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Care A2+ legal fight with US distributor hits $675k wall
A legal battle between Care A2+ and a US distributor over alleged marketing issues will be put on hold unless the baby formula manufacturer can set aside more than $675,000 in security costs.
Naomi Neilson
The Federal Court ordered manufacturer Care A2+ to hand over $675,859 in security of costs if it wishes to keep a cross-claim against US distributor Genesco Laboratories alive.
The first tranche of $50,000 is due by mid-February, and if payment is not received by early March, the cross-claim will be dismissed.
In determining whether to make the order, Justice Allaster Halley noted an “unexplained registration” of security interests over Care A2+ assets and that a receiver was appointed in December 2022.
Care A2+ made the “forensic decision” not to lead any evidence to explain the circumstances of the receiver.
Justice Halley did not accept Care A2+’s submission “that an unexplained appointment of a receiver over all of the assets of a corporation does not give rise to any inference that the corporation may not be able to meet an adverse costs order”.
The dispute first hit Australian courts in June 2023, when Genesco filed proceedings against Care A2+ alleging the manufacturer breached its contract and was misleading or deceptive when it proposed to supply the infant formula product to the distributor.
Genesco alleged it lost $200 million in profit because the product was defective, Care A2+ could not meet advertising requirements, and because the manufacturer had falsely claimed the product was compliant with the US Food and Drug Administration (FDA).
The distributor has also alleged Care A2+ director Kelly Hyland engaged in misleading or deceptive conduct, but it has put this claim on hold pending the determination of related proceedings in the US.
The Care A2+ cross-claim is directed at Genesco’s alleged inability to acquire and effectively promote the sale of the product.
In its cross-claim, Care A2+ submitted it abandoned an alternative strategy to enter the US infant formula market due to its reliance on alleged “certain representatives” made by Genesco.
If the parties cannot agree on how subsequent tranches should be paid, the court will consider the issue in early March.
Naomi Neilson
Naomi Neilson is a senior journalist with a focus on court reporting for Lawyers Weekly.
You can email Naomi at:
