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From Antitrust Law Daily, October 9, 2018

Putative class action over ‘environmentally friendly’ soap doesn’t wash out

By Gregory Kane, J.D., M.B.A.

A putative class action against a big box wholesale retailer alleging deceptive marketing of dish and laundry soap as "environmentally responsible" despite including toxic chemicals as ingredients survived a motion to dismiss the claims for lack of standing, jurisdiction, and failure to state a claim, the federal district court in Brooklyn has held. The complaint alleged sufficient facts to establish actual injury to the plaintiff, but was not sufficient to demonstrate a future threat so as to grant the plaintiff’s motion for injunctive relief (Gonzalez v. Costco Wholesale Corporation, September 29, 2018, Graufis, N.).

Background. A consumer who purchased Kirkland Signature Premium Dish Soap and Laundry Detergent labeled as "environmentally responsible" and "safer for the planet," among other like phrases, brought a putative class action against Costco Wholesale Corporation for being misleading. The consumer claimed the products contain numerous toxic chemical ingredients that a reasonable consumer would not expect in an environmentally responsible product. Plaintiff claims the alleged deception allowed Costco to sell, sell more of or charge more for the products than if it had been accurately labeled. Plaintiff’s second amended complaint included claims for violations of New York General Business Law (NYGBL), unjust enrichment, and breach of express warranty. Plaintiff also sought injunctive relief pursuant to the NYGBL. Defendant moved to dismiss the complaint for lack of standing and jurisdiction and failure to state a claim.

Article III standing. The consumer had Article III standing, according to the court. Plaintiff alleged that she suffered economic injury by virtue of purchasing the products under the assumption that they were environmentally responsible based on the product labeling and marketing. Plaintiff provides particulars as to what was misleading and what made the labeling misleading. The differences between what the plaintiff believed she was purchasing and what she actually purchased were concrete and not too abstract so as to satisfy the injury requirement for standing. The complaint also provided sufficient evidence to connect the alleged injury to the allegedly false labeling.

NYGBL claims. A reasonable consumer could view labelling that includes phrases such as "environmentally responsible" as deceptive when that statement is viewed in context of the product label as a whole, according to the court. Plaintiff was also able to sufficiently allege that consumers will pay a premium for more environmentally responsible products because they will seek and pay a premium for products that do not negatively affect the environment, supporting the claim that she paid a price premium for the product which is a concrete injury from the deception. As such, the motion to dismiss the NYGBL claims was denied. The claim for unjust enrichment was duplicative, however, and the motion to dismiss that claim was granted.

Injunctive relief. The consumer sought to prohibit defendant from representing that the products in question are safer or environmentally desirable unless and until the harmful chemicals are removed. However, the consumer did not plan to purchase the products again as-is and could not rely on past injuries for purposes of standing for injunctive relief. As such, the request for injunctive relief was dismissed for lack of standing by the court.

Personal jurisdiction. The court lacked general personal jurisdiction over Costco to adjudicate the claims of out-of-state class members as defendant’s principal place of business is not located in New York nor are they incorporated there. But the question of specific jurisdiction remains unclear due to a split in the interpretation of Bristol-Myer Squibb v. Superior Court of California, 137 S.Ct. 1773 (2017). Plaintiff had not yet brought a motion to certify a nationwide class and as such the resolution of jurisdiction awaits that motion, if the plaintiff so files.

Express warranty. The consumer alleged that Costco was the seller of the products, made affirmations of fact or promises regarding those products, and that the consumer relied on those misrepresentations to her detriment. The phrases such as "environmentally responsible" were not too vague when considered in context nor was it too broad to disallow the specific harm alleged. As such, the motion to dismiss the express warranty claim was denied by the court.

The case is No. 16-CV-2590 (NGG) (JO).

Attorneys: Tina Wolfson (Ahdoot & Wolfson, PC) for Natalia Gonzalez. Adam James Hunt (Morrison & Foerster LLP) for Costco Wholesale Corp.

Companies: Costco Wholesale Corp.

MainStory: TopStory Advertising StateUnfairTradePractices NewYorkNews

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