Cristostomo v. New Balance Athletics, Inc.

647 F.Supp.3d 1

Matthew CRISTOSTOMO, Anthony Bollini, Spencer Verrilla, Derrick Evans,Clifton Bradley, and Robert Kaminsky,individually and on behalf of all others similarly situated, Plaintiffs, v. NEW BALANCE ATHLETICS, INC., Defendant.

Civil Action No. 1:21-cv-12095-AK

United States District Court, D. Massachusetts

Signed December 23, 2022

L. Timothy Fisher, Pro Hac Vice, Bursor & Fisher, P.A., Walnut Creek, CA, Max S. Roberts, Pro Hac Vice, Bursor & Fisher, P.A., New York, NY, James J. Reardon, Reardon Scanlon LLP, West Hartford, CT, for Plaintiffs.

Richard David Hosp, Mark S. Puzella, Sheryl Koval Garko, Orrick, Herrington & Sutcliffe LLP, Boston, MA, for Defendant.

MEMORANDUM AND ORDER

A. KELLEY, District Judge

Plaintiffs Matthew Cristostomo, Anthony Bollini, Spencer Verrilla, Derrick Evans, Clifton Bradley, and Robert Kaminsky bring forth this action against Defendant, New Balance Athletics, Inc. (hereinafter "New Balance"). The plaintiffs purchased shoes from a premium New Balance "Made in the USA" collection. New Balance admits the shoes in this collection are made of up to 30% foreign content but claims they adequately disclose this detail to consumers. The plaintiffs dispute this characterization and bring forth claims based on violations of consumer protection law, breach of warranty, fraud, and false advertising.

New Balance has filed a motion to dismiss the plaintiffs' complaint and to strike certain class allegations. [Dkt. 19]. For the following reasons, New Balance's motion is DENIED.

I. BACKGROUND

The following facts are drawn from the complaint and taken as true for the purposes of a motion to dismiss for failure to state a claim. García-Catalán v. United States, 734 F.3d 100, 102 (1st Cir. 2013); see also Fed. R. Civ. P. 12(b)(6).

New Balance sells a line of shoes that prominently feature claims that the shoes are "Made in the USA" despite the fact that the shoes' foreign composition mean they do not meet the "all or virtually all" standard used by the Federal Trade Commission ("FTC") to merit such a label. [Dkt. 16 "Am. Compl." at ¶ 2]. Products described as made in the USA imply to consumers a higher quality product, evoke a sense of patriotism, and provide support for domestic manufacturing jobs. [Id. at ¶ 50]. For these reasons, consumers are willing to pay more for products when they bear the label "Made in the USA." [Id. at ¶¶ 51-54].

New Balance has maintained manufacturing, production, and distribution facilities in New England for the past 75 years. [Dkt. 20 at 3]. New Balance produces a premium "made" collection of shoes that emphasizes that they are "Made in the USA." [Am. Compl. at ¶ 19]. Several of these shoes feature American flags, the unqualified phrase "Made in the USA" on the outside tongue of the shoes, and/or the word "USA". [Id. at ¶¶ 20-25]. This is true of the "Made in USA" 990v5, 990v4, 990v3, 990v2, and the 993. [Id.] The 992 and 1540v3 do not have such representations on the physical shoe but appear as part of the "Footwear Made in the USA" collection on the New Balance website. [Id. at ¶ 25]. The shoes in the collection also feature the prefix "Made in USA" before their respective names when they appear on the New Balance website. [Id.] The inside label on the tongues of each shoe bear "Made in USA." [Id. at ¶ 26].

The shoes' packaging includes materials that emphasizes their US connection. The top of the box features a silhouette of a USA flag with the word "made" written on top of it. [Id. at ¶ 27]. The phrase "made in the U.S. for over 75 years" is written on the side of the top. [Id.] The underside of the box also features another small "made" logo next to a flag with a caption that places the "made" collection in the context of "over 75 years of authentic American craftsmanship." [Id.]

The shoes are not able to meet the FTC's guidelines for "Made in the USA" labeling because they are not "all or virtually all" made in the USA. [Id. at ¶ 29]. Imported parts and foreign labor make up at least 30% of each shoe. [Id. at ¶¶ 33-35]. In particular, New Balance admits that it imports the soles. [Id. at ¶ 35]. The sole or "outsole" is key to the shoes' functioning, especially for athletic shoes, and is a part of the shoe where the durability and quality matter a great deal. [Id.]

Alongside its "Made in USA" language, New Balance does include some disclaimers. While the front of the hangtags on its shoes features the "MADE." logo with the US flag, the rear side of the hangtags says, "New Balance 'made' is a premium collection that contains a domestic value of 70% or greater." [Id. at ¶ 39]. On the side of each shoebox, below another larger "made" logo, the same phrase appears. [Id. at ¶ 40]. When navigating to the "made" collection on the New Balance website, a similar disclaimer about a domestic value of 70% or more appears below the link to the collection. [Dkt. 20 at 8]. This disclaimer reappears on other portions of the New Balance website as well. [Am. Compl. at ¶ 41]. The term of domestic value employed by New Balance possesses no relevant legal definition. [Id. at ¶¶ 43-46].

