John v. Whole Foods Market Group, No. 16-986 (2d Cir. 2017)

Annotate this Case
Justia Opinion Summary

Plaintiff filed a putative class action alleging that grocery stores in New York operated by Whole Foods systematically overstated the weights of pre‐packaged food products and overcharged customers as a result.  The district court dismissed the complaint based on plaintiff's lack of Article III standing. The Second Circuit vacated and remanded, holding that the district court did not draw all reasonable inferences in plaintiff's favor. In this case, plaintiff 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 plaintiff regularly purchased Whole Foods packages of cheese and cupcakes throughout the relevant period. Therefore, the complaint satisfied the low threshold required to plead injury in fact.

Download PDF
16 986 cv John v. Whole Foods Mkt. Grp., Inc. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2016 (Argued: October 17, 2016 Decided: June 2, 2017) Docket No. 16 986 cv _____________________________________ SEAN JOHN, individually and on behalf of all others similarly situated, Plaintiff Appellant, JOSEPH BASSOLINO, individually and on behalf of all others similarly situated, Consolidated Plaintiff, v. WHOLE FOODS MARKET GROUP, INC., Defendant Appellee.* _____________________________________ Before: KEARSE, JACOBS, and LOHIER, Circuit Judges. Plaintiff appellant Sean John brings this putative class action alleging that grocery stores in New York operated by defendant appellee Whole Foods Market Group, Inc. systematically overstated the weights of pre packaged food products and overcharged customers as a result. The District Court dismissed John’s suit at the pleading stage for lack of Article III standing. Because we * The Clerk of Court is directed to amend the caption as set forth above. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 conclude that John plausibly alleged an injury in fact, we VACATE and REMAND for further proceedings consistent with this opinion. DOUGLAS G. BLANKINSHIP, Finkelstein, Blankinship, Frei Pearson & Garber, LLP, White Plains, NY, for Plaintiff Appellant. DAVID E. SELLINGER (Gregory J. Casas, Elliot H. Scherker, Brigid F. Cech Samole, on the brief), Greenberg Traurig, LLP, New York, NY, Austin, TX, Miami, FL, for Defendant Appellee. LOHIER, Circuit Judge: Sean John filed a putative class action alleging that New York City grocery 16 stores operated by Whole Foods Market Group, Inc. systematically overstated 17 the weights of pre packaged food products and overcharged customers as a 18 result. The United States District Court for the Southern District of New York 19 (Engelmayer, J.) granted Whole Foods’ motion to dismiss John’s complaint for 20 lack of Article III standing because he failed to allege a sufficient injury in fact. 21 Because we conclude that John plausibly alleged an injury in fact, we VACATE 22 and REMAND for further proceedings consistent with this opinion. 23 24 25 BACKGROUND Because John appeals from a judgment dismissing the complaint on the pleadings, we accept as true the facts alleged in the complaint, “and we may 2 1 consider documents incorporated into or integral to the complaint.” WC Capital 2 Mgmt., LLC v. UBS Sec., LLC, 711 F.3d 322, 325 (2d Cir. 2013). 3 1. Alleged Facts 4 In 2014 and 2015 John “routinely shopped” at two Whole Foods stores in 5 Manhattan and made “regular[] purchase[s]” of pre packaged products, 6 including “pre packaged cheese and cupcakes approximately one or two times 7 per month.” “Pre packaged” food products are those that Whole Foods weighs 8 and prices prior to shelving, assigning a price to each package based on the 9 weight of the food. 10 Whole Foods routinely inflated the weight listed on the labels of pre 11 packaged products, and, as a result of the mislabeling, overcharged unwitting 12 customers for pre packaged food. The complaint does not identify a specific 13 food purchase as to which Whole Foods overcharged John. Instead, it more 14 generally describes pervasive overcharging of pre packaged food throughout 15 Whole Foods’ stores in New York City. But the complaint does attach a June 16 2015 press release of the New York City Department of Consumer Affairs (the 17 “DCA”) entitled “Department of Consumer Affairs Investigation Uncovers 18 Systemic Overcharging for Pre packaged Foods at City’s Whole Foods.” As its 3 1 title suggests, the press release announced the DCA’s investigation of 2 overcharging