Antitrust Law Daily Wrap Up, ADVERTISING NEWS—W.D. Wash.: Chiquita charged with making false environmental claims, (May 27, 2014)

By Greg Hammond, J.D.

Chiquita Brands International, Inc.’s purportedly environmentally safe practices have been questioned by a non-profit company, after it learned that a Guatemalan village’s water supply was tainted by chemicals from mass banana production. The non-profit’s six claims of action against Chiquita were reduced to three claims—a violation of the Washington Consumer Protection Act, breach of express warranty, and negligent misrepresentation—after the federal district court in Seattle partially granted Chiquita’s motion to dismiss (Water & Sanitation Health, Inc. v Chiquita Brands International, Inc., May 22, 2014, Jones, R).

Background. Chiquita, one of the largest producers and marketers of fruits and vegetables in the world, purchases millions of pounds of bananas annually from the Guatemalan company, COBIGUA. As part of Chiquita’s online marketing campaign, it advertises the company’s environmentally safe business practices, representing that it: (1) uses solid waste traps at all of its packaging stations to ensure rivers and streams remain clean; (2) protects waters sources by reforesting all affected natural watercourses; and (3) plants cover crops in all of its banana farm drainage ditches in lieu of chemical weed control.

Water & Sanitation Health, Inc. (WSH) is a non-profit organization that provides sustainable clean-water systems to impoverished villages across the world. In furtherance of the organization’s purpose, it does not purchase food from companies that destroy impoverished villages’ clean-water systems. WSH allegedly relied on Chiquita’s online environmentally safe practices representations and consequently purchased bananas from the company. However, WSH later discovered that the drinking water in the community where COBIGUA’s Chiquita bananas are produced was contaminated with chemicals from the company’s large scale, mono-culture banana production.

WSH brought six claims against Chiquita: (1) unjust enrichment; (2) unfair and deceptive business practices under the Washington Consumer Protection Act (CPA); (3) breach of contract; (4) breach of implied or express warranties; (5) negligent misrepresentation; and (6) declaratory and injunctive relief. The non-profit argued that it would not have purchased Chiquita’s bananas had it known that the online representations were false or misleading and in direct conflict with WSH’s mission. The case was before the federal district court in Seattle on Chiquita’s motion to dismiss. Because WSH did not oppose the dismissal of its breach of contract and implied warranties claims, the court dismissed them.

Consumer Protection Act. In support of its motion to dismiss, Chiquita argued that WSH’s CPA claim failed because WSH failed to plausibly allege injury. However, the court disagreed, noting that by alleging its injury was the cost of bananas purchased as a result of Chiquita’s allegedly false or deceptive advertising, WSH plausibly alleged an injury to its business or property. Consequently, Chiquita’s motion to dismiss in relation to WSH’s CPA claim was denied.

Remaining claims. The court granted Chiquita’s motion to dismiss in relation to WSH’s unjust enrichment and declaratory and injunctive relief claims, reasoning that: (1) WSH failed to allege Chiquita had an “appreciation or knowledge” of the revenue from WSH’s banana purchase, in support of its unjust enrichment claim, and (2) WSH further failed to allege irreparable injury in support of its injunctive relief claim. However, the court denied Chiquita’s motion to dismiss the breach of express warranty and negligent misrepresentation claims, finding that WSH alleged its breach of express warranty claim with sufficient particularity at this stage of the proceeding, and WSH adequately pled damages under its negligent misrepresentation claim.

Although Chiquita’s motion to dismiss was partially granted and partially denied, WSH has been given the opportunity to file a first amended complaint by June 13, 2014.

The case number is C14-10 RAJ.

Attorneys: Steve W. Berman (Hagens Berman Sobol Shapiro LLP) for Water and Sanitation Health, Inc. Tara M O'Hanlon (Miller Nash) for Chiquita Brands Intl., Inc.

Companies: Water and Sanitation Health, Inc.; Chiquita Brands Intl., Inc.

Cases: Advertising ConsumerProtection WashingtonNews