A federal judge said Walmart, Target and Bed Bath & Beyond must face a lawsuit claiming they sold linens that were falsely labeled "100% Egyptian Cotton" or "100% Long-Staple Egyptian cotton" despite being suspicious of their origin.
A decision on Monday by U.S. District Judge Vincent Briccetti in New York addressed claims that consumers nationwide overpaid for mislabeled cotton produced by an Indian textile company, Welspun India Ltd.
Target sold sheets that were supposed to be made from 500-thread count Egyptian cotton under the Fieldcrest label between August 2014 and July 2016.
The Minneapolis-based retailer in August 2016 cut off business with Welspun Global Brands, which at the time was one of the largest textile makers, and offered refunds on the sheets.
Egyptian cotton often commands a premium price because of its prestige, and because its long fibers yield a finer, lighter, softer and more durable fabric.
In a 39-page decision, Briccetti said consumers may pursue breach-of-warranty and negligent-misrepresentation claims against the retailers and a U.S. unit of Welspun, and fraud claims against the Welspun unit.
He dismissed fraud claims against the retailers because there was no "strong inference of fraudulent intent." New York and California consumers were allowed to sue the retailers under their respective states' consumer protection laws.
Target, Bed Bath & Beyond and a lawyer for Welspun declined to comment. Walmart did not respond to requests for comment. The consumers' lawyers did not immediately respond to similar requests.
The complaint alleges that Target and Bed Bath & Beyond knew about the faulty "Egyptian cotton" claims for several months before they stopped selling them. The lawsuit claims Walmart knew as early as 2008.
The cotton was sold under the Fieldcrest, Royal Velvet, Better Homes and Gardens, Canopy, Crowning Touch and Perfect Touch brands, court papers show.
Target cut ties in August 2016 after an internal investigation found that the material in the sheets did not meet the Egyptian cotton claims.
Target then pulled the products from the store shelves and Target.com, and said at the time that Welspun's deception was unethical and a clear violation of the company's code of conduct.
The retailer then began reaching out to Target customers to offer a full refund.
Walmart and Bed Bath & Beyond stopped selling the linens in question later in 2016.
The litigation combined several lawsuits. It was reassigned to Briccetti after the original judge, Richard Sullivan, was promoted to the federal appeals court in Manhattan.