumps at no additional charge in turn billed Medicare for the pumps as well as the pump sets, and Medicare paid for the pumps and pump sets that Ross had provided under the Always Lease.

¶ 8 Under the settlement agreement, Ross agreed to pay to the United States

$382,408,087. Ross also agreed to pay the participating state Medicaid programs $17,591,913. Certain aspects of the agreement were to take effect upon the completion of a plea agreement in a parallel criminal case in the United States District Court for the Southern District of Illinois where CG Nutritionals, Inc., was named as the defendant.

¶ 9 The settlement agreement referred to a stipulation of facts entered contemporaneously in a related criminal matter. According to the stipulation of facts, Ross sold providers "bundled" kits containing both pumps and pump sets as one product for a single price, but advised providers that Medicare allowed for separate reimbursement of the pumps and pump sets. This allowed providers to receive two payments from Medicare, one for reimbursement for the pump sets that were included in the bundle with the cost of pump and a second separate charge for the pump itself. In turn, this made it difficult for Medicare to ascertain the actual charges for the equipment. Ross often provided pumps as part of a bundled product or at no additional charge to providers in exchange for an agreement from the provider that it would purchase a minimum number of other components of the system every month. According to the stipulation, Ross offered up-front payments to some providers and, in particular, advised Southern that by calling the payments a form of bonus it would not have to be reported as a discount, thereby preventing or delaying Medicare from determining the actual price.

¶ 10 On February 7, 2005, defendant filed a motion to transfer to Lake County on grounds of forum non conveniens. On December 21, 2005, plaintiff filed her first amended complaint. On December 11, 2006, defendant filed another motion to transfer on grounds of forum non conveniens.

¶ 11 After a hearing, the circuit court entered an order denying defendant's motion to transfer. The order, entered January 28, 2010, read:

"Cause comes on for hearing on defendant's Motion to Transfer.

Even noting that the deference is 'slight,' defendant cannot maintain its burden. The purported scheme which is the basis for the civil action was discovered, investigated and presented in St. Clair County.

Motion denied."

¶ 12 On April 8, 2010, this court entered an order denying defendant's petition for leave to appeal. Subsequently, the Illinois Supreme Court entered a supervisory order directing this court to vacate the order of April 8, 2010, and allow defendant's petition for interlocutory appeal. Rath v. Abbott Laboratories, Inc., 237 Ill. 2d 558, 935 N.E.2d 517 (2010) (supervisory order). After considering defendant's appeal, this court affirms the circuit court.


¶ 14 An equitable doctrine, forum non conveniens derives from "considerations of fundamental fairness and the sensible and effective administration of justice." Langenhorst v. Norfolk Southern Ry. Co., 219 Ill. 2d 430, 441, 848 N.E.2d 927, 934 (2006). Under the doctrine, a circuit court is permitted to decline jurisdiction when transfer to another jurisdiction " 'would better serve the ...

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