Friday, October 12, 2018

Third Circuit holds that misrepresentation of safety isn't actionable false advertising for consumables that didn't cause individual harm

In re: Johnson & Johnson Talcum Powder Products Marketing, Sales Practices & Liability Litig., 903 F.3d 278 (3d Cir. 2018)

Plaintiff Estrada alleged that perineal use of Johnson & Johnson’s Baby Powder can lead to an increased risk of developing ovarian cancer.  Over a dissent, the court of appeals held that a plaintiff suffered no Article III injury when she bought a product that she now believes she should never have bought: buyer’s remorse is not cognizable, and a purchase is itself not an economic injury where the buyer got the benefit of the bargain.

Estrada didn’t allege even an increased risk of cancer, or emotional injury from the fear of developing cancer, or medical monitoring costs.  Nor did she allege that the product didn’t live up to its claims: “designed to gently absorb excess moisture,” “keep[ ] skin feeling soft, fresh and comfortable,” and “reduce the irritation caused by friction.” Nor did she allege that she still possessed a durable but now-useless product; she’d consumed what she’d bought, so she also didn’t allege transaction costs associated with reselling or returning Baby Powder. The core allegation was that, if she’d known of the risk, she wouldn’t have bought the powder in the first place.

She might have successfully pled economic injury by pleading that she’d have bought a less expensive alternative, and her complaint did suggest that alternative cornstarch-based products existed that didn’t pose the same risk. But she failed to allege that cornstarch-based products would have been cheaper, or that there was a price premium associated with J&J’s superiority claims for its products.

On appeal, she argued that she hadn’t received the benefit of the bargain: she paid for a product that didn’t increase the risk of ovarian cancer but received one that did, which was worth less than what she paid. But she got baby powder that “successfully did what the parties had bargained for and expected it to do: eliminate friction on the skin, absorb excess moisture, and maintain freshness.” But wasn’t she also, at least implicitly, promised that the product would do that safely?  To have Article III standing, a plaintiff has to allege “facts that would permit a factfinder to value the purported injury at something more than zero dollars without resorting to mere conjecture.”

Although courts often “credit allegations of injury that involve no more than ‘application of basic economic logic,’ … there is a difference between allegations that stand on well-pleaded facts and allegations that stand on nothing more than supposition.” References to future expert opinions weren’t enough to establish constitutional standing, even though the majority also said that “a plaintiff need not develop detailed economic models at the pleading stage to establish that she has standing.”  Here, all Estrada alleged was that, although she bought the product at a given price, she later wished that she hadn’t.

But what about that implied promise of safety? Why not presume that Estrada would pay more for safe than unsafe powder?  First, to presume that “would turn the standing question on its head” because federal courts lack jurisdiction unless the record shows that it exists. [That’s a weird move. Not all allegedly implied promises are promises of safety; especially since we can rely on other economic theories in the standing inquiry, it seems very commonsensical to infer the relevance of safety, which wouldn’t provide standing in every case even if it would provide standing in every case about safety.] “[O]ur refusal to leap to such a conclusion is supported by Estrada’s apparent desire to continue purchasing Baby Powder in the future despite being aware of its alleged health risks.” That desire apparently wasn’t conditioned on receiving a price discount in the future.

Second, Estrada’s own allegations indicated that the powder she received was safe for her, given the absence of allegations about risk to her.

The majority clarified that there was no conflict with its reading of Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 120 Cal.Rptr.3d 741, 246 P.3d 877 (2011), which held that, “[f]or each consumer who relies on the truth and accuracy of a label ... the economic harm is the same: the consumer has purchased a product that he or she paid more for than he or she otherwise might have been willing to pay if the product had been labeled accurately.” The key language was “paid more”: in Kwikset, there was a sufficient pleading that the plaintiffs didn’t receive the benefit of their bargain.