by Whole Foods and its preliminary findings that Whole Foods’ 3 New York City stores “routinely overstated the weights of its pre packaged 4 products—including meats, dairy and baked goods.” App’x 26. The press 5 release elaborated on these findings: 6 7 8 9 10 11 12 13 14 15 DCA tested packages of 80 different types of pre packaged products and found all of the products had packages with mislabeled weights. Additionally, 89 percent of the packages tested did not meet the federal standard for the maximum amount that an individual package can deviate from the actual weight, which is set by the U.S. Department of Commerce. The overcharges ranged from $0.80 for a package of pecan panko to $14.84 for a package of coconut shrimp. Id. 16 The DCA’s findings, the press release continued, “point to a systematic 17 problem with how products . . . are weighed and labeled” and “suggest[] that 18 individual packages are routinely not weighed or are inaccurately weighed, 19 resulting in overcharges for consumers.” Id. Finally, according to the press 20 release, the DCA planned to “further evaluate” Whole Foods’ “compliance with 21 City and state laws” and estimated that the “potential number of violations that 22 Whole Foods faces for all pre packaged goods in the NYC stores is in the 23 thousands.” App’x 27. 4 1 The DCA’s investigation leading up to the June 2015 press release took 2 place from fall 2014 to winter 2015, the same period in which John allegedly 3 made monthly purchases of cheese and cupcakes. The investigation focused on 4 the eight Whole Foods stores operating in New York City during that period, 5 which included the two stores that John patronized. Whole Foods has since 6 confirmed that cheese and cupcakes were among the pre packaged products that 7 the DCA alleged were mislabeled with overstated weights. 8 2. Procedural History 9 In filing this class action, John alleged violations of sections 349 and 350 of 10 the New York General Business Law as well as a claim for unjust enrichment.1 11 He sought compensatory damages, refunds, punitive damages, injunctive relief, 12 attorneys’ fees, and costs. The proposed class includes all persons who 13 purchased at least one of fourteen types of pre packaged product within the six 14 years prior to the filing of the complaint from a Whole Foods store in New York 15 State. This case was originally filed in New York State court, but Whole Foods successfully removed it to federal court pursuant to the Class Action Fairness Act. See 28 U.S.C. § 1332(d). 1 5 1 The District Court granted Whole Foods’ motion to dismiss the complaint 2 pursuant to Rules 12(b)(1) and 12(b)(6), holding that John lacked Article III 3 standing because he failed to plausibly allege that he was personally 4 overcharged by Whole Foods for a specific purchase. In re Whole Foods Mkt. 5 Grp., Inc. Overcharging Litig., 167 F. Supp. 3d 524, 537 (S.D.N.Y. 2016). Again 6 citing John’s failure to allege that he personally had been overcharged, the 7 District Court explained that, even if John had standing, it would grant Whole 8 Foods’ motion to dismiss the complaint for failure to state a claim upon which 9 relief could be granted, and that amending the complaint would be futile. Id. at 10 538–39. Despite its conclusion that John lacked standing, the District Court 11 dismissed the complaint with prejudice. Id. at 539. 12 13 14 This appeal followed. DISCUSSION As a preliminary matter, we again “note that where a complaint is 15 dismissed for lack of Article III standing, the dismissal must be without 16 prejudice, rather than with prejudice.” Carter v. HealthPort Techs., LLC, 822 17 F.3d 47, 54 (2d Cir. 2016). “Such a dismissal is one for lack of subject matter 18 jurisdiction.” Id. And “without jurisdiction, the district court lacks the power to 6 1 adjudicate the merits of the case” or “dismiss a case with prejudice.” Id. at 54–55 2 (quotation marks omitted). “Thus, if we were to agree with the [D]istrict 3 [C]ourt’s conclusion that the Complaint failed to show Article III standing,” we 4 would remand with instructions that the judgment be “amended to provide that 5 the dismissal is without prejudice.” Id. at 55. 6 We need not do so, however, because we conclude that John’s complaint 7 plausibly alleges that he has Article III standing and therefore vacate the 8 dismissal and remand for further proceedings. 