Company's "ESG" Publicity Is Commercial Speech, Unprotected by California Anti-SLAPP Law

From Monday's decision in Hicks v. Grimmway Enterprises, Inc., by Judge Janis Sammartino (S.D. Cal.):

In this putative class action, Plaintiff alleges that Defendant, a California agricultural corporation, misrepresented the environmental impact of its farming practices through its advertising and "Inaugural Report on Environmental, Social and Governance Actions" ("ESG Report"). Specifically, Plaintiff alleges that Defendant's statements about "regenerative farming"; its Environmental, Social, and Governance ("ESG") commitments; and "preserving natural resources" were "false, deceptive, and misleading." According to Plaintiff, Defendant's "method of growing its goods is causing severe harm to the ecosystem, and to its neighbors and communities." Plaintiff purports to represent a class of consumers who "would not have purchased (or would not have paid a premium [for])" Defendant's products had they known of Defendant's allegedly misleading statements. The FAC asserts three causes of action: (1) false advertising …; (2) "unlawful, unfair, or fraudulent" business practices …; and (3) violation of the Consumer Legal Remedies Act ….

Defendant argues that Plaintiff's three causes of action should be dismissed under California's anti-SLAPP statute because "(a) [they are] impermissibly predicated on Defendant Grimmway's exercise of its free speech rights (namely, political advocacy and statements of public interest), and (b) Plaintiff will fail to establish a probability of prevailing on the merits." Plaintiff counters that "all of the language at issue is 'commercial speech,' " which "does not receive [a]nti-SLAPP protections." …

[Under] § 425.17(c), the "commercial speech exemption[]" …, causes of action arising from commercial speech are exempt from the anti-SLAPP law when:

(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.

First, it is undisputed that Defendant is an entity primarily engaged in the business of selling or leasing goods. See Mem. at 8 ("Defendant Grimmway is a grower and shipper of carrots and organic produce ….").

Second, the ESG Report contains several representations of fact about Defendant's business operations and goods. The ESG Report boasts of Defendant's "Environmental Stewardship"; "Leadership in Organics"; low-emission farm equipment; "Responsible Farming Practices"; and "Quality Assurance and Food Safety," among other aspects of its business operations and goods. One section of the ESG Report is pointedly titled "Operations" and describes Defendant's efforts to "increase productivity, food safety and quality, and accountability." …

Third, the Court finds that the ESG Report was created, at least in part, to promote Defendant's goods or services. The ESG Report repeatedly spotlights the safety and quality of Defendant's goods. "Consumers can buy our products with confidence that they meet the industry's most rigorous safety standards," reads the ESG Report.  "Food safety and quality assurance are not simply check boxes," the ESG Report continues. "They preface every aspect of our multi-state operations from seed to store, encompassing planting, growing, harvesting, processing, packaging, and transportation of our products." The ESG Report also highlights Defendant's "responsiveness to customers," as well as its certifications and best practices,  Elsewhere, Defendant discusses steps it has taken to achieve its "mission to provide the world with high-quality, healthy produce."  Taken in conjunction, the representations in the ESG Report advertise Defendant's produce as fresh, safe, healthy, sustainable, and grown by a reliable and ethically responsible business organization.

The Court acknowledges that significant sections of the ESG Report discuss topics not strictly tied to Defendant's goods and services. For example, the ESG Report also features information pertaining to "Employee Health and Wellness"; "Diversity, Equity, and Inclusion"; and various philanthropic initiatives. The overall message of the ESG Report, however, is that Defendant is an ethically responsible grower and seller of high-quality food products. As such, the ESG Report promotes Defendant's products and its brand more generally….

Finally, the ESG Report's audience consists of actual and potential customers, as well as organizations likely to influence potential customers. Defendant argues that the ESG Report was merely directed to "internal and external stakeholders like employees, policymakers, and advocacy groups." The ESG Report itself, however, defines the term "stakeholders" as including not only the groups that Defendant listed, but also "Consumers" and "Customers." Moreover, the ESG Report was distributed to "Chambers of Commerce," "various trade associations," and "the media," all of which are likely to influence potential customers.

The ESG Report was also published on Defendant's website, where direct customers and end-consumers could access it. According to Dana Brennan, the Vice President for External Affairs & Corporate Responsibility for Defendant, the ESG Report was only published online so that Defendant could be eligible for a global corporate governance award and "was not put online for any sales-related purpose and was not directed to end-consumers." Plaintiff, however, has submitted evidence that links to the ESG Report were widely circulated on Defendant's social media accounts. While Defendant may have initially published the ESG Report to its website with the global corporate governance award in mind, the subsequent promotion of the ESG Report to Defendant's social media followers supports the conclusion that the ESG Report was used to target Defendant's actual and potential customers.

Defendant argues 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 Grimmway's products." … [But] when analyzing whether a given communication represents commercial speech, this Court and other federal and state courts have looked to the communication as a whole in order to give context to specifically challenged statements …. Defendant also emphasizes the fact that the ESG Report discusses various issues of public interest and was distributed to legislative officials. Communications may, however, "constitute commercial speech notwithstanding the fact that they contain discussions of important public issues." Moreover, the distribution of the ESG Report to legislative officials does not negate the ESG Report's commercial nature….

Of course, Grimmway could still prevail under normal procedures, if plaintiff can't show that Grimmway's statements are false or sufficiently misleading. But it can't take advantage of the special procedural protections (such as attorney fee shifting, immediate appealability, and the like) that California's anti-SLAPP law provides.