Sun faces class action suit over closure of Caraco plants 6 years ago

It has been more than 6 years since Caraco Pharmaceutical Laboratories was forced to suddenly shut two Detroit-area manufacturing plants after the FDA sent in marshals to seize drugs, claiming the plants had contamination issues. One of the plants was even closed last year by Caraco owner Sun Pharmaceutical. But legal problems continue to reverberate for Sun for having laid off hundreds of workers without notice.

The U.S. 6th U.S. Circuit Court of Appeals ruled Thursday that a class action suit being pursued by laid off workers can proceed. The suit stems from the fact that Caraco didn't issue a federal WARN notice over the 2009 layoffs until 11 days after the plants were closed. It claimed "extraordinary circumstances" as the reason for filing late, according to the opinion filed by the appeals court.

But former employees sued, contending that the problems at the plant had gone on for years, with warning letters and inspections, and Caraco had been told by the FDA that if it didn't get its act together that seizure was on its menu of possible actions.

Sun had bought Caraco in 1997 to establish a U.S. presence. But manufacturing problems uncovered by FDA inspectors resulted in a warning letter in 2008 for the Detroit plant and one in nearby Wixom. The letter said that metformin pills were out of spec and some were contaminated with metal scrapings. A year later, concerned that improvements were not being made, the FDA issued a consent decree and dispatched U.S. marshals to close the plant. They seized an estimated $20 million in drugs in the process. Reports said that more than 450 of the 650 employees were immediately laid off.

Sun got to work on remediation and in 2012, the FDA closed out the warning letter. Last year, the drugmaker closed the plant in Detroit, laying off about 180 people who still worked there. A WARN notice was filed in that case.

Sun, of course, still has it hands full with remediation efforts. Besides having to deal with FDA concerns over one of its legacy plants in India, it is trying to bring up to par four plants banned by the FDA that it got in its $4 billion buyout of Ranbaxy Laboratories. It recently reported, the cost from those efforts, had undercut its revenues and earnings.

-- here's the ruling