Ellis: Successful Defense Strategy
Companies have defeated greenwashing allegations via dispositive motions to dismiss that contest conclusory allegations and challenge whether a plaintiff acted as a “reasonable consumer.” For example, in Ellis v. Nike USA, Inc., the U.S. District Court for the Eastern District of Missouri dismissed a plaintiff’s complaint because she “failed to plausibly allege” that the defendant’s statements regarding its “Sustainability Collection” products were “misleading, false, or fraudulent as required to establish liability.” No. 23-cv-00632, 2024 WL 1344805, at *4 (E.D. Mo. Mar. 28, 2024). Ellis also held that the plaintiff did not allege facts sufficient to show that she acted as a “reasonable consumer . . . in light of all the circumstances.”
The plaintiff in Ellis alleged that she purchased three Nike Dri-FIT products from the company’s “Sustainability Collection” “after viewing the product’s hangtag labeling, marketing, and advertisements.” However, she failed to include any such labeling, marketing, or advertising materials in her complaint. Rather, she alleged that the three items she purchased, as well as an additional 2,028 items listed in an exhibit to the complaint, were advertised as “being sustainable and made with ‘recycled and organic materials’” but were actually “made with virgin synthetic and non-organic materials that are harmful to the environment.” The plaintiff claimed that she paid an unspecified “premium” but failed to allege the amount she paid for the three products that she actually purchased. She asserted individual and putative class claims for violations of the Missouri Merchandising Practices Act (MMPA) as well as common-law claims for unjust enrichment, negligent misrepresentation, and fraud.
The court initially held that the complaint did not contain any facts to substantiate the plaintiff’s claim that more than 2,000 Nike products “are not made with any ‘recycled and organic fibers’” and are “not made with any ‘sustainable’ materials.” The court also identified numerous flaws with the plaintiff’s allegations, including that she failed to (1) mention any testing or analysis, (2) explain how the products’ look or feel might indicate their makeup, (3) allege information about the supplier of Nike’s materials or about Nike’s manufacturing process, and (4) provide inside knowledge from a whistleblower. The court determined that the exhibit attached to the complaint, which listed the products’ makeup (e.g., as “100% polyester” or “83% polyester and 17% spandex”), was insufficient to support the plaintiff’s claims because it was “silent on whether the products contain or do not contain recycled or organic material.” Id. at *3. Her claim that she “lack[ed] the meaningful ability to test or independently ascertain or verify whether a product [was] made with ‘recycled and organic fibers’ and ‘sustainable materials’” was also insufficient to sustain her pleading burden.
Next, the court rejected the plaintiff’s MMPA claim because she failed to allege that she “acted as a reasonable consumer would in light of all circumstances.” Id. at *4. In particular, she failed to allege what “she actually read or heard about the three products before she purchased them” and did not “reveal what the hangtag on any of [the] products stated.” Id. Although the complaint included a product hangtag image, the plaintiff did not allege that she actually purchased that product. Moreover, the complaint included descriptions of various alleged “representations” from Nike’s website, advertisements, and social media, but the plaintiff failed to allege that she ever saw any of these “specific representations.” She also “did not plead what information was available to her at the time, nor what she reviewed or did not review.” Thus, the court held that she did not “plausibly plead[] that she acted as a reasonable consumer would in light of all the circumstances.” Id.
Dorris: Unfavorable Defense Outcome
Recent decisions denying motions to dismiss in greenwashing class actions heighten the risk that companies will be forced to endure costly litigation and vexatious discovery to demonstrate that they are living up to their environmental claims. For instance, in Dorris v. Danone Waters of America, the U.S. District Court for the Southern District of New York denied, in part, a defendant’s motion to dismiss arguing that the plaintiffs’ interpretation of a third-party environmental certification on its product label was “unreasonable.” No. 7:22-cv-8717, 2024 WL 112843 (S.D.N.Y. Jan. 10, 2024).
The Dorris plaintiffs filed a putative nationwide class action alleging that the defendant engaged in “false and misleading advertising and marketing” for its “Evian Natural Spring Water.” They further alleged that they purchased the Evian products because the product label included an image containing the phrase “carbon neutral” in two separate locations. According to the complaint, this label was a “representation that the [p]roduct [was] ‘carbon neutral,’” and the plaintiffs claimed that they understood this “to mean the [p]roduct’s manufacturing did not produce CO2 or otherwise cause pollution.” Additionally, they argued that the representation was false because the defendant’s manufacturing allegedly “causes carbon dioxide . . . to be released into the atmosphere.” They also challenged the defendant’s reliance on the third-party certification from Carbon Trust. With respect to damages, the plaintiffs submitted that they “would not have purchased the [p]roduct” if they knew that it “was not carbon neutral,” and they alleged that they paid a “price premium” for the product “due to its environmentally friendly representations.” On behalf of a putative nationwide class and various subclasses, the plaintiffs alleged violations of the New York and Massachusetts consumer fraud statutes and the California Consumers Legal Remedies Act (CLRA), as well as claims for breach of express and implied warranty, unjust enrichment, and fraud.
