CASCADE YARNS, INC. v. KNITTING FEVER, INC. et al
Filing
987
ORDER ON MOTIONS; denying dft's 976 MOTION for Relief from Deadline to Sever Country of Origin Counterclaims filed by Knitting Fever Inc, KFI, Inc., granting pltf's 963 MOTION to Consolidate Cases filed by C ascade Yarns Inc, denying as moot pltf's 967 MOTION for Relief from Deadline to Conduct Discovery to Support Defense to "Country of Origin" Counterclaim and Continue Trial Date filed by Cascade Yarns Inc. Case C13-674RSM is consolidated with this case; all future pleadings and orders to be filed under C10-861RSM by Judge Ricardo S Martinez. (RS)
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
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CASCADE YARNS, INC., a Washington
Corporation
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NO. C10-861 RSM
Plaintiff,
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v.
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KNITTING FEVER, INC., KFI, INC.,
DESIGNER YARNS, LTD., SION ELALOUF,
JAY OPPERMAN, DEBBIE BLISS,
EMMEPIEFFE SRL, and DOES 1-50,
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ORDER ON MOTIONS
Defendants,
v.
ROBERT A. DUNBABIN, SR., JEAN A.
DUNBABIN, ROBERT A DUNBABIN, JR.,
and SHANNON M. DUNBABIN,
Third Party Defendants.
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This matter comes before the Court for consideration of Plaintiff Cascade Yarn, Inc.’s
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Motion to Consolidate Cases (Dkt. # 963) and Motion for Relief from Deadline to Conduct
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Discovery and Continue Trial Date (Dkt. # 967), as well as Motion for Relief from Deadline to
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Sever Country of Origin Counterclaims by Defendants Knitting Fever, Inc. and KFI, Inc.
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(collectively, “KFI”)( Dkt. # 976). Plaintiff moves the Court to consolidate this action (“Cascade
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I”) with another action filed by Plaintiff in 2013 against the KFI Defendants, Cascade Yarns, Inc.
ORDER ON MOTIONS - 1
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v. Knitting Fever, Inc., et. al., C13-674RSM (“Cascade II”). For the reasons set forth herein,
Plaintiff’s motion to consolidate is GRANTED, Defendants’ motion is DENIED, and this action
shall be consolidated with Cascade II. Plaintiff’s motion for relief from deadline is accordingly
DENIED as moot.
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Background
The background of this dispute is well known to the parties, and only those details
relevant to the instant motions shall be summarized here. Plaintiff Cascade Yarns, Inc.,
(“Cascade”) sells luxury yarns, some of them a blend of wool with other natural fibers, including
kid mohair, silk, and cashmere. The yarns, bearing the Cascade brand label, are sold through
retail yarn shops and boutiques around the United States. Defendant Knitting Fever, Inc. is one
of Cascade’s chief competitors. KFI is a distributor of a number of brands of luxury yarns,
including the popular Debbie Bliss line.
Cascade filed this action on May 24, 2010, followed by four successive amended
complaints, all alleging that certain yarns sold by KFI are mislabeled as to fiber content, and that
such mislabeling constitutes false advertising and unfair competition in violation of the Lanham
Act, 15 U.S.C. § 1125(a), as well as the Washington Consumer Protection Act (CPA), RCW
19.86. Dkt. # 2. KFI counterclaimed against Cascade and its principals as third party defendants
for defamation and false statements, and also claimed that certain Cascade yarns are mislabeled
as to fiber content or as to country of origin. Dkt. # 182. On October 29, 2012, after it
disqualified Plaintiff’s expert on fiber testing for lack of reliability (Dkt. # 865), the Court
granted Defendants’ motions for summary judgment and dismissed all claims asserted by
Cascade in its Fourth Amended Complaint. Dkt. # 886. The Court subsequently granted
Plaintiff’s several motions for summary judgment in part, dismissing KFI’s unfair competition
counterclaims based on alleged mislabeling as to fiber content (Dkt. # 891) and all counterclaims
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ORDER ON MOTIONS - 2
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concerning Cascade’s allegedly false statement excepting those based on KFI’s milk fiber yarns.
Dkt. # 962. As a consequence, the only claims remaining in this lawsuit are (1) KFI’s
counterclaims for unfair competition under the Lanham Act and Washington common law based
on country of origin labeling of certain Cascade yarns (“country of origin claims”), and (2) KFI’s
counterclaims, arising from Cascade’s “Milk Protein Fiber Hype” posting on its website, for
unfair competition under the Lanham Act and Washington common law, defamation, and
tortious interference with contract and business expectancies (“defamation claims”).
Shortly after the Court denied Cascade’s motion for reconsideration on the dismissal of
claims based on fiber content, Cascade filed a second action against KFI. In Cascade II, Cascade
asserts claims under the Lanham Act for unfair competition and false advertising, together with
state law claims for unfair competition in violation of the CPA and common law, all concerning
KFI’s labeling of certain of its own yarns as to their country of origin. Cascade II, Dkt. ## 1, 14.
Cascade was purportedly deterred from seeking leave to add its “newly discovered claims” to its
operative complaint in Cascade I by this Court’s admonition that further requests to amend
would be highly scrutinized and instead filed them in a separate action. Dkt. # 963, p. 2.
