Tashima’s Opinion Leaves Unanswered Whether Consumer Has a Claim Based on ‘Overpayment’ for Product Where Manufacturer Made No Misrepresentation; Plaintiff Says Popcorn She Bought Had Value of ‘$0’
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals on Friday, although affirming the dismissal of a woman’s action against the maker of a popcorn based on the lack of an allegation that she suffered a cognizable injury, left the door open to the proposition that an injury could be predicated on an overpayment for a product even though the manufacturer made no misstatement about its qualities.
Plaintiff Jacquelyn McGee took the position that “Pop Secret” popcorn, which she purchased, “is not fit for human consumption and has a value of $0,” so that she suffered an economic injury to the extent of the purchase price.
McGee “raises what appears to be a novel theory,” Senior Circuit Judge A. Wallace Tashima observed in his opinion for a three-judge court. The theory fails, in the present instance, he said, based on the particular fact situation—but he did not discount the possibility that the approach might succeed under different circumstances.
The plaintiff had purchased defendant Diamond Foods, Inc.’s popcorn, spotted that it contains partially hydrogenated oils (“PHO”), then brought a putative class action in U.S. District Court Southern District of California under theories of unfair competition, nuisance, and breach of the implied warranty of merchantability.
PHO, she averred, is “a food additive banned in many parts of the world because it is the only dietary source of artificial trans fat, a toxic carcinogen for which there are many safe and commercially acceptable substitutes.” McGee added that the ingredient “causes cardiovascular heart disease, diabetes, cancer, and Alzheimer’s disease, and accelerates memory damage and cognitive decline,” adding that it is unsafe in any amount.
(In 2015, the Food and Drug Administration determined that there is no consensus among experts as to whether PHO is safe for human consumption.)
District Court Judge John A. Houston dismissed the action with prejudice, ruling McGee lacked Art. III standing based on having failed to plead an “injury in fact.” Tashima agreed.
“This is not, however, a case in which McGee alleges that she paid more for a product due to Diamond’s deceptive conduct. She does not allege that Diamond made false representations—or actionable non-disclosures—about Pop Secret. Thus, a key element of our overpayment cases—a defendant’s misrepresentations about a product—is absent here.”
However, he acknowledged that her “novel theory” that a misrepresentation is not essential to a claim based on an “overpayment” does appear “to find some support” in cases.
Tashima pointed to the Ninth Circuit’s 2009 decision in Birdsong v. Apple, Inc. where a manufacturer was sued based on inherent dangers in using its iPods which, the plaintiffs alleged, caused the devices to be worth less than the purchase price.
“Although we rejected this argument,” Tashima said, “we did so on the narrow ground that ‘the plaintiffs have failed to allege a cognizable defect,’…rather than treating the theory as more broadly untenable. Thus, Birdsong arguably may be read to suggest that, at least in the context of a hidden defect, economic injury can be established on an overpayment theory absent misrepresentations.”
He also made note of a 2010 decision by a three-judge Third Circuit panel in Koronthaly v. L’Oreal USA, Inc. There, a woman sued based on lipstick she had purchased containing lead in a greater amount than the Federal Drug Administration permits in candy.
The Third Circuit court said that “[a]bsent any allegation” by the plaintiff that “she received a product that… was worth objectively less than what one could reasonably expect,” she “has not demonstrated a concrete injury-in-fact.” Tashima said that “suggested” that liability could exist in the presence of a disappointed expectation.
Although that opinion was denominated “not precedential,” he said, it was cited by the Third Circuit in a footnote to its 2018 opinion in In re Johnson & Johnson Talcum Powder Products Marketing., Sales Practice & Liability Litigation.
Declining to assess whether McGee’s theory could succeed under some circumstances, he wrote:
“To resolve this appeal, we need not decide whether, in the absence of a misrepresentation, an overpayment theory of economic injury is viable. Even assuming that it is, McGee has failed to allege injury on that basis here. She does not allege that Pop Secret contained a hidden defect, as alleged in Birdsong, or that Pop Secret was worth objectively less than what she paid for it, as hypothesized in Koronthaly and Johnson & Johnson Talcum Powder. As McGee concedes, Pop Secret’s nutritional label disclosed the presence of artificial trans fat, and the health risks of consuming artificial trans fat were firmly established by the time of McGee’s purchases.”
Tashima also declined to respond to a theory put forth by Diamond, saying in a footnote:
“Although we agree with Diamond that McGee has not alleged an economic injury, we do not reach Diamond’s argument that ‘a plaintiff who consumes a food product suffers no economic injury.’ We leave for another day the question of whether a plaintiff who consumes a product can nonetheless be deprived of the benefit of her bargain or have overpaid for the product.”
With respect McGee’s contention that an economic loss stemmed from her having lost the “benefit of a bargain,” he wrote:
“McGee does not contend that Diamond made any representations about Pop Secret’s safety. Although she may have assumed that Pop Secret contained only safe and healthy ingredients, her assumptions were not included in the bargain, particularly given the labeling disclosure that the product contained artificial trans fat. Thus, even if those expectations were not met, she has not alleged that she was denied the benefit of her bargain.”
He also said that “McGee has not plausibly alleged that her consumption of Pop Secret caused her immediate physical injury” and “has not plausibly alleged that her consumption of Pop Secret substantially increased her risk of disease.”
The case is McGee v. S-L Snacks National, 17-55577.
Tashima’s opinion was filed one day short of two years since the cases argued in Pasadena.
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