Tuesday, September 10, 2013

yarn country of origin claims get a chance to unroll

Cascade Yarns, Inc. v. Knitting Fever, Inc., No. C13–674RSM, 2013 WL 4721812 (W.D. Wash. Sept. 3, 2013)

Cascade initially sued defendant KFI alleging that certain yarns it sold were mislabeled as to fiber content in violation of the Lanham Act and Washington state law.  KFI counterclaimed for defamation and false advertising of certain Cascade yarns as to fiber content or country of origin.  The fiber content claims were dismissed on motions for summary judgment, leaving KFI’s counterclaims for defamation and false labeling as to country of origin.  Cascade then separately sued KFI for state and federal false advertising, alleging country of origin mislabeling; these were the claims presently before the court.

The complaint alleged that KFI distributed yarns branded as Mondial and Katia. Mondial is an Italian company and Katia is based in Spain.  Before 2010, Mondial yarns supplied to KFI were labeled “Made in Italy.”  Katia yarns were labeled as made in Spain, but KFI allegedly knew that at least one was actually made in Italy.  Sometime after late 2010, Mondial began sourcing from Turkey and China and ceased listing a country of origin on many labels, while other Mondial yarns were labeled “Made in China.”  Katia also began importing yarn from Turkey and China and ceased to list a country of origin on many of the labels. Identifying a premium-priced yarn as “Made in China” would allegedly be unattractive to consumers.  The court found these allegations sufficient: “While Cascade will have to identify the specific yarns and provide proof in order to prove this allegation and prevail on the merits of its claims, it need not provide such specificity at the pleading stage.”

KFI argued that failing to identify a country of origin wasn’t false labeling.  It contended that the Wool Products Labeling Act requires that products be labeled “with the name of the country where such products were processed or manufactured.” The FTC explained that the phrase “made in” or “product of” isn’t required with the country of origin unless “needed to avoid confusion or deception.” Thus, KFI concluded, Katia labels displaying Katia’s address in Barcelona, Spain, properly indicated the country of origin. But that would only be so if the yarn were actually produced or manufactured in Spain. And the complaint alleged that some Katia yarns originated in China or Turkey, making a label listing only Spain potentially false.

KFI also argued that six of the seven accused Mondial yarns were properly labeled.  It attached copies of the labels to its motion, including three “Made in China” labels (apparently done via sticker).  Cascade offered its own copies of the labels of the same three yarns stating “Made in Italy.”  This extrinsic evidence was irrelevant to a motion to dismiss in the absence of authentication about chain of custody and time of sale or purchase.  Thus, the allegations survived a motion to dismiss.

KFI argued that the complaint violated rules against claim-splitting.  But the allegations of false advertising about yarn content in the earlier case were not based on the same set of facts as the allegations here, even though they were both Lanham Act false advertising claims. “The facts to be offered in proof are entirely different; there is no overlap whatsoever between a claim that a label misstates the fiber content of a yarn and a claim that the label misstates the country of origin.”

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