JUAN HUERTAS, On behalf of themselves and all others similarly situated; EVA MISTRETTA, On behalf of themselves and all others similarly situated; JOSE VILLARREAL; DON PENALES, JR.; MIKE POOVEY; JEREMY WYANT; CHRISTOPHER CADORETTE; JONATHAN MARTIN; SEAN STEINWEDEL v. BAYER US LLC
No. 23-2178
United States Court of Appeals for the Third Circuit
November 7, 2024
Argued May 1, 2024; PRECEDENTIAL
Before: KRAUSE, CHUNG, and AMBRO, Circuit Judges.
Steven L. Bloch, Silver Golub & Teitell, 1 Landmark Square, 15th Floor, Stamford, CT 06901
Timothy J. Peter, Faruqi & Faruqi, 1617 John F. Kennedy Boulevard, Suite 1550, Philadelphia, PA 19103
Max S. Roberts [ARGUED], Bursor & Fisher, 1330 Avenue of the Americas, 32nd Floor, New York, NY 10019
Counsel for Appellants
Andrew Soukup, Marianne E. Spencer, David M. Zionts [ARGUED], Covington & Burling, 850 10th Street NW, One City Center, Washington, DC 20001
Counsel for Appellee
OPINION OF THE COURT
CHUNG, Circuit Judge.
Bayer U.S. LLC (“Bayer“) is a pharmaceutical company that sells a variety of healthcare products, including the antifungal Lotrimin and Tinactin spray products at issue in this litigation. Lotrimin and
I. BACKGROUND2
Benzene is a chemical that has been labeled a human carcinogen and linked to cancers, such as leukemia and non-Hodgkin lymphoma, by various governmental agencies and cancer research institutions. In 2018, the Food and Drug Administration (“FDA“) released guidance concerning the levels at which certain solvents are considered safe in pharmaceuticals. The FDA rated benzene among the few substances at issue that “should not be employed in the manufacture of drug substances . . . and drug products because of their unacceptable toxicity.” Food and Drug Administration, Q3C – Tables and List Rev. 4: Guidance for Industry 5 (Aug. 2018), https://www.fda.gov/media/133650/download. However, if the “use [of benzene] is unavoidable in order to produce a drug product with a significant therapeutic advance, then [its] levels should be restricted” to 2 parts per million (the “FDA guideline limit“).3 Id. Benzene exposure can occur through inhalation, orally, or through skin absorption.
In October 2021, Bayer voluntarily recalled certain Lotrimin and Tinactin spray products after it discovered benzene in samples of the products. The recall covered unexpired “spray products with lot numbers beginning with TN, CV, or NAA” that were “distributed between September 2018 to September 2021.” App. 135. The recall notice acknowledged that “[b]enzene is classified as a human carcinogen” and that “[e]xposure to benzene can occur . . . through the skin.” App. 136. Despite the notice‘s admission that “[b]enzene is not an ingredient in any of Bayer[‘]s Consumer Health products,” it clarified that its “decision to voluntarily recall these products is a precautionary measure and that the levels detected are not expected to cause adverse health consequences in consumers.” App. 135–36. Shortly after the recall, pharmaceutical testing company Valisure, LLC (“Valisure“) tested thirteen samples of recalled Lotrimin and Tinactin products. Twelve of the thirteen samples, all with lot numbers beginning with TN, contained detectable levels of benzene, and eleven of
Plaintiffs Juan Huertas and Eva Mistretta filed a putative class action on November 16, 2021, alleging that they purchased Lotrimin and Tinactin products during the recall period and seeking damages for various state law causes of action. The District Court dismissed the original complaint without prejudice, and Plaintiffs filed their First Amended Complaint (“FAC“) in September 2022, which added seven additional named plaintiffs.
