“Pop Secret” Lawsuit Fails to Fluff, When Ninth Circuit Finds No Article III Standing

In McGee v. Diamond Foods, Inc., No. 17-55577 (9th Cir. Dec. 4, 2020), the Ninth Circuit affirms dismissal of a lawsuit against a snack food company alleging adulteration with an unhealthy ingredient, finding no Article III injury in fact.

“McGee contends that Diamond engaged in unfair practices, created a nuisance, and breached the warranty of merchantability by including partially hydrogenated oils (‘PHOs’) as an ingredient in Pop Secret. She further alleges that PHOs, the primary dietary source of industrially produced trans fatty acids (also known as artificial trans fat), are an unsafe food additive that causes heart disease, diabetes, cancer, and other ailments.”

McGee also alleged that because the U.S. Food and Drug Administration (“FDA”) “made a final determination that there is no longer a consensus among qualified experts that [PHOs] . . . are generally recognized as safe (GRAS) for any use in human food,” the inclusion of the ingredient was unlawful under state and federal law, violating state unfair trade, tort, and warranty law. The district court dismissed on standing grounds.

The Ninth Circuit rejects each of plaintiff’s three theories of injury in fact.

First, she alleges economic loss, i.e., that ‘[t]he amount of trans fat she consumed in Pop Secret caused her economic injury because she believed she was purchasing a safe product when she was not.’” The panel holds that the plaintiff’s subjective belief in the value of of the goods purchased is not enough under such a benefit-of-the-bargain theory. “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.”

“McGee alternatively appears to contend that she suffered an economic injury because she paid more for Pop Secret than it was worth. She alleges that she ‘suffered loss in an amount equal to the amount she paid for Pop Secret’ because ‘Pop Secret is not fit for human consumption and has a value of $0.’” While paying more for a product than it is worth due to false representations may constitute an injury in fact, “[s]he 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.”

Even if no misrepresentation were required, a “novel” theory says the Ninth Circuit, she has not alleged that Pop Secret has a hidden defect or was worth objectively less than she paid for it. “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.”

Second, she “alleges that ‘[t]he amount of trans fat she consumed in Pop Secret . . . caused her physical injury by harming her heart and blood vessels and substantially aggravating her age-related cholesterol and insulin dysregulation.” While agreeing that physical injury constitutes an injury in fact, “McGee has plausibly alleged that she suffered these injuries. She does not allege that she has undergone medical testing or examination to confirm that she suffers from these conditions or that they were caused by her consumption of Pop Secret.” Nor could the plaintiff plausibly allege “that the consumption of nearly half a pound of artificial trans fat over several years invariably results in such injuries.”

Finally, she “alleges that her consumption of Pop Secret ‘substantially increase[d]’ her ‘risk of heart disease, diabetes, cancer, and death.’” But plaintiff also did not plausibly allege future injury, the Ninth Circuit holds. “[A]lthough the complaint alleges that there are serious health risks associated with the consumption of artificial trans fat, even in small quantities, we are not persuaded that McGee has plausibly alleged that her limited consumption of Pop Secret [0.2 grams a day] placed her at substantial risk of disease.”

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