The “Reasonable Consumer’s” View of Green Labels—Lessons From Two Greenwashing Cases

• Select symbols and wording that reflect the product itself and its own green features, and avoid those that could be associated with an independent organization if the product has not in fact been endorsed or recognized by that organization or group.
• A symbol should not suggest or imply that the product has been ranked by a rating system unless an independent, third-party organization has rated the product.
• Companies that market their products as green should familiarize themselves with and adhere to the FTC Green Guides, as they are often resorted to as guidance to what types of environmental claims are potentially misleading.

In recent years, many companies have attempted to capitalize on consumers’ heightened and growing concern about environmental issues by touting the green aspects and features of their products or services. This has led to consumer class action lawsuits premised on claims of greenwashing, the practice of making false or unverifiable claims that a product or service is environmentally friendly. Two recent decisions illustrate how the use of certain words or symbols on product packaging can impact whether such a class action lawsuit will survive. These decisions provide guidance to companies that make claims that their products or services are environmentally friendly. The following cases were brought to court and litigated in California.

Illustrative Cases

In Koh v. SC Johnson & Son, Inc., 2010 U.S. Dist. Lexis 654 (N.D. Cal. Jan. 6, 2010), the plaintiff alleged SC Johnson prominently placed a “seal of approval” label on the front of its Windex products, suggesting that products bearing this label were environmentally sound. The label had a green background and read “Greenlist Ingredients” under a drawing of two leaves and a stem. The reverse side of the label, which can be read through the back of the clear Windex packaging, read “Greenlist is a rating system that promotes the use of environmentally responsible products. For additional information, visit www.scjohnson.com[.]”

The plaintiff alleged that these representations conveyed that the product had received the seal of approval of a nonprofit environmental group or other neutral third party, and further alleged that he would not have purchased Greenlist-labeled Windex at its premium price had he known the Greenlist label was actually created by SC Johnson and not a third party, and that Windex was not environmentally friendly.

The class action lawsuit against SC Johnson, alleging, among others, violation of California’s Unfair Competition Law (UCL), False Advertising Law (FAL) and Consumer Legal Remedies Act (CLRA). SC Johnson moved to dismiss the plaintiff’s claims, but the United States District Court for the Northern District of California denied the motion. The Court found the plaintiff’s allegation that “he did not receive the benefit of the bargain in that Windex cost more than similar products without misleading labeling” satisfied the pleading requirements of the UCL and FAL. The Court further concluded that a reasonable consumer could have found the Greenlist label to be misleading.

In assessing whether a reasonable consumer would interpret the Greenlist label as being endorsed by a third party, the Court examined the context of the symbol and the use of the trademarked term “Greenlist” by several environmental groups to describe environmentally sound products. The Court also relied on an example supplied in Federal Trade Commission (FTC) guidelines, the so-called “Green Guides,” in which the FTC indicated that a product label containing a globe icon surrounded by the words “Earth Smart” would be “likely to convey to consumers the product is environmentally superior to other products” and would be deceptive “if the manufacturer could not substantiate the broad claim.” The Court concluded that “it is plausible that a reasonable consumer would interpret the Greenlist label as being from a third party.” As a result of the Court’s ruling, the plaintiff was permitted to move forward with his claims and has moved to certify a class.

In a more recent case concerning Fiji bottled water products, a California appellate court reached a different conclusion. In Hill v. Roll Int’l Corp., No. A128698 (Cal. App. May 26, 2011), the plaintiff alleged that Fiji Water misrepresented to consumers that its water was an environmentally sound product. Specifically, she alleged that the use of a “Green Drop” on the front of the product looked similar to the seals of approval used by independent, third-party organizations. In addition, a green water drop on the back of the bottle adjacent to the address for an Internet website, “fijigreen.com,” allegedly conveyed that the product was environmentally sound and superior to other bottled waters that did not contain the drop. The plaintiff further alleged that she paid approximately 15% more for Fiji Water than for other bottled water products. According to the plaintiff, she would not have bought Fiji Water had she known that the green drop was in fact the creation of Fiji and not a neutral party or environmental group, and that Fiji Water was not environmentally friendly or superior to similar bottled water available at less expensive prices. Fiji Water demurred to the plaintiff’s UCL, FAL, CLRA and other claims. Finding that the plaintiff failed to state a cause of action, the trial court upheld the demurrer. The Court of Appeal affirmed.

