In re Abbott Laboratories Derivative Shareholders Litigation (2003), the shareholder-plaintiffs alleged the corporate directors breached their duty of good faith through their failure to follow up on repeated notices of regulatory noncompliance. How did the court rule?

d

.

The court ruled the plaintiffs sufficiently pleaded allegations that, if true, constituted a

breach of the duty of good faith leading to the directors' actions falling outside the

protection of the business judgment rule.

Explanation:

This shareholder derivative suit arises from a consent decree between Abbott Laboratories ("Abbott") and the Food and Drug Administration ("FDA"). The action was brought in federal court on behalf of Abbott shareholders against Abbott's board of directors alleging that the directors breached their fiduciary duties and are liable under Illinois law for harm resulting from a consent decree which required Abbott to pay a $100 million civil fine to the FDA, withdraw 125 types of medical diagnostic test kits from the United States market, destroy certain inventory, and make a number of corrective changes in its manufacturing procedures after six years of federal violations. The district court dismissed the original complaint for failure to plead demand futility with particularity under Fed. R. Civ. P. 23.1 and has now dismissed the amended complaint for the same reason. We reverse and remand for further proceedings.