According to the FAC, “[t]he notable consistency with which unacceptable levels of benzene were detected by Valisure in the Products they tested indicates that the Products [that] Plaintiffs and members of the Classes purchased contained impermissible levels of benzene.” App. 250. Plaintiffs argued that this manufacturing flaw (1) deprived them of the benefit of their bargain because they contracted for safe products that did not contain benzene, but they got benzene-contaminated products that were unusable and worthless, and (2) they “were forced to waste portions of the Products or to spend additional money to purchase replacement medications that they would not have spent but for the Products being contaminated.” App. 256. Plaintiffs also argued that their exposure to benzene increased their risk of developing cancer in the future, requiring them “to undertake significant monitoring they otherwise would not have to detect the possible development of cancers and other ailments.”5 App. 256.
All of the Plaintiffs alleged that they purchased Lotrimin or Tinactin spray products during the recall period from September 2018 to September 2021. Each Plaintiff also alleged that his or her product(s) contained benzene, but only four of the nine Plaintiffs—Juan Huertas, Eva Mistretta, Jeremy Wyant, and Mike Poovey—provided lot numbers specified in the recall.6
The District Court dismissed the FAC with prejudice in May 2023 for lack of standing. It concluded that the FAC‘s “addition of multiple Plaintiffs and a plethora of conclusory statements, copied and pasted vague assertions, and facts requiring inferential leaps” failed to “remed[y] the factual deficiencies that existed in the original Complaint.” App. 14. As a result, the District Court held that “the FAC does not sufficiently allege facts to support the conclusion that Plaintiffs suffered economic loss,” App. 16, or harm stemming from the increased risk of developing a physical injury in the future as a result of using a benzene-contaminated product. Plaintiffs timely appealed.
II. JURISDICTION AND STANDARD OF REVIEW
The District Court had jurisdiction over Plaintiffs’ claims pursuant to
III. DISCUSSION
“To establish standing, a plaintiff must have (1) suffered an injury[-]in[-]fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” In re Johnson & Johnson Talcum Powder Prod. Mktg., Sales Pracs. & Liab. Litig., 903 F.3d 278, 284 (3d Cir. 2018) [hereinafter J&J] (quotations omitted). This appeal turns on the first prong of the standing inquiry—whether Plaintiffs’ complaint plausibly alleged injury-in-fact. Injury-in-fact is comprised of three sub-elements: (1) “an invasion of a legally protected interest;” (2) “injury [that] is both concrete and particularized;” and (3) “injury [that] is actual or imminent, not conjectural or hypothetical.” Id. (quotations omitted).
“While it is difficult to reduce injury-in-fact to a simple formula, economic injury is one of its paradigmatic forms.” Danvers Motor Co. v. Ford Motor Co., 432 F.3d 286, 291 (3d Cir. 2005). One way “a plaintiff might successfully plead an economic injury [is] by alleging that she bargained for a product worth a given value but received a product worth less than that value.” J&J, 903 F.3d at 283. This is known as the benefit-of-the-bargain theory of injury. Under this theory, “[t]he economic injury is calculated as the difference in value between what was bargained for and what was received.” Id. Plaintiffs here rely on the benefit-of-the-bargain theory to establish injury-in-fact, arguing that they paid full purchase price for products “free of contaminants and dangerous substances,” App. 255, but received products
A. Plaintiffs Have Plausibly Alleged that Benzene-Contaminated Products Are Worth Less than Uncontaminated Products.
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,” App. 255, but instead received products that were “unmerchantable and unfit for use,” id., “as they [were] adulterated and contain[ed] harmful levels of benzene,” App. 254. 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.9 The logic requires little elaboration: if a product contains a manufacturing flaw so severe that it cannot be used,10 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 “[b]enzene is classified as a human carcinogen” and that it “is not an ingredient in any of Bayer Consumer Health products,” including Lotrimin and Tinactin. App. 135, 136. 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. App. 137. Since the contaminated products contained a defect that rendered them unusable, the products were worth
Bayer argues that our decision in J&J 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. 903 F.3d at 281–82. 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. Id. at 283.
We explained that the plaintiff failed to allege standing because she “entirely consumed a product that . . . functioned for her as expected,” id. at 280, and her “theory of recovery [wa]s simply that she suffered an economic injury by purchasing improperly marketed Baby Powder,” id. at 282 (emphasis omitted). 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.” id. at 288. 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.” id. at 285. More simply, she was required to “allege that she purchased Baby Powder that was worth less than what she paid for.” id. at 287.
