Hemy v. Perdue Farms, Inc., 2011 U.S. Dist. LEXIS 137923 (D.N.J.)
Plaintiffs alleged that Perdue inhumanely raised and slaughtered its chickens, yet falsely advertised to the contrary. Perdue makes Perdue-branded and Heartland-branded chicken. It allegedly prominently advertised that Harvestland, and some Perdue, chicken was “Humanely Raised.” It also allegedly charged a premium price for the labeled products. Perdue based its claims on the National Chicken Counsel's Animal Welfare Guidelines and Audit Checklist for Broilers. The NCC is an industry trade group, and its guidelines allegedly allow brutal treatment. Moreover, plaintiffs alleged that the guidelines allow each company to determine for itself whether or not it meets the guidelines. In fact, plaintiffs alleged, audits of various Perdue facilities revealed horrifying conditions.
Among other things: live chicks were found in Perdue's waste stream, chickens were held for excessive periods of time in trucks while awaiting slaughter, and Perdue's electrocution process and neck-cutting machines sometimes failed to quickly kill the birds thereby subjecting them to "paralysis, seizures, and cardiac arrest while still conscious." Plaintiffs contended that no reasonable consumer would expect that a “Humanely Raised” chicken had been treated in this fashion.
Separately, plaintiffs alleged that Perdue misleadingly advertised its chicken as “Raised Cage Free,” a meaningless and misleading claim because broiler chickens in the US are virtually never raised in cages, unlike egg-laying hens. Thus, the claim allegedly created a misleading comparison with competitors’ chickens.
Further, plaintiffs alleged that Perdue’s use of a USDA Process Verified shield was misleading, because this is a voluntary marketing tool. The USDA's Agricultural Marketing Service reviews a company's internally-generated guidelines and then conducts desk and on-site audits to determine whether the company follows its own guidelines. It does not compare the company’s practices to industry standards. The shield plus the “Humanely Raised” and “Raised Cage Free” markings allegedly misled consumers into believing that a reputable government agency had independently confirmed those claims.
Perdue allegedly aggressively marketed its use of its shield, as in brochures stating: "We've always known our Perdue chicken is good and with our new USDA Process Verified seal now we know it's Verifiably Good." Perdue also advertised the shield through its website and Facebook page, television commercials, and media and press statements. In a New Jersey Star Ledger article in 2010, a Perdue employee allegedly stated that the shield meant that the USDA had determined that Perdue's practices exceed industry standards.
The plaintiffs purchased Harvestland chicken allegedly relying on the “Humanely Raised” and “Raised Cage Free” labels and USDA shield. They brought claims based on the New Jersey Consumer Fraud Act, common law fraud, negligent misrepresentation, unjust enrichment, and breach of express warranty.
The Animal Welfare Institute moved to intervene or stay until the NAD issued a final ruling on the AWI’s pending challenge against Purdue based on the same claims. Because of this pending lawsuit, the NAD closed the investigation (though noting that it would reopen the investigation if a court didn’t make a determination on the truthfulness and accuracy of the challenged claims).
Though AWI waited five months to move to intervene, the suit was still in its infancy, and AWI’s delay was due to communicaitons with the parties to attempt to convince them to agree to a voluntary stay. The court concluded the motion was timely filed, but denied it anyway. There was no common claim or defense; the NAD proceeding was entirely voluntary, and the plaintiffs here already adequately represented the public interest against deception. Letting AWI intervene would cause undue delay. The court further indicated that it would have denied a stay anyway: resolution of the NAD proceeding would have no bearing on the case. The NAD’s rules were what led it to close the case, not any ruling from the court.
Perdue successfully argued that plaintiffs lacked standing to challenge Perdue brand products, because they only bought Harvestland products, not Perdue products.
The court began with the principle that standing requires an injury that affects the plaintiff in a personal and individual way; a plaintiff can’t rest a claim on the legal rights of third parties. Standing applies in putative class actions too, and can’t be predicated on injury the plaintiff hasn’t suffered. Class representatives must show they personally have been injured, not that other members of the class have been injured.
