“Humanely Raised” Chicken Label Might Violate New Jersey Consumer Fraud Act

This posting was written by John W. Arden.

Allegations that Perdue "Harvestland" chicken products misled consumers regarding the "humane" treatment of chickens, a purported endorsement by the U.S. Department of Agriculture, and the difference between the treatment of "Harvestland" chickens and those of competitors stated claims for violation of the New Jersey Consumer Fraud Act, fraud in the inducement, negligent misrepresentation, and breach of express warranty, according to the federal district court in Newark (Hemy v. Perdue Farms, Inc., March 31, 2013, Shipp, M.). The court denied Perdue Farms’ motion to dismiss.

From September 2009 to the present, Perdue Farms, Inc. has labeled its Harvestland chicken products as "humanely raised" and "USDA Process Verified." These labeling claims were false and deceptive and induced the purchase the "premium priced" products, according to a lawsuit filed by a proposed class of consumers. Plaintiff Nadine Hemy alleged that she would not have purchased the products if she knew that the chickens were not in fact treated humanely or differently from other chickens on the market.

Plaintiffs alleged that Perdue’s "humanely raised" claim was based on an industry standard that necessitates inhumane treatment and allows non-compliance by way of "huge loopholes." They claimed that Harvestland chickens are shackled by their legs, upside-down, while fully conscious; electrically shocked before being rendered unconscious; cut ineffectively or partially while fully conscious; downed and scalded while conscious; stored in trucks for hours in excessive temperatures; subjected to lighting conditions that result in eye disorders; injured in the process of being removed from their shells; subjected to health problems and deformities resulting from selective breeding; and provided no veterinary care.

The industry guidelines forming the basis of the "Humanely Raised" label are followed by "virtually every other mass chicken producer in the nation" and sanction many cruel practices, the plaintiffs charged. The plaintiffs themselves believed that "Humanely Raised" meant that chickens were treated humanely throughout their lives and given a quick and painless death. These beliefs were shown to be reasonable by a survey of 209 members of an online consumer panel, they said.

Based on these claims, the plaintiffs brought an action against Perdue Farms and other parties in the New Jersey Superior Court, alleging violation of the New Jersey Consumer Fraud Act, fraud in the inducement, negligent misrepresentation, and breach of express warranty. The case was removed to the federal district court, which issued an opinion and order dismissing certain claims with prejudice but allowing the plaintiffs to replead allegations regarding the "Humanely Raised" and "USDA Process Verified" claims. Upon the filing of a third amended complaint, Perdue Farms made a motion to dismiss, and plaintiffs filed a motion to file a supplemental brief.

Motion to file supplemental brief. As a preliminary matter, the motion for leave to file a supplemental brief was denied. While plaintiffs argued that the motion was the result of their receipt of "new information" from a Freedom of Information Act request, the court found that the attempted injection of new information, or facts, runs afoul of the Third Circuit precedent holding that a complaint may not be amended by the briefs in opposition to a motion to dismiss.

New Jersey Consumer Fraud Act. In order to state a claim under the New Jersey Consumer Fraud Act, plaintiffs must demonstrate (1) unlawful conduct by Perdue Farms, (2) an ascertainable loss to the plaintiffs, and (3) a casual connection between the unlawful conduct and the ascertainable loss.

Regarding the "Humanely Raised" claims, the court held that plaintiffs pled sufficient facts that the audit checklist Perdue utilized in its PVP program was analogous to that of the industry standard; pled a plausible claim that Perdue Harvestland Chickens were treated in a similar manner as other mass produced chickens; properly limited their claims to reflect only Harvestland chicken products; and showed a plausible claim that a reasonable consumer may believe that the slaughtering process is encompassed by Perdue’s Humanely Raised label.

Plaintiffs also sufficiently alleged that the USDA Process Verified label, in concert with the "Humanely Raised" label, created the impression that an unbiased third party certified Perdue’s claims. An Internet survey referenced in the complaint supported the contention that the Havestland chickens were "approved and endorsed" by the U.S.D.A. The survey contended that 58% of consumers believed that the U.S.D.A. Process Verified shield meant that the company met standards for the treatment of chickens developed by the U.S.D.A.

Fraud in the inducement. Perdue moved to dismiss the fraud in the inducement claim, arguing that common law fraud involves a more onerous standard than a claim for fraud under the New Jersey Consumer Fraud Act. The elements of common law fraud are (1) a material misrepresentation of a present or past fact; (2) knowledge of falsity; (3) an intention that the other person rely on it; (4) reasonable reliance by the other person; and (5) resulting damages.

In this case, plaintiffs alleged that statements regarding the humane treatment of chickens were material misrepresentations, that Perdue was aware of their falsity, that Perdue intended consumers to rely on these statements and pay more for the "premium" brand; and that they themselves relied on the misrepresentations to their detriment in paying the higher price for humanely raised chickens.

For purposes of the motion to dismiss, the court held that the plaintiffs sufficiently pled fraud in the inducement.

Negligent misrepresentation. A claim for negligent misrepresentation requires a plaintiff to establish that the defendant made an incorrect statement, which was justifiably relied upon, causing economic loss. For the same reasons supporting the New Jersey Consumer Fraud Act and fraud in the inducement claims, the court found that the plaintiffs pled sufficient facts for their negligent misrepresentation claim to withstand a motion to dismiss.

Breach of express warranty. The elements of breach of express warranty are (1) a contract between the parties, (2) a breach of contract, (3) damages flowing from the breach, and (4) the party stating the claim performed its own contractual obligations. The court found that the plaintiffs sufficiently alleged that the Humanely Raised label on the Harvestland products created an express warranty; that the treatment given the chickens breached the contract; that the plaintiffs paid more for the Harvestland chicken; and that plaintiffs performed their obligations by paying the purchase price of the chicken.