Courts are experiencing a recent surge of consumer class action filings alleging that manufacturers are misrepresenting the manner of procurement of materials for their products. These allegations center around claims of “ethical sourcing.” Broadly speaking, the goal of ethical sourcing is to ensure that a company only buys products and materials that are produced under reasonable working conditions and with fair pay for workers, as well as with minimal impact on the environment. Ethical sourcing is intended to reinforce social and environmental responsibility by companies.
In the last several years, some consumers have shown a preference for ethically sourced products in lieu of similar products that are not necessarily procured in this way. This practice, known as ethical consumerism, is at the heart of a recent decision in the United States District Court for the Southern District of New York, Lee v. Canada Goose US, Inc., No. 20 Civ. 9809 (VM), 2021 U.S. Dist. LEXIS 121084 (S.D.N.Y. June 29, 2021), which raises the question of whether generalized statements by a company about its ethical sourcing are actionable.
In Lee, the complaint alleged, among other things, that the plaintiff and others similarly situated purchased Canada Goose jackets believing that the fur on the jackets was procured as a result of “ethical, sustainable, and humane sourcing.” This consumer belief purportedly was based on representations made in Canada Goose’s labeling and marketing materials. The complaint further claimed that these representations were false, because Canada Goose sourced fur “from jurisdictions that have no regulations regarding the methods of slaughtering trapped animals or the types of traps that may be used,” and because Canada Goose’s suppliers’ trapping methods were inhumane. As such, the complaint alleged that Canada Goose had violated the District of Columbia Consumer Protection Procedures Act (“DCCPPA”) and unspecified other “State Consumer Protection Statutes,” and also alleged causes of action for breach of express warranty and unjust enrichment.
In response, and in anticipation of filing a motion to dismiss, Canada Goose argued that the Complaint failed to state a claim upon which relief could be granted. Specifically, Canada Goose argued that: (1) its statements were accurate; (2) the plaintiff’s “subjective views” regarding the “humaneness” of fur trapping did not equate to deceptive statements by Canada Goose; and (3) the alleged misrepresentations were mere puffery—i.e., too general and vague to be reasonably relied upon and thus, not actionable.
In a bit of a quirky procedural twist, somewhat unique to federal practice in New York, the three-page pre-motion letters that the parties submitted to the Court in advance of the filing of Canada Goose’s motion to dismiss were deemed by the Court to be the actual motion to dismiss and opposition. As such, the Court decided the motion to dismiss based on these submissions alone, resulting in a slightly puzzling 29-page decision granting the motion in part and denying it in part.
In analyzing the plaintiff’s DCCPPA claim, the Court divided the allegations of the complaint into three categories: (1) allegations regarding “ethical, responsible and sustainable” sourcing; (2) allegations regarding compliance with the Agreement on International Humane Trapping Standards (AIHTS) and Best Management Practices for Fur Trapping (BMP); and (3) allegations regarding licensing and regulations regarding fur trapping.
The Court dismissed the allegations regarding AIHTS and BMP standards, as well as the allegations regarding licensing and regulations. Id. at *12. In so doing, the Court found that the statements were “accurate and therefore unlikely to mislead,” because Canada Goose did, in fact, comply with those standards. Id. The Court also dismissed the DCCPPA claim “insofar as it charges a violation of Section 28-3904(h) of the [statute]”—which prohibits “advertis[ing] … goods or services … without the intent to sell them as advertised”—because “Plaintiff ha[d] failed to allege intent.” Id.
The more interesting part of the decision is the Court’s refusal to dismiss the more generalized DCCPPA allegations regarding ethical sourcing. Id. Admitting that the “allegations are thin,” the Court nevertheless determined that they “support[ed] the reasonable inference that Canada Goose’s purported commitment to ‘ethical’ fur sourcing [was] misleading because Canada Goose obtains fur from trappers who use allegedly inhumane leghold traps and snares.” Id. Notably, the Court recognized that the plaintiff “d[id] not explicitly allege that Canada Goose sources its fur from [animals] trapped using these methods,” but was nonetheless “satisfied that such a conclusion can be drawn reading the Complaint in the light most favorable to Plaintiff.” Id. at *17-18. After rewriting the complaint in the plaintiff’s favor, the Court concluded that “these allegations support the reasonable inference that Canada Goose obtains fur from trappers whose methods are inhumane, despite its outward commitment to ‘ethical’ fur sourcing.” Id. at *18.
The Court went on to further find that Canada Goose’s claim regarding ethical fur sourcing was plausibly material to consumers. Id. at *19. The Court reasoned that, because the complaint alleged that “reasonable consumers consider ‘animal welfare’ to be an important factor in whether a product is ‘ethically produced,’” a claim of “ethical sourcing” equates to a representation of humane treatment of animals that consumers would plausibly rely upon in the decision to purchase the product. Id.
In the balance of its opinion, the Court declined to address whether the plaintiff could assert claims under the consumer protection laws of jurisdictions other than the District of Columbia, where he was allegedly harmed, choosing to “reserve decision on [that issue] until the class-certification stage.” Id. at *22-23. And the Court declined to dismiss the plaintiff’s express warranty claim as “duplicative of the [DC]CPPA claim.” Id. at *24. But the Court did dismiss the plaintiff’s unjust enrichment claim, “because such a claim is unavailable when there is an express agreement governing the dispute” (i.e., the alleged express warranty “on the hang tag attached to Canada Goose’s Products”). Id. at *24-25.
The Court’s decision to let the “ethical sourcing” claim proceed is surprising. Whether someone or something is “ethical” is generally in the eye of the beholder. The claim of “ethical sourcing,” therefore, is typically deemed to constitute puffery—i.e., a very general, subjective claim about a product that is difficult to prove or disprove. In fact, such a claim is routinely found to be too vague for a reasonable consumer to rely upon in any material way. It was only because of the Court’s own inference—not alleged by plaintiffs—that Canada Goose sources its fur “from trappers whose methods are inhumane,” that certain claims in the Complaint were deemed material and therefore survived the motion to dismiss. While an opinion issued as a result of a motion to dismiss is generally limited to the four corners of the complaint, the Court here seemingly went outside the pleadings to make this inference. And in the end, it was this (questionable) inference by the Court that cooked the goose for the defendant and permitted a portion of the action to proceed to discovery.