Plaintiffs allege that no reasonable person would expect the language that appears on the side of the shoebox, the rear of the hangtag, and on the website to contradict the unqualified representation that the shoes were "Made in the USA." [Id. at ¶ 42]. They further allege that a reasonable consumer would not expect a shoe labeled "Made in USA" to have significant parts made outside of the Unites States. [Id.]

Plaintiff Matthew Cristostomo purchased the model 992 in March 2021, the 990 in June 2021, and the 993 in November 2021 at a New Balance outlet near his home in Chula Vista, California. [Id. at ¶ 7]. Plaintiff Anthony Bollini purchased the 990 at a New Balance store near his home in Farmington, Michigan in January 2019. [Id. at ¶ 8]. Plaintiff Spencer Verrilla purchased the 990v3 and 992 on Amazon.com in September 2021. [Id. at ¶ 9]. Plaintiff Derrick Evans purchased a 990v5 from a Footlocker new his home in Bloomfield, New Jersey in November 2020. [Id. at ¶ 10]. Plaintiff Clifton Bradley, whose home is in Seminole, Florida, purchased the 990v5 from newbalance.com in August 2020. [Id. at ¶ 11]. Plaintiff Robert Kaminsky, whose home is in Fresh Meadows, New York, purchased the M990 BK5 and the M990 G15 from Amazon.com. [Id. at ¶ 12]. Each plaintiff alleges that the shoes were marketed, advertised, and packaged as being "Made in the USA." [Id. at ¶¶ 7-12]. Each plaintiff further alleges that, prior to their purchase, they reviewed the shoes' "Made in USA" materials, relied on those representations which they understood as representations and warranties that the shoes were made in the USA and that had they known the shoes could not be considered "Made in the USA, they would not have purchased the shoes for the price they did." [Id. at ¶¶ 4, 7-12].

Plaintiffs bring fourteen claims against New Balance for the allegedly deceptive marketing of their "Made in USA" shoes. [Id. at ¶¶ 72-242]. The first claim is for deceptive advertising in violation of Mass. Gen. Laws ch. 93A (Count I). [Id. at ¶¶ 72-91]. The second and third claim are for breach of express warranty (Count II) and violation of the Magnuson-Moss Warranty Act (hereinafter "MMWA") (Count III). [Id. at ¶¶ 92-108]. Plaintiffs also bring one claim for unjust enrichment (Count IV) and one claim for fraud (Count V). [Id. at ¶¶ 109-121]. The remaining claims are brought under various consumer protection state statutes in California (Counts VI-VIII), Michigan (Count IX), Pennsylvania (Count X), New Jersey (Count XI), Florida (Count XII), and New York (Counts XIII-XIV), which prohibit false/misleading advertising. [Id. at ¶¶ 122-242].

New Balance has filed a motion to dismiss all claims and to strike the plaintiffs class allegations [Dkt. 19], which plaintiffs have opposed [Dkt. 22].

II. LEGAL STANDARD

To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint must allege sufficient facts to state a claim for relief that is "plausible on its face" and actionable as a matter of law. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Reading the complaint "as a whole," the Court must conduct a two-step, context-specific inquiry. García-Catalán, 734 F.3d at 103. First, the Court must perform a close reading of the complaint to distinguish factual allegations from conclusory legal statements. Id. Factual allegations must be accepted as true, while legal conclusions are not entitled to credit. Id. A court may not disregard properly pleaded factual allegations even if actual proof of those facts is improbable. Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011). Second, the Court must determine whether the factual allegations present a "reasonable inference that the defendant is liable for the misconduct alleged." Haley v. City of Bos., 657 F.3d 39, 46 (1st Cir. 2011) (citation omitted). Dismissal is appropriate when the complaint fails to allege a "plausible entitlement to relief." Rodriguez-Ortiz v. Margo Caribe, Inc., 490 F.3d 92, 95 (1st Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 559, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

Under Fed. R. Civ. P 12(f), the Court can strike redundant, immaterial, impertinent, or scandalous matter from the pleadings. Manning v. Bos. Med. Ctr. Corp., 725 F.3d 34, 42 (1st Cir. 2013) (citations omitted). If it is "obvious from the pleadings that the proceeding cannot possibly move forward on a classwide basis," the Court can use its authority under 12(f) to strike the complaint's class allegations. Id. at 59. However, the Court however should exercise caution when doing so and "should typically wait until development of a factual record." Id.

III. DISCUSSION

1. Deceptive Advertising of New Balance's "Made in USA" Shoes

A. New Balance's...