Thursday, June 29, 2017

Second Circuit holds that allegations of "systematic" underweighing plead injury in fact for specific individual

John v. Whole Foods Market Gp., Inc., 858 F.3d 732 (2d. Cir. 2017)

John filed a putative class action under GBL §§ 349-350 alleging that New York City Whole Foods grocery stores systematically overstated the weights of pre-packaged food products and overcharged customers as a result. The court of appeals reversed the district court’s holding of lack of Article III standing on the pleadings.

John alleged that he “routinely shopped” for two years at two Whole Foods stores in Manhattan and made “regular[ ] purchase[s]” of pre-packaged products, including “pre-packaged cheese and cupcakes approximately one or two times per month.” The complaint didn’t identify a specific food purchase as to which Whole Foods overcharged John, but described pervasive overcharging of pre-packaged food throughout Whole Foods’ stores in New York City. The complaint a June 2015 press release of the New York City Department of Consumer Affairs announcing preliminary findings that Whole Foods’ New York City stores “routinely overstated the weights of its pre-packaged products—including meats, dairy and baked goods”:

DCA tested packages of 80 different types of pre-packaged products and found all of the products had packages with mislabeled weights. Additionally, 89 percent of the packages tested did not meet the federal standard for the maximum amount that an individual package can deviate from the actual weight, which is set by the U.S. Department of Commerce. The overcharges ranged from $0.80 for a package of pecan panko to $14.84 for a package of coconut shrimp.

The DCA’s findings, the press release continued, “point to a systematic problem with how products ... are weighed and labeled” and “suggest[ ] that individual packages are routinely not weighed or are inaccurately weighed, resulting in overcharges for consumers.” The investigation took place during the same period as John’s purchases and focused on the eight Whole Foods stores in NYC, including the two stores he patronized.  Whole Foods confirmed that cheese and cupcakes were among the pre-packaged products that the DCA alleged were mislabeled.

Because Whole Foods brought only a facial challenge to John’s allegations of standing, John had no evidentiary burden at the pleading stage. The district court thought that John didn’t plead injury in fact, which consists of “an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical.”

The court of appeals disagreed. It was undisputed that overpaying for a product results in a financial loss constituting a particularized and concrete injury in fact. But the critical basis for John’s claim that he was overcharged was the DCA’s press release announcement that 89 percent of Whole Foods’ pre-packaged products tested by the DCA were mislabeled, and the press release’s conclusion that the mislabeling was “systematic” and “routine[ ].”  The district court didn’t think that was enough, but it failed to draw all reasonable inferences in John’s favor.  It wanted “an investigative finding of ubiquitous, systematic over-weighting at Whole Foods’ New York City stores,” “invariable incidents of this deceptive labeling practice,” and “across-the-board overcharging so as to embrace, other than by conjecture, the cheese and cupcakes ... that John ... occasionally bought in 2014 and 2015.” It also wanted a description of the DCA’s methodology.

But the DCA’s press release asserted that the mislabeling was “systematic” and “routine[ ],” and a facial attack on the pleadings wasn’t the right place to test the DCA’s sampling methods.  His alleged facts made his alleged injury plausible.  The district court was concerned over evidentiary obstacles on the merits, but targeted discovery might be able to address those. 

1 comment:

  1. Significant re the Emoluments Clause litigation? (At least getting to tax returns discovery?)