The Court of Appeal found the plaintiff’s allegations did not meet the reasonable consumer standard used under the UCL and FAL, which requires a plaintiff to show potential deception of consumers acting reasonably in the circumstances. According to the Court, no reasonable consumer could believe that the “Green Drop” was a seal of approval of an independent organization. In reaching its conclusion, the Court first looked at the drop itself and found it was not deceptive because it bore no name or recognized logo of any group, much less a third party organization, no trademark symbol, and no other indication that it is anything but a symbol of Fiji Water.

Second, the Court noted the symbol was “just a green drop, being the most logical icon for its particular product, water” and was not like the globe icon in the example provided in the FTC guidelines because a symbol of the Earth is more suggestive of the seal of an environmental organization than a drop of water. Third, the Court found the context of the green drop on the back of the bottle confirmed the symbol was not supported by an independent organization because the drop was adjacent to the website name fijigreen.com. Such placement of the drop next to its own website showed it is a symbol of Fiji Water and not that of a third party organization. While the Court recognized reasonable consumers would view the green drop as referring to the environment, it noted the FTC guidelines do not prohibit “ ‘touting’ a product’s ‘green’ features.” The Court reasoned that “[b]y providing guidelines and a ‘safe harbor’ for advertisers wanting to make environmental marketing claims,” the FTC promotes the making of such claims, “provided they do not mislead reasonable consumers.”

Importantly, the Court of Appeal also distinguished the green drop in Hill from the “Greenlist” symbol used in Koh. The Court pointed out “the label [in Koh] was very different from the plain, green drop symbol” because the symbol in Koh “made express representations of environmental superiority; used the trademarked name ‘Greenlist,’ a name not immediately apt to be associated with the product or its manufacturers; and identified the name as a rating system, which further suggested an independent source that rated other manufacturers’ products as well.”

Guidelines

Taken together, the Koh and Hill decisions provide guidance to companies that seek to tout the environmentally friendly aspects of their products on the product packaging. To protect itself against claims of greenwashing, a company should ensure its product labeling complies with, among others, the following guidelines.

• First, a company should select symbols and wording that reflect the product itself and its own green features and avoid those that could be associated with an independent organization, such as a third party environmental group, if the product has not in fact been endorsed or recognized by that organization or group.
• Second, the symbol should not suggest or imply that the product has been ranked by a rating system unless an independent, third party organization has, in fact, rated the product.
• Third, companies that market their products as green should familiarize themselves with, and adhere to, the FTC Green Guides, as plaintiffs who bring greenwashing claims, and courts assessing whether those claims have merit, often resort to the Green Guides for guidance as to what types of environmental claims are potentially misleading.

Class action filings based on claims of greenwashing are a relatively recent phenomena, still in their infancy, and it remains to be seen whether they will survive. If a class is eventually certified in the Koh litigation, there likely will be a sharp increase in the number of greenwashing suits filed, as the plaintiffs’ bar will take note of the fact that sufficiently pled greenwashing class claims have the potential to reach a jury. By adhering to the above guidelines, a company may not avoid greenwashing class action litigation altogether, but should improve its chances of obtaining a dismissal at the pleading stage, thereby avoiding costly discovery, class action briefing and perhaps, trial.

Neal Marder is a partner at Winston and Strawn’s Los Angeles office, the chair of the Litigation group in Los Angeles, and the firm-wide chair of Winston’s National Class Action practice. His practice concentrates on complex business and commercial litigation, white collar, securities, internal investigations and antitrust, with an emphasis on the defense of class actions. www.winston.com

Christian E. Dodd is a former senior litigation associate in the Los Angeles office of Winston & Strawn LLP.

Summer associate Stephanie Leonard also contributed to this article.