Antitrust Law Daily Wrap Up, ADVERTISING—W.D. Wash.: False labeling claims based on product content and country of origin maintainable as separate actions, (Sep 4, 2013)

By Edward L. Puzzo, J.D.

False advertising claims based on allegations of false labeling of product fiber content could be maintained as a separate action from allegations of false labeling of country of origin, the federal district court in Seattle has ruled (Cascade Yarns, Inc. v. Knitting Fever, Inc., September 3, 2013, Martinez, R.).

Cascade Yarns alleged that Knitting Fever and related defendants (KFI) had engaged in false advertising under the Lanham Act. It was alleged that KFI distributed the yarns of Mondial, an Italian company, and Katia, a Spanish company; that Mondial and Katia began sourcing their products from Turkey and China; and that Mondial yarns labeled “Made in Italy” and other Mondial and Katia yarns with no country of origin were sold in the United States.

KFI first moved to dismiss Cascade’s claims on the grounds that Cascade had failed to allege any false or misleading statement made by KFI concerning the country of origin of yarns sold, and had failed to allege that the specific yarns in question were sold by KFI. In response, the court found that, while Cascade will have to identify specific mislabeled yarns that were sold by KFI, the allegations were pled sufficiently to withstand the motion to dismiss at the pleading stage.

Claim-splitting. Concurrent with this case (Cascade II), the same parties were involved in separate litigation (Cascade I). KFI also sought to dismiss this action, Cascade II, for running afoul of the prohibition against claim-splitting, stating that since the parties in both actions were the same, and the claims for relief were the same, Cascade had no right to maintain two separate actions. The court denied KFI’s motion, finding that the causes of action in both cases, while both based in part on the Lanham Act, were different claims.

In Cascade I, the claims of false advertising and unfair competition were based on allegations of false labeling of the fiber content of the yarns. In this case, Cascade II, the claims of false advertising and unfair competition were based on false labeling as to country of origin. Thus no improper claim splitting had occurred, and the action could not be dismissed on that basis, the court ruled.

In a separate order issued on the same date in Cascade I, the court extended a deadline for the filing of a motion to consolidate the concurrent actions.

The case is No. C13-674RSM.

Attorneys: Robert J. Guite (Sheppard Mullin Richter & Hampton) for Cascade Yarns, Inc. Joshua R. Slavitt (Gordon & Rees LLP) for Knitting Fever, Inc.

Companies: Cascade Yarns, Inc.; Knitting Fever, Inc.

Cases: Advertising WashingtonNews