Labeling litigation in the food and beverage space remains vigorous, especially in California. To avoid becoming a party to such litigation, participants in the manufacturing and sale of consumer products must take care to ensure that their labeling and marketing of products is accurate and is not misleading as prohibited by various consumer protection statutes. A recent opinion in a pending California action highlights the increase in “greenwashing” litigation – where plaintiffs claim that labels and marketing materials misrepresent the environmentally sustainable practices associated with a product.
The Recent Nestlé Case: A recent California opinion provides some insight into potential pitfalls businesses face in the labeling space. On September 26, 2024, a California federal judge certified claims brought on behalf of a class of consumers against Nestlé USA, Inc. (“Nestlé”). The case is Marie Falcone v. Nestlé USA Inc., No. 3:19-cv-00723, in the U.S. District Court for the Southern District of California.
In that case, the plaintiff represents consumers who purchased at least one of nine different Nestlé chocolate products that contain sustainability claims, such as “sustainably sourced”, “responsibly sourced”, and “sustainably harvested cocoa beans.” Based on the representations on the product packaging, the plaintiff alleges that Nestlé misled consumers because it allegedly did not source its ingredients, including cocoa beans in accordance with environmentally and socially responsible standards.
The plaintiff’s claims were brought under two theories: (i) California’s Unfair Competition Law (UCL), which prohibits “unlawful, unfair, or fraudulent” conduct in connection with virtually all business activities; and (ii) the Consumer Legal Remedies Act (CLRA), which applies to any “consumer” transaction involving the “sale or lease of goods or services.” The court granted certification under both claims. On the CLRA claim, Nestlé’s research into the impact that sustainability representations have on consumer purchasing decisions supported the grant of class certification.
For CLRA claims, injury may be presumed if a reasonable person deems the representation important material (i.e., important to their purchasing choice). For purposes of certifying the class, plaintiffs must point to the existence of evidence that would prove (or disprove) that all class members deemed the representation material. As revealed by employee depositions, internal emails, and marketing campaign documents, Nestlé studied the impact of sustainability messaging on consumer behavior and found that responsible sourcing is important to consumers. For example, a sustainability presentation regarding Nestlé’s Toll House brand cited statistics that “[c]hocolate product with environmental claims sold 5x FASTER than overall category[.]” The judge noted that Nestle’s own research and/or internal records about the importance of the representations is the common evidence that could prove or disprove the materiality question.
The judge also rejected Nestlé’s argument that class-wide proof is not possible because there are 59 different product labels involved containing variations in the logo or phrasing of the sustainability statement. Furthermore, the various sustainability messaging on the labels were deemed “interchangeable” and variations in messaging did not preclude class certification. Plaintiffs have made it past the hurdle of class certification and Nestle must now defend the claims on the merits.
Recent California Legislation Focuses on Greenwashing: In response to the proliferation of greenwashing and other labeling claims, the California legislature has been taking action specifically focused on businesses’ representations concerning their green or climate-related claims.
By way of example, the Voluntary Carbon Market Disclosures Act, which went effective January 1, 2024, provides specific requirements for companies that market or sell voluntary carbon offsets in California. Cal. Health & Safety Code § 44475, et. seq. This law includes daily penalties of up to $2,5000 per day for information that is either “not available or is inaccurate” on a company’s website.
The “Greenwashing” Trend: The Nestlé case is not alone and follows numerous recent litigations and guidance relating to greenwashing. In addition to staying up to date on the recent statutory and litigation trends, companies should stay abreast of various guidance on how to market the environmental aspects of a product to potentially avoid becoming a defendant in a lawsuit.
By way of example, the Federal Trade Commission (“FTC”) has issued “Green Guides” to help companies avoid such claims, noting that “sometimes what companies think their green claims mean and what consumers really understand are two different things.” The Green Guides were first issued in 1992 and have been (and continue to be) revised several times.
The FTC’s website also has several additional greenwashing related resources, including among other things: (i) a running list of instructive litigation cases; (ii) press releases; (iii) blog posts; (iv) advisory opinions; (v) business education materials; and (vi) videos.