ESG Enforcement Tracker

Three named claimants have appealed the dismissal of a proposed class action lawsuit alleging that Vuse-branded vaping products were falsely marketed as “carbon neutral”. The claimants allege that they relied upon those representations when purchasing the products and paid a premium price as a result. The proceedings raise questions about the extent to which environmental marketing claims based on carbon credits may be challenged through scrutiny of the underlying offset projects.

The defendants state that the carbon-neutral claim was achieved, in part, through actual emission reductions and through the ‘retirement’ of carbon credits generated by forestry products, for which they relied on 3rd-party certification. The claimants allege that a high proportion of the credits relied upon between 2021 and 2024 did not genuinely achieve carbon reductions (either because the forestry activity would have occurred in any event or because the projects were unlikely to achieve the claimed reductions).

Carbon credits represent quantified reductions or removals of greenhouse gas emissions generated by a project. Businesses may purchase and ‘retire’ carbon credits to offset emissions they have not directly reduced.

The claimants contend that, if the underlying projects did not achieve genuine carbon reductions (as they allege), the Vuse-branded products were not carbon-neutral as marketed. On that basis, the claimants brought civil claims under California consumer protection and false advertising laws, as well as claims for breach of warranty and unjust enrichment.

In February, the District Court dismissed the action. The court accepted that the claimants had sufficiently pleaded economic loss but concluded that they had not plausibly alleged that a reasonable consumer would adopt their interpretation of “carbon-neutral”, which it described as “unreasonable or fanciful”. The court further concluded that the complaint failed to establish a sufficient connection between the alleged deficiencies in the underlying offset projects and consumer deception.

Rather than amending their complaint before the District Court, the claimants elected to appeal to the Ninth Circuit. In an opening brief filed on 15 July, they argued that the District Court erred by:

• • Construing the reasonable consumer test by reference to a ‘substituted’ unattainable interpretation of “carbon-neutral”, rather than the ‘measurable’ net-emissions representation which the claimants allege was conveyed by the marketing;
  • failing properly to address their allegations concerning the neutralisation of net emissions through carbon offsetting;
  • characterising the claimant’s allegations as a methodological disagreement rather than an affirmative claim that the representations were false;
  • dismissing the express warranty on the basis that the representations lacked sufficient specificity; and
  • relying, at the pleading stage, on third-party certification evidence, notwithstanding the claimant’s allegations concerning the effectiveness of the underlying projects (towards net carbon reduction) and the guidance contained in the Federal Trade Commission’s Green Guides.