Are Retailers Responsible for Publicly Promoted Products: Herman Details Fifth Circuit’s Recent Reversal in Defective Baby Formula Case

Special counsel Steve Herman recently published an article reviewing the U.S. Fifth Circuit Court’s reversal of a District Court’s ruling to dismiss a family’s case against Hain Celestial Group and Whole Foods over defective baby formula. Continue reading below, or click here to read on JD Supra.

A recent Congressional report [i] identified the risk of toxic heavy metal contamination of various brands of commercial baby food. Palmquist v. Hain Celestial Group [ii] is one of the first of many cases pending nationwide seeking damages. Earlier this year, the U.S. Court of Appeals for the Fifth Circuit reversed a judgment against the Palmquist family, reinstated their claims, and remanded them to state court.

The Case

In September 2014, Grant and Sarah Palmquist welcomed a baby boy after Mrs. Palmquist’s healthy and uneventful pregnancy. During the first two years of his life, their son, Ethan, met or exceeded developmental milestones. During this period, Ethan almost exclusively consumed Hain’s Earth’s Best Organic Products, purchased from Whole Foods, a multinational supermarket chain headquartered in Austin, Tex.

As a toddler, the Palmquists saw their son’s “social, language, and behavior[al]” skills rapidly regress. After meeting with doctors and specialists, some physicians attributed most, if not all, of Ethan’s symptoms to autism spectrum disorder or major neurocognitive disorder. Some also diagnosed Ethan with heavy metal poisoning.

Several years after Ethan’s heavy metal toxicity diagnosis, in 2021 the House Oversight and Reform Committee released a report demonstrating that certain baby foods, including Hain’s, contained elevated levels of toxic heavy metals, including arsenic, lead, cadmium, and mercury. The Palmquists then sued both Hain and Whole Foods in Texas state court that same year, alleging strict-products-liability and negligence claims against Hain’s and breach-of-warranties and negligence claims against Whole Foods.

Hain removed the case to Federal Court, contending that Whole Foods was improperly joined to defeat diversity jurisdiction. After removal, the Palmquists filed an amended complaint that purportedly “clarified their allegations against Whole Foods under the federal pleading standard.” In their second amended complaint, the Palmquists sought to clarify that their breach-of-warranties cause of action included claims that Whole Foods expressly represented to the public and the Palmquists that Hain’s baby food was safe. The Palmquists also added a negligent undertaking claim.

The District Court Weighs In

The District Court determined that any new claims could not be considered because jurisdiction is resolved by looking at the complaint at the time the petition for removal is filed. In addition to their new negligent-undertaking claim, the District Court concluded that the Palmquists added a new breach of express warranty claim in the second amended complaint.

Nonetheless, even considering the purportedly new claim, the District Court concluded that under the Texas Civil Practice & Remedies Code §82.003(a), retail sellers such as Whole Foods are generally not liable for the harm caused by the products they sell. The Palmquists, then, had improperly joined Whole Foods, which was dismissed from the suit. During the trial on the merits against Hain, after the Palmquists had rested, the District Court granted Hain’s Motion for Judgment as a Matter of Law, finding that the Palmquists had presented no evidence of general causation.

The Fifth Circuit Reversal

The Palmquist family challenged both rulings on appeal.

The U.S. Fifth Circuit first determined that the language in the second complaint was “broad enough to encompass both breach of express and implied warranties claims.” This was in part due to the paragraph being entitled “Breach of Warranties,” which could include both express and implied claims. The Court of Appeal added that although the as-removed complaint included language that “generally discussed Whole Foods’ implied warranties, it also discussed Whole Foods’ express representations regarding Hain’s products.” With this understanding, the District Court’s dismissal of Whole Foods from the suit was premature because, according to the Fifth Circuit, the Palmquists’ second amended complaint did not include a new breach of express warranty claim.

The Court of Appeals then addressed the district court’s interpretation of the viability of such claims under Texas Law. The Fifth Circuit notes that the district court, Hain, and Whole Foods all based their proposition that alleged misrepresentations may be too general to be actionable on decisions from federal courts. However, when sitting in diversity, federal courts apply state substantive law. Therefore, the Court of Appeals finds that these federal decisions are insufficient to conclude that a cause of action cannot plausibly be stated. Indeed, the Palmquists pointed to examples of Texas state court cases recognizing “fairly generalized statements adequate enough to support claims against a nonmanufacturing seller.”

Accepting the allegation from the Palmquists that Whole Foods represents that it “carefully vets its products to make sure they meet high standards by researching ingredients, reading labels and auditing sourcing practices” as true, and interpreting ambiguities of state law in favor of the Palmquists, the Fifth Circuit Court held that “the district court erred in determining that there was no possibility of recovery under Section 82.003(a)(5).”

The Court also agreed with the Palmquists’ argument that the “Whole Foods business model depends on the customers’ willingness to pay a premium for products that Whole Foods advertises as healthy and high quality.” Whole Foods also implies that they have special knowledge, unavailable to customers, about Hain’s baby food ingredients. Therefore, the “district court erred in concluding that Whole Foods was improperly joined and in denying the Palmquists’ motion to remand.”

Future Removal Jurisdiction Cases

The Fifth Circuit’s reversal ensures that the Palmquists will have the right to pursue all their claims, against both defendants, in state court. More broadly, the Court of Appeals reconfirms important legal precedent and traditions regarding the appropriate allocation of jurisdiction and authority between the states and the federal courts. Finally, with respect to Texas consumers, the decision makes it more likely that retailers will assume responsibility for the products they promote to the public.

Steve Herman is special counsel in Fishman Haygood’s Litigation section. His broad civil practice spans 30 years of sophisticated commercial and class action experience, including co-lead counsel in the Deepwater Horizon Oil Spill litigation. Click here to learn more about his practice.

[i] U.S. House of Representatives, Baby Foods Are Tainted with Dangerous Levels of Arsenic, Lead, Cadmium, and Mercury

[ii] Palmquist v. Hain Celestial Group, No.23-40197, 2024 WL 2720460 (May 28, 2024)