The court found plaintiffs’ failure to allege that they purchased Purdue brand products critical because they therefore failed to sufficiently allege injury in fact with respect to those products. (This is part of a broader trend to contract standing, which I’ve discussed before. There is nothing obvious or natural about the court’s conclusion. In some sense, each class member suffers a different injury than each other member, even though it’s the same general kind of injury. So how do we tell how similar the injuries have to be to make up a class? Presumably, the court is not going to require a class representative for each particular Harvestland product—breasts, thighs, whole chickens, 8 ounces, 24 ounces, etc. That kind of distinction would seem to be a distinction without a difference, even though it is probably true that the people who buy 24 ounces of chicken at once have some systematic differences from the people who buy 8 ounces at once. They’re just unlikely to differ systematically in response to claims about the humaneness of the process that produced the chicken. At the very least, such differences would be something the defendant should probably have to show to defeat class treatment. Why isn’t it the same for Purdue/Harvestland? Why does the trademark on the package affect how people might respond to the exact same claims? I can see an argument that this might occur depending on other brand characteristics, but the court doesn’t offer any reasons, and again this seems like the wrong kind of issue—deeply factual—to decide at the pleading stage.)
Regardless, the challenges to Perdue brand products were dismissed with prejudice; the court continued with respect to Harvestland only.
The NJCFA requires (1) unlawful conduct; (2) ascertainable loss; and (3) a causal connection between them. Plaintiffs alleged that, despite the package claims, Perdue didn’t actually humanely raise and slaughter its chickens, and that “Raised Cage Free” was misleading because it suggested that uncaging broiler chickens is a value-added feature when, in fact, nobody’s broiler chickens are typically caged. Finally, plaintiffs alleged that Perdue's use of the USDA seal next to the other claims created the false impression that the other claims had been independently verified by a neutral government agency, and that Perdue made this independent verification claim in other ways as well.
The court began by noting that NJCFA claims have to meet Rule 9(b)’s standards. Plaintiffs alleged specific purchases motivated by specific claims, which they alleged were not true based on audits of "various Perdue facilities used to produce chicken products ultimately marketed as 'Humanely Raised'" and also alleged an ascertainable loss because they paid a premium for labeled products. Among the allegations: Perdue allowed live chicks to suffocate in the trash, Perdue abused chickens during catching and transportation, Perdue kept live birds in the "Dead on Arrival" bins for deceased birds, Perdue subjected chicks to sleep deprivation to encourage abnormal growth; chicks were thrown to the floor as they were mechanically separated from their shells shortly after hatching; and chicks developed gait defects that suggest inhumane raising. With respect to slaughter in particular, plaintiffs alleged that Perdue electrically shocked the chickens before they were unconscious and crammed chickens into trucks for hours while they awaited slaughter, among other things.
The court said that “at first blush” this appeared to satisfy Rule 9(b). But looking further, it didn’t, because the allegations didn’t specify that these suffering birds ended up as Harvestland branded chicken. Plaintiffs could file an amended complaint (the court also wanted more specificity about the audits that were the source of the allegations about mistreatment, linking the audits to Harvestland products and showing that the audits were done during the same times plaintiffs were making their purchases, though I can’t see why Rule 9(b) requires that the audits, rather than the conditions revealed in the audits, need to have been contemporaneous with the purchase).
“For the sake of completeness,” the court also addressed an additional argument: Perdue claimed that a bunch of these allegations were about the inhumane slaughter of the chickens, and that slaughter has nothing to do with raising, so its “Humanely Raised” claim couldn’t possibly deceive consumers into thinking it engaged in humane slaughtering practices. In yet another illustration of the variability of human perception, the court was persuaded! Perdue relied on the dictionary definition of “raised,” which doesn’t include slaughtering, and a Department of Labor regulation governing wage and hour exemptions and a USDA Agricultural Marketing Service regulation to the same effect. The court found that these sources showed that, in many contexts, “the commonly understood definition of raising does not include slaughter.” Dictionary definitions and governmental definitions are relevant evidence, showing that the meaning plaintiffs pled for “raised” “is not the commonly understood definition of that term.” Thus, the plaintiffs needed to allege facts explaining the basis for a reasonable consumer having a different interpretation.
Apparently, reasonable consumers would like to buy, and pay a premium for, chicken that was well treated just up to the point of slaughter, at which point consumers no longer care if the chickens die suffering. The context—an advertising claim about the suffering-minimizing treatment supposedly provided, not a processing directive about a point in the life cycle of the animal—obviously implies that the chickens were humanely treated until death, or what’s the point? “We hold off on the inhumane treatment until we’re nearly ready to kill the chickens” wouldn’t have the same selling power. The court, however, found this argument—that no reasonable consumer would expect humanely raised chickens to be inhumanely slaughtered—was purely conclusory and “fails to explain why the ordinary meaning of ‘raised’ should be broadened to include slaughter.” The complaint needed to plead facts indicating that raising includes slaughtering, and plaintiffs’ “conclusory” allegations that they assumed that this was the case were insufficient. “To properly plead the intent of a group of consumers, a plaintiff must put forth concrete facts from which the Court can determine the plausibility of that allegation.” A statement about what consumers would expect “is not entitled to a presumption of truth under modern pleading standards.” Queries: does this mean that all consumer fraud complaints must include survey evidence? What percentage of consumers is required before the assumption becomes reasonable? Are we going to conduct an inquiry into the adequacy of the survey on the pleadings instead of on the merits? I would submit that “modern pleading standards” do not go so far.
