In this age of mass manufacturing, each unit in a product line is usually the same as every other.  But manufacturing isn’t perfect.  Sometimes, for various reasons, some units in a product line will deviate from the manufacturer’s intended specifications.  When this happens, consumer class actions often follow, on the theory that the manufacturer misled consumers by failing to disclose the defect or by selling goods that didn’t conform to the manufacturer’s promises.  But these actions pose serious challenges.  For one thing, when the alleged defect is subtle (like the inclusion of an extraneous chemical), it can be difficult for the named plaintiff to plausibly plead that her own unit of product was affected.  Moreover, when only some units in a product line have the defect in question, determining whether any individual purchaser received a defective unit is an individualized inquiry.  This creates a barrier to class certification, which is usually the whole ballgame in consumer protection suits.

Enter the “risk of a defect” theory.  In an attempt to salvage cases like these, plaintiffs often assert that their grievance isn’t that they bought a defective product.  Instead, they claim that every single purchaser of the product line suffered a common “economic” injury—whether they received a defective unit or not—because the risk of a defect made the product line less valuable across the board.  These plaintiffs assert that even purchasers who received non-defective units that conformed to the manufacturer’s promises were injured, because they wouldn’t have been willing to buy the product (or pay as much money for it) had they known of the risk that they might receive a defective unit—a risk that never materialized.  By focusing on this abstract “economic” injury rather than a concrete product defect, this theory is meant to eliminate the need for individualized inquiries of each class member, smoothing the path to certification (and massive recoveries).

But does it actually work?  Not in the Eighth Circuit.  As that court sees it, in framing their alleged injuries in such an abstract manner, plaintiffs who plead this theory run afoul of Article III’s requirement of a “concrete and particularized” injury that affected them “in a personal and individual way.”  A recent decision from the Western District of Missouri, Schloegel v. Edgewell Personal Care Co., No. 4:21-CV-00631-DGK, 2022 WL 808694 (W.D. Mo. Mar. 16, 2022), exemplifies how this “risk of a defect” theory can backfire. 

In Schloegel, the plaintiff alleged that “some samples of Banana Boat sunscreen products” manufactured by the defendant had “been found to be adulterated with benzene,” a carcinogen, and that the defendant had “failed to disclose via labeling or advertising that Banana Boat sunscreen products may contain benzene.”  Id. at *1 (emphases added).  Although the plaintiff did “not allege that the specific [unit of] product she purchased was adulterated with benzene,” she nevertheless argued “that her injury occurred when she purchased the Banana Boat sunscreen product, as she would have paid significantly less or not have made the purchase at all had she known of the risk of exposure to benzene.”  Id. at *1-2 (emphasis added).  She thus brought claims for (i) false advertising under Missouri’s consumer protection law and (ii) unjust enrichment, along with a request for an injunction to prohibit the defendant from selling the sunscreen without “a warning label that the product may contain benzene.”  Id. at *1.

The court dismissed the plaintiff’s complaint for lack of Article III standing.  In doing so, the court concluded that the Eighth Circuit’s 2014 decision in Wallace v. ConAgra Foods, Inc., 747 F.3d 1025, was on all fours.  In Wallace, the plaintiffs alleged that the defendant’s Hebrew National hot dogs had been falsely labeled as kosher, when in fact an indeterminate number—but not all—of the hot dogs did not meet kosher requirements because of inadvertent impurities.  Id. at 1028–29.  They alleged that they had been injured because they paid a price premium in the belief that the hot dogs were “100% strictly kosher, when they weren’t”—but they conceded there was no way to ascertain which hot dogs had been made with treif meat, or whether the particular hot dogs they had purchased were so tainted.   Id. at 1030. The Wallace court held that, “[w]ithout any particularized reason to think the consumers’ own packages of Hebrew National beef actually exhibited the alleged non-kosher defect, the consumers lack[ed] Article III standing to sue.”  Id.  As the Schloegel court observed, Wallace teaches that, in the Eighth Circuit, plaintiffs cannot establish Article III standing by alleging only “that a product line contains a defect or that a product is at risk for manifesting this defect; rather, the plaintiffs must allege that their [individual unit of] product actually exhibited the alleged defect.”  Id. at *2 (quoting Wallace, 747 F.3d at 1030) (first two emphases added). 

The plaintiff in Schloegel sought to distinguish Wallace on the ground that her suit was “not a defective product case, but rather an economic harm case.”  Schloegel, 2022 WL 808694 at *2.  Specifically, she argued that because “she would have paid significantly less or not have made the purchase at all had she known of the risk of exposure to benzene,” she had personally suffered an economic injury-in-fact, regardless of whether the sunscreen she purchased actually contained the chemical.  Id.  This “distinction” is illusory, however, because Wallace was indeed pleaded as an economic harm case.  See Wallace, 747 F.3d at 1029 (explaining that plaintiffs had alleged they “paid too much for Hebrew National products based on [the] misleading representations”).  In any event, the Schloegel court found that, even if her alleged economic harm might amount to a concrete injury, she had overlooked “that she must not only show a concrete injury, but also a particularized one.”  Id.  And absent any allegation “that she actually purchased Banana Boat Sunscreen products which were adulterated with benzene,” the court determined that the plaintiff had “failed to allege that she did not receive exactly what [the defendant allegedly] promised: an unadulterated sunscreen product.”  Id. (emphasis added).  The court thus held that the plaintiff had not demonstrated an actual injury sufficient to establish Article III standing.  Id.  The court did, however, dismiss the complaint without prejudice, giving the plaintiff an opportunity to plead additional facts to show—if possible—that the particular unit of product she purchased was in fact adulterated.

The holding in Schloegel highlights the Eighth Circuit’s stringent test for Article III standing in cases that allege false advertising related to product defects: in that jurisdiction, allegations tied to the mere risk of a product defect are insufficient.  Notably, although the potential defect in both Schloegel and Wallace concerned the inclusion of an unintended, extraneous substance, the Eighth Circuit has applied this principle to other fact patterns, too: for example, cases involving car engines with a risk of overheating, see In re Polaris Mktg., Sales Pracs., & Prods. Liab. Litig., 9 F.4th 793, 797 (8th Cir. 2021); cribs with a risk of coming apart and creating a hazard to infants, see O’Neil v. Simplicity, Inc., 574 F.3d 501, 503 (8th Cir. 2009); and brakes with a risk of malfunctioning during an emergency, see Briehl v. Gen. Motors Corp., 172 F.3d 623, 627-29 (8th Cir. 1999). Although the plaintiff in Schloegel tried to sidestep these decisions by framing her loss as an overpayment—rather than injury caused by the defect itself—the court reasoned that such allegations of pocketbook harm are insufficiently particularized where the plaintiff fails to allege that the specific unit of product she purchased was in fact defective.  As the Eighth Circuit has put it: “[t]he problem with this argument is that,” where the named plaintiff’s own unit of product “has not exhibited the alleged defect,” she “ha[s] necessarily received the benefit of [her] bargain”—even if others who purchased the same product did not.  O’Neil, 574 F.3d at 504.

Particularly given the large number of false advertising class actions that are filed in district courts in Missouri and Minnesota, litigants on both sides of the “v.” should take note of the Eighth Circuit’s hard line in applying Article III’s standing requirements to these types of claims.  The Schloegel plaintiffs failed to do so—and their class action ambitions burned up in the harsh Kansas City sun.