TerraCycle Lawsuit: Settlement Terms and Labeling Fallout

The TerraCycle lawsuit was a 2021 California case in which the nonprofit The Last Beach Cleanup sued TerraCycle, Inc. and nine consumer product companies, alleging that their “recyclable through TerraCycle” labels deceived shoppers because most of the recycling programs had hidden budget caps and enrollment limits. The case settled in November 2021, without a court ruling, and forced changes to product labels, TerraCycle’s supply-chain oversight, and how the company disposes of collected waste.¹

Who Sued TerraCycle and Why

The Last Beach Cleanup, a 501(c)(3) founded by chemical engineer Jan Dell, filed the complaint on March 4, 2021 in the Superior Court of California, County of Alameda. The case was later removed to the U.S. District Court for the Northern District of California.²³

Nine consumer brands were named alongside TerraCycle, each accused of placing unqualified “recyclable through TerraCycle” claims on packaging made of single-use plastics or other materials that municipal recycling programs cannot process:

The Coca-Cola Company, for Honest Kids juice drinks labeled “Recycle your drink through TerraCycle.”
The Procter & Gamble Company, for Febreze air fresheners.
L’Oreal USA, for Garnier hair care products.
Gerber Products Company, for baby food pouches.
Tom’s of Maine, for toothpaste packaging.
Late July Snacks, for tortilla chip bags.
Materne North America, for GoGo squeeZ applesauce pouches.
The Clorox Company, in connection with Burt’s Bees products. Clorox argued in its removal notice that it was improperly joined because Burt’s Bees is a separate entity.
CSC Brands LP.

The complaint alleged that these companies “reap the rewards of portraying themselves as environmentally friendly without providing any meaningful benefit to the environment or to consumers.”⁴

What the Labels Allegedly Hid

TerraCycle runs “Sponsored Waste Programs” in which corporations pay the company to collect and recycle hard-to-recycle packaging. In exchange, those companies can label the packaging “recyclable through TerraCycle.” The programs are free for consumers, but the corporate sponsor sets an annual budget cap. Once a program hits its limit, TerraCycle stops accepting that brand’s packaging until more funding arrives.⁵

The lawsuit’s central argument was that product labels never disclosed those caps or the participation limits that came with them. When a free program was full, consumers who still wanted to recycle the packaging were effectively pushed toward TerraCycle’s paid “Zero Waste Boxes,” which ranged from roughly $80 to over $450.⁴

The complaint also alleged that the defendants failed to produce records showing that collected material was actually being recycled rather than landfilled or incinerated. TerraCycle does not recycle materials itself; it ships collected waste to third-party processors. Before 2021, the company performed only financial audits of those processors, not operational ones.⁶

The Legal Theory

The suit alleged three violations of California’s Unfair Competition Law (Cal. Bus. & Prof. Code § 17200) under its “fraudulent,” “unlawful,” and “unfair” prongs, along with claims under the California False Advertising Law and the California Environmental Marketing Claims Act.² Much of the argument rested on the Federal Trade Commission’s Green Guides, which say an unqualified “recyclable” claim is appropriate only when recycling facilities are available to a “substantial majority” of consumers, defined as at least 60%.³

The case was not a class action and did not seek monetary damages for individual consumers. The Last Beach Cleanup stated in its complaint that “an award of monetary damages would not redress Defendants’ false, misleading, and deceptive statements,” and asked the court instead for injunctive relief ordering the companies to stop making the claims.⁷

What the Settlement Required

The parties reached a settlement effective November 5, 2021, and a notice of dismissal with prejudice was filed on November 10, 2021. No judge ruled on the merits. The agreement imposed obligations in four areas.¹

Labeling Disclosures

The brand defendants agreed to revise product labels to disclose when a TerraCycle program has limited availability or is subject to suspension once a budget cap is reached. Starting in January 2023, products that could not meet recyclability substantiation requirements were barred from being marketed as “recyclable through TerraCycle.” TerraCycle itself was restricted from licensing its name on labels or advertising unless the associated program was an “Unlimited” waste program that accepts all products without budget restrictions. For any program that was not unlimited, the limitations had to be disclosed.⁸

Supply Chain Auditing

TerraCycle agreed to keep written records substantiating every “recyclable” claim on its website and on product labels, and to implement supply chain policies backing those claims. Annually, the company must track the weight of material received through Sponsored Waste Programs, the weight sent to third-party processors, and obtain written confirmation from each processor that material has reached “completion of recycling.” TerraCycle also committed to developing standards for third-party substantiation and to facilitating annual third-party audits.⁸

Incineration Ban

The settlement explicitly prohibited TerraCycle from using incineration to dispose of products received through its Sponsored Waste Programs.⁸

Legal Fees

TerraCycle agreed to pay The Last Beach Cleanup’s legal fees. No damages were awarded to any party.⁹

