In recent years, businesses have faced an onslaught of consumer class actions challenging sustainability initiatives, environmental commitments, and ethical sourcing language. In our view, these lawsuits frequently rely on dubious injury allegations because they challenge company-wide statements without properly connecting those statements to the value of any specific product purchased by plaintiff. After all, federal courts have limited jurisdiction, requiring a plaintiff to plausibly allege, with facts, an actual injury flowing from defendant's conduct. Some courts are increasingly taking a harder look at pleadings to determine whether a plaintiff can plausibly allege that a company's environmental or ethical visions, goals, or policies actually affect the value of the company's product. In the most recent example, a federal court in Florida concluded that the answer to that question, at least with respect to Lululemon's "Be Planet" campaign, was no.
Economic Injury in Consumer Class Actions and Increased Scrutiny at the Pleading Stage
Every plaintiff, whether in a class action or not, must establish standing to bring claims in federal court. To do so, plaintiffs must plead injury that is traceable to defendant's actions. In consumer class actions, this is most frequently pleaded with allegations that the plaintiff paid more for a product based on an alleged false or misleading statement than they otherwise would have. In other words, they paid a "price premium" for the supposedly falsely advertised product. Given lenient pleading standards, many courts have allowed plaintiffs to proceed past a pleadings challenge by repeating these magic words in a complaint. In reality, such price premium theories often fall apart when subjected to the economic rigor applied at the class certification or summary judgment stage. But businesses are saddled with significant legal spend and expert costs in the meantime. Accordingly, businesses are right to demand a more exacting look at the plausibility of such conclusory injury allegations at the pleading stage, which is why some defendants continue to challenge a plaintiff's standing to bring such claims based on threadbare "price premium" allegations.
The Lululemon Case
In Gyani et al. v. Lululemon Athletica Inc. et al., plaintiffs accused Lululemon of misleading consumers with its "Be Planet" campaign, which included broad company-wide aspirations, such as
- ensuring 75% of products contain sustainable materials by 2025 and 100% of products contain sustainable materials and end-of-use solutions by 2030
- ·offering options to extend product life through resale, repair, and recycling
- sourcing 100% renewable electricity to power the company's operations by 2021 and reducing carbon emissions across its global supply chain by 60% per unit of value and
- reducing freshwater use intensity by 50% and single-use plastic packaging by 50% by 2025
Plaintiffs claimed that these statements were deceptive. They argued that the "Be Planet" campaign overemphasized the significance of Lululemon's environmental initiatives relative to the company's overall climate and environmental footprint. Plaintiffs attempted to plead injury by using the magic words that the "Be Planet" campaign led them to pay a "price premium" for the specific products they purchased than they otherwise would have.
The problem for the plaintiffs, as Lululemon argued, was that plaintiffs failed to plead any facts supporting a connection between the Be Planet campaign and the price of the goods plaintiffs purchased. Without such a connection, there is no injury traceable to Lululemon's conduct and, accordingly, no standing for plaintiffs to bring their claims.
The court agreed. "Boilerplate allegations of paying a price premium" were insufficient to assert an economic injury. Instead, to establish economic injury, plaintiffs must allege facts that the products were defective or worth less than the price paid: "A plaintiff must tie the value of the product to any purported misrepresentation." But here, plaintiffs did not allege there was any deceptive act with respect to the products they purchased. Instead, they simply relied on the company-wide Be Planet campaign but never made a connection between the two. Their failure to connect the campaign to the value of the products doomed their complaint from the start. The court found plaintiffs lacked any economic injury and for the same reasons could not pursue claims for injunctive relief and dismissed the complaint for lack of standing. Because of plaintiffs' procedural missteps, they were also denied leave to amend.
A Shifting Tide for Businesses?
The Lululemon decision comes on the heels of other courts reaching similar conclusions. In Tyrnauer v. Ben & Jerry's Homemade, Inc. (D. Vt. July 8, 2024), for example, plaintiffs conclusorily alleged that they paid a price premium for ice cream products based on company-wide ethical sourcing and ethical standard statements. The federal court in Vermont dismissed plaintiffs' claims for lack of standing because "the monetary loss . . . depends not on the product's advertising, labeling, packaging, quality, quantity, or ingredients, but on plaintiffs' subjective, abstract, and intangible belief that Ben & Jerry's ice cream is not sufficiently 'ethically sourced.'" Similarly, in Blackburn v. Etsy, Inc. (C.D. Cal. Oct 12, 2023), plaintiffs contended that company-wide statements regarding Etsy's purchase of carbon offsets caused them to pay more for goods sold on the company's website. But the Central District of California dismissed plaintiffs' claims for lack of standing because the complaint "alleges no well-pleaded facts that support a plausible inference that [p]laintiffs paid a price premium caused by Etsy's statements about carbon offsetting."
Implications for Businesses
Decisions like Lululemon, Ben & Jerry's, and Etsy suggest courts may be applying appropriate skepticism to claims challenging environmental and ethical sourcing statements. But it is also a reminder that businesses should be diligent in their environmental and social governance marketing. At least in the case of Lululemon, the court emphasized that the "deception" plaintiffs purportedly relied on amounted to nothing more than "goals and promises," highlighting language centered around "targets" and "commitments." Some courts will consider the aspirational nature of statements, versus ripe or measurable representations, as part of their standing analysis. But courts remain deeply divided on how either set of statements should be treated, and they will therefore continue to attract outsized attention from the plaintiffs' bar.
Regardless, businesses should follow best practices with respect to their environmental and social governance marketing: (1) ensure proper substantiation for all claims and avoid broad or unqualified statements; (2) stay up to date on regulatory developments, including those set by the FTC green guides; and (3) train marketing and legal teams to recognize and mitigate risk associated with sustainability and ethical sourcing claims.
Our team remains at the forefront of this area of the law and will be watching how this dynamic area continues to evolve.
