Thursday, May 30, 2013

EZ Seed has rough time in court

In re Scotts EZ Seed Litigation, 2013 WL 2303727 (S.D.N.Y.)

Plaintiffs sued Scotts, Lowe’s, and Home Depot, alleging that Scotts EZ Seed, made by Scotts and sold at Lowe's and Home Depot stores, doesn’t grow grass as advertised.  EZ Seed is a “combination mulch-grass seed product” labeled as growing grass “50% thicker with half the water” compared to “ordinary seed.”  Other label claims: “WaterSmart”; “Grows Anywhere! Guaranteed”; “Makes the Most Of Every Drop”; “Grows in Tough Conditions! Guaranteed!”; “Drought tolerant”; “[t]he revolutionary seeding mix that takes care of the seed for you, so you can grow thick, beautiful grass ANYWHERE,” including “Dry, sunny areas,” “Dense shade,” and “Even grows on pavement!”; and “premium quality … developed to thrive in virtually every condition—harsh sun, dense shade, and even spreads to repair wear and tear. The result—thicker, beautiful, long lasting grass!”

There was also a graphic purporting to show EZ Seed outperforming ordinary seed, labeled “50% THICKER WITH HALF THE WATER††.” Below the pictures were disclosures: “††Results 32 days after planting; each watered at half the recommended rate for ordinary seed. Results may vary. *Subject to proper care.”

Scotts also offers a “No Quibble Guarantee,” which provides: “If for any reason you, the consumer, are not satisfied after using this product, you are entitled to get your money back. Simply send us the original evidence of purchase and we will mail you a refund check promptly.” 

Home Depot and Lowe’s allegedly used in-store displays containing the same statements and reviewed and approved false and misleading materials for EZ Seed, including ads that bore their respective names/marks.

The plaintiffs, who each resided in New York or California, alleged that they bought EZ Seed in reliance on these representations and that it failed to perform as promised.  They cited studies by “the largest turfgrass development institution in North America” that suggested that EZ Seed failed to grow any grass when given half the amount of water recommended for ordinary seed over a thirty-two day period. One plaintiff sought a refund for four canisters, but Scotts only refunded the purchase price of two canisters.  Plaintiffs sued for violations of the Magnuson-Moss Warranty Act (MMWA), breach of warranty, California’s CLRA, UCL, and FAL, and NY GBL §§ 349 & 350, and related common-law claims.

Plaintiffs argued that the various statements on EZ Seed’s label and ads were written warranties under the MMWA because they promised that EZ seed would “meet a specific level of performance over a specified period of time,” as stated in the statutory definition.  They also alleged that the No Quibble guaranty was a promise to refund under the MMWA. 

The court found that some statements arguably promised a specific level of performance, such as “50% thicker with half the water,” but didn’t provide a specific period of time.  The FTC has interpreted the MMWA to mean that “[a] product information disclosure without a specified time period to which the disclosure relates is … not a written warranty.”  This may seem arbitrary, but a line must be drawn and this is it.  The only representation that came close to including a specific period of time was “50% thicker with half the water,” because directly below those words were images purporting to show EZ Seed having grown significantly more grass than ordinary seed “32 days after planting.” Thus, plaintiffs argue defendants promise that EZ Seed grows 50% thicker with half the water in 32 days.  But the “32 days” language was immediately followed by “each watered at half the recommended rate for ordinary seed. Results may vary.”  Thus, the label expressly cautioned purchasers that they might not get the promised result in 32 days.

The No Quibble guaranty might be a warranty under the MMWA, though.  One plaintiff alleged that she “sought a money-back refund for the four EZ Seed canisters she had purchased pursuant to the Scotts No Quibble Guarantee. However, Scotts refused to honor the No–Quibble Guarantee for two containers of the EZ Seed.” The court would draw the reasonable inference that she properly requested a refund, and Scotts failed to honor her request; that was entirely plausible.  Maybe the facts wouldn’t bear that out, but that was for later.

