Antitrust Law Daily Wrap Up, ADVERTISING—E.D. Cal.: Consumer’s claims against Lowe’s over short-packaging scheme proceed, (Jan 20, 2016)

By Linda O’Brien, J.D., LL.M.

A consumer sufficiently alleged that a home improvement retailer had knowledge of and participated in a scheme with a garden products manufacturer to misrepresent the quantity of mulch contained in bags of its private-label premium mulch, the federal district court in Sacramento, California, has decided. Thus, the retailer’s motion to dismiss was denied (McMillan v. Lowe’s Home Centers, LLC, January 20, 2016, Mueller, K.).

Consumer Glenn McMillan purchased bags of premium mulch from a Lowe’s retail store in April 2014. Lowe’s contracted with garden products manufacturer Gro-Well for the manufacture, packaging, and distribution of private-label premium mulch. The bag labels represented that the net contents of each bag was two cubic feet. After determining that each bag contained substantially less than two cubic feet of mulch, McMillan filed a complaint in May 2015 against Lowe’s and Gro-Well, alleging that the bag labels were false and misleading in violation of California’s Consumers Legal Remedies Act (CLRA), Unfair Competition Law (UCL), and False Advertising Law (FAL). Lowe’s moved for dismissal of the complaint.

Participation in the alleged fraud. The court found that McMillan sufficiently alleged that Lowe’s participated in the alleged short-packaging scheme. Although a retailer is not required to “police each and every representation made by the products on its shelves,” a retailer may be liable for unlawful business practices that it personally participated in or had control over. According to the court, the complaint specifically alleges that Lowe’s directs the manufacturing and packaging of the premium mulch through contractual agreements, created a standard, uniform bag for packaging the mulch, and developed the textual and graphic content on the mulch labels. Those allegations were sufficient to give Lowe’s notice of the particular misconduct alleged in the complaint.

Knowledge of the alleged fraud. The complaint also alleged that Lowe’s directed Gro-Well to use a standard process for distributing a uniform amount of mulch in each bag and each company knew the uniform amount of mulch actually distributed in each bag. The court determined that, those allegations taken with the allegations that the bags contained substantially less mulch than advertised, were sufficient to plausibly show that Lowe’s knew or should have known that the representations were false.

The case is No. 1:15-cv-00695-KJM-SMS.

Attorneys: Matthew C. De Re, PHV (Zimmerman Law Offices, PC) for Glenn McMillan. Neil K. Gilman, PHV (Hunton & Williams LLP) for Lowe's Home Centers, LLC. Todd Michael Noonan (DLA Piper LLP) for Gro-Well Brands, Inc.

Companies: Lowe’s Home Centers, LLC; Gro-Well Brands, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews