Thursday, August 11, 2022

court treats Green Guides as rules/regulations for purposes of state safe harbors

Duchimaza v. Niagara Bottling, LLC, 2022 WL 3139898, No. 21 Civ. 6434 (PAE) (S.D.N.Y. Aug. 5, 2022)

Interesting opinion treating FTC Guides as binding for purposes of state safe harbor laws. I’m not sure that Guides are “rules” or “regulations” in the ordinary sense, given that they can’t be relied on directly by the FTC to impose liability but merely indicate what the agency considers to be false or misleading, but it’s not clear that anybody in this case pressed that question.

Duchimaza alleged that Niagara’s representation that its water bottles were “100% Recyclable” was false and misleading under New York GBL §§ 349 & 350, as well as common law fraud, breach of express warranty, and unjust enrichment. She alleged that the label is not recyclable in her geographic area and, based on national and statewide statistics, fewer than half the bottles she purchased would be recycled. The complaint alleged that some bottle caps and the labels are comprised of PP plastic and biaxially oriented polypropylene (BOPP) plastic, a form of PP, which are “among the least recyclable plastics.” The labels, specifically, are allegedly not recyclable in New York County, where the New York City Department of Sanitation states that “ ‘film plastic,’ including ‘wrappers,’ is not accepted as part of the recycling program.” The Sierra Club has described bottle labels on which such “100% Recyclable” claims are printed as “completely unrecyclable.”

In addition, the complaint alleged that the components made of materials capable of being recycled—the bottles and HDPE caps—are not in fact recycled due to the limited capacity of the nationwide recycling system, and particularly, the recycling plants in Duchimaza’s area.

Municipal recycling facilities (MRFs) both in New York and nationwide now allegedly refuse to accept certain types of plastic and implement strict quality standards, such that acceptance by an MRF does not mean that a product will be recycled. In general, the complaint alleged, nearly 90% of all plastic waste is not recycled, and recycling problems are “particularly acute in New York.” A local news article stated that plastic bottles in Southampton and East Hampton “do not stand a chance” of being recycled as they are sent to landfills or incinerated.

The court found that Duchimaza adequately pled standing for damages even without alleging that the particular bottles she purchased and placed in a recycling bin were not in fact recycled, since she alleged that she paid a price premium based on the misrepresentation that they were “100% recyclable.” But she didn’t plead standing for injunctive relief.

It is a “complete defense” to liability under GBL §§ 349 and 350 that an “act or practice is ... subject to and complies with the rules and regulations of, and the statutes administered by, the federal trade commission or any official department, division, commission or agency of the United States.” The court referred to the Green Guides as “regulations … promulgated by the FTC,” which “establish[ ] commercial practices regarding recyclability claims.”

The parties agreed that the term “recyclable” is a term of art and that the FTC’s Green Guides informed its meaning. The Guides state that:

A product or package should not be marketed as recyclable unless it can be collected, separated, or otherwise recovered from the waste stream through an established recycling program for reuse or use in manufacturing or assembling another item.... Marketers should clearly and prominently qualify recyclable claims to the extent necessary to avoid deception about the availability of recycling programs and collection sites to consumers.

But marketers may make unqualified recyclable claims provided that “recycling facilities are available to a substantial majority [at least 60%] of consumers or communities where the item is sold,” “at least 60%.” And marketers may make unqualified claims where “the entire product or package, excluding minor incidental components, is recyclable.”

The court agreed that “recyclable” does not mean “actually recycled,” making the theory of “not really recycled” insufficient to plead falsity. “[T]he focus of the Green Guides is on the availability of recycling facilities, not the incidence of recycling.” Thus, “whether a recyclability claim is misleading turns not on the incidence of recycling, but whether a substantial majority of consumers can place such products into the recycling stream.” [It sure seems like that could be misleading about the incidence of actual recycling.]

As to the caps and labels, the question was whether they qualified as “minor incidental components” of the bottles. The Green Guides use bottle caps as an example of a “minor, incidental component.” They recognize an exception if “the presence of the incidental component significantly limits the ability to recycle the product,” but there were no such allegations here. As to the labels, the court found they also qualified as a “minor incidental” component, using “the term’s ordinary dictionary meaning, as required when a statutory or regulatory term is undefined.” “The label is more consequential than the cap only insofar as it contains informational content, a point not germane to recyclability.”

The other claims failed too.

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