Ninth Circuit Brings Clarity to Made in the USA Labeling

Thanks to the California legislature and the Ninth Circuit’s recent unpublished opinion in Fitzpatrick v. Tyson Foods, food manufacturers and distributors in California can label their products “Made in the USA,” even if the products contain certain percentages of foreign-made ingredients or components without fear of becoming embroiled in class action litigation.  In a case argued by Cozen O’Connor’s own Richard Fama, the Ninth Circuit ruled on March 13, 2018 that the California Legislature’s amendment of Business and Professions Code § 17533.7 to allow for a more liberal definition of “Made in the USA” provides a “safe harbor” to manufacturers and retailers who chose to label their products as “Made in the USA.”

Under the old version of the law, a manufacturer could not label a product as “Made in the USA” if any part of the product was fabricated outside of the United States. This rigorous standard actually discouraged manufacturers from attempting to produce products of United States origin, thereby defeating the intended purpose of the statute and depriving consumers of products that are substantially made in the United States.  In 2015, however, California Governor Jerry Brown signed into law Senate Bill 633, which amended Section 17533.7.  The law now states that the limitation on “Made in the USA” labeling does not apply if either: (1) the part of the product produced outside of the U.S. constitutes less than 5% of the “final wholesale value of the manufactured product,”; or (2) if the manufacturer can demonstrate that “it can neither produce the article, unit, or part within the United States nor obtain the article, unit, or part of the merchandise from a domestic source” irrespective of cost, and that “all of the articles, units, or parts of the merchandise obtained from outside of the United States constitute not more than 10% of the final wholesale value of the manufactured product.” 

In Fitzpatrick, the plaintiff purchased Milo’s Kitchen Brand dog treats that she claimed were mislabeled as being “Made in the USA.”  She alleged that at the time of her alleged purchase, she believed that the “Made in the USA” label met the standards set forth in Section 17533.7, which, at the time, prohibited “Made in the USA” labeling if any ingredient was “entirely or substantially” foreign-sourced.  However, after Fitzpatrick allegedly purchased the Milo’s Kitchen Brand dog treat, but before she filed the action, the California Legislature amended the statute to specifically permit such labeling when foreign-sourced ingredients comprise less than the 5% and 10% limits discussed above.

Accordingly, the Ninth Circuit found that the District Court properly concluded that the California Safe Harbor Doctrine barred Fitzpatrick’s claims under California’s Consumer Protection statutes.  That doctrine, quite reasonably, precludes plaintiffs from bringing claims based on actions the Legislature permits.

This ruling is a boon for manufacturers and retailers that sell their products in California.  The Ninth Circuit has brought false labeling claims in line with the will of the California Legislature, rendering California plaintiffs unable to rely on the old version of the labeling law for injuries that occurred before the law was amended.

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Cozen O’Connor has a national team of attorneys experienced in handling food contamination and product recall coverage matters related to first-party, third-party and specialty policies. The firm also developed a Food, Beverage & Nutritional Products Industry Team to provide advice and counsel to a wide range of companies connected directly and indirectly to the food and beverage industry.
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