We’ve written before about the growing trend of “ethical sourcing” or “ethical production” class actions, which challenge manufacturers’ claims (or nondisclosures) about the humane (or inhumane) way their ingredients or materials are grown, caught, or harvested. A recent decision out of the Southern District of New York in a case involving “free range” eggs typifies this litigation trend and the concern it poses to food and beverage manufacturers.
In Mogull v. Pete and Gerry’s Organics LLC, No. 21 CV 3521, 2022 WL 602971 (S.D.N.Y. Feb. 28, 2022), Judge Briccetti denied a motion to dismiss a putative class action complaint alleging that the producer of “Nellie’s Free-Range Eggs” deceived consumers by selling eggs that were not in fact “free-range.” The court held, inter alia, that a reasonable consumer could plausibly interpret “free-range” as a literal, actionable promise that the eggs were laid by hens that were able to move comfortably indoors and roam freely outdoors. This decision highlights the risk manufacturers can face in making “ethical sourcing” claims like these—even when their products conform to applicable industry standards.
The Complaint and Motion to Dismiss
Nellie’s, one of the nation’s largest sellers of eggs, markets certain of its eggs as being “free-range.” First. Am. Compl. (“FAC”) ¶ 3. As seen below, the packaging on these cartons includes images of hens in the outdoors and states that its eggs come from “Outdoor Forage” hens. Id. ¶ 4.
Specifically, a portion of the packaging reads:
“Most hens don’t have it as good as Nellie’s. 9 out of 10 hens in the U.S. are kept in tiny cages at giant egg factories housing millions of birds. Sadly, even “cage-free” is now being used to describe hens that are crowded into large, stacked cages on factory farms, who never see the sun. Nellie’s small family farms are all Certified Humane Free-Range. Our hens can peck, perch, and play on plenty of green grass.” Id. ¶ 3.
Nellie’s also advertises its eggs as “free range” on its website, fittingly titled nelliesfreerange.com. Id. ¶¶ 10-11. The site features photographs of hens in a sunny field alongside statements such as: “Our happy hens are free to roam and strut throughout their wide-open pasture. They peck at bugs and flowers, cluck around in groups, and just live as free as a bird all day long.” Id. Nellie’s website further explains that being “free-range” means that the hens are “free to roam outside as they please,” while merely being “cage free” does not necessarily guarantee hens any outdoor access. Id. ¶ 12. Nellie’s YouTube channel also shows videos of its hens frolicking in a meadow, with a voiceover explaining that “free-range hens get to live their lives like real hens, with access to pasture every day in good weather.” Id. ¶ 9.
But plaintiff Constance Mogull cried fowl. She alleged that Nellie’s “free-range” claims misled consumers into believing that its hens were actually able to move freely indoors and roam outdoors, when those hens were actually “crammed” into overcrowded sheds with limited or no access to the outdoors. Id. ¶ 6. In support of this claim, she cited photographs allegedly of Nellie’s henhouses, “which are virtually indistinguishable from the example Nellie’s shows on its website as being not ‘Free Range’ where hens are essentially living in a space much like an overcrowded warehouse.” Mogull, 2022 WL 602971, at *1 (cleaned up) (quoting FAC ¶ 18). Mogull’s complaint also cited a YouTube video in which shoppers who purchased Nellie’s eggs were shown footage of the alleged tight quarters on Nellie’s farms and responded that the conditions did not comport with their understanding of “free-range.” FAC ¶ 34.
Mogull’s suit alleged deceptive acts or practices in violation of New York General Business Law (“GBL”) § 349, false advertising in violation of GBL § 350, breach of express warranty, and fraud.
In its motion to dismiss, Nellie’s argued that its hen-farming practices meet the qualifications for “Certified Humane Free-Range” status set by the nonprofit organization Humane Farm Animal Care. Mot. to Dismiss at 8-10. Nellie’s explained that, contrary to Mogull’s assumptions about what “free range” may mean, these standards only require that outdoor access be provided “for a minimum of 6 hours per day during the daytime, except during inclement weather,” and that there be “at least one exit [from the henhouse] every 50 feet (15 m) along one side of the house.” Id. at 9. According to Nellie’s, because its practices conform to these requirements, its “free range” claims cannot be misleading as a matter of law.
In the alternative, Nellie’s argued that the challenged statements are non-actionable puffery, because a reasonable consumer would not assume that the phrase “free-range” conveyed a specific factual claim about the lives of the hens. Id. at 12-13.
