MANHATTAN (CN) – Reviving a federal class action against Whole Foods, the Second Circuit found Friday that customers have plausibly alleged that the supermarket gouges them at the register by routinely exaggerating the weight of prepackaged foods.
Identified in the 13-page ruling as a frequent cheese and cupcake shopper, lead plaintiff Sean John brought the underlying complaint last year after the New York City Department of Consumer Affairs blew the whistle on mislabeled products at Whole Foods Market.
Citing a federal standard for how much the weight of a product can deviate from its labeled weight, the DCA announced in June 2015 that 89 percent of prepackaged Whole Foods products it put on a scale clocked in at impermissibly lower weight.
“The overcharges ranged from $0.80 for a package of pecan panko to $14.84 for a package of coconut shrimp,” according to the DCA’s press release.
John, who patronized two of the eight Whole Foods in New York City that the DCA investigated, sought to represent a class of all shoppers who purchased at least one of 14 types of prepackaged products over the past six years.
Though Whole Foods confirmed the DCA’s allegations with respect to cheese and cupcakes, a federal judge dismissed John’s case in Manhattan.
The court said John failed to show that he had personally been overcharged for a specific purchase, but a three-judge panel of the Second Circuit concluded Friday that this was too tough a standard at this early stage of the case.
Noting that it was the DCA that called the mislabeling by Whole Foods was “systematic” and “routine,” the federal appeals court said “a facial attack on the pleadings is not the proper stage to determine whether the DCA’s sampling methods justified its declaration of widespread overcharging.”
“At the pleading stage, John need not prove the accuracy of the DCA’s findings or the rigor of its methodology; he need only generally allege facts that, accepted as true, make his alleged injury plausible,” U.S. Circuit Judge Raymond Lohier wrote for the court.
A spokesperson for Whole Foods Market emphasized that the case is still in its early stages. “While we are disappointed in the court’s decision, which procedurally allows the case to move forward, we will continue to vigorously defend against the plaintiff’s meritless claims,” the company said in a statement.
Lohier spoke to this point as well, noting that John might still lose if he cannot meet the court’s more demanding standards at summary judgment or trial.
“Of course, we understand the District Court’s concern that John faces what may be significant evidentiary obstacles on the merits; but targeted discovery might show whether those obstacles can be surmounted,” Lohier wrote. “For present purposes, John has plausibly alleged a nontrivial economic injury sufficient to support standing: according to the DCA’s investigation, Whole Foods packages of cheese and cupcakes were systematically and routinely mislabeled and overpriced, and John regularly purchased Whole Foods packages of cheese and cupcakes throughout the relevant period. Taking these allegations as true and drawing all reasonable inferences in his favor, it is plausible that John overpaid for at least one product. John’s complaint thus satisfies the ‘low threshold’ required to plead injury in fact.”
Shareholders brought a class action against the Texas-based supermarket as well, noting that the Whole Foods’ common stock closed at $36.08 on July 30, 2015, a fall of $4.74 per share, or 11.61 percent, after the DCA’s announcement.
Whole Foods settled New York City’s labeling investigation for a half-million-dollars in December 2015.
A year later, Whole Foods employees brought a class action that accused the supermarket of manipulated its “gainsharing” program to stiff workers of money they earned in a bonus profit-sharing arrangement.