This is a very common complaint with leather. You will find that no manufacturer will warranty the hides from color loss, primarily because they cannot determine the environment the chairs are in or how many hours a day they are used. Or, the maintenance you have done on the hides (if any).

I sold leather for 38 years in my store before retiring. This was always the # 1 complaint and I investigated hundreds of issues such as this over that time period. 99% of the time the leather was not defective, the owners simply were not taking care of it, used the wrong cleaning and considitioning products, or abraded the color coat away due to high friction.

Most leather is topcoated with pigment (Painted). Once in a great while, a hide is defective, but that is so rare I ran across it exactly twice in all those years. Next upper leather tier hides are dyed (aniline) so the color coat will never wear away, but anilines are subject to sun fade if left in sunny rooms.

Leather can be re-sprayed to recoat the painted topcoat on your chairs. If you go that route, be sure to clean and condition the hides regularly to help prevent future color loss on finished leathers.

Your problem seems to be the top layer of the leather deteriorating and falling away from the rest of the material. The material is not fading from sun. It's falling apart. I would sue NFM in Small Claims court for the full amount. Before doing that, I'd ask my credit card company to dispute the charge. They haven't honored the extended warranty they accepted payment for. Good luck.