Second Circuit Liberalizes Article III Standing for Class Action Against Whole Foods

You walk into Whole Foods and see organic this, grass fed that, and cage free, free range the other.  What don’t you see? A large sign that says: “Buy some prepackaged tabouli. We have overweighted it and will charge you more than you’re actually going to get.  You’re welcome.”  That’s what the plaintiff in John v. Whole Foods Mkt. Grp., Inc., a proposed class action, alleges that Whole Foods has actually done.  

The problem: the plaintiff doesn’t know if he was actually overcharged.  Instead, he alleges that he shopped at Whole Foods, that he bought prepackaged goods, and that he believes he was charged more than he should have paid because Whole Foods systematically overweighted the food.  His allegations are based, however, almost exclusively on a New York City Department of Consumer Affairs investigation that preliminarily found that Whole Foods’ New York City stores “routinely overstated the weights of its pre‐packaged products–including meats, dairy and baked goods.”  The complaint quotes extensively from a 2015 DCA press release about the investigation and the preliminary findings, including that 


The plaintiff alleged that he shopped at Whole Foods during the time period of the DCA investigation, but could not identify one particular time that he was overcharged.  Instead, he alleged that Whole Foods overpriced the prepackaged goods systematically and he must have fallen victim to the scheme.   

The Southern District of New York dismissed the complaint for lack of Article III standing  because the plaintiff failed to plausibly allege that he was personally
overcharged by Whole Foods for a specific purchase.

The Second Circuit, however, vacated the dismissal and remanded for further proceedings.  Noting that the injury-in-fact requirement is a low bar, the Court held that the plaintiff’s complaint, drawing all reasonable inferences in the plaintiff’s favor, plausibly alleged that he was overcharged while shopping at Whole Foods.  The Court held that the DCA’s press release when combined with the plaintiff’s monthly purchases at Whole Foods were enough because the complaint alleged that the DCA investigation found that the Whole Foods practice was systematic.  It was, therefore, likely that the plaintiff had been overcharged, at least for Article III standing purposes.  Although it held that the plaintiff had standing, the Court cautioned that it remained the plaintiff’s burden to establish that he was actually overcharged in order to succeed in his claims.  

The Second Circuit’s decision liberalizing Article III standing in consumer class actions could have significant implications.  To be sure, in every case where a governmental agency or consumer watchdog conducts an investigation into an allegedly deceptive consumer practice, there will be a plaintiff who will sue based upon the findings of the investigation.  If the plaintiff alleges that the deceptive practice was systematic, and the agency investigation at least in some ways supports that allegation, the plaintiffs will have Article III standing under John.  With more plaintiffs making it past a a motion to dismiss, more cases are likely to settle in order to avoid not only the enormous costs of litigating a class action, but also to avoid paying damage claims to a potentially huge class of plaintiffs.  That’s great for plaintiffs and the plaintiffs’ bar but not so great for Whole Foods and other retailers.

The Second Circuit’s opinion can be found here.

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