Third Circuit affirms disgorgement award in "Made in the USA" case

Newborn Bros. Co. v. Albion Engineering Co., No. 24-1548, No. 24-3046, 2025 WL 3540060 (3d Cir. Dec. 10, 2025)

Along with his rally-going, Judge Bove did participate in this nonprecedential affirmance of various rulings, including disgorgement, in this false advertising case in which Albion was found liable for falsely advertising its caulk dispensing guns as “Made in the USA.”

First, Newborn didn’t need a consumer survey where it had other evidence of deception, from individual customers and distributors who believed Albion products were made in America. Newborn also showed materiality: its branding expert testified that “Made in USA” has “tremendous value” and was a “factor in a significant portion of consumer decisions,” and Albion’s own expert agreed that “sometimes ‘Made in the USA’ is material to some people.”

Newborn also showed sales diversion. For example, “a distributor of Albion products testified that he pushed Albion products to the detriment of Newborn’s products but, once he realized that Albion products contained foreign materials, he sold more Newborn products.” The District Court also found that “once Newborn filed this lawsuit and increased the attention on Albion’s labelling practices, its sales rose.”

The injunction was also fine: The District Court ordered Albion to send a letter to “each distributor it has sold a caulking gun to within the past five years” and “request that any samples, displays, or other materials referencing ‘Phila. PA.’ or referring to Albion caulking guns being ‘Made in USA’ be returned,” as well as display a notice concerning this litigation. Albion argued that this was overbroad, but the District Court found that Albion’s old products and marketing materials were still in circulation.

The District Court also ordered Albion to list on its packaging each component of the product and its country of origin until CBP provides Albion with updated guidance. Albion previously sought guidance from the CBP in 2012; in 2019, CBP told Newborn that importing steel rods and then changing them in the US would “not constitute a substantial transformation,” and thus the country of origin was not the United States. The District Court concluded that “Albion has intentionally foregone a subsequent, clarifying ruling [from the CBP], choosing instead to forego any country-of-origin markings at all.” [That … seems unlikely to comply with the law regarding imported goods.] It was not an abuse of discretion to require Albion to display detailed country-of-origin information on its products until it receives CBP guidance. Even though this applied to products that were already labeled “Made in Taiwan,” which Albion argued was enough to satisfy CBP, “[t]he injunction does not order compliance with CBP requirements; it is an exercise of the District Court’s discretion to fashion a remedy.”

On the cross-appeal, Newborn argued that the lower court shouldn’t have accepted Albion’s unclean hands defense, which involved Newborn’s use of a U.S.A. logo to market imported goods. No dice. “[B]oth Newborn and Albion attempted to market themselves as American manufacturing companies and reap the benefits of that image.” Although “the connection between the misconduct and the claim must be close” for unclean hands to apply, and although there were “material differences in timeframe, content, and context” for some of the examples offered by Albion, the District Court focused on Newborn’s 2007 trademark renewal application. Newborn averred in that submission that it was still using the “Newborn U.S.A.” trademark and “submitted an example of a calking-gun advertisement bearing the trademark without reference to Newborn’s U.S. warehouse facilities.” Thus, the district court didn’t abuse its discretion.

Nor did the unclean hands doctrine require evidence of consumer confusion or injury. “[O]ne’s misconduct need not necessarily have been of such a nature as to be punishable as a crime or as to justify legal proceedings of any character. Any willful act concerning the cause of action which rightfully can be said to transgress equitable standards of conduct is sufficient cause for the invocation of [the unclean-hands doctrine.]”

It was also not an abuse of discretion to reduce the disgorgement award for repeat customers. Albion’s expert opined that after a customer or distributor purchased an accused product, “he or she became aware of the products’ foreign origin by either stamp, sticker, or hang tag such that it is reasonable to infer that any subsequent purchase by that same customer or distributor would be made for reasons unrelated to the country of origin,” and the court relied on that to reduce the award. I agree with Newborn that the expert—an economist who focuses his practice on providing economic analyses for litigation, including disgorgement calculations—wasn’t qualified to testify about consumer beliefs. But the court of appeals held that testimony “concerning consumer behavior” “falls squarely within” an economist’s expertise.

Comment: Ah, the dismal science! Actual experts in consumer behavior would note that consumers don’t generally do that kind of preference-updating. Having bought the product—in part because of its US origin claims—consumers generally try to justify their purchases retroactively. As the Supreme Court explained long ago,

We find an especially strong similarity between the present case and those cases in which a seller induces the public to purchase an arguably good product by misrepresenting his line of business by concealing the fact that the product is reprocessed or by misappropriating another's trademark. In each, the seller has used a misrepresentation to break down what he regards to be an annoying or irrational habit of the buying public—the preference for particular manufacturers or known brands regardless of a product’s actual qualities, the prejudice against reprocessed goods, and the desire for verification of a product claim. In each case, the seller reasons that, when the habit is broken, the buyer will be satisfied with the performance of the product he receives. Yet a misrepresentation has been used to break the habit, and … a misrepresentation for such an end is not permitted.