Court Dismissals of “Made in USA” Class Actions

Two cases involving allegations that companies falsely labeled their products as “Made in USA” and thereby violated California’s “Made in USA” statute have recently been dismissed.  In April, the Southern District Court of California dismissed all claims against Heinz.  Then, earlier this month on June 6, the Central District Court of California dismissed all claims against Stearn’s Products.  In both cases, the issue came down to the fact the plaintiff simply did not adequately allege facts to state a claim under the law.  Importantly, in the Stearn’s case, the court also ruled that the new version of California’s “Made in USA” law applies retroactively to products put in the marketplace prior to January 1, 2016.

In the Heinz case, the plaintiff, Suzanne Alaei (who happens to also have a similar case pending against Rockstar), alleged Heinz’s products contain ingredients such as turmeric, tamarind, and jalapeños that are not from the U.S.  The plaintiff failed, however, to allege the ingredients were in the product she purchased or the country of origin of those ingredients.  In its decision, the court also noted that no issue was raised about where the Heinz products are actually made, but instead only takes issue with the origin of some of the ingredients.

In addition, the court also held that Alaei lacks standing to bring claims for other Kraft Heinz products she didn’t buy or see advertised as “MFD. in U.S.A.” Specifically, although plaintiff alleged she purchased a single bottle of Heinz 57 sauce, she sought to represent a class of all Californians who purchased any Heinz product advertised as “Made in USA.”  but which contained foreign-made ingredients. The court held that unless those products and alleged misrepresentations were “substantially similar” to those she bought, the plaintiff lacked standing. The plaintiff failed, however, to allege facts to establish that all of Heinz’s other products were substantially similar to the single product she purchased– she didn’t identify the other products in her complaint, failed to identify the ingredients in the other products, and she hadn’t purchased the other products.

In the Stearn’s case, the plaintiff, Natalie Rossetti, similarly alleged (and not surprising since she and Alaei are represented by the same counsel) Stearn’s products fail to meet the California “Made in USA” standard, because a handful of ingredients are “foreign ingredients.”  Also, similar to the Heinz case, Rossetti did not take issue with where the finished cosmetics are actually manufactured–and she couldn’t, as they are indeed manufactured in the United States.  In its order, the court identified both a procedural and substantive defect in Rossetti’s case.  The procedural issue involved the plaintiff’s failure to file a venue affidavit — an affidavit required by statute when bring a Consumer Legal Remedies Act claim.

On the substantive issues, the court identified the more problematic issue for Plaintiff was her reliance on an outdated version of California’s “Made in USA” statute.  (If you are follower of this blog, you will recall that the statute was amended in 2015, effective January 1, 2016.  For more information read the prior post here.)

The court accepted Stearn’s argument that the amendment of Section 17533.7 precludes the plaintiff from relying on the old statute, “even though the sale and purchase involved preceded the newly-amended statute’s effective date.”  The court relied on a well settled rule “‘that an action wholly dependent on statute abates if the statute is repealed without a savings clause before the final judgment is final.'”  The rule is based on the doctrine that where a change in law results in a reversal, that is where it now effectively permits what was previously prohibited conduct, pending actions are abated.  (The outcome would be different if the new statute had instead imposed new liabilities or increased the punishment for prior conduct.  In that type of situation, the legislature would have had to specifically provide for the retroactive application of the new law.)

Accordingly, because the plaintiff was relying entirely on the old version of the law, the plaintiff failed to make her case.  The court gave Rossetti until July 6, 2016, to file an amended complaint.

In the Heinz case, the plaintiff filed an amended complaint.  Heinz responded with another motion to dismiss the second amended complaint. The hearing is currently set for July 11, 2016.  In its Motion, Heinz argues that the mere presence of foreign sourced ingredients does not violate the statute.  In addition, the raw material ingredients in the products do not constitute separate, identifiable components.  Notably, these same arguments were made in Stearn’s motion to dismiss, (and at the oral argument I specifically requested that the court consider ruling on these issues, but the court decided it didn’t need to be confronted yet).

As I mentioned previously, raw materials, i.e., ingredients, like those that make up cosmetic creams, lotions, shampoos, or ketchup, are different than the identifiable components of jeans, e.g., zippers, buttons, thread, or tags.  Until we have a ruling from a court addressing these issues, however, the ambiguity of California’s “Made in USA” statute will plague companies trying to comply with the statute.  Hopefully, between one of these cases, we will have an answer to this question soon.




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