9 To satisfy the “‘irreducible constitutional minimum’ of standing,” a 10 plaintiff “must have (1) suffered an injury in fact, (2) that is fairly traceable to the 11 challenged conduct of the defendant, and (3) that is likely to be redressed by a 12 favorable judicial decision.” Spokeo, Inc. v. Robins, —U.S.—, 136 S. Ct. 1540, 13 1547 (2016) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)). Each 14 element of standing “must be supported . . . with the manner and degree of 15 evidence required at the successive stages of the litigation,” and at the pleading 16 stage, “general factual allegations of injury resulting from the defendant’s 17 conduct may suffice.” Lujan, 504 U.S. at 561. And, because Whole Foods mounts 18 only a “facial” challenge to John’s allegations of standing, John bears no 7 1 evidentiary burden at the pleading stage. Carter, 822 F.3d at 56. As we 2 explained in Carter: 3 4 5 6 7 8 9 10 11 12 13 14 When the Rule 12(b)(1) motion is facial, i.e., based solely on the allegations of the complaint or the complaint and exhibits attached to it (collectively the “Pleading”), the plaintiff has no evidentiary burden. The task of the district court is to determine whether the Pleading “allege[s] facts that affirmatively and plausibly suggest that [the plaintiff] has standing to sue.” On appeal, we review the district court’s decision on such a facial challenge de novo, “accept[ing] as true all material [factual] allegations of the complaint,” and “draw[ing] all reasonable inferences in favor of the plaintiff.” Id. at 56–57 (citations omitted). The District Court dismissed John’s suit on the ground that he failed to 15 satisfy the injury in fact requirement. We have repeatedly described that 16 requirement as “a low threshold,” WC Capital Mgmt., 711 F.3d at 329 (quoting 17 Ross v. Bank of Am., N.A., 524 F.3d 217, 222 (2d Cir. 2008)), which “helps to 18 ensure that the plaintiff has a personal stake in the outcome of the controversy,” 19 Susan B. Anthony List v. Driehaus, —U.S.—, 134 S. Ct. 2334, 2341 (2014) 20 (quotation marks omitted). Injury in fact consists of “an invasion of a legally 21 protected interest that is concrete and particularized and actual or imminent, not 22 conjectural or hypothetical.” Spokeo, 136 S. Ct. at 1548 (quotation marks 23 omitted). 8 1 John argues that his complaint adequately and plausibly alleges that 2 Whole Foods overcharged him at least once for pre packaged cheese and 3 cupcakes. Here, no one disputes that overpaying for a product results in a 4 financial loss constituting a particularized and concrete injury in fact. See Carter, 5 822 F.3d at 55 (“Any monetary loss suffered by the plaintiff satisfies this element; 6 [e]ven a small financial loss suffices.” (quotation marks omitted)). Rather, the 7 dispute arises from the following: in addition to the allegation that he made 8 monthly purchases of Whole Foods pre packaged cheese and cupcakes, the 9 critical basis for John’s claim that he was overcharged is the DCA’s press release 10 announcement that 89 percent of Whole Foods’ pre packaged products tested by 11 the DCA were mislabeled, and the press release’s conclusion that the mislabeling 12 was “systematic” and “routine[].” We consider whether the press release 13 together with John’s monthly purchases provides a plausible basis to conclude 14 that John overpaid Whole Foods for pre packaged cheese or cupcakes during the 15 period alleged in the complaint. 16 The District Court was unswayed by the statistic that 89 percent of all 17 packages tested by the DCA failed to satisfy federal labeling standards. Relying 18 on our statement in Shipping Financial Services Corp. v. Drakos that 9 1 “jurisdiction must be shown affirmatively, and that showing is not made by 2 drawing from the pleadings inferences favorable to the party asserting it,” 140 3 F.3d 129, 131 (2d Cir. 1998), the District Court believed that John’s complaint 4 failed adequately to allege that he personally overpaid for any specific purchase. 5 Our broad statement in Drakos relied on a more circumscribed statement by the 6 Supreme Court in Norton v. Larney that appeared to prohibit drawing 7 “argumentative” inferences favorable to the party asserting jurisdiction. 