Antitrust Law Daily Wrap Up, ADVERTISING—4th Cir.: Lanham Act claims against furniture maker, trade association properly scrapped, (Jun 19, 2015)

By Greg Hammond, J.D.

Lanham Act false advertising claims brought by a furniture covering developer against furniture maker Ashley Furniture Industries and a leather industry trade association were correctly tossed, the U.S. Court of Appeals in Richmond decided. The defendants’ statements concerning the other parties’ use of the terms “leather” and “bonded leather” in marketing materials were neither false nor misleading statements of fact (Design Resources, Inc. v. Leather Industries of America, June 18, 2015, Duncan, A.).

Design Resources, Inc. (DRI) filed suit against Leather Industries of America and Ashley Furniture Industries, alleging that the two companies ran ads or made statements falsely stating that DRI’s new bonded leather product—NextLeather®—was marketed as “bonded leather” in violation of federal law. Specifically, Ashely Furniture ran an ad stating that “some upholstery suppliers are using leather scraps that are mis-represented as leather.” In addition, two statements were published in Furniture Today magazine that DRI complained of, including: (1) “To call it ‘leather’ is outright deception, outright fraud,” and “it’s not real leather…it’s a synthetic that has leather fibers glued to the underside” (Gunin article statements); and (2) “Calling these products bonded leather ‘is deceptive because it does not represent its true nature. It’s a vinyl, or a polyurethane laminate or a composite, but it’s not leather. If you tar and feather someone, does that make them a chicken?” (Andrews article statement).

The federal district court in Greensboro, North Carolina granted Ashely Furniture’s and Leather Industries’ motions for summary judgment, disposing of DRI’s Lanham Act false advertising claims. DRI appealed.

Ashley Furniture ad. The court first agreed that DRI failed to substantiate a claim that the Ashley Furniture ad was either literally false or impliedly false. In support of its literal falsity argument, DRI asserted that, even though the ad refers only to products marketed as leather, it unmistakably refers to products not marketed as leather, but as bonded leather or NextLeather. However, one has to be willing to accept that the ad means the opposite of what it says, according to the court, which is an insupportable interpretation because a false advertising claim cannot rely on the consumer to draw inferences that an ad only hints at or merely suggests.

DRI also contended that the Ashley ad was false by implication because it misled consumers about its NextLeather product. In support of its claim, DRI pointed to a survey conducted by Ashley’s expert witness and argued that the survey demonstrated that consumers understood the ad to be about bonded leather, which was synonymous with NextLeather. However, DRI failed to make the required showing that the Ashley ad confused consumers about NextLeather. Because DRI’s claim depended on consumer confusion about NextLeather, and the survey demonstrated no confusion about DRI or its product, DRI failed to substantiate a theory of implied falsity in the Ashley Ad.

Gunin article. The appellate court found that DRI had failed to provide sufficient support for a false advertising claim with regard to the Gunin article. Specifically, the court agreed that the statement in the Gunin article cannot qualify as false or misleading because it is true, noting that nothing on the face of the statement suggested that the use of the term “bonded leather”—by DRI or anyone else—is misleading, and DRI acknowledged that its NextLeather product is not leather as that term is understood in the furniture upholstery industry.

Andrews article. Lastly, the court agreed that DRI failed to provide sufficient evidence to demonstrate that the statement in the Andrews article was a false or misleading representation of fact. It found that a prediction about a term’s power to deceive expresses only an opinion about the term’s likely effect on consumers; it is not a representation of fact—false or otherwise—and is thus not actionable under the Lanham Act.

The case number is 14-1990.

Attorneys: Kristin Beneski (Lane Powell PC) for Design Resources, Inc. Cameron Reynolds Argetsinger, II (Kelley, Drye & Warren, LLP) for Leather Industries of America. William Andrew Copenhaver (Womble Carlyle Sandridge & Rice, PLLC) for Ashley Furniture Industries, Inc.

Companies: Design Resources, Inc.; Leather Industries of America; Ashley Furniture Industries, Inc.

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