Court Reversed Fraudulent Joinder Ruling on Formula Suits
The 7th Circuit clarified that plaintiffs' intent to sue hospitals is not a valid basis for fraudulent joinder.
Updated on Sept. 28, 2026 in Healthcare
On July 28, 2026, the 7th Circuit U.S. Court of Appeals reversed a lower court holding involving five actions that allege links between preterm infant formulas and necrotizing enterocolitis. The decision impacts how manufacturers approach jurisdictional challenges in multi-defendant litigation.
Why it matters
The appellate panel determined that the lower court's analysis was inconsistent with existing Supreme Court and appellate precedent, signaling a shift in how defendants can use fraudulent joinder to move cases to federal court.
The ruling impacts five distinct actions involving allegations that cow-milk-based infant formulas, manufactured by Abbott Laboratories and Mead Johnson, are linked to necrotizing enterocolitis.
The players
Abbott Laboratories
A global medical device and healthcare company that produces cow-milk-based infant formulas.
Mead Johnson
A nutrition company specializing in pediatric health products, including infant formulas.
The details
The appellate panel examined whether a plaintiff's motive for including a non-diverse hospital defendant could justify a fraudulent joinder claim. By rejecting the lower court's focus on subjective intent, the 7th Circuit tightened the standards for removing cases from state to federal court. Manufacturers and legal teams must now reevaluate their jurisdictional strategies in light of this refined standard for multi-defendant liability.
Timeline
July 28, 2026: The appellate panel issued its opinion on the fraudulent joinder ruling.
Market Landscape
This decision follows a pattern set by the Supreme Court’s jurisdictional standards regarding fraudulent joinder. It marks a departure from lower court interpretations that allowed for subjective intent to influence where complex product liability litigation is heard.
Operators in the healthcare and manufacturing sectors should consult with counsel to understand how this appellate standard affects their current jurisdictional risk profiles in pending litigation. Companies facing multi-party product liability suits may need to reassess the viability of removing state cases to federal court.
The takeaway
The 7th Circuit’s move reinforces that jurisdictional removals cannot be based on speculative assessments of why a plaintiff chose to sue a specific hospital defendant. Businesses should track how this precedent is applied in other circuits to gauge whether it will simplify or complicate the venue-selection process in future product liability waves.
Further reading
For broader trends in medical industry liability, review the Healthcare archive.
Source note: This article includes information reported by Harrismartin.
