D's own ads prove materiality of difference between Fraser and balsam firs

Evergreen East Cooperative v. Bottomley Evergreens & Farms, Inc., 2021 WL 1163799, No. 20-cv-184 (AJN) (S.D.N.Y. Mar. 26, 2021)

“Christmas tree distributor Evergreen East Cooperative claims that its rival Bottomley Evergreens & Farms sold mislabeled trees through retail partners including Home Depot and Whole Foods.” Defendants moved to dismiss, relevantly arguing that consumers would not care whether their trees were the more desirable Fraser firs (as advertised) or cheaper, faster-drying, more-shedding balsam firs (as they were in fact). Defendant Whole Foods wasn’t adequately alleged to be liable, but the other claims survived.

Evergreen allegedly paid more for Fraser firs because of their scarcity, and so was forced to market them to consumers for higher prices. Bottomley allegedly imported thousands of balsam firs from Canada, labeled them as Fraser firs, and sold them to consumers throughout the New York area, undercutting Evergreen’s prices for genuine Fraser firs and making consumers believe that its prices were unreasonable.

The labels at Home Depot used the words “Fraser Fir” printed in large letters, followed by three bullet points: “Most highly awarded Christmas tree”; “Superior needle retention with sturdy branches for ornaments”; “Soft texture and traditional holiday fragrance.” Home Depot’s in-store signage and advertising also identified the trees as Fraser firs. Evergreen notified Home Depot of the problem, but it took no action for the rest of the Christmas season. However, it didn’t allege that Whole Foods used misleading labels or that it notified Whole Foods of the problem.

Materiality: “Accepting Evergreen’s allegations as true and drawing all reasonable inferences in its favor, there are significant differences between balsam and Fraser firs that affect their desirability to consumers and drive the Fraser fir’s higher price…. Bottomley and Home Depot offer no argument as to why shorter shelf life and inferior durability would not influence the purchasing decisions of consumers.” Instead, they argued that shoppers examine individual trees, so they’d pick the one they wanted aesthetically. Even if that were appropriate on a motion to dismiss, “[a]s between two trees that look the same, consumers might prefer (and pay more for) one that will retain its needles longer.”

Plus, their own advertising also refuted their immateriality argument.

The trees’ labels prominently identify them as Fraser firs—twice on just the front of the label. The label then lists qualities of Fraser firs as selling points to consumers. In isolation, a statement like “superior needle retention” might amount to no more than puffery. But the label does not present this claim as a vague boast about the quality of the seller’s trees. Instead, it lists it as a bullet point beneath the heading “Fraser Fir” along with other statements that appear to describe that variety of tree, conveying the message that consumers should select Fraser firs over other Christmas trees because of their particular qualities. Puffery or not, the label reflects that consumers should—and do—care about the difference between Fraser firs and balsam firs.

As for causation, this was “the classic Lanham Act false-advertising claim in which one competitor directly injures another by making false statements about his own goods or the competitor’s goods and thus inducing customers to switch.” “This Court disagrees with Bottomley and Home Depot that a plaintiff needs to plead an encyclopedic set of details about the Christmas tree market, their inventory, and the characteristics of their trees to plausibly allege causation under this well established theory.”

State claims: Was this consumer-oriented conduct or merely private harm? § 349 doesn’t require harm to public safety. “Where the allegedly deceptive communication is made directly to consumers, it is self-explanatory that the conduct is ‘consumer-oriented,’ and thus no further showing on this element is required.” Also, “consumers are harmed when they do not get what they pay for.” Contrary district court holdings were “plainly inconsistent with subsequent pronouncements of the New York Court of Appeals.”