Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D.N.J.: Whirlpool’s use of Energy Star labels on washing machines might violate consumer protection laws, (Jun 18, 2014)

By Greg Hammond, J.D.

Whirlpool Corporation’s use of Energy Star labels on its washing machines in 2009 and 2010 might have violated state consumer protection laws, the federal district court in Newark, New Jersey has ruled (Dzielak v Whirlpool Corporation, June 16, 2014, McNulty, K). Consumers pleaded sufficient facts to establish claims under New Jersey, California, Florida, Ohio, and Texas law.

Background. The Energy Star Program is a voluntary program that identifies and promotes energy-efficient products and buildings to reduce energy consumption, reduce pollution, and improve energy security. In order for a washing machine to meet the minimum efficiency standards to be Energy Star-qualified, the machine must use approximately 37 percent less energy and approximately 50 percent less water than standard models.

A number of consumers purchased a Maytag Centennial washing machine that contained an Energy Star label between 2009 and 2010. However, the machine was later disqualified by the Environmental Protection Agency after it failed minimum efficiency standards tests. Various consumers brought a putative class action, alleging violations of seven state consumer fraud statutes, as well as other claims. Whirlpool and various retailers filed a motion to dismiss, arguing that the consumers’ allegations were insufficient as a matter of law.

New Jersey. Under the New Jersey Consumer Fraud Act (NJCFA), New Jersey consumers were required to allege: (1) unlawful conduct by the defendant; (2) an ascertainable loss by the plaintiff; and (3) a causal connection between the defendant’s unlawful conduct and the plaintiff’s ascertainable loss. The court determined that the consumers sufficiently alleged that the Energy Star logo was an affirmative misrepresentation under the NJCFA, representing unlawful conduct. In addition, the court found that the higher premium price paid for the allegedly Energy Star-qualified machines, combined with the higher electricity bills from the non-compliant machines, was sufficient to demonstrate an ascertainable loss by the plaintiff. Because the consumers alleged reliance on the Energy Star logo, the court concluded that they sufficiently alleged a causal connection between the defendants’ unlawful conduct and the consumers’ ascertainable loss. Consequently, the motion to dismiss with regard to the consumers’ NJCFA claim was denied.

California. California consumers brought an action under the state’s Consumer Legal Remedies Act (CLRA), Unfair Competition Law (UCL), and False Advertising Law (FAL). Under the court’s analysis, (1) one consumer’s CLRA claims were dismissed because he purchased the Maytag machine prior to Whirlpool’s knowledge that the machines were non-compliant with the Energy Star Program; (2) the UCL claims were sufficient, as the court concluded that the consumers sufficiently alleged Whirlpool’s fraudulent conduct that was likely to deceive the public; and (3) the consumers pleaded their FAL claims with sufficient particularity. Consequently, the motion to dismiss the consumers’ California claims was partially granted and partially denied.

Michigan. The consumers alleged that Whirlpool and the various retailers violated the Michigan Consumer Protection Act (MPCA) by misrepresenting the energy efficiency of the machines—after learning of the defects—with the intent that consumers would rely on such representations when they decided to purchase the machines. However, because the Michigan consumers failed to specify which particular MCPA section was violated, the court was required to grant the motion to dismiss with regard to this issue.

Indiana. The Indiana Deceptive Consumer Sales Act (IDCSA) prohibits “incurable” and “uncured” deceptive acts. For “uncured” deceptive acts, the IDCSA requires a plaintiff to provide a defendant with notice of the deceptive act. However, because the Indiana consumers failed to provide Whirlpool or the retailers with the statutorily required notice, it found that the consumers failed to state a legal cause of action under the IDCSA, and the motion to dismiss was granted with regard to this issue.

Remaining states. Consumers also brought sufficient claims under the Florida Deceptive and Unfair Trade Practices Act; the Ohio Consumer Sales Practices Act; and the Texas Deceptive Trade Practices Act.

The case number is 2:12-0089 (KM).

Attorneys: Andrea Clisura (Faruqi & Faruqi) for Charlene Dzielak. David R. Kott (McCarter & English, LLP) for Whirlpool Corp., Sears Holdings Corp., Fry's Electronics, Inc., and Lowe's Home Center. Nicholas Stevens (Starr, Gern, Davison & Rubin, PC) for The Home Depot, Inc.

Companies: Whirlpool Corp.; Sears Holdings Corp.; The Home Depot, Inc.; Fry's Electronics, Inc.; Appliance Recycling Centers of America, Inc.; Lowe's Home Center

Cases: StateUnfairTradePractices Advertising ConsumerProtection NewJerseyNews