Still, the court ruled, the same analysis applied to the rest of the “reasonable consumer” allegations. Gory details about specific alleged slaughtering practices—for example, that the chickens were traumatized by handling that broke their bones and dislocated their joints—did not provide factual support for the assertion that reasonable consumers would expect that humanely raised chickens wouldn’t be slaughtered inhumanely. (I guess the judicial “common sense” hailed by Iqbal and Twombly only applies to defendants? Or maybe the court just thinks that anyone who eats chicken ought not to inquire too closely into the conditions of production.) The chickens may be slaughtered inhumanely, but that doesn’t connect up with Perdue’s claim that it humanely raised its chickens.
Additionally, plaintiffs’ claims of ascertainable loss were also deficient because they failed to quantify the difference in value promised and value received; they only alleged a “premium” price and didn’t compare it to the price of competing products.
The “Raised Cage Free” allegations also failed, in part for not being limited to Harvestland products, but also because the complaint didn’t dispute that the chickens were not caged. Plaintiffs “have not pointed to any case law suggesting that using an accurate advertising phrase to promote oneself is actionable under the NJCFA.” Nor did they allege that Perdue made explicit comparisons to other producers. Thus there were insufficient allegations of misleadingness, and this claim was dismissed with prejudice.
As to the USDA Process Verified Shield, plaintiffs alleged that the placement on the package, as well as in-store signs, placards, and brochures created a false impression of government endorsement. Purdue advertised, "We've always known our Perdue chicken is good and with our new USDA Process Verified seal, now we know it's Verifiably Good." Perdue's website and Facebook page stated that the USDA Process Verified shield means that consumers "can have full confidence in the way we raised our chickens ...." And a Purdue employee was quoted in the New Jersey Star-Ledger saying that "[t]he USDA Process Verified Program, which is audited by the USDA, verifies that we are exceeding the industry standards."
The court was unimpressed. First, plaintiffs didn’t properly distinguish between Harvestland and Perdue-branded products. And the allegations didn’t contain specific facts from which it could be inferred that Perdue’s ads suggested to a reasonable consumer that the USDA certified Perdue’s use of the “Humanely Raised” and “Raised Cage Free” labels. So, for example, the newspaper quote connects the USDA program with “exceeding the industry standards,” but that doesn’t suggest that the USDA verified that Perdue was humanely raising its chicken. Nor does “now we know it’s Verifiably Good” speak to the other claims. (Again, so much for common sense. Consumers are apparently supposed to parse claims like lawyers looking for contractual loopholes—and this standard is applied at the pleading stage, before any factual development.) Anyway, plaintiffs didn’t allege they read the newspaper article, so they couldn’t rely on it to satisfy Rule 9(b).
Likewise, allegations that Perdue stated on its website and Facebook page that Perdue is "the only poultry company with third-party audits by the USDA to ensure humane treatment of [its] birds," and that Perdue urged shoppers to "look for third-party verification of any non-USDA defined term used on poultry packaging" were insufficient because there were no allegations about when these statements were posted, and it wasn’t clear that plaintiffs personally viewed those statements prior to purchase.
(The court did note that the fact that Perdue was USDA-authorized to use the shield didn’t “completely undermine” the plaintiffs’ allegations, which were that the combination of the shield with the other claims was misleading.)
Plaintiffs’ common law fraud and negligent misrepresentation claims suffered the same fate. Unjust enrichment also failed because that requires a direct relationship between the parties, which wasn’t present here. The express warranty claims were also insufficient because plaintiffs failed to allege any non-conclusory facts to support their claim that Perdue breached its advertising-created agreement by failing to actually humanely raise their Harvestland chickens. Though literally true but misleading representations may provide the basis for an express warranty claim, plaintiffs failed to allege that “Humanely Raised” was otherwise misleading. Likewise, plaintiffs failed to allege that Perdue didn’t live up to its end of the bargain with respect to “Raised Cage Free,” so the court dismissed that claim with prejudice.