Judge Rules Federal Law Does Not Preempt California’s Made in USA Rule in AG Jeans Suit

On October 27, 2014, U.S. District Judge Dana Sabraw in San Diego denied a motion by denim maker AG Adriano Goldschmied, Inc. and Nordstrom, Inc. to dismiss a proposed class action over “Made in the U.S.A.” labels on AG jeans. The judge ruled that federal law does not preempt California’s stricter Made in USA statute.

The claims

The plaintiff, Paz, said he bought a pair of AG’s “The Protégé” jeans on May 16, 2014, relying on the label. According to the complaint, the jeans contained parts made outside the USA, such as fabric, thread, buttons, rivets or zipper components. He sued under California’s consumer protection laws, including Business and Professions Code § 17533.7. At the time, that section barred a “Made in U.S.A.” label if any part of a product was “entirely or substantially” made outside the USA.

Why the court said both laws can apply

AG and Nordstrom argued that the FTC’s “all or virtually all” standard and the Textile Fiber Products Identification Act conflicted with California law. Judge Sabraw agreed that the standards differ but said a company could follow both:

• “Outside California, Defendants could use the ‘Made in U.S.A.’ labels, but inside California, they could not. This may be burdensome for Defendants, but it is not impossible for them to do so,” the order states.
• The textile act does not require an unqualified “Made in USA” label. It calls for disclosures such as “Made in USA of imported fabric,” so accurate labeling would meet both laws.
• The court found that both laws share the same purpose: telling shoppers whether their purchases support USA industry and workers.

Industry reaction

California Apparel News reported that the ruling left Los Angeles apparel makers weighing whether to use separate labels for garments sold in California. Ilse Metchek, president of the California Fashion Association, said, “The reaction to this is huge.”

A second San Diego federal judge later let a similar jeans suit go forward (our coverage). AG and Nordstrom went on to propose a settlement of more than $4 million in 2015 (our coverage), and California loosened its statute that year (our coverage).