Turning to the state law warranty claims, the court found that most were merely nonactionable puffery: “WaterSmart”; “Drought tolerant”; “Grows Anywhere! Guaranteed!”; “Makes the Most Of Every Drop”; and “Grows in Tough Conditions! Guaranteed!”  However, some statements could be express warranties under the UCC: (1) EZ Seed grows grass “50% thicker with half the water” compared to “ordinary seed,” and (2) EZ Seed is “developed to thrive in virtually every condition—harsh sun, dense shade, and even spreads to repair wear and tear” and similar statements to the extent they promised that EZ Seed would grow grass in both sunny and shady areas. These statements promised specific, measurable performance, as did the No Quibble guaranty.

The court did not find the claims that EZ Seed was “revolutionary” and “takes care of the seed for you, so you can grow thick, beautiful grass ANYWHERE” actionable.  Apparently the claim that EZ Seed would even grow grass on pavement was exaggerated puffery, though to me the grow anywhere/even on pavement claim sounds exactly like a specific, surprising but possible claim the advertiser would want a buyer to believe in order to bolster its claims about ordinary performance, just like showing a blender pulverizing unexpected ingredients.  This link to an Amazon page shows Scotts using a photo of the product growing on pavement to prove how good it is, and here’s a Scotts on Facebook using a different photo to make the same claim, “EZ Seed is guaranteed to grow grass anywhere! Don’t believe us? Check out this photo, it even grows on pavement.” I’m pretty sure the FTC would consider that non-puffery.


Anyway, these warranty claims were only stated against Scotts, not Home Depot or Lowe’s, since they only appeared on EZ Seed’s labeling.  Plaintiffs failed to allege that the other defendants independently made the same promises when selling EZ Seed, as opposed to “merely passively displaying” Scotts’ promises.

Turning to breach of implied warranty, privity is usually required for such claims.  Plaintiffs argued that here, the retailers acted as Scotts’ agent, but the court rejected that theory.  As against the retailers, who argued that plaintiffs didn’t properly allege that EZ Seed failed its essential purpose, the court refused to dismiss the claim.  The purpose of EZ Seed was to grow grass; plaintiffs alleged that it didn’t grow; this was enough to allege that it wasn’t fit for the ordinary purposes for which it was used, and plaintiffs stated an implied warranty of merchantability claim against Home Depot and Lowe's.

The court turned to the California consumer protection statutes.  Again, puffery was not actionable, but some potentially actionable statements remained.  The claim against Scotts survived, but not against the retailers because of failure to plead fraud with particularity: plaintiffs didn’t identify what statements the retailers allegedly made, lumping them together with Scotts.  Plus plaintiffs didn’t plausibly allege that the retailers knew or should have known of the falsity.  (Sigh.)

The New York analysis was different because claims under §§ 349 & 350 aren’t subject to Rule 9’s heightened pleading requirements.  (This is purely historical/path-dependent, as far as I can tell; neither state requires knowledge of falsity for core liability, so application of Rule 9(b) depends on whether courts think terms like “fraudulent” etc. matter more than whether an actual common law fraud type claim is being brought; the court’s not wrong to cite differing precedents from different coasts, but I don’t think there’s an actual rationale underlying that difference.)  Plus, these claims don’t require reliance.  (… Like some of the California claims?)  And New York doesn’t require plaintiffs to plead that defendants knew or should’ve known that the statements were false or misleading. 

So, while the claims based on puffery were dismissed, the claims based on nonpuffery remained, because plaintiffs properly alleged that the challenged statements (1) were directed at consumers, (2) were misleading in a material way, and (3) caused plaintiffs to be injured.  The claims against Lowe’s were dismissed, though, because the only plaintiff who allegedly bought EZ Seed at Lowe’s did so in California.  Given the different pleading standards, though, the claim against Home Depot survived; plaintiffs didn’t have to allege reliance on particular statements made by Home Depot or Home Depot’s knowledge. Instead, they met the low pleading standard “by alleging Home Depot included some or all of the actionable representations in its in-store advertisements and on its website, and the plaintiffs who purchased EZ Seed at Home Depot were injured because the product did not work.”

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