The defendant moved to dismiss, arguing that (1) the product labels “accurately state[d] th[at] Carbon Trust, an independent third party, certified the [p]roduct ‘carbon neutral’”; (2) “no reasonable consumer would interpret carbon neutral to mean the [p]roduct does not emit any carbon dioxide whatsoever during its entire life cycle”; and (3) “[p]laintiffs [could not] rely on violations of the . . . Green Guides to support their claims” because “they do not create legal obligations or a private right of action.” Id. at *3, *6.
But the court denied the motion to dismiss, in part, and allowed the plaintiffs to proceed with their claims for violations of Massachusetts’s consumer fraud statute and the CLRA, breach of express warranty, unjust enrichment, and fraud.
First, the court held that the term “carbon neutral” could be misleading to a reasonable consumer even though it appeared immediately next to the symbol for Carbon Trust and a prompt to visit Evian’s website to learn more about the certification. It reasoned that “the term ‘carbon neutral’ is more technical and scientific, unfamiliar to and easily misunderstood by the reasonable consumer.” Thus, the court concluded that it was “plausible” that “the ambiguous term ‘carbon neutral,’ a technical word not within an average consumer’s common parlance and carrying multiple meanings, could mislead a reasonable consumer.” Id.
Second, the court held that the FTC’s Green Guides supported its conclusion that the term “carbon neutral,” as used on the Evian label, could mislead a reasonable consumer. Though the defendant argued that its use of carbon neutral complied with the Green Guides because it was a “specific environmental benefit . . . supported by a third-party certification,” the court observed that the “Green Guides merely illustrate how the term ‘carbon neutral’ may be unfair or deceptive as an unqualified or not clearly defined marketing claim.” Id. The court also determined that the defendant’s use of the term was “a type of general environmental benefit claim that the FTC warns against.” Consequently, the plaintiffs’ allegations were “sufficient to plausibly allege” that the defendant’s use of the phrase was “likely to mislead.”
The defendant filed a motion for reconsideration. Dorris, No. 7:22-cv-8717, at Dkt. Nos. 37–40. The motion is fully briefed and pending a ruling from the court.
Noteworthy Settlements
Numerous companies have already made significant settlement payments to resolve greenwashing class actions. For instance, Keurig Green Mountain, Inc., recently agreed to pay approximately $10 million to resolve claims challenging its labeling and marketing of K-Cups as recyclable. Smith v. Keurig Green Mountain, Inc., No. 4:18-cv-06690 (N.D. Cal. 2018). Keurig also agreed to revise its product labels and marketing as part of the settlement. In a separate case, a leading consumer products company agreed to pay almost $4 million to resolve claims that it mislabeled its products as being suitable for “recycling.” Moreover, two leading retailers agreed to pay $2.5 million and $3 million in two separate FTC actions alleging that their products were deceptively marketed as bamboo. See, e.g., United States v. Walmart, Inc., No. 1:22-cv-00965 (D.D.C. 2022). Additional high-value settlements are expected in the near future due to the recent wave of court decisions denying defendants’ motions to dismiss in greenwashing class actions.
Risk-Mitigation Strategies
The legal and regulatory landscape surrounding greenwashing class actions is murky and unpredictable. Accordingly, companies should take the following steps to mitigate their exposure to such claims.
- First, assess compliance with the FTC’s Green Guides and stay informed regarding the forthcoming updates. The Green Guides are not currently binding, and, under certain circumstances, compliance with the Green Guides will not be a complete defense to litigation. Nonetheless, the Green Guides are a helpful guidepost, and failing to comply with the Green Guides could make a company an easy target for plaintiffs. If the FTC ultimately issues substantially revised Green Guides, plaintiffs will certainly attempt to take advantage of the changes to assert novel claims against consumer-facing companies.
- Second, aim for accuracy and simplicity. Resist the urge to overstate environmentally friendly attributes of products and services. Disclose accurate information, and avoid broad, unqualified representations.
- Third, track and retain the statistics and data necessary to defend your environmental claims. Information that appears on a company’s public-facing website or in any advertising, marketing, or labeling must be accurate and current. Also, depending on the circumstances, certifications from third-party organizations may not be sufficient to protect against greenwashing claims.
- Fourth, consider whether the use of certain colors, words, or images in product packaging, marketing, advertisements, or labels might be interpreted as a misleading “implied” environmental claim. Not all environmental claims will be obvious.
- Fifth, ensure that your company is practicing what it preaches. A company’s operations should match its environmental claims. Plaintiffs frequently target manufacturing practices, logistics issues, carbon emissions, recycling practices, usage of recycled materials, and waste-disposal activities.
Consumer-facing companies should take a proactive approach to greenwashing issues to mitigate the risk of litigation and to develop legal defenses to combat any litigation that may arise.
