Antitrust Law Daily Wrap Up, ADVERTISING—W.D. Wash.: Yarn company’s false ad, unfair competition claims scrapped, (Apr 20, 2015)

By Greg Hammond, J.D.

A luxury yarn company was mostly unable to prove that a competitor mislabeled the country of origin on various yarn products, in support of claims the competitor violated the Lanham Act and Washington’s Consumer Protection Act (WCPA). The federal district court in Seattle largely granted the competitor’s motion for summary judgment for failure to demonstrate actual injury or that certain yarns were falsely or misleadingly labeled, dismissing claims concerning all but one yarn (Cascade Yarns, Inc. v. Knitting Fever, Inc., April 15, 2015, Martinez, R.).

Background. Cascade Yarns, Inc. and Knitting Fever, Inc. compete in the market for the sale of luxury yarns. On May 24, 2010, Cascade filed suit against Knitting Fever, alleging that the company engaged in false advertising and unfair competition in violation of the Lanham Act and the WCPA by mislabeling the fiber content of certain yarns. Knitting Fever filed counterclaims asserting that Cascade mislabeled fiber content or country of origin of various yarns. The court later dismissed all of Cascade’s claims and many of Knitting Fever’s counterclaims, leaving only Knitting Fever’s Lanham Act and WCPA unfair competition claims based on country of origin labeling of certain Cascade yarns and its Lanham Act and Washington common law claims arising from a posting on Cascade’s website.

Cascade subsequently filed a second action against Knitting Fever, asserting Lanham Act and state law unfair competition and false advertising claims concerning Knitting Fever’s alleged mislabeling of certain yarns as to their country of origin. The claims were consolidated in November 2013. Knitting Fever moved for summary judgment on Cascade’s new claims. Conversely, Cascade moved, in part, for judgment on the pleadings and summary judgment.

Lanham Act claims. Knitting Fever chiefly argued that Cascade’s false advertising claims failed because Cascade was unable to provide any evidence of injury in order to recover monetary damages. The court agreed, finding that Cascade failed to disclose any damages expert or computation of damages, failed to adduce any evidence of damages through discovery, and raised no suggestion that discovery would somehow enable it to make such a showing. Knitting Fever’s motion for summary judgment was therefore granted with regard to Cascade’s Lanham Act claims for monetary damages.

The court next considered Cascade’s Lanham Act claims for injunctive relief concerning the country of origin on five yarns, including Katia, Mondial Giava, Papillon, Pizzo Lux, and Mondial Vello D’Oro yarns. The claims concerning Katia yarns were dismissed because Cascade’s allegations that they were mislabeled were based on nothing more than speculative assertions, the court concluded. Further, injunctive relief was not warranted with regard to the Mondial Giava, Papillon, and Pizzo Lux yarns. The court found that Knitting Fever did not willfully violate the Lanham Act because it voluntarily introduced evidence of mislabeling occurring during a short period of time and that the products have borne proper labels since. The motion for summary judgment on the Lanham Act claim for injunctive relief concerning the sole yarn remaining, Mondial Vello-Doro, was denied, however, because there was a genuine issue of material fact as to its continued mislabeling.

WCPA claims. Because the WCPA claims for common law unfair competition were “substantially congruous” with its Lanham Act claims, the court granted summary judgment in favor of Knitting Fever as to Cascade’s claims for monetary damages under Washington law and denied injunctive relief for Cascade’s state law claims based on the alleged mislabeling of the Katia, Mondial Giava, Papillon, and Pizzo Lux yarns. Summary judgment was denied as to Cascade’s state law claims for injunctive relief based on the alleged mislabeling of the Mondial Vello D’Oro yarns. Cascade’s motions for summary judgment and judgment on the pleadings were consequently denied.

The case number is C- RSM..

Attorneys: Robert J. Guite (Sheppard Mullin Richter & Hampton) for Cascade Yarns Inc. Jacob Cohn (Gordon & Rees) for Knitting Fever Inc., Designer Yarns Ltd., and KFI, Inc.

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

Cases: Advertising ConsumerProtection StateUnfairTradePractices WashingtonNews