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.” Resp. Br. at 23. 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.” Resp. Br. 23. 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.” Resp. Br. 23.
As an initial matter, J&J is distinguishable because the Court explicitly recognized that it did “not involve allegations of a defective product.” 903 F.3d at 281. Here, however, Bayer‘s products were not supposed to contain benzene, and Plaintiffs plausibly alleged that the benzene contamination12—the product‘s defect—rendered it unusable, making it inherently worth less than if it had been manufactured properly.13
explained that key to Cottrell‘s outcome was that “plaintiffs’ economic theory of harm was based on more than mere conjecture.” J&J, 903 F.3d at 285; see also id. at 286–87. By contrast, the J&J plaintiff “fail[ed] to allege . . . that the Baby Powder provided her with an economic benefit worth one penny less than what she paid.” Id. at 288. Instead, she only “offer[ed] conclusory assertions of economic injury.” Id. at 285.
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.
Our conclusion that contaminated products are worth less than uncontaminated products is consistent with decisions from other Courts of Appeals. For example, in In re Aqua Dots Products Liab. Litig., 654 F.3d 748 (7th Cir. 2011), several parents sued a manufacturer that produced a toy with defective components that, when ingested, metabolized into a chemical substance that can cause a variety of side effects and could even lead to death. Id. at 749. The parents’ children were not harmed by the toy, but the Seventh Circuit nonetheless concluded that the parents had standing to sue under a benefit-of-the-bargain theory because “they paid more for the toys than they would have, had they known of the risks the beads posed to children.” Id. at 751. Similarly, in Debernardis v. IQ Formulations, LLC, 942 F.3d 1076 (11th Cir. 2019), the Eleventh Circuit held that plaintiffs who purchased adulterated dietary supplements under the FDCA “received . . . defective product[s] that had no value.” Id. at 1085. The Eleventh Circuit explained that its “conclusion [was] consistent with the well-established benefit-of-the-bargain theory of contract damages, which recognizes that some defects so fundamentally affect the intended use of a product as to render it valueless.”14 Id.
In sum, Plaintiffs alleged that they purchased recalled Lotrimin and Tinactin
B. Whether Plaintiffs Plausibly Alleged They Purchased Defective Products
Having determined that Plaintiffs have plausibly alleged economic injury, we must still determine whether they sufficiently alleged that their products were defectively manufactured and contained benzene. See J&J, 903 F.3d at 289 (explaining that allegations that a product is “unsafe as to others are not relevant to determining whether [named plaintiffs] ha[ve] standing [themselves]“). Otherwise, their claim that they purchased a product worth less than the product for which they bargained necessarily fails, and they are not entitled to relief under the benefit-of-the-bargain theory.
Plaintiffs need only demonstrate standing “with the manner and degree of evidence required at the successive stages of the litigation.” Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992). At the motion-to-dismiss stage, “courts cannot inject evidentiary issues into the plausibility determination,” Schuchardt v. President of the United States, 839 F.3d 336, 347 (3d Cir. 2016), because “the [subsequent] discovery process is designed to enable [plaintiffs] to un[ ]cover evidence that may support the allegations set forth in a complaint,” Evancho v. Fisher, 423 F.3d 347, 354 (3d Cir. 2005). Thus, as a general matter, Plaintiffs need not assert with specificity the extent of the contamination across all products, so long as they provide sufficient details to plausibly allege that their products were contaminated. In evaluating such an allegation, we must “accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom[ ] and view them in the light most favorable to the plaintiff.” Id. at 350. The key, though, is that we only draw “reasonable” inferences in a plaintiff‘s favor. See id. (emphasis added).
