Federal Court Narrows Class Using Standing and the NJ Products Liability Act
In Levinson v. Johnson & Johnson Consumer Cos., 2010 WL 421091 (D.N.J. Feb. 1, 2010), Judge Dennis Cavanaugh was confronted with yet another attempt to turn a product liability action into a consumer fraud class action by carefully pleading only economic harm and a failure to disclose the risk of harm. Faced with motion to dismiss, Judge Cavanaugh significantly narrowed the class, but he allowed certain limited claims to go forward.
In Levinson, some Missouri plaintiffs brought a putative nationwide class action against J&J and Wal-mart, alleging that J&J's Baby Shampoo and Wal-mart's Equate Tearless Baby Wash contained trace amounts of chemicals that increase the risk of cancer, cause skin irritation, and can lead to asthma and hypersensitivity. Plaintiffs allegedly had independent lab tests conducted that identified trace amounts of methylene chloride (which FDA has banned from use in cosmetics), 1,4-dioxane and formaldehyde. Plaintiffs alleged that the defendants' failure to disclose the presence of these chemicals -- as well as statements such as "Ultra Mild," "Hypoallergenic," and "gentle enough even for newborns" -- constituted a violation of state consumer fraud statutes, a breach of the implied warranty of merchantability and implied warranties of fitness for a particular purpose, and unjust enrichment.
The defendants moved to dismiss for lack of standing and for failure to state a claim as a matter of law. In analyzing their standing argument, the court relied heavily on Koronthaly v. L'Oreal, 2008 U.S. Dist. LEXIS 59024 (D.N.J. July 25, 2008), a case involving the purchase of lipstick containing lead. Judge Cavanaugh described the holding in Koronthaly as "[i]n the absence of an FDA regulation concerning lead content in lipstick, or other legal prohibition, the plaintiff could not 'seek a remedy for a harm that she had not actually or allegedly suffered.'" Levinson, 2010 WL 421091 at *4 (citation omitted). Accordingly, the court held that plaintiffs lacked standing to assert purely economic harm from the chemicals that were unregulated by the FDA in soap or cosmetics (formaldehyde and 1,4-dioxane), but they could assert a claim for purely economic harm involving the substance that had been banned by the FDA for use in cosmetics (methylene chloride). As the court explained:
While the Court agrees that the assertion of an economic injury is not an automatic bar to standing, Koronthaly demonstrates that an exception has been recognized in the context of claims concerning defective products, absent a specific legal prohibition precluding particular ingredients or usages. Insofar as Plaintiffs' claims pertain to allegedly toxic chemicals that have not been banned by the FDA for use in cosmetics . . . this Court concludes that any potential injury is too remote, hypothetical and/or conjectural to establish standing in this matter. However, insofar as Plaintiffs' claims pertain to methylene chloride, a chemical explicitly banned for use by the FDA in any cosmetic, this Court declines to dismiss Plaintiffs' claims pursuant to Fed.R.Civ.P. 12(b)(1) for lack of standing.
Id. at *4.
The court then proceeded to analyze whether the individual causes of action stated a claim under Rule 12(b)(6). The parties apparently had represented to the court that regardless of whether New Jersey law or Missouri law were applied, the result would be the same, and thus there was no conflict of laws issue. Id. at *5. The court disagreed, holding that New Jersey's Product Liability Act preempted plaintiffs' other claims. The court relied upon Sinclair v. Merck & Co., 948 A.2d 587 (N.J. 2008), in which the New Jersey Supreme Court held that consumer fraud claims for economic harm allegedly caused by prescriptions for Vioxx were preempted by the Product Liability Act. Judge Cavanaugh concluded:
Similarly, at the heart of this matter is the potential for harm caused by the defective products, J&J Baby Shampoo and Wal-Mart Equate Tearless Baby Wash, containing allegedly "toxic chemicals linked to increased cancer risk, adverse skin reactions, and other serious health problems." (See Pl. Compl. para. 2). . . . [C]onsistent with the Sinclair decision, this court concludes that the PLA subsumes all of Plaintiffs' claims, effectively precluding Plaintiffs' claims with respect to the CFA, and otherwise, in the absence of "harm" as defined by the PLA. The Court does not agree that articulating a claim in terms of pure economic harm where the core issue is the potential injury arising as a consequence of the products' allegedly harmful chemicals converts the underlying defective product claim into an independent and unrelated consumer fraud issue. Limiting a claim to economic injury and the remedy sought to economic loss cannot be used to obviate the PLA.
Id. at *6.
Accordingly, because New Jersey's Product Liability Act would preempt all claims, but Missouri's would not, the court concluded there was a conflict of laws requiring it to determine which law would apply. Because the plaintiffs were from Missouri and bought and used the product there, the court concluded that Missouri law would apply to these plaintiffs' claims.
Missouri's Consumer Fraud Act requires a causal connection between the allegedly unfair practice and the plaintiff's harm. Where the harm allegedly results from a failure to disclose, "'there must be a showing that the [product] in fact suffered that defect, or evidence from which the defect reasonably could be inferred, in order to demonstrate an ascertainable loss as a result of [defendant]'s failure to disclose the defect.'" Id. at *7 (citation omitted). The court concluded that as to methylene chloride, which the FDA had banned for use in cosmetics, plaintiffs had sufficiently pled a Consumer Fraud Act claim.
Similarly, the court concluded that, with respect to methylene chloride, plaintiffs had sufficiently pled claims for breach of implied warranties under Missouri law. Id. at *9.
However, the court held that plaintiffs had failed to plead a cause of action for unjust enrichment under Missouri law because they had not sufficiently pled that there was irreparable injury or the lack of an adequate remedy at law. Id. The loss was economic, and could be remedied by the payment of money, which could be recovered by an action at law. Thus, there could be no unjust enrichment.
For those keeping a tally, the court whittled the Missouri plaintiffs' claims down to the violation of Missouri's Consumer Fraud Act and breach of implied warranties solely for the inclusion of methylene chloride -- not the other substances. In concluding that New Jersey law would preclude all claims because of its Product Liability Act, the court also went a long way toward establishing why a nationwide class could not be certified. It remains to be seen where this action will go from here, but we will attempt to monitor it for you.
