Airline Sued for Greenwashing Over Use of Carbon Offsets

A consumer filed a class action lawsuit against a commercial airline on May 30, 2023, in the U.S. District Court for the Central District of California alleging three violations of California state law related to unfair and deceptive practices. The suit alleges that the airline falsely claimed it had achieved carbon neutrality beginning in March 2020 when, it is alleged, the claims were based on the purchase and retirement of carbon offsets that do not represent real, verifiable carbon reductions. The suit further alleges that consumers paid the airline a premium for airline tickets under the mistaken belief that their flights had no carbon footprint. Advertisements by businesses that make broad environmental claims that cannot be backed up, often referred to as "greenwashing," have increasingly come under scrutiny of regulators and private citizens.

At the federal level, greenwashing claims generally fall under the authority of the Federal Trade Commission (FTC) under Section 5 of the FTC Act.¹ Certain industries are carved out from FTC authority, including air carriers, which are regulated by the U.S. Department of Transportation (DOT).² Congress specifically vested DOT with authority to regulate consumer protection matters in the aviation space.³ The Airline Deregulation Act (ADA) also contains a broadly construed express preemption clause prohibiting state law actions against air carriers that relate to an air carrier's "price, route or service."⁴ Because the complaint alleges that the airline's carbon-neutral advertising influenced its choice of air transportation service and "extracted higher prices from consumers," the new lawsuit will likely face motions to dismiss on ADA preemption grounds.

Notwithstanding the weakness of the current case, it is anticipated that businesses across sectors that rely on carbon offsets will face increasing public pressure, threats of litigation and an increasingly uncertain regulatory landscape. The FTC, in a move that signals its intent to more aggressively police greenwashing, is currently revising the "Green Guides" that provide the agency's definitive view on how it interprets its broad unfair and deceptive practices enforcement authority with respect to environmental advertising claims. Although the statute that empowered DOT to challenge "unfair and deceptive" practices is modeled on the FTC Act, DOT has developed its own jurisprudence in interpreting this standard. Meanwhile, suits have been brought by private citizens under state law with increasing frequency over the last few years. Federal action has come under increasing threat of courts that are hostile to broad exercises of agency authority, making suits brought under state law potentially pivotal for defining the future contours of greenwashing law.

Notes

¹ 15 USC § 45.

² Id; 49 USC § 41712.

³ See 49 USC § 41712 (DOT has plenary authority to "investigate and decide whether an air carrier ... has been or is engaged in an unfair or deceptive practice or an unfair method of competition in air transportation or the sale of air transportation"); Morales v. Trans World Airlines, Inc., 504 U.S. 374, 390-91 (1992) (recognizing that DOT retains power to address unfair advertising practices); In re Korean Air Lines Co., Ltd., 642 F.3d 685, 694 (2011) (citing H.R. Rep. 98-793, at 4 (1984) ("'[f]ederal regulation insures a uniform system of regulation and preempts regulation by the states' in a field where state-based variations 'would be confusing and burdensome to airline passengers, as well as to the airlines'")).

⁴ 49 USC § 41713(b).