The U.S. Court of Appeals for the Third Circuit partially reversed a U.S. District Court of New Jersey dismissal of a class action claim filed against Bayer by customers who purchased pharmaceuticals found to be contaminated with benzene.

In 2021, Bayer was hit with a class action lawsuit, Huertas v. Bayer. The Third Circuit considered an appeal filed by nine consumers who asserted claims over their purchase of Lotrimin and Tinactin products to treat athlete’s foot and ringworm. U.S. District Judge Susan D. Wigenton of the District of New Jersey dismissed the consumers’ claims for lack of standing.

Third Circuit Judge Cindy K. Chung found that the district court was incorrect in applying a heightened legal standard for standing and reversed the lower court’s order that dismissed the complaint. Chung held that the plaintiffs plausibly alleged their claims that the products in question were worth less than they would have been if they were not contaminated.

“The logic requires little elaboration: if a product contains a manufacturing flaw so severe that it cannot be used, it is not worth the full price purchasers paid with the understanding they would be able to use all of the product,” Chung said.

In October 2021, Bayer recalled millions of dollars worth of products when the company discovered they had been contaminated with benzene, a known carcinogen. According to the opinion, the plaintiffs did not allege that they were injured, but instead contended that the products were worth less than they bargained for.

“Since the contaminated products contained a defect that rendered them unusable, the products were worth less than their full purchase price,” Chung said. “To hold otherwise would be to conclude that an unusable product is worth the same as a usable one—a conclusion that resists logic.”

Bayer attempted to rely on the Third Circuit’s 2018 decision in In re Johnson & Johnson Talcum Powder. In that case, the appeals court rejected the plaintiff’s theory because she alleged that she suffered economic injury through an increased risk of ovarian cancer by using the product. The Third Circuit held that the plaintiff’s benefit-of-the-bargain theory was no more than an allegation.

“Instead, we explained that a plaintiff must ‘allege facts that would permit a factfinder to determine that the economic benefit she received in purchasing the powder was worth less than the economic benefit for which she bargained,’” Chung said. “More simply, she was required to ‘allege that she purchased Baby Powder that was worth less than what she paid for.’”

Chung also cited the U.S. Court of Appeals for the Seventh and Eleventh circuits in support of her conclusion. The Seventh Circuit held in 2011, in In re Aqua Dots, that the plaintiffs had standing to sue the toy manufacturer, even though their children were not harmed by its defect, under the benefit-of-the-bargain theory. The Eleventh Circuit made a similar finding in Debernardis v. IQ Formulations in 2019.

“In sum, plaintiffs alleged that they purchased recalled Lotrimin and Tinactin products based on the understanding that those products would be fit for topical use in treating fungal infections,” Chung concluded. “Instead, they received products that they were instructed to ‘stop using’ and to ‘discard … appropriately.’ Given that contaminated products are unfit for their intended use, they are inherently worth less than the uncontaminated products plaintiffs thought they were purchasing.”

However, Chung addressed the fact that not every plaintiff provided the lot numbers specified in Bayer's recall, which covered September 2018 through September 2021. The judge only reinstated the claim for four of the nine plaintiffs who provided those numbers.

“We are pleased with the court’s decision to affirm the dismissal of five of the nine plaintiffs in this case," a spokesperson for Bayer wrote to the Law Journal. "As to the remaining plaintiffs, if they choose to proceed with their claims by filing an amended complaint, we look forward to explaining to the district court why their claims lack merit. Bayer already provided consumers, including plaintiffs, with the opportunity to seek the same relief they are seeking through this case through a product recall, and it is disappointing that they have chosen to pursue litigation."

The spokesperson added that Bayer is pursuing litigation against its supplier, seeking to recover the damages incurred due to the recall.

Counsel for the plaintiffs, Max S. Roberts of Bursor & Fisher, and counsel to Bayer, David M. Zionts of Covington & Burling, did not immediately respond to requests for comment.