Texas Lawsuit Highlights Risk From ESG Marketing Claims

A class action lawsuit targeting one of the largest pasture-raised egg brands in the country is allowed to proceed, following a ruling by the federal court in the Western District of Texas. Austin-based Vital Farms, the defendant along with two of its executives, “sells very expensive eggs, and it sells a lot of them,” says the complaint. “Consumers pay these high prices for Vital’s eggs – a commodity product – because Vital markets itself as an ethical company that treats animals in an ethical, humane, and transparent manner.” This claim is false, the complaint alleges, and Vital’s customers “have been tricked into paying an unjustifiably high premium.”

The decision allowing this case to proceed highlights what K&L Gates attorney Nathan A. Huff says is a growing threat to agribusinesses: greenwashing litigation mounted by advocacy groups, based on a company’s Environmental, Social and Governance (ESG) related marketing claims.

Huff lays out five warnings to companies that may be at risk. One of them, directly relevant to the particulars of the Vital Farms case, is that relying on ESG certification from a third-party organization may not be a sufficient defense. Vital Farms moved to dismiss the case in part by arguing its claims about being “certified humane” for a “pasture-raised” product were valid because its operations were certified as such by a widely respected organization called Humane Farm Animal Care (HFAC). It wasn’t enough for the judge, who may have been moved by graphic accounts in the complaint of elements of industry processes that are not addressed by HFAC criteria.

Among Huff’s other warnings for agribusinesses engaged in ESG marketing: Be aware that greenwashing litigation can target company officers for individual liability. In sum, he advises a meticulous review of all ESG-related statements with potential litigation in mind.