Court Rules on ‘Made in USA’ Suit Against New Balance

Late last week, Judge Angel Kelley issued a memorandum and order denying defendant New Balance Athletics, Inc.’s motion to dismiss and to strike “certain class action allegations” in a complaint over the shoe company’s use of “Made in the USA” in branding.

Plaintiffs allege that New Balance has misleadingly labeled its “premium ‘Made in the USA’ collection” because the shoes contain non-USA content.

The judge wrote that “New Balance admits the shoes in this collection are made of up to 30% foreign content but claims they adequately disclose this detail to consumers. The plaintiffs dispute this characterization and bring forth claims based on violations of consumer protection law, breach of warranty, fraud and false advertising.”

The six named plaintiffs each claim to be purchasers of New Balance “Made in the USA” shoes. Plaintiffs allege that consumers pay a higher price for such products because the such labels appeal to patriotic sensibilities and suggest a higher quality product support for domestic manufacturing employment.

Plaintiffs note new Balance’s disclaimers regarding “domestic value of 70% or greater” appearing shoe boxes, the “hangtags” on shoes and the New Balance website but contend that such disclosures are insufficient. Plaintiffs assert fourteen causes of action predominantly under consumer protection statutes of various states but also for fraud, unjust enrichment, breach of express warranty and violation of the federal Magnuson Moss Warranty Act.  At the pleadings stage, Judge Kelley necessarily accepted the allegations as true and concluded that those allegations were sufficient to survive preliminary motions to dismiss or strike.

In analyzing the deceptive advertising allegations that are at the heart of the case, Judge Kelley noted the FTC’s guidance for claims of “Made in the USA]”mean that “all or virtually all the product must be made in the USA” and that New Balance’s disclaimers were not sufficient to bring the products within the FTC’s “Qualified U.S. Origin Claims” given the disclaimers’ relatively inconspicuous placement and inherent ambiguity.  Although Judge Kelley noted that the heightened pleading requirement for fraud under FRCP 9(b) may make it a closer question, he found the allegations sufficient. Judge Kelley also determined that New Balance’s disclaimers were not sufficient ton dismiss the warranty based claims.

Of particular interest to those familiar with prior litigation involving New Balance’s “Made in the USA” marketing  is Judge Kelley’s discussion of a 2019 settlement in Dashnaw v. New Balance Athletics, Inc. (S.D. Cal.). New Balance “does not argue that the Dashnaw settlement precludes the plaintiffs’ claims, but rather that New Balance’s compliance with Dashnaw makes the plaintiffs claims implausible.” That settlement required certain changes in New Balance’s marketing. Judge Kelley determined that plaintiffs “plausibly” pled that New Balance is not in full compliance with that settlement and that “ NewBalance may employ deceptive marketing even when in compliance …”

Judge Kelley finally addresses the motion to strike the nationwide class allegations. He noted that a court should “exercise caution when striking class allegations based solely on pleadings” and declined to do so. He emphasized that Mass. Gen. Laws Section 93A , underlying one of the state statutory causes of action “provides sufficient basis for a nationwide claim against a Massachusetts company …“ and also notes the federal warranty claim under Magnuson Moss Act.

 Plaintiffs’ counsel is Bursor & Fisher, P.A.. Defense counsel is Orrick, Herrington & Sutcliffe.