In recent years, consumer class lawsuits have challenged firms’ sustainability, environmental, and ethical sourcing efforts. These lawsuits often use dubious injury assertions because they challenge company-wide statements without tying them to the value of any product purchased by the plaintiff. Since federal courts have limited jurisdiction, plaintiffs must plausibly establish a genuine injury from the defendant’s behavior. Some courts scrutinize pleadings to discover if a plaintiff can prove that a company’s environmental or ethical ideals, goals, or policies affect product value. Recently, a Florida federal court ruled that Lululemon’s “Be Planet” advertising did not meet that test.
Economic Damage in Consumer Class Actions and Increased Pleading Scrutiny
Every plaintiff, class action or not, must prove standing to sue in federal court. Plaintiffs must allege defendant-caused damage. This is usually pled in consumer class actions with claims that the plaintiff paid more for a product due to a false or misleading statement. They paid a “price premium” for the allegedly misrepresented product. Many courts have enabled plaintiffs to bypass pleadings challenges by repeating these magic phrases in a complaint due to permissive standards. Price premium arguments generally fail economic scrutiny at class certification or summary judgment. Businesses must pay high legal and expert fees in the meantime. Businesses are right to demand a more stringent examination of the plausibility of conclusory injury assertions at the pleading stage. Some defendants oppose a plaintiff’s standing to pursue such claims based on threadbare “price premium” arguments.
The Lululemon Case
Gyani et al. v. Lululemon Athletica Inc. et al. accused Lululemon of misleading consumers with their “Be Planet” campaign, which contained broad company-wide ambitions like
Ensure 75% of products contain sustainable materials by 2025 and 100% by 2030, including end-of-use solutions. offering resale, repair, and recycling alternatives to prolong product life
The company aims to use 100% renewable electricity by 2021, reduce carbon emissions by 60% per unit of value in its global supply chain, and reduce freshwater use intensity and single-use plastic packaging by 50% by 2025.
The plaintiffs said these assertions were dishonest. They said the “Be Planet” slogan overemphasized Lululemon’s environmental commitments compared to its climate and environmental footprint. Plaintiffs tried to claim injury by claiming that the “Be Planet” marketing caused them to pay a “price premium” for their purchases.
Lululemon claimed the plaintiffs failed to prove a link between the Be Planet campaign and the pricing of their goods. Without a connection, Lululemon’s behavior did not cause injury, so plaintiffs have no standing to sue.
The court concurred. “Boilerplate allegations of paying a price premium” did not prove economic injury. An economic injury must be proven by showing 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.” The plaintiffs did not allege any deception about the things they bought. Instead, they used the company-wide Be Planet campaign without connecting the two. They started their complaint wrong by not linking the campaign to product value. The court dismissed the complaint for lack of standing since the plaintiffs had no economic loss and could not seek injunctive relief. Plaintiffs were refused leave to amend due to procedural errors.
A Business Turning Point?
The Lululemon ruling follows prior judicial rulings. In Tyrnauer v. Ben & Jerry’s Homemade, Inc. (D. Vt. July 8, 2024), plaintiffs claimed they paid more for ice cream due to company-wide ethical sourcing and standard declarations. The Vermont federal court 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. In Blackburn v. Etsy, Inc. (C.D. Cal. Oct 12, 2023), plaintiffs claimed that Etsy’s company-wide disclosures about carbon offset purchases raised their prices. 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.”
Impact on Businesses
In Lululemon, Ben & Jerry’s, and Etsy, judges may be skeptical of allegations questioning environmental and ethical sourcing declarations. It also reminds companies to sell their environmental and social governance efforts. In Lululemon, the court stressed that the “deception” plaintiffs relied on was “goals and promises,” using wording like “targets” and “commitments.” Some courts evaluate standing based on aspirational claims versus ripe or demonstrable representations. However, courts remain strongly divided on how to treat either set of assertions, so the plaintiffs’ bar will continue to focus on them.
Businesses should follow best practices for environmental and social governance marketing: (1) verify all claims and avoid broad or unqualified statements; (2) stay current on regulatory developments, including FTC green guides; and (3) train marketing and legal teams to recognize and mitigate sustainability and ethical sourcing claim risk.