Companies Should Stop and Read the Tea Leaves After Latest False Advertising Verdict

Read our alert on “Made in America” claims here.

Earlier this year, a group of California plaintiffs secured a verdict over Bigelow Tea for misleadingly labeled boxes of tea — a reminder for manufacturers that consumers are increasingly scrutinizing product packaging. 

Case Background

In 2020, California consumers brought a class-action case against Bigelow alleging that the company’s tea products were misleadingly labeled and as a result, violated various California statutory provisions. Specifically, plaintiffs alleged that the phrases “MANUFACTURED IN THE USA 100% AMERICAN FAMILY OWNED” and “AMERICA’S CLASSIC” were false because the tea leaves were not grown in the United States. Although the FTC’s regulations do not provide for a private right of action, California Business and Professions Code § 17533.7 allows for private lawsuits and also prohibits companies from using “Made in U.S.A.,” “Made in America,” “U.S.A.,” or similar words if the product is not “entirely or substantially made, manufactured, or produced” in the United States. The California Consumer Legal Remedies Act (CLRA) prohibits “using deceptive representations or designations of geographic origin in connection with goods or services.” The plaintiffs also brought claims sounding in breach of express and implied warranty, intentional and negligent misrepresentation, and unjust enrichment and common law restitution.

The District Court for the Central District of California certified the class as to the plaintiffs’ claims under the CLRA, fraud and intentional misrepresentation, and breach of express warranty. The court also granted the plaintiffs partial summary judgment, determining that the “Manufactured in the USA” statement was “literally false” because the tea leaves are grown and processed abroad. The court rejected the manufacturer’s argument that the “manufactured” statement referred only to the location where the tea was blended and packaged into tea bags. 

The remaining damages issues — whether there was intentional conduct by the company that would support an award of punitive damages and the amount of any compensatory damages — went before a jury in April. During the trial, the plaintiffs presented evidence, including internal emails in which executives discussed different options for “Made In USA”-type slogans. These emails purportedly showed how Bigelow employees proposed several alternatives, such as “blended and packaged in America.” The plaintiffs’ economics expert also testified that the class overpaid for the tea products by approximately $3.26 million because of the “Manufactured in the USA 100%” label by comparing Bigelow’s revenues before and after the statement was added to the label. The jury ultimately awarded $2.36 million dollars in compensatory damages to the plaintiffs but declined to award punitive damages because it found there was not clear and convincing evidence of intentional conduct by Bigelow.

Takeaways

Manufacturers should be sure that any “Made in the USA”-type claims comply with 16 C.F.R. 323, the FTC’s Made in the USA Labeling Rule, and any analogous state laws. Generally, to make an unqualified “Made in USA” claim, the product must be “all or virtually all” made in the United States and made using American-made components and ingredients. The “all or virtually all” means that all significant parts and processing that goes into the product must be of United States origin and contain no, or a negligible amount of, foreign content. If the “all or virtually all” standard cannot be met, manufacturers may be able to make qualified United States origin claims if their products and/or the particular language fall within certain exemptions. Some examples of qualified claims are “Made in USA from imported parts,” “designed in USA,” and “painted in USA.”

Several more “Made in the USA” class action lawsuits have been filed recently in California federal court, including one against a food manufacturer and another against a personal hygiene products manufacturer. Both lawsuits bring similar allegations as those brought in the Bigelow suit. This new wave of lawsuits further highlights the importance consumers appear to be placing on product origin claims.