266 U.S. 8 511, 515 (1925). To the extent Norton shunned the drawing of inferences in favor 9 of a plaintiff’s standing at the pleading stage, the Supreme Court more recently 10 has held that “general factual allegations of injury . . . may suffice, for on a 11 motion to dismiss we presum[e] that general allegations embrace those specific 12 facts that are necessary to support the claim.” Lujan, 504 U.S. at 561 (quotation 13 marks omitted). When the defendant asserts a “facial” challenge to standing, 14 therefore, it remains the case that courts should continue to draw from the 15 pleadings all reasonable inferences in the plaintiff’s favor and “are to ‘presum[e] 16 that general allegations embrace those specific facts that are necessary to support 17 the claim.’” Carter, 822 F.3d at 58 (quoting Lujan, 504 U.S. at 561); see Amidax 18 Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011). 10 1 Here, the District Court did not draw all reasonable inferences in John’s 2 favor. To the contrary, it faulted the complaint for failing to allege “an 3 investigative finding of ubiquitous, systematic over weighting at Whole Foods’ 4 New York City stores,” “invariable incidents of this deceptive labeling practice,” 5 and “across the board overcharging so as to embrace, other than by conjecture, 6 the cheese and cupcakes . . . that John . . . occasionally bought in 2014 and 2015.” 7 167 F. Supp. 3d at 534. The District Court was also troubled by the absence of 8 allegations describing the DCA’s methodology. But the DCA’s press release 9 asserted that the mislabeling by Whole Foods was “systematic” and “routine[],” 10 and a facial attack on the pleadings is not the proper stage to determine whether 11 the DCA’s sampling methods justified its declaration of widespread 12 overcharging. At the pleading stage, John need not prove the accuracy of the 13 DCA’s findings or the rigor of its methodology; he need only generally allege 14 facts that, accepted as true, make his alleged injury plausible. See Lewert v. P.F. 15 Chang’s China Bistro, Inc., 819 F.3d 963, 968 (7th Cir. 2016) (identifying injury in 16 fact based in part on plausible allegation that restaurant customer’s data was 17 stolen, where restaurant sent notice of data breach to all of its diners nationwide 18 but did not know which specific customers were affected). John may ultimately 11 1 be unable to show he was injured under the more demanding standards 2 applicable at summary judgment or trial. Of course, we understand the District 3 Court’s concern that John faces what may be significant evidentiary obstacles on 4 the merits; but targeted discovery might show whether those obstacles can be 5 surmounted. For present purposes, John has plausibly alleged a nontrivial 6 economic injury sufficient to support standing: according to the DCA’s 7 investigation, Whole Foods packages of cheese and cupcakes were systematically 8 and routinely mislabeled and overpriced, and John regularly purchased Whole 9 Foods packages of cheese and cupcakes throughout the relevant period. Taking 10 these allegations as true and drawing all reasonable inferences in his favor, it is 11 plausible that John overpaid for at least one product. John’s complaint thus 12 satisfies the “low threshold” required to plead injury in fact. WC Capital Mgmt., 13 711 F.3d at 329 (quotation marks omitted). 14 Our decision in Amidax Trading Group v. S.W.I.F.T. SCRL is not to the 15 contrary. In that case, Amidax accused the Society for Worldwide Interbank 16 Financial Telecommunication (“SWIFT”) of turning over information about 17 Amidax’s financial transactions, contained in SWIFT’s database, in response to 18 requests from the federal government related to a terrorism investigation. 671 12 1 F.3d at 143–44. Because Amidax had not established that the entire SWIFT 2 database was turned over, we required that Amidax allege at least that its 3 customers “so frequently utilized the SWIFT network to transfer funds that it is 4 plausible, not just possible, that Amidax’s data was handed over.” Id. at 147–48. 5 We affirmed the dismissal of the complaint because Amidax had failed to 6 provide any such allegations of past frequency of use of the SWIFT network. Id. 7 at 148. In doing so, however, we did not foreclose the possibility that injury in 8 fact could be adequately pleaded with plausible allegations of a likelihood of 9 past injury. 10 For these reasons, we conclude that John has plausibly alleged that he 11 suffered an injury in fact by pleading both the frequency of his purchases and the 12 systematic overcharging of pre packaged foods at the Whole Foods stores he 13 patronized. See Carter, 822 F.3d at 56. 14 CONCLUSION 15 16 proceedings consistent with this opinion. We VACATE the District Court’s judgment and REMAND for further 13