Plaintiffs urge us to infer from Bayer‘s recall itself that Plaintiffs’ products were contaminated. We agree with the District Court that this was insufficient to establish that they purchased contaminated products. The mere fact that a product was recalled would “not nudge[ ] [Plaintiffs‘] claims across the line from conceivable to plausible.” Twombly, 550 U.S. at 570.15
In addition to the recall itself, Plaintiffs offer Valisure‘s testing results to establish that they purchased contaminated products. In finding that Plaintiffs had not plausibly alleged that their products contained benzene, the District Court rejected Plaintiffs’ reliance on the Valisure testing and explained that “[b]ecause Plaintiffs cannot allege that all of the representative products contained benzene and contained excessive levels of benzene, Plaintiffs are unable to establish a plausible inference that every Product at issue, including those purchased by Plaintiffs, also contained benzene and excessive levels of such.” App. 20. While we understand the challenge the District Court faced in assessing
Plaintiffs need only plausibly allege that they purchased contaminated products. This does not require a showing that all products in the recall were contaminated, as this would impose a heightened standard requiring that it be more likely than not—or probable—that Plaintiffs purchased a defective product. See Twombly, 550 U.S. at 556 (“Asking for plausible grounds to infer [contamination] does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of [an injury].“); see also In re Recalled Abbott Infant Formula Prod. Liab. Litig., 97 F.4th 525, 529-30 (7th Cir. 2024) (suggesting that injury is adequately particularized when facts allege that “contamination of [ ] products was sufficiently widespread to plausibly affect any given [product], including the ones [Plaintiffs] purchased“); John v. Whole Foods Mkt. Grp., Inc., 858 F.3d 732, 734-36 (2d Cir. 2017) (holding injury was plausibly alleged when third-party testing conducted during the relevant period determined that the challenged mislabeling practices were “systematic” and “routine“).17
Even applying this standard, we might still have reservations about the reasonable inferences that could be drawn from Plaintiffs’ allegations, but on appeal, Plaintiffs have offered additional support. Specifically, Plaintiffs notified us of a complaint in a separate, later action filed by Bayer against Aeropres Corporation, the manufacturer of the component in Lotrimin and Tinactin that was contaminated with benzene, for costs associated with the recall. See Aeropres Complaint. Plaintiffs requested that we take judicial notice of the Aeropres Complaint, and we granted the motion. Because Bayer filed the Aeropres Complaint after the District Court dismissed Plaintiffs’ FAC with prejudice, Plaintiffs raise this argument, necessarily, for the first time on appeal.
According to the Aeropres Complaint, “Bayer commissioned . . . testing of Lotrimin and Tinactin samples[,] which revealed that Lotrimin and Tinactin samples manufactured beginning in September 2018, the
Plaintiffs ask us to consider the allegations in the Aeropres Complaint as lending support for the plausibility of Plaintiffs’ allegations of contamination. While before the District Court, Plaintiffs were given the opportunity to amend their original complaint, but at that time, the Aeropres Complaint had not yet been filed. Therefore, Plaintiffs’ FAC was necessarily devoid of allegations regarding Bayer‘s contentions in the Aeropres Complaint, which may have supported a potential finding of plausibility.18 Rather than consider
Finally, because neither the recall itself, nor the Valisure testing, nor the Aeropres Complaint, have any relevance to Plaintiffs who have failed to allege a TN, CV, or NAA lot number, we conclude that the District Court properly dismissed their claims for lack of standing. To conclude otherwise would require an inference that all products sold during the recall window contained the specified prefixes, or that those prefixes dominated Bayer‘s Lotrimin and Tinactin sales during that time frame. Neither the FAC nor the Aeropres Complaint allege facts that would support this inference. Without any information to tie these Plaintiffs’ products to the recall other than the timeframe during which they made their purchases, these Plaintiffs’ allegations “stop[ ] short of the line between possibility and plausibility.” Twombly, 550 U.S. at 546; see also id. at 555 (“Factual allegations must be enough to [assure a court of jurisdiction] above the speculative level.“).
IV. CONCLUSION
For the foregoing reasons, we will reverse the District Court‘s dismissal of the complaint as to Plaintiffs Huertas, Mistretta, Wyant, and Poovey and remand for further proceedings consistent with this opinion.