Banks v. R.C. Bigelow, Inc., No. 2:20-cv-06208-DDP-RAOx, 2024 WL 3330554 (C.D. Cal. Jul. 8, 2024)
The court here grants the consumer plaintiffs’ motion for
partial summary judgment on their theory of falsity of Bigelow’s “manufactured
in the USA” claim for its tea bags. All of the products at issue use tea leaves
grown and processed abroad. Processing ves includes plucking, withering,
rolling, oxidizing, drying, and sorting. “It is this processing which
determines the type of tea — black, green, or oolong.” Bigelow then imports the
tea leaves, blends and packages the tea into its tea bag products, and
distributes them. The logo on back of the packaging stated “MANUFACTURED IN THE
USA 100% AMERICAN FAMILY OWNED.” Plaintiffs received class action certification
as to (1) CLRA, (2) common law fraud and intentional misrepresentation, and (4)
breach of express warranty claims.
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prominent Manufactured in the USA 100% claim on bottom right of back package |
It was undisputed that all the tea leaves, and all the tea leaf processing, occurred abroad, and that foreign processing both determines type and renders the tea consumable. Still, Bigelow argued that “Manufactured in the USA 100%” was not literally false because the tea bags were made in the US. The court disagreed. California law makes unlawful the use of “Made in the U.S.A.,” “Made in America,” or “similar words when the merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.” The court found no substantive difference between the terms “made” and “manufactured” for the purposes of a CLRA claim involving alleged misrepresentations of United States origin; the words of the law suggested a legislative decision that the terms were “largely interchangeable.” In addition:
Judges should not engage in
fashioning excessively nuanced exceptions to these consumer protection
statutes, such as finding some artificial distinction between the words made
and manufacture. Otherwise, the marketing industry will undoubtedly attempt to
sidestep consumer protection statutes and mislead consumers through clever and
ambiguous terminology, the very outcome these statues seek to prevent. Indeed,
the Legislature has specifically instructed that the CLRA is to be “liberally
construed and applied to promote its underlying purposes, which are to protect
consumers against unfair and deceptive business practices and to provide
efficient and economical procedures to secure such protection.”
Anyway, “manufacture” means “something made from raw
materials by hand or machinery” and “describe[s] the physical process of
transforming raw materials into goods.” A Made in the U.S.A. claim is false “if
a substantial or significant portion of the component parts of the product are
manufactured abroad.” The tea leaves, the “key component” of the tea bags, undergo
a “physical process” that “transforms” them from “raw” unconsumable tea leaves
into a consumable “good” of a distinct variety and flavor profile (black,
green, or oolong tea) outside of the United States. “The distinctive aspects of
tea, the flavor and quality, are made or destroyed during this process.
Defendant’s own promotional video refers to the actions which happen abroad as ‘the
steps of tea-making.’” The additional actions taken to create the tea bags didn’t
change the fact that the tea leaves “have already been processed abroad and are
no longer a raw material prior to import.” Even Bigelow’s Rule 30(b)(6)
designee acknowledged that manufacture includes a broader set of activities
than the blending and packaging that occurs in the United States. The tea
leaves were “vital” and “the very essence” of the tea bags; they were why
consumers buy the bags, which served as packaging for the product desired.
Indeed, the fact that the tea was consumable increased the
need for consumer protection here. The court offered an example of a baby food
seller who “sourced peach puree from the Chernobyl area, then pasteurized that
puree in the United States and packaged it in a convenient pouch labeled ‘Made
in the USA’ or ‘Manufactured in the USA.’” Thus, the statement was literally
false.
Reliance: This can be presumed classwide from exposure plus
materiality, as long as the named plaintiff actually relied on the
representation. “[A] showing of class-wide exposure sufficient to establish
predominance at the class certification stage creates a rebuttable presumption
that there was in fact class-wide exposure.” That presumption was not rebutted.
Bigelow argued that the statement was just on the back of the box, but it was
prominent—set off to the side in bold type.
Materiality: Bigelow
pointed to market research data indicating that consumers purchase tea for a
variety of reasons that are “overwhelmingly unrelated to the source of the
constituent tea leaves.” But “[t]hat other factors are material to a consumer’s
purchasing decision does not establish that the origin of the tea would be
immaterial to a reasonable consumer,” and Bigelow’s market data didn’t test
consumers’ reaction to origin or made in the USA statements. Bigelow also
offered a consumer survey purporting to show no effect on consumer purchasing behavior,
but plaintiffs’ expert calculated a price premium. That’s generally for a jury.
And the named plaintiffs may have purchased Bigelow tea before the statements
was added to the package, but whether it was material to them was also for a
jury.
Further, false or misleading U.S. origin claims are material
as a matter of law. “While materiality is generally a question of fact, when
the legislature has seen fit to specifically outlaw certain statements in order
to protect consumers, such statements are material as a matter of law.” This
was not a rebuttable presumption, so survey evidence wasn’t relevant. “When the
Legislature has deemed a particular statement material enough to warrant
legislative action, a defendant cannot rebut such a determination through
self-serving surveys and market research. Further, even if it were a rebuttable
presumption, Defendant’s above referenced evidence would be insufficient to
rebut the presumption.”
However, damages remained a jury question. Bigelow argued
that plaintiffs failed to show a price premium. But their expert’s testimony
was admissible, and punitive damages remained possible.
Bigelow’s knowledge and intent was also a jury question for fraud
and negligent misrepresentation, as well as punitive damages. “Plaintiffs point
to sufficient evidence from which a reasonable jury could conclude that Bigelow
knew that ‘Manufactured in the USA 100%’ was false or, at the very least, had
no reasonable grounds for believing it.” There was also evidence of intent to
induce reliance, “as the very purpose of advertising a particular statement on
a package is to induce reliance.”
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