Mogull v. Pete and Gerry's Organics, LLC

Background

Constance Mogull brought a proposed class action against Pete and Gerry’s Organics, LLC, which the opinion also calls “Nellie’s.” She alleged that the company marketed eggs as “free-range” through packaging, its website, and a YouTube video, including statements and images suggesting that the hens could roam outdoors and had access to pasture.

Mogull alleged that the hens were instead crowded into sheds and had limited or no access to outdoor space. She claimed that this conflicted with consumers’ understanding of “free-range,” that she relied on the representations when buying the eggs, and that she paid more for them than she would have paid for eggs not marketed as “free-range.”

Motion and legal standard

Pete and Gerry’s moved to dismiss the first amended complaint under Rule 12(b)(6), which permits dismissal when a complaint does not adequately state a legal claim. At this stage, the court accepted well-pleaded factual allegations as true and considered whether they plausibly supported relief. The court did not decide whether the allegations would ultimately be proven.

New York consumer-protection claims

Mogull asserted claims under Sections 349 and 350 of the New York General Business Law. Section 349 prohibits deceptive business practices, and Section 350 prohibits false advertising. The court explained that these claims require allegations of consumer-oriented conduct that was materially misleading and caused injury.

The court held that Mogull plausibly alleged that “free-range” was materially misleading and was not merely puffery. “Puffery” means broad, vague promotional language that cannot be proved true or false. The court concluded that a reasonable consumer could understand “free-range” as a factual statement about the conditions in which the hens were raised. It also found that the packaging and website did not make it clear that “free-range” referred only to the company’s “Certified Humane” designation. The court therefore declined to dismiss the claims under Sections 349 and 350.

Fraud claim

Mogull also alleged fraud. The court found that she had plausibly alleged a false statement, the company’s knowledge of its farming practices and consumers’ understanding of “free-range,” her reliance on the representations, and financial injury. Although the court described the issue of fraudulent intent as a close call, it concluded that the allegations supported a sufficiently strong inference of intent at the pleading stage. The court declined to dismiss the fraud claim.

Express-warranty claim

Mogull alleged that the “free-range” representations created an express warranty. An express warranty is a factual statement or promise by a seller about goods that becomes part of the basis of the purchase. The court held that the allegations that the eggs were represented as coming from “free-range” hens, that the production methods did not meet that description, and that Mogull relied on the representation were sufficient to plead breach of warranty.

Pete and Gerry’s also argued that Mogull failed to provide timely notice of the alleged breach. The court noted that New York law generally requires a buyer to notify the seller within a reasonable time after discovering or reasonably being expected to discover the breach. Mogull alleged that she sent a demand letter on February 19, 2021, less than a month after learning about the company’s practices. Accepting that allegation as true, the court held that she plausibly alleged timely notice and declined to dismiss the warranty claim.

Disposition

Judge Vincent L. Briccetti denied the motion to dismiss. The defendant was ordered to file an answer by March 14, 2022, and the court stated that it would schedule an initial conference by separate order. The opinion did not decide whether the alleged representations were ultimately false or whether Mogull would prevail on any claim.