In October 2021, Bayer recalled millions of dollars’ worth of Lotrimin and Tinactin spray products after discovering that products dating back to 2018 were contaminated with benzene. Plaintiffs do not allege that they have suffered any physical injuries from using the contaminated products. Rather, they seek compensation for economic losses they allegedly suffered from purchasing products that are worth less than the uncontaminated products for which they bargained. The District Court dismissed on Article III grounds, but the Court of Appeals reversed.

“Plaintiffs’ theory of economic standing is straightforward: benzene-contaminated products are worth less than a properly manufactured product, thereby depriving Plaintiffs of the benefit of their bargain. Plaintiffs’ argument to that effect is straightforward: they bargained for an antifungal product free of contaminants and dangerous substances, but instead received products that were unmerchantable and unfit for use, as they were adulterated and contained harmful levels of benzene. This defect, Plaintiffs allege, rendered their products worthless. We conclude that Plaintiffs have plausibly alleged that Lotrimin and Tinactin products that are unusable due to the contamination are necessarily worth less than the product when properly manufactured. The logic requires little elaboration: if a product contains a manufacturing flaw so severe that it cannot be used, it is not worth the full price purchasers paid with the understanding they would be able to use all of the product. Here, Bayer’s recall notice recognized that benzene is classified as a human carcinogen and that it is not an ingredient in any of Bayer Consumer Health products, including Lotrimin and Tinactin. In other words, the contaminated products contained a manufacturing defect because they contained a carcinogenic component that is not an ingredient of the products. The recall notice went on to instruct that consumers should stop using the recalled products, meaning that, as a result of the defect, the products were no longer fit for use. Since the contaminated products contained a defect that rendered them unusable, the products were worth less than their full purchase price. To hold otherwise would be to conclude that an unusable product is worth the same as a usable one — a conclusion that resists logic.

“Bayer argues that our decision in In re Johnson & Johnson Talcum Powder Prod. Mktg., Sales Pracs. & Liab. Litig. forecloses Plaintiffs’ theory of economic injury. There, the plaintiff sued Johnson & Johnson under the benefit-of-the-bargain theory, arguing that she suffered economic injury by purchasing baby powder that allegedly increased the risk of developing ovarian cancer. She contended that baby powder had been marketed as a safe product, and had she known of its risks, she would not have purchased the product. We explained that the plaintiff failed to allege standing because she entirely consumed a product that functioned for her as expected, and her theory of recovery was simply that she suffered an economic injury by purchasing improperly marketed Baby Powder. We rejected the theory because it amounted to no more than an allegation that she purchased a product at a given price and later wished she had not done so. Instead, we explained that a plaintiff must allege facts that would permit a factfinder to determine that the economic benefit she received in purchasing the powder was worth less than the economic benefit for which she bargained. More simply, she was required to allege that she purchased Baby Powder that was worth less than what she paid for.

“According to Bayer, however, J&J did something more. Bayer reads J&J to mean that the mere presence of an unwanted attribute does not render a product defective and ‘worth less’ than what it otherwise would be worth. In other words, Bayer argues that J&J forecloses Plaintiffs’ position that a contaminated product is inherently worth less than the risk-free, properly manufactured product. J&J applies here, Bayer contends, because Plaintiffs here have not alleged that the products they purchased failed to cure their fungal infections as expected.

“As an initial matter, J&J is distinguishable because the Court explicitly recognized that it did not involve allegations of a defective product. Here, however, Bayer’s products were not supposed to contain benzene, and Plaintiffs plausibly alleged that the benzene contamination — the product’s defect — rendered it unusable, making it inherently worth less than if it had been manufactured properly.  Moreover, J&J did not hold that the only way to prove that an unsafe product is worth less is by alleging that the product did not perform therapeutically as expected. This is evident from J&J’s reliance on our earlier case, Cottrell v. Alcon. In Cottrell, plaintiffs demonstrated an injury-in-fact when they purchased an eye medication because the medication’s dropper dispensed excessive product. Thus, the source of their economic injury was a design defect resulting in waste. J&J explained that key to Cottrell’s outcome was that plaintiffs’ economic theory of harm was based on more than mere conjecture. By contrast, the J&J plaintiff failed to allege that the Baby Powder provided her with an economic benefit worth one penny less than what she paid. Instead, she only offered conclusory assertions of economic injury.

“As in Cottrell, Plaintiffs’ theory of economic injury here is more than mere conjecture. Similar to the allegation in Cottrell that plaintiffs’ products contained a design defect leading to product waste, Plaintiffs here allege that a manufacturing defect rendered contaminated products unusable. These unusable products were worth less than the products when properly manufactured and fit for human use.”

 

Huertas v. Bayer, 120 F.4th 1169 (3d Cir. 2024).