Allbirds has built a $1 billion brand of footwear that has been coined as making “Silicon Valley’s favorite shoes,” in the process has “beaten the odds in the startup world by raising a quarter of a billion dollars and turning earth-friendly wool sneakers into a legit product category,” as Fortune put it early this year. In addition to amassing fans across the globe and investors like Tiger Global Management, Lerer Hippeau, Fidelity, and T. Rowe Price, which have poured upwards of $200 million into the company, Allbirds has garnered the attention of a class of plaintiffs that claim that it is not living up to the claims that is makes in its sustainability-centric marketing, including about the carbon footprint of its products, and its “sustainable” and “responsible” manufacturing practices.
According to the complaint that she filed in a New York federal court earlier this summer, plaintiff Patricia Dwyer claims that Allbirds knows that “consumers are increasingly influenced by the business practices of companies they choose to engage with, [and that] factors important to consumers include whether a company acts in way that protects the environment, labor practices and animal welfare.” The brand’s “marketing is based on all these factors, which has helped it become worth over one billion dollars,” Dwyer asserts. However, she argues that despite its advertising being “replete with eco-friendly phrases,” the reality of Allbirds’ operations does not match that “eco-friendly”-focused marketing, and the footwear brand is peddling “false, deceptive and misleading” information.
Specifically, Dwyer alleges that Allbirds’ life cycle assessment tool – which identifies the carbon footprint of each product – does not assess the environmental impact beyond the manufacturing of the shoes, themselves, such as the impact of “wool production, including on water, eutrophication, or land occupation,” and thus, “exclude[es] almost half of wool’s environmental impact.” At the same time, the plaintiff claims carbon footprint figures “are based on ‘the most conservative assumption for each calculation, skewing the calculations in its own favor,’ so it can make more significant environmental claims.”
Beyond that, Dwyer asserts in the complaint that Allbirds makes “misleading animal welfare claims,” including by “promot[ing] the ‘happy’ sheep” whose wool is at the heart of its products. “Allbirds has claimed that its wool harvesting practices are sustainable [and] humane,” per Dwyer. However, she argues that “based on investigations into more than 100 large-scale wool operations, most of which had been promoted in the same terms used by Allbirds – as ‘sustainable’ and ‘responsible’ – ‘workers beat, stomped on, cut open the skin of, and slit the throats of conscious, struggling sheep,’” practices that are “neither sustainable nor humane.”
Still yet, Dwyer argues that Allbirds’ “emphasis on ‘transparency’ is also false, deceptive and misleading, ‘as it stonewalls any enquiries into its wool sourcing,’” and that its products “contain other representations that are false and misleading,” which is problematic, as “reasonable consumers must and do rely on a company to honestly identify and describe the components, attributes and features of [its] products, relative to itself and other comparable products or alternatives.”
Sustainability claims are not inconsequential, Dwyer argues, as they add value to the products in connection with which they are attached, and enable companies to charge more. “Had [she] and the proposed class members known the truth [about Allbirds’ products], they would not have bought the products or would have paid less for them,” Dwyer argues, claiming that Allbirds not only “sold more of the products … than it would have in the absence of this misconduct,” it also sold them “at higher prices.” In short: “If Allbirds were required to either truthfully disclose the practices which provide the wool for its shoes, or if it refrained from representing its ‘humane’ and “animal-friendly’ attributes, fewer people would buy the shoes.”
Allbirds formally responded by way of an answer, complete with an array of affirmative defenses, dated July 17. In addition to asserting that Dwyer’s and putative class members’ claims are barred, in whole or in part, due to “a lack of standing and failure to establish any cognizable injury,” and that Dwyer “fails to and cannot prove money damages with any degree of certainty sufficient to permit recovery of damages,” Allbirds claims that its actions were “authorized by the applicable law and thus, are not actionable,” and that Dwyer’s claims are barred because “Allbirds was not under a legal duty to disclose the allegedly concealed facts.”
The Broad View: The case is striking, as it is one of a handful of recent class action complaints that aim to hold companies accountable for sustainability centric advertising claims that may have previously been viewed – and treated – as unactionable, due, in large part, to a lack of formal definitions for terms in the “green” vein. “With no consensus of a standard to use to verify the meaning of sustainability, using the term in a marketing context creates some risk,” Crowell & Moring’s Cheryl Falvey wrote back in 2013, noting, however, that sustainability claims that “relate solely to aspirations and goals … can be used.”
This case and others demonstrate that this appears to be changing. Canada Goose, for instance, is currently in the midst of a false advertising suit for allegedly misleading consumers about the nature of the trapping methods used to source the fur for its buzzy jackets by claiming that it is dedicated to “the ethical, responsible, and sustainable sourcing and use of real fur.”
The sheer amount of companies that are pushing products by way of sustainability and other eco-friendly claims and the largely unrelated nature of such uses will likely lead to more cases in the space, and the outcomes may not bode well for brands based on at least some of the early determinations of Southern District of New York Judge Victor Marrero in the Canada Goose case, in which he refused to toss out a false advertising claim on the basis that the plaintiff plausibly alleged that Canada Goose’s statement that it is committed to “ethical, responsible, and sustainable sourcing” could prove misleading to a reasonable consumer.
With these cases and others in mind, and as brands – and regulators – continue to grapple with what it means to be “green,” “sustainable,” or “eco-friendly,” companies are encouraged to “pay attention to their advertising when they make claims regarding their positive environmental impact,” per Perkins Coie’s Amanda Beane, Jason Howell, and Emily Cooper. “Given the risk of regulatory enforcement, competitor challenges, and class actions, companies should keep the Federal Trade Commission’s Green Guides, state regulations, and general truth-in-advertising laws in mind and closely scrutinize broad environmentally-friendly marketing and labeling claims.”
The case is Patricia Dwyer v. Allbirds, Inc., 7:21-cv-05238 (SDNY).