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In re Sears

December 4, 2007

IN RE SEARS, ROEBUCK & CO. TOOLS MARKETING AND SALES PRACTICES LITIGATION
CHARLES CHATHAM ET AL., INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
SEARS, ROEBUCK & CO., DEFENDANT.



The opinion of the court was delivered by: John F. Grady, United States District Judge

MDL-1703

MEMORANDUM OPINION

Before the court is plaintiffs' motion for class certification. For the reasons explained below, the motion is denied.

BACKGROUND

In this putative class action, plaintiffs, who are citizens of several different states, claim that defendant Sears, Roebuck & Company ("Sears") deceptively advertised its proprietary line of "Craftsman" tools as manufactured in the United States when in fact many of the tools are foreign-made or contain significant foreign parts.

Plaintiffs' current complaint is titled "Third Amended Consolidated Class Action Complaint" ("Third Amended Complaint"). After a series of motions to dismiss the instant complaint and previous complaints or portions thereof, the remaining plaintiffs are Charles Chatham, Gloria Layton, Heather Pistorius, Stephen Jolley, Curtis Oates, William Hurst, Kathryn DeSautell, Nancy Freid, and David Freid.*fn1 These plaintiffs' remaining claims are for statutory consumer fraud (Count III), unjust enrichment (Count IV), and "equitable relief" (Count VI).

In brief, plaintiffs' allegations are as follows. Defendant Sears has sold a line of tools under its proprietary "Craftsman" brand for over seventy years. Craftsman tools, which generate approximately $4 billion in annual sales, are nationally marketed, and Sears advertises and promotes the brand as being made in the United States. Sears also advertises Craftsman tools as being of higher quality because they are made in America by "American workers." (Third Am. Compl. ¶ 2.)

Sears has made the representation that Craftsman tools are made in the United States through various media: Sears's catalogs, Sears's Web site, advertising in periodicals and newspapers, on display racks and signs for the tools, and in television shows and commercials featuring actor John Ratzenberger, home improvement expert Bob Vila, and race car driver A.J. Foyt. Plaintiffs also allege on information and belief that Sears trains its employees to make verbal representations to customers that Craftsman tools are made in the United States.

Plaintiffs allege that Sears's "Made in USA" claim is deceptive because many, if not most, Craftsman tools are foreign-made or contain significant foreign components. The Third Amended Complaint cites several examples of tools, such as axes and hoes, that were marked "Made in USA" when in fact substantial parts of those tools were made abroad. Plaintiffs contend that Sears has violated Federal Trade Commission ("FTC") guidelines, which provide that "manufacturers and marketers should not indicate, either expressly or implicitly, that a whole product line is of U.S. origin when only some products in the product line are made in the U.S. according to the 'all or virtually all' standard." (Id. ¶ 94 (citing publication on FTC Web site).) In plaintiffs' view, Sears has exploited consumers' patriotism and desire to buy domestically-produced goods and to support American workers and the American economy. The "Made in USA" claim has enabled Sears to sell Craftsman tools at inflated prices.

At some point, Sears decided to manufacture more Craftsman products overseas in order to save money and increase profit margins. In the year 2000, approximately 20 percent of Craftsman products were not made in the United States; by 2005, the number had increased to 70 percent.

During this time period, Sears's executives were aware that their customers believed that Craftsman products were made in the United States. Sears commissioned studies which found that consumers believed that "Made in the USA" was an attribute of Craftsman more so than any other brand of hand and power tools and from which Sears concluded that "Craftsman is well known to be a 'Made in USA' brand." (Id. ¶¶ 70-71.) Sears also commissioned studies on how the knowledge that Craftsman products were made overseas would affect customers. The findings were that 25 percent of Sears's customers would not buy the products at all "if it [became] known" that the products were made overseas; that an additional 49 percent of its customers "would pay between" 10 and 25 percent less "for products that they believed were not made in America"; and that 57 percent of its "do-it-yourself" customers and 72 percent of its "pro" customers would pay 20 to 50 percent more for a tool if it were made in the United States. At the same time, the Craftsman line of products had a profit margin of 31.3 percent. This margin was roughly twice that of other tool manufacturers whose products were not perceived by customers as being made in the United States.

Plaintiffs further allege:"Sears knew that if it became known that its Craftsman products were not made in the U.S.A. it would be forced to reduce its prices and profit margins on Craftsman to be in line with other manufacturers. Sears decided not to correct the misconception its customers had about the origin of its Craftsman products because such a disclosure would cost it money." (Id. ¶¶ 74-75.)

After lawsuits similar to the instant suit were filed around the country, Sears "acknowledged the wrongfulness of its conduct" by instructing its employees to mark out or tape over "Made in USA" labels on certain Craftsman tools in Sears stores. (Id. ¶ 4.) According to plaintiffs, however, this cover-up did not completely eliminate the false representations, and "millions of consumers had been, and continue to be, misled by the improper claims of country of origin." (Id.)

The Third Amended Complaint includes a paragraph for each plaintiff (or plaintiff-couple, in the Freids' case) containing individualized allegations. For example, plaintiff Chatham's allegations are as follows:

Plaintiff Charles Chatham is a citizen of the State of Alabama. Between 2003 and the present, at a Sears store in the Oxford Mall, in Oxford, Alabama, Plaintiff Chatham purchased a Craftsman edger, and Craftsman rakes, shovels, sledge hammers, and garden tools. Shortly before making his purchases, Plaintiff Chatham saw and relied on Sears advertising for the Craftsman line, which stated "Made in USA," and/or included depictions of the United States flag, on Craftsman posters in the Sears store in Oxford Mall, on Bob Vila television commercials which he viewed from his home, and on the packaging of the tools he purchased. At the time of his purchases, and as a result of seeing these posters, television commercials, and packaging, Plaintiff Chatham believed that each Craftsman tool he purchased was made in the United States, and that belief was the primary factor in his decision to purchase Craftsman over any other brand. As a result of Sears' concealment, as alleged below, Plaintiff Chatham was unaware his Craftsman tools were not made in the United States, until approximately the time this lawsuit was filed. On post-purchase inspection, he found an imprint on his Craftsman Edger, which indicates it was made in Canada. On information and belief, Plaintiff Chatham's above-referenced Craftsman tools were not made in the United States. Plaintiff Chatham further alleges that, but for Sears' material misrepresentations alleged herein, he would not have purchased Craftsman tools in the first instance, and/or not at the inflated and premium prices he paid for those tools. (Id. ¶ 5.)

Plaintiffs now move for class ...


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