Thus, Estrada’s claim for restitution also failed.  And her claims were “further weakened by her alleged desire to purchase Baby Powder in the future despite knowing of its alleged health risks,” which suggested that other consumers might want to do so too. Also, “consumers are already highly informed of the alleged health risks associated with Baby Powder given the numerous publicly available studies and publications that she cites in her complaint. Estrada’s complaint refers to, inter alia, … a pamphlet allegedly distributed ‘to all ovarian cancer patients at nearly every medical facility in the United States.’ Wouldn’t such widespread knowledge already have been factored into the current market price of Baby Powder? And if so, how did Johnson & Johnson earn unlawful profits by withholding information that the market might have already taken account of?” [This argument is unworthy of a circuit court.  As far as I can tell, Estrada never alleged that consumers of baby powder are “highly informed” of the health risks, even if other people know (ovarian cancer patients strike me as finding out too late, for example).]

And for injunctive relief, Estrada’s knowledge of the risks made her unlikely to suffer future injury; the court wouldn’t allow a “stop me before I buy again” claim.  “The law affords Estrada the dignity of assuming that she acts rationally, and that she will not act in such a way that she will again suffer the same alleged ‘injury.’”

Judge Fuentes dissented, beginning with the possibly relevant fact that juries around the country have found J&J liable for its powder’s propensity to increase ovarian cancer risks. Estrada alleged that, if she’d known that, she wouldn’t have bought the powder. In the abstract, it was correct that a plaintiff who gets the benefit of her bargain can’t claim injury in fact. But the majority ignored key terms in that bargain, in the dissent’s view, specifically safety. Estrada alleged that J&J held the product out as safe.

The powder need not be unsafe as to Estrada in order for safety to be part of her bargain. Her economic harm wasn’t an increased risk of cancer. Her harm was the economic harm caused by purchasing a product due to J&J’s misrepresentation about safety.  She alleged that she wouldn’t have bought the product had she known the truth, and that’s an Article III injury in fact.  Its actual safety as to her was non-economic harm, not at issue.

The dissent addressed the majority’s hypothetical—what if J&J had been able to go back in time 50 years, when Estrada first started buying the product, and reassure her (based on what we know from her allegations) that she personally wouldn’t be among the people harmed by the product? The majority concluded that this “legal fiction” proved that she hadn’t been harmed. 

But safety representations have two related meanings: First, “is this going to hurt and/or kill me?” That was the realm of products liability.  Second, “is this product safe in general?”  Consumers might want to know this because, among other things, they might be buying the product for others’ use.  And they also might want to know this simply because it’s among the reasons to choose one product over others.  Kwikset showed why Estrada did suffer injury: she wanted something that she didn’t get, despite the alleged misrepresentation that she would get it. “I see no reason we should devote ourselves to understanding why a plaintiff values what she values.”  We don’t ask whether an observant Jew’s preference for kosher meat represents anything real, or a Rolex consumer’s preference for a real Rolex over a substantively identical counterfeit. All they had to do was plausibly allege that they wouldn’t have bought a properly labeled product, or wouldn’t have paid as much for it.  So too here. Estrada alleged that she valued “safety.” That should be enough. [There is a real basis for this preference, too.  Time-travel fantasies aside, I want to know what general risks products pose when I buy them. I don’t expect Dr. Who or J&J to pop out and reassure me that I'll dodge a bullet, and I doubt I’d believe them if they did.]  There was no attenuated causal chain here; she alleged that she wouldn’t have bought the product had she known the truth, making the injury the total sum she paid.

The dissent would further hold that injury was “no more than application of basic economic logic.”  “Dealing only with the allegations of the pleadings, it seems sufficiently elementary that a product held out as safe will command a higher price than a product held out as markedly increasing a woman’s risk of developing ovarian cancer.”  As for allegations about willingness to purchase again, the majority read her pleadings to state that she was willing to buy the product as-is, but it made more sense that her pleaded desire to buy baby powder in the future was contingent on J&J credibly offering a product that met the terms of her bargain.  “She is only unlikely to suffer future economic injury if we presume that Johnson & Johnson has lied and will continue to lie in its labeling, or that Estrada will assume that any label offered by Johnson & Johnson is untruthful.”

Plus, the majority’s interpretation of lack of standing to seek injunctive relief essentially struck down a part of California’s UCL, which was not a good idea.

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