Grimmway Enterprises cannot escape a false advertising and unlawful business practices lawsuit waged against it over its environmental, social, and governance (“ESG”) commitments by way of an anti-SLAPP effort. In a decision this month, Judge Janis Sammartino of the U.S. District Court for the Southern District of California held that because the environment-focused claims made by Grimmway Enterprises in its Inaugural ESG Report constitute commercial speech, the Report is exempt from anti-SLAPP protections, and as a result, the California-based agricultural corporation must face the claims that Plaintiff Elizabeth Hicks waged against it in a proposed class action case.
For Some Background: Hicks filed suit against Grimmway in December 2022, accusing the organic vegetables producer of misrepresenting the environmental impact of its farming practices through its marketing. According to Hicks, Grimmway’s statements in its ESG report – namely, about its “regenerative farming” practices, its commitment to ESG (including its “responsible farming” practices and its adherence to “the industry’s most rigorous safety standards”), and its efforts to “preserv[e] natural resources” – are “false, deceptive, and misleading” because its farming method causes “severe harm to the ecosystem, and to its neighbors and communities.”
Grimmway responded to Hicks’s claims with a motion to strike, arguing that the complaint should be tossed out on the basis that Hicks’s causes of action – false advertising and unlawful business practices in violation of California Business & Professions Code, and violation of the Consumer Legal Remedies Act – should be dismissed in accordance with California’s anti-SLAPP statute because they are “impermissibly predicated on Grimmway’s exercise of its free speech rights (namely, political advocacy and statements of public interest),” and Hicks will “fail to establish a probability of prevailing on the merits.”
Hicks countered that “all of the language at issue is ‘commercial speech,’” and thus, should not be shielded by anti-SLAPP protections. And Grimmway argued in response that the commercial speech exemption does not apply here because the challenged statements “were not ‘made for the purpose of obtaining approval for, promoting, or securing sales’ of [its] products.”
Simpson Strong–Tie Factors & Commercial Speech
Fast forward to June 5 and Judge Sammartino sided with Hicks, finding that the four factors in Simpson Strong–Tie Co. v. Gore weigh in favor of the language in Grimmway’s Report being commercial speech, which is exempted from anti-SLAPP liability. The four Simpson Strong–Tie factors include …
(1) the cause of action is against a person primarily engaged in the business of selling or leasing goods or services;
(2) the cause of action arises from a statement or conduct by that person consisting of representations of fact about that person’s or a business competitor’s business operations, goods, or services;
(3) the statement or conduct was made either for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person’s goods or services or in the course of delivering the person’s goods or services; and
(4) the intended audience is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer.
Reflecting on those factors, the court primarily held that “it is undisputed” that Grimmway – a “grower and shipper of carrots and organic produce” – is primarily engaged in the business of selling goods. As for the second factor, the court found that Grimmway’s ESG Report contains “several representations of fact about [its] business operations and goods,” including “boasts of [its] ‘Environmental Stewardship,’ ‘Leadership in Organics,’ low-emission farm equipment, ‘Responsible Farming Practices,’ and ‘Quality Assurance and Food Safety.’” One section of the ESG Report is “pointedly titled ‘Operations’ and describes [Grimmway’s] efforts to ‘increase productivity, food safety and quality, and accountability,’” according to the court, which found that the second factor is present here.
Third, the court found that the ESG Report “was created, at least in part, to promote [Grimmway’s] goods or services.” The court acknowledged that “significant sections of the ESG Report discuss topics not strictly tied to [Grimmway’s] goods and services,” such as sections on “Employee Health and Wellness” and “Diversity, Equity, and Inclusion.” However, it ultimately determined that the third factor was met, as “the overall message of the ESG Report” is the promotion of Grimmway’s “products and its brand more generally.”
Finally, despite Grimmway’s argument that the ESG Report was merely directed to “internal and external stakeholders like employees, policymakers, and advocacy groups,” the court found that the Report’s audience consists of “actual and potential customers, as well as organizations likely to influence potential customers,” which meets the fourth factor. Among other things, the court emphasized the fact that Grimmway published the ESG Report in its website, “where direct customers and end-consumers could access it,” and subsequently promoted it on social media, which “supports the conclusion that the ESG Report was used to target [its] actual and potential customers.”
Not finished, the court also shot down Grimmway’s argument that the commercial speech exemption does not apply here because the “challenged statements … were not ‘made for the purpose of obtaining approval for, promoting, or securing sales’ of its products.” On this point, Grimmway “emphasize[d] the fact that the ESG Report discusses various issues of public interest and was distributed to legislative officials.” Unpersuaded, Judge Sammartino (citing SCOTUS’ decision in Bolger v. Youngs Drug Prod. Corp.) held that communications may “constitute commercial speech notwithstanding the fact that they contain discussions of important public issues.” And “moreover, the distribution of the ESG Report to legislative officials does not negate the ESG Report’s commercial nature.”
TDLR: All four Simpson Strong–Tie Co. factors are present here, and the court found that the ESG Report constitutes commercial speech, making it so that the Report is exempt from anti-SLAPP protections.
THE BIGGER PICTURE: Hardly a fashion/retail-specific clash, the case, itself, is, nonetheless, relevant for retail entities in light of the onslaught of ESG marketing across industries. Given the largely commercial nature of companies’ ESG-focused communications, including the mounting number of voluntary sustainability reports and guidelines that are being produced, the latest round of this case suggests that companies will have a difficult time successfully utilizing California’s anti-SLAPP statute – which applies to claims based on the defendant’s exercise of their rights to free speech, petition, or participation in matters of public interest or concern – to achieve an early exit from litigation.
The case is Hicks v. Grimmway Enterprises, Inc., 3:22-cv-02038 (S.D.Cal.).
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