Finally, Nellie’s argued that the fraud claim should be dismissed because the challenged statements are true, and even if they are not, Mogull failed to plead scienter.
The Court’s Ruling
Judge Briccetti denied the motion to dismiss in its entirety—presumably leaving Nellie’s with egg on its face.
First, the court explained that, under either Section 349 or Section 350 of the GBL, an advertisement is actionably misleading if a “significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled.” Mogull, 2022 WL 602971 at *3. Although the court recognized that “in certain cases” this reasonable consumer test can be applied “as a matter of law,” it viewed such pleadings-stage determinations as “warranted only in … rare situation[s].” Id. This case, the court concluded, was “not one of the[se] rare instances.” Id.
Specifically, the court found that Mogull plausibly alleged that reasonable consumers could be misled by Nellie’s “free range” statements in light of the allegation that Nellie’s hens are actually “crammed into henhouses 20,000 at a time” and unable to roam outside. Id. In reaching this conclusion, the court noted that these alleged conditions were contrary not only to Mogull’s alleged understanding of the phrase “free range,” but also to the USDA and FDA definitions of “free-range” alleged in the complaint.
The court rejected Nellie’s argument that the “free-range” claim was true and non-misleading as a matter of law merely because Nellie’s farming practices allegedly meet the Humane Farm Animal Care “Certified Humane Free-Range” standard. Id. The court suggested that this argument might have merit if Nellie’s had used the phrase “free range” only when making an explicit reference to this particular standard. However, the court explained that “free-range” appears as a standalone claim throughout Nellie’s packaging and website (including in the website’s domain name). Only one use of the phrase in Nellie’s packaging is directly adjacent to the phrase “Certified Humane.” Id. Accordingly, the court found it “plausible that a reasonable consumer would not understand [the phrase] ‘free-range eggs’” as limited to an assertion “that Nellie’s eggs meet the ‘Certified Humane’ standard.” Id.
The court also rejected Nellie’s fallback argument that “free-range” was non-actionable puffery. Id. at *4. Puffery, the court explained, is “an exaggeration or overstatement expressed in broad, vague, and commendatory language,” or a “[s]ubjective claim[ ]” about a product that “cannot be proven either true or false.” Id. (quoting Lipton v. Nature Co., 71 F.3d 464, 474 (2d Cir. 1995)). Finding that a reasonable consumer could interpret “free-range” as a specific, testable factual claim “that the eggs were produced by hens with extended access to indoor and outdoor space,” the court concluded that it does not constitute puffery. Id. As support, the court cited Judge Failla’s decision in an earlier case, which similarly found that the phrase “Our hens can peck, perch, and play on plenty of green grass” was not puffery because it could plausibly be construed as a specific factual claim regarding the hens’ access to the outdoors. Lugones v. Pete & Gerry's Organic, LLC, 440 F. Supp. 3d 226, 241 (S.D.N.Y. 2020).
Finally, the Court declined to dismiss Mogull’s fraud claim. The court credited the complaint’s allegation that Nellie’s, as a top distributor of eggs in the United States, is aware of its farmers’ practices and aware of how the term “free-range” is perceived by consumers. Mogull, 2022 WL 602971 at *4. Accordingly, although it acknowledged that it was a “close call,” the court found that Mogull had adequately alleged facts giving rise to the requisite “strong inference of fraudulent intent.” Id.
Key Takeaways
While other, more hard-boiled courts have received “ethical sourcing” and “ethical production” suits less favorably, the Mogull decision exemplifies some judges’ willingness to let claims like these grow beyond the embryonic phase. As we’ve noted before, decisions like this one are a bit surprising: unlike, say, claims that a product is free of a particular substance, claims that a product (or ingredient) was obtained humanely or ethically are subjective almost by definition, as customers’ views of what is humane and ethical depend on their own personal moral codes. And it seems a bit unfair to impose liability on manufacturers for failing to meet consumers’ personal assumptions about what statements like these may mean—at least where, as in Mogull, there is a colorable sense in which the claims are true.
As this decision underscores, manufacturers hoping to avoid being scrambled by litigation shouldn’t rely on their ethical sourcing claims being deemed non-actionable puffery. Instead, they should take care to provide clear and explicit definitions in their labeling, websites, and advertising of what their ethical sourcing claims are (and aren’t) intended to mean, and they should consider linking their claims to these definitions (e.g., with an asterisk) each and every time they’re used.
One thing we can say for sure: this trend of class actions based on “free range” and similar ethical production claims is far from ova.
