Antitrust Law Daily Wrap Up, ADVERTISING NEWS: Retailer seeks High Court review in yarn mislabeling, RICO suit, (Feb 11, 2016)

By Greg Hammond, J.D.

Yarn retailer The Knit With is asking the U.S Supreme Court to review a decision entered by the U.S. Court of Appeals in Philadelphia, affirming that Knit With failed to sufficiently allege false advertising and racketeering claims to pursue an action against a group of yarn designers and a distributor for allegedly participating in a conspiracy to sell mislabeled yarn (The Knit With v. Knitting Fever, Inc., Dkt. 15-1008).

In September 2008, specialty yarn store Knit With filed suit against Knitting Fever, Inc., a distributor of hand knitting yarn, and several individual yarn designers and suppliers, asserting Lanham Act false advertising claims and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). Knit With alleged that Knitting Fever mislabeled cashmere yarn supplied to Knit With by misrepresenting the amount of cashmere contained in the yarn. The appellate court affirmed the lower court’s order, granting summary judgment in favor of the defendants.

Knit With argues that the Supreme Court should grant the petition for review in order to clarify the scope of a Lanham Act false advertising action after the Court’s decision in Lexmark, which instructs that §1125(a) confers a cause of action upon commercial entities with a commercial interest in products falsely advertised by another that results in harm to the complainant’s reputation or sales. With regard to the RICO claims, Knit With argues that the Court should grant the petition to re-affirm the now-threatened Sedima standard—that injury caused by a racketeering act conducted through a pattern of racketeering activity in the conduct of an enterprise confers standing under 18 U.S.C. §1964(c).

The questions presented are: (1) Does the scope of a false advertising action categorically bar a retailer’s redress of marketplace injuries resulting from its wholesaler mis-labeling products supplied for re-sale to consumers when a federal statute mandates product labeling accurately disclose the products’ composition? and (2) Does the holding in Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496-97 (1985) (A plaintiff only has 1964(c) standing if, and can recover to the extent that, he has been injured in his business or property by the conduct constituting the violation) no longer reflect this Court’s determination whether a plaintiff has a cause of action (standing) under 18 U.S.C. 1964(c) or may courts determine a claim made to the measure of damages provided by 1964(c) negates a cause of action to redress injury to business of property by reason of another’s conduct of an enterprise through a pattern of racketeering activity?

Companies: The Knit With; Knitting Fever, Inc.

News: Advertising RICO