Second Circuit Reverses Dismissal on Standing Grounds

It’s axiomatic that – at the pleading stage – all inferences are to be drawn in plaintiffs’ favor. All well pled allegations are to be taken as true.

Yet complaints are often nitpicked, especially by defendants who foresee trouble once discovery is underway.  They search for holes in the pleadings, even when (or especially when) those holes are likely to be filled later with evidence.

That strategy often works.  So plaintiffs can take solace in the new Second Circuit opinion that not only reiterates these general principles, but expressly relies on them to form the backbone of its opinion.

The case is John v. Whole Foods Market Group.  Plaintiff alleged Whole Foods systematically overstated the weights of prepackaged foods, leading to overcharges for its customers.  The case followed a New York Department of Consumer Affairs investigation, which concluded some 89% of Whole Foods’ prepackaged foods featured overstated weights.

Whole Foods moved to dismiss on standing grounds.  It argued that just because the weight of 89% of its food had been overstated, that didn’t necessarily mean that the weight of plaintiff’s food had been overstated.  So, Whole Foods argued, plaintiff could not plausibly allege that he overpaid.  Whole Foods also sought dismissal on the ground that the complaint lacked details about the New York investigation’s methodology.

The district court agreed with Whole Foods’ arguments and dismissed for failure to plausibly allege injury.  The Second Circuit reversed.

Concluding that the allegations plausibly established that plaintiff had overpaid, the Second Circuit emphasized that “general factual allegations of injury may suffice” to plead injury for Article III standing purposes.  And the court emphasized that facial challenges to standing (where defendant moves based only on the pleadings, without offering evidence), courts must draw “all reasonable inferences in the plaintiff’s favor and are to presume that general allegations embrace those specific facts that are necessary to support the claim.’”

The court also held the pleading stage was not the time to require plaintiff to establish the accuracy of the New York investigation’s findings or the rigor of its methodology. Instead, the court explained that discovery should proceed, since “targeted discovery might show” whether obstacles to proving injury at the summary judgment stage could “be surmounted.”  The court concluded:

Taking these allegations as true and drawing all reasonable inferences in his favor, it is plausible that [Plaintiff] John overpaid for at least one product.  John’s complaint thus satisfies the “low threshold” required to plead injury in fact.

This ruling provides plaintiffs in the Second Circuit with another tool for focusing trial courts on the applicable (and plaintiff-friendly) legal standards at the pleading stage.