November 04, 2014: A class action lawsuit alleging U.S. clothing manufacturers have violated California's false advertising law by including foreign-made zippers or buttons has been upheld by a federal judge.
According to trade advisors Sandler, Travis & Rosenberg, the case could still result in settlements, damages or other expensive alternatives for the affected companies.
In Paz v. AG Adriano Goldschmeid Inc. et al, the defendant requested that such an allegation against it be dismissed on the grounds that the California law is pre-empted because it conflicts with federal laws – namely, the Federal Trade Commission Act and the Textile Fiber Products Identification Act – that allow more flexibility in the use of the "made in USA" label.
In its decision, the court indicated for the first time that a "made in USA" claim using qualifying language, such as "made in USA of imported fabric and components," would not run afoul of the California statute. The court noted that the strict conditions in the California law only apply to "made in USA" labels and that the statute fails to provide any guidance on whether qualified labels would constitute a violation. However, the decision is not yet final.
The court held that there is no conflict between the different federal and California standards because it is possible to comply with both (e.g., by labeling the jeans according to the California standard inside California and according to the federal standard elsewhere), even though doing so may be burdensome to the apparel company.
California law prohibits any product from being labeled "made in USA" if that product or any article, unit or part thereof has been entirely or substantially made, manufactured or produced outside of the United States. Apparel companies are particularly vulnerable to claims of violating this law because their goods are typically composed of many components sourced from numerous locations around the world.