TerraCycle Lawsuit: Greenwashing Suit, Yeti Case, and Settlement

The TerraCycle lawsuit landscape centers on two cases: a 2021 greenwashing action brought by the nonprofit The Last Beach Cleanup against TerraCycle and nine major brand partners, which settled in November 2021 with mandatory labeling changes, third-party audits, and a ban on incineration; and a 2022 trademark and conversion suit by Yeti Coolers alleging that a TerraCycle subcontractor resold branded merchandise it was paid to destroy, which settled in June 2025 on undisclosed terms. Neither case produced a payout to consumers. Both left a paper trail about how TerraCycle’s sponsored recycling programs actually work.

The 2021 Greenwashing Suit

On March 4, 2021, The Last Beach Cleanup, a nonprofit founded by chemical engineer Jan Dell, filed suit in the Superior Court of California, County of Alameda (Case No. RG21090702).¹ Alongside TerraCycle, the complaint named Coca-Cola, Procter & Gamble, Clorox, L’Oréal USA, Gerber (a Nestlé subsidiary), Tom’s of Maine (a Colgate-Palmolive subsidiary), Late July Snacks (Campbell Soup), Materne North America, and CSC Brands.²

The allegation was straightforward. Products carried unqualified “recyclable” labels directing consumers to mail packaging through TerraCycle’s sponsored programs. Those programs had budget caps that were not disclosed. Once a free program filled, consumers were left throwing packaging away or buying TerraCycle’s paid Zero Waste Boxes.¹ The suit also alleged that defendants failed to keep records confirming that collected materials reached “completion of recycling,” a requirement under both the FTC’s Green Guides and California law.

The complaint pleaded three California claims: the Unfair Competition Law (Bus. & Prof. Code § 17200), the False Advertising Law (§ 17500), and the Environmental Marketing Claims Act (§ 17580.5), the last of which requires marketers to hold and disclose competent evidence for any environmental claim.¹

What the Settlement Required

The case never reached trial. A settlement took effect November 5, 2021, and The Last Beach Cleanup withdrew its complaint.³ Its obligations reshaped how TerraCycle-linked products can be marketed:

Products tied to limited-availability programs must disclose that the program can be suspended when budget limits are reached. “100% recyclable” labeling was prohibited.²
TerraCycle agreed to maintain documentation for every recycling claim, develop voluntary certification standards, and facilitate annual third-party audits of its Sponsored Waste Programs.³
TerraCycle committed to tracking, annually, the weight of material received, the weight sent to processors, and written confirmation that material reached completion of recycling.³
Incineration was expressly barred as a disposal method for Sponsored Waste Program materials.³
TerraCycle could only license its name to “Unlimited” programs with no budget cap; anything less had to disclose the specific limits on labels and in advertising.⁴
TerraCycle agreed to pay an undisclosed sum in attorneys’ fees to the Lexington Law Group.²

Consumers received no damages. Starting January 2023, products failing the new substantiation criteria could no longer be marketed as recyclable through TerraCycle programs.³ Although the order bound only California, TerraCycle said it rolled the labeling changes out nationally and adopted a global directive to use “Recycle with TerraCycle” in place of “recyclable” in partner marketing.⁵

How TerraCycle Responded

CEO Tom Szaky rejected the underlying allegations, saying the company disagreed with “any and all of the claims.”⁶ He argued that consumers usually had at least one alternative when a specific program hit its cap, sometimes free, sometimes paid, and that TerraCycle contractually guarantees recycling to corporate clients and provides certification documentation.

After the settlement, Szaky described many requirements as steps already underway. On disclosure, he said “the suit definitely opened our eyes to that point” and called the change “a fine change.” On the incineration prohibition, he said TerraCycle had never used incineration but was “happy to put that into writing.”³ Clorox, Gerber, Tom’s of Maine, and Procter & Gamble publicly signaled they would continue their TerraCycle partnerships.²

The Yeti Resale Lawsuit

The second major TerraCycle lawsuit came from a corporate client. In 2022, Yeti Coolers sued TerraCycle, subcontractor Akshar Plastic Inc., Akshar COO Devang H. Patel, and additional defendants in the Western District of Texas (Case No. 1:22-CV-01337-DAE).⁷ Yeti alleged it had paid TerraCycle to destroy and recycle roughly 55,000 pounds of branded merchandise, including jackets, vests, backpacks, and totes. According to the complaint, Akshar instead sold the goods through unauthorized channels, including MorningSave.com and Woot!.⁸