As of April 2025, more than half of the 120 free programs listed on TerraCycle’s U.S. website carry “Enrollment limits apply” declarations, a direct result of the settlement. The company’s UK website has not adopted the same disclosure format.⁵

Independent Investigations That Followed

Reporting during and after the settlement raised further questions about whether collected material was actually being recycled. TerraCycle has said the Last Beach Cleanup case is the only lawsuit ever filed against it over recycling claims, recycled content, or reuse services, and no government regulatory investigation or enforcement action arising from these investigations has been publicly reported.⁵

In 2021, investigative journalists Tristan Chytroschek and Benedict Wermter, working on a documentary called “The Recycling Myth,” found around 30 bales of TerraCycle’s UK plastic waste at a site in Bulgaria. A waste broker was recorded on camera saying the material was destined for incineration in a cement kiln. CEO Tom Szaky called the discovery the result of “a single human error” by a subcontractor’s worker and said exporting and incinerating waste “would make no plausible economic sense.” He said the waste had been returned to the UK. The filmmakers disputed that account, pointing to the Bulgarian facility’s relationship with a local cement kiln.¹⁰

In May 2022, the BBC’s Panorama aired “Recycling: Where Does My Rubbish Go?” The program reported that one of TerraCycle’s UK waste handlers, Tianyong Wang, had pleaded guilty to illegally shipping waste to Indonesia. TerraCycle’s contract was technically with a separate business at the same address; TerraCycle said it severed ties with the handler and was considering legal proceedings against him. The program also alleged TerraCycle’s collection and recycling rates were “extremely low” and said the business model was “likely misleading consumers.” Szaky defended the rates as “a start.”¹¹

An October 2022 Bloomberg Businessweek investigation placed GPS trackers inside three items sent through TerraCycle programs: a Turkish dried apricot wrapper, a Gerber baby food pouch, and a UPS bubble wrap package. The apricot wrapper and Gerber pouch were tracked to warehouses in Bloomington, Illinois, operated by subcontractors Bell International and Akshar Plastic. Those facilities faced lawsuits from the city of Bloomington over public nuisance complaints, including the accumulation of thousands of car seats from a 2019 TerraCycle initiative. Both tracked items ended up in a landfill in Pontiac, Illinois. The bubble wrap tracker pinged at a GDB International facility in New Jersey for months before going silent. Szaky acknowledged in the story that roughly 20% of collected material could sit in storage for months or years while awaiting sufficient volume to justify processing.⁶

Where Recyclability Labeling Law Now Stands

The TerraCycle settlement opened a wave of greenwashing litigation over recyclability claims, and courts have split on how to handle them. Some federal judges have dismissed similar suits at the pleading stage using a narrow, literal definition of “recyclable”: if a product is theoretically capable of being recycled, the label is technically true. A 2022 case against Coca-Cola and a 2022 case against 7-Eleven both went this way. Other courts have allowed claims to proceed on the theory that even a technically true statement can violate consumer protection law if it has the capacity to deceive a reasonable consumer.¹²

California’s SB 343, signed into law in 2021, directly targets the kind of claims at issue in the TerraCycle case. It prohibits “recyclable” labels, including the chasing arrows symbol, unless the material is collected by recycling programs serving at least 60% of California’s population and is actually sorted into recycling streams by at least 60% of those programs. The compliance deadline is October 4, 2026. In March 2026, a coalition of 18 trade associations filed suit arguing the law violates the First Amendment.¹³

At the federal level, the FTC began formally updating its Green Guides in December 2022 and held a workshop focused on recyclability claims in May 2023. That revision process has not been completed.¹⁴

1
Climate Case Chart. Last Beach Cleanup v. TerraCycle, Inc., Case Collection
2
Climate Case Chart. Last Beach Cleanup v. TerraCycle, Inc.
3
Climate Policy Radar. Last Beach Cleanup v. TerraCycle, Inc., No. 4:21-cv-06086-DMR
4
Plastics Today. TerraCycle and Corporate Partners Sued by NGO for Misleading Consumers
5
Ethical Consumer. TerraCycle: Sustainable or Greenwashing
6
Bloomberg. The Warehouses of Plastic Behind TerraCycle’s Recycling Dream
7
State Impact Center. Last Beach Cleanup v. TerraCycle, Inc., Complaint
8
Resource Recycling. TerraCycle and Brands Settle California Labeling Lawsuit
9
Fast Company. Recycling in the US Is an Absolute Mess. This Lawsuit Shows Just How Hard It Is
10
Packaging Insights. TerraCycle’s Tom Szaky Responds to Incineration Expose
11
Packaging Insights. TerraCycle Accused of Recycling Failures and Consumer Misinformation in BBC Panorama Revelations
12
Harvard Environmental Law Review. Applying Consumer Protection Basics to Greenwashing Recyclability Cases
13
Nixon Peabody. California’s SB 343 Restricts Common Recyclability Claims on Products and Packaging
14
The Regulatory Review. The FTC Green Guides and Recyclability