Class Action Goes “Pop” Where Challenged Trans Fats Were No “Secret”
In a recent decision, McGee v. S-L Snacks Nat’l, 982 F.3d 700 (9th Cir. Dec. 4, 2020), the Ninth Circuit upheld a district court’s dismissal of a putative class action for lack of Article III standing. McGee is notable for the court’s willingness, at the motion-to-dismiss stage, to subject a consumer’s theories of injury to meaningful scrutiny, and for its willingness to disregard conclusory and implausible allegations of harm. It also serves as a helpful reminder that disclosures in a product’s ingredients list can be highly relevant in assessing the plausibility of a consumer’s claimed losses. (We have previously discussed the import of ingredient lists in motions to dismiss here, here, and here.) The Ninth Circuit’s refreshingly rigorous analysis of Article III standing in McGee may augur well for defendants’ motions to dismiss in future consumer-protection litigation.
McGee’s Claims and the District Court’s Ruling
Plaintiff Jacquelyn McGee sued Diamond Foods, manufacturer of Pop Secret popcorn, alleging that by eating Pop Secret she had consumed more than half a pound of partially hydrogenated oil (“PHOs”), an artificial trans fat, between 2008 and the filing of her 2014 complaint. Id. at 703-04. McGee alleged that PHOs cause cancer and other adverse health effects, and cited a number of studies in her complaint allegedly finding the same. She asserted claims for, inter alia, unfair and unlawful business practices under California Unfair Competition Law and breach of the implied warranty of merchantability, arguing that there was “no safe level of PHO or artificial trans fat intake” and that Diamond Foods had unfairly elected not to use safer, commercially acceptable alternatives. Id. at 703 (internal quotation marks omitted). Critically, the presence of PHOs in the product was explicitly identified on the nutrition label, and McGee did not allege that the labels were themselves misleading. Instead, she alleged that Diamond’s use of PHOs, per se, gave rise to the alleged liability.
In the district court, Diamond argued that McGee’s alleged physical injury—based on the “credible threat of harm” stemming from “her increased risk of disease from consuming trans fat”—was insufficient to establish Article III standing, as was the economic injury alleged from “pa[ying] for a product detrimental to her health on her belief that the popcorn was safe.” McGee v. Diamond Foods, Inc., No. 14 Civ. 2446, 2016 WL 816003, at *3 (S.D. Cal. Mar. 1, 2016). In dismissing the complaint without prejudice to amend, the court found that McGee failed to allege a sufficient physical or economic “injury-in-fact,” where there were no facts or reasonable inferences from McGee’s allegations that the trans fat popcorn substantially increased her risk of harm, and where she alleged only that she purchased a product that was less healthy than expected. Id. at *6-7. When McGee filed an amended complaint, the district court dismissed again on substantially the same grounds. McGee v. Diamond Foods, Inc., No. 14 Civ. 2446, 2017 WL 1135569, at *3 (S.D. Cal. Mar. 27, 2017).
The Ninth Circuit’s Decision
In a published decision, the Ninth Circuit affirmed the district court, rejecting each of McGee’s potential theories as to Article III standing.
First, McGee argued that she had standing under a “benefit of the bargain” theory—i.e., that she had failed to receive something she was promised because she “believed she was purchasing a safe product when [in fact] she was not.” 982 F.3d at 704. The court rejected this theory, reasoning that McGee was required to allege that she did not receive a benefit for which she had actually bargained, rather than a benefit that she merely desired to obtain. Id. at 705-06. Because McGee failed to allege that Diamond had made any representations about the safety of consuming Pop Secret, her unilateral assumption that the popcorn contained only safe and healthy ingredients did not become part of the basis of her bargain with Diamond—particularly where the product’s labeling disclosed the presence of PHOs. Id. at 706.
Next, the Court rejected McGee’s “overpayment theory,” i.e., her assertion that she had suffered an economic injury because, due to the presence of PHOs, she paid more for Pop Secret than it was actually worth. McGee premised this claim on the allegation that “Pop Secret is not fit for human consumption and [therefore] has a value of $0.” Id. at 704. Again, however, because she failed to allege that Diamond had made any false representations or actionable non-disclosures regarding PHOs, the court held that “a key element of our overpayment cases—a defendant’s misrepresentations about a product—is absent here.” Id. at 707. The court declined to decide whether, in the absence of an express misrepresentation, an overpayment theory of economic injury could ever be viable. Id. For purposes of this case, it sufficed that McGee could not allege that Pop Secret contained a hidden defect or that it was worth objectively less than she paid for it, where (1) the product’s labeling disclosed the presence of artificial trans fat and (2) the health risks associated with trans fat were already firmly established at the time of her purchases. Id. at 707-08. (We previously addressed the limits of manufacturers’ liability for alleged “overpayment” damages absent any express misrepresentations here.)
Finally, the Court rejected McGee’s theories of standing based on present and/or future physical injury. While the complaint referred to articles discussing the potential health effects of artificial trans fat generally, it did not contain any allegations that McGee had undergone medical testing or examination to confirm that she presently suffered from any medical condition as a result of consuming Pop Secret. Id. at 708. McGee’s argument that consuming half a pound of PHOs over several years invariably causes physical injury was too speculative and not actually supported by the studies cited in her complaint. Id. at 708-09. The court also concluded that McGee failed to sufficiently allege future physical injury because the studies she relied upon addressed health risks associated with greater levels of artificial trans fat consumption than McGee claimed she had consumed. Id. at 709-10.
Takeaways for Manufacturers
McGee confirms that, at least under some circumstances, nutrition fact panels and ingredient disclosures provide information that can be used to support a motion to dismiss and remain important tools for defeating consumer class actions. In particular, where allegedly harmful or undesirable ingredients are disclosed in an ingredient list, and no contrary affirmative claims (e.g., that the product is safe or healthy) appear elsewhere in the product’s labeling or advertising, plaintiffs are unlikely to be able to successfully allege that the presence of the ingredient caused them economic injury.
In addition, McGee sets an appropriately high bar for plaintiffs to plausibly plead present or future physical injury due to the consumption of a challenged ingredient: generalized or speculative claims will not suffice. Moreover, even on a motion to dismiss, courts can (and should) closely review any scientific articles that plaintiffs cite in their complaint to verify whether those publications actually support the plaintiff’s allegations of harm, rather than blindly accepting the plaintiff’s characterization of them.