Yeti pleaded trademark infringement, false designation of origin under the Lanham Act, unfair competition, and conversion. It contended that Akshar’s certification of destruction was “intentionally false” and that TerraCycle failed to conduct independent verification. Senior U.S. District Judge David Alan Ezra entered a default judgment against alleged middleman Oscar Guel, ordering him to return any remaining Yeti goods and pay $124,200 in damages.⁸

Yeti and TerraCycle settled following mediation, according to a notice filed with the court on June 9, 2025.⁹ Terms were not disclosed. The status of the claims against Akshar and Patel was not clear from available filings.

Subcontractor Problems Behind the Lawsuits

The complaint in the Yeti case pointed at the same structural issue that investigative reporting had already flagged around the greenwashing suit: TerraCycle does not perform recycling itself. It relies on third-party subcontractors, and Szaky has acknowledged that roughly 20% of collected material sits in storage for months or years until volume justifies processing.¹⁰

One subcontractor site drew sustained regulatory attention. Akshar Plastic and Bell International LLC ran a facility in Bloomington, Illinois, where a 2019 TerraCycle-Walmart car seat recycling program left tens of thousands of child safety seats piled 20 feet high. Szaky attributed the pileup to receiving ten times more material than expected. The city of Bloomington forced a cleanup in 2020, with Akshar paying nearly $38,000; a $60,000 judgment followed in 2022 for maintenance and zoning violations; a May 2023 injunction barred the operators from further zoning-violating industrial activity; and by September 2023 an additional $181,000 judgment had been entered, unpaid as of April 2024. The Bloomington-Normal Water Reclamation District also weighed revoking the facility’s wastewater discharge permit.¹¹

Separately, the documentary “The Recycling Myth” identified roughly 30 bales of TerraCycle UK plastic waste in Bulgaria, where a waste broker told filmmakers the material was bound for incineration in a cement kiln.¹² Szaky called it a “single human error” by a subcontractor, said exporting waste for incineration “would make no plausible economic sense,” and stated the material was returned to the UK and recycled.

Where Things Stand Now

TerraCycle has grown despite the litigation. The company reported $43.1 million in 2024 revenue, up from $24.7 million in 2020, with gross profits of $19.3 million.¹³ In April 2026 the SEC qualified a $75 million Regulation A offering, following a $5 million Regulation CF raise in late 2025; Szaky has described the round as a potential “warm-up” to an IPO.¹⁴

In its SEC offering circular, TerraCycle acknowledged the risk of future litigation and regulatory actions tied to its own practices or those of its vendors, warning that such actions “could result in significant costs and reputational harm.”¹⁴ As of mid-2026, no new lawsuits over TerraCycle’s recycling claims have been publicly reported beyond the two above.¹³

1
State Impact Center. Last Beach Cleanup v. TerraCycle, Inc.
2
Wall Street Journal. TerraCycle Partners Including Coca-Cola, P&G to Change Recycling Labels After Settling Lawsuit
3
Resource Recycling. TerraCycle and Brands Settle California Labeling Lawsuit
4
Sabin Center for Climate Change Law. Last Beach Cleanup v. TerraCycle, Inc.
5
Ethical Consumer. TerraCycle: Sustainable or Greenwashing
6
Resource Recycling. TerraCycle and Brands Sued Over Recycling Claims
7
Courthouse News Service. YETI Coolers v. Mercatalyst, TerraCycle, Akshar Plastic, Inc.
8
ASI Central. Lawsuit: Yeti Merch Was Supposed to Be Recycled; Instead, It Was Sold Illegally
9
GovInfo. YETI Coolers v. TerraCycle, Case 1:22-CV-01337-DAE
10
Bloomberg. TerraCycle Investigation
11
WGLT. B-N Water Reclamation District Could Disconnect Plastics Recycler From Sewer System
12
Packaging Insights. TerraCycle’s Tom Szaky Responds to Incineration Exposé
13
Waste Dive. TerraCycle Launches $75M Regulation A Offering
14
SEC. TerraCycle US Inc. Offering Circular