By Jonathan Stempel
NEW YORK (Reuters) - A federal judge said Walmart (NYSE:WMT) Inc, Target Corp (NYSE:TGT) and Bed Bath & Beyond Inc (NASDAQ:BBBY) 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.
Monday's decision by U.S. District Judge Vincent Briccetti in White Plains, New York, addressed claims that consumers nationwide overpaid for mislabeled cotton produced by an Indian textile company, Welspun India Ltd.
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.
A lawyer for Welspun and Bed Bath & Beyond declined to comment. Walmart, Target and their respective lawyers did not immediately respond to requests for comment. The consumers' lawyers did not immediately respond to similar requests.
According to the complaint, the retailers sold Welspun's "Egyptian" cotton well into 2016 even though Target and Bed Bath & Beyond had known for several months, and Walmart had known as early as 2008, that the cotton was mislabeled.
The cotton was sold under the Fieldcrest, Royal Velvet, Better Homes and Gardens, Canopy, Crowning Touch and Perfect Touch brands, court papers show.
Target severed its ties to Welspun in August 2016, and Walmart and Bed Bath & Beyond stopped selling the linens in question later that year.
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.
The case is In re Welspun Litigation, U.S. District Court, Southern (NYSE:SO) District of New York, No. 16-06792.