Is the “surf up” again in California for “Made in USA” class actions? A prior wave of “Made in USA” class action litigation in California crashed up against a number of legal difficulties, including how one calculated damages for buying a product “mislabeled” as “Made in USA.” However, the California Supreme Court in the Kwikset case ultimately resolved this issue largely in plaintiffs’ favor.
Now a class action complaint has been filed on June 9, 2014, against designer jean company Citizens of Humanity (“COH”) and Macy’s Inc. (“Macy’s”) which alleges that the jeans were falsely labeled as “Made in USA” when, in fact, many of the components were imported. This follows on the heels of a settlement in a class action filed earlier this year against Lifetime Products, Inc. and The Sports Authority, Inc. for allegedly misusing the “Made in USA” label on basketball products. Defendants agreed to a permanent injunction and to provide gift cards or a basketball to each class member ranging in value from $12.50 to $30 and to make annual charitable contributions of $325,000 over a five-year period.
As we’ve written previously, “Made in USA” claims (and related legal complications) have been almost as trendy as the latest designer jeans. We’ve long argued that stringent “Made in USA” standards likely don’t comport with consumers’ understanding of the term and may discourage, rather than encourage manufacturers to source domestically. While the FTC has been active on the enforcement front, California’s “Made in USA” statute is particularly onerous. California Business & Professions Code § 17533.7 prohibits the use of “Made in USA” “when the merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.” Some judges have pointed to the use of “any part thereof” in the statute and suggested that even the use in a product of a single screw sourced from overseas would preclude use of the claim. In contrast, the FTC policy states that all of the significant parts of the product have to come from the United States, but a “negligible” amount can be foreign, allowing for increased flexibility in terms of foreign component parts. California has tried to address this concern in part by creating a “Made in California” seal with more flexible standards but this does not necessarily help companies with national brands who do not want to create California-specific labeling or ad campaigns.
In this specific case, Louise Clark, the class representative, alleges that when she purchased her “Boyfriend” jeans from a San Diego Macy’s, she was supporting “U.S. jobs and the U.S. economy.” She asserts she suffered an “injury in fact” by “paying for something that she believed was “genuinely manufactured in the USA, when it was not.” The complaint contends that “the fabric, thread, buttons, and/or rivets [of the ‘boyfriend’ jeans] are manufactured outside the U.S.” Although the exact amount of damages sought is not set forth, the potential liability is clearly not pocket change.
Unless and until California modifies its law to conform to the FTC’s standard, companies with “Made in USA” claims would do well to monitor the situation there and look closely at every rivet, zipper, button, thread, and screw.
* Jessica Swauger is a Venable summer associate and not admitted to practice law.