Cascade asserts that it was only in July 2012, at the close of discovery under the Court’s
scheduling order in Cascade I, that it “became aware of certain yarns sold by KFI that did not
identify a country of origin.” Dkt. # 963, p. 5. Many of these yarns were evidently brought to
market from late 2011 through 2013. Dkt. # 950, Exs. B-G. See also, Cascade II, Dkt. # 11, Ex.
A, ¶¶ 15-17. Cascade further asserts that it was only through Mr. Elalouf’s declaration of July
22, 2013 that it garnered affirmative evidence that several of the yarns were made in China
(Cascade II, Dkt. # 17, Ex. B), despite bearing labels associating them only with Italy when
purchased on the market by Cascade. Dkt. # 960, Exs. A-D.
Cascade now seeks to consolidate the two matters, which the Court has previously
characterized as asserting “mirror-image Lanham Act claims for false designation of country of
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ORDER ON MOTIONS - 3
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origin.” Dkt. # 934, p. 3. Cascade has also, out of “an abundance of caution,” filed a motion
requesting relief from the Court’s Scheduling Order of May 8, 2013, in order to conduct limited
discovery regarding its unclean hands defense to KFI’s counterclaims based on false or
misleading country of origin labeling. Dkt. # 967. Cascade acknowledges that this motion will be
moot should the Court grant its motion to consolidate. Id. at p. 2. Through its response brief, KFI
improperly sought to voluntarily sever its country of origin claims without prejudice to
reasserting them in Cascade II. After being admonished by Cascade’s counsel that the Federal
Rules of Civil Procedure bar it from withdrawing claims in response to a motion, KFI filed a new
motion seeking relief from deadline to sever its country of origin counterclaims. Dkt. # 976. This
Order will address all three motions.
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Analysis
Motion to Strike
As an initial matter, the Court denies as moot Plaintiff’s motion to strike Defendants’
citation to and discussion of Interscope Records v. Leadbetter, 2007 WL 1217705 (W.D. Wash.
2007). Cascade asserts that KFI’s reference to Interscope Records in its response to Plaintiff’s
Motion to Consolidate is misleading and unsupported by the cited case. Dkt. # 968, p. 5. KFI has
responded that it mistakenly cited to the wrong docket entry for the disputed case, has provided a
declaration supporting counsel’s inadvertence (Dkt. # 972), and has provided the Court with a
copy of the intended order as well as a corrected copy of its response to Cascade’s Motion to
Consolidate. Id. at Exs. 1, 3. The Court finds that Defendants’ corrected response brief, which
aptly cites to the quoted material, moots Plaintiff’s motion to strike.
Severance of Claims
Fed. R. Civ. P. 21 provides that “the court may at any time, on just terms, add or drop a
party. The court may also sever any claim against a party.” Rule 21 may be used to “sever claims
of parties, otherwise permissibly joined, for purposes of convenience, to avoid prejudice, or to
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ORDER ON MOTIONS - 4
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promote the expeditious resolution of the litigation.” Ferger v. C.H. Robinson Worldwide, Inc.,
2006 WL 2091015, *1 (W.D. Wash. 2006). The court exercises broad discretion in determining
whether to sever claims that are “discrete and separate.” Anticancer, Inc. v. Pfizer, Inc., 2012 WL
1019796, *1 (S.D. Cal. 2012)(quoting Rice v. Sunrise Express, Inc., 209 F.3d 1008, 1016 (7th
Cir. 2000)). See also, Coleman v. Quaker Oats Co., 232 F.3d 1271, 1297 (9th Cir. 2000)(noting
that a district court possesses “broad discretion…to make a decision granting severance.”).
Courts consider the following factors in determining whether to sever a claim under Rule 21:
“(1) whether the claims arise out of the same transaction or occurrence;
(2) whether the claims present some common questions of law or fact;
(3) whether settlement of the claims or judicial economy would be facilitated;
(4) whether prejudice would be avoided if severance were granted; and
(5) whether different witnesses and documentary proof are required for the
separate claims.”
Anticancer, Inc., 2012 WL 1019796, at *1(quoting SEC v. Leslie, 2010 WL 2991038, at *4 (N.D.
Cal. 2010)).
Defendants argue that all of the applicable factors favor severance. In particular, KFI
asserts that the claims it seeks to sever – those based on Cascade’s country of origin labeling of
its own yarns – are factually and legally distinct from the second set of claims, which concern
Cascade’s statements about KFI and its yarns. KFI also asserts that severance will further the
efficient administration of justice by allowing KFI to file its country of origin claims in Cascade
II and permitting the trial on its defamation counterclaims in the present case without further
delay. Plaintiff contends that Defendants’ late-stage attempt to sever its country of origin claims
is an attempt to use Rule 21 as a tool to gain a tactical benefit in its endeavor to prevent
consolidation of the two cases. Plaintiff also contends, and Defendants dispute, that its unclean
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ORDER ON MOTIONS - 5
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hands defense is probative with respect to both KFI’s defamation and country of origin
counterclaims and that the two sets of claims should properly remain joined.
The Court finds that KFI has not carried its burden to establish the necessity of severance.
The subject matter of KFI’s counterclaims is not so distinct that two separate trials, with two
separate juries, is warranted. Both sets of counterclaims involve identical parties, are brought
under identical statutory provisions, and are likely to involve many of the same witnesses. The
fact that KFI’s two counterclaims concern different sets of allegedly false or misleading
statements made by Cascade is insufficient to render them sufficiently discrete and separate so as
to warrant severance.
As the parties are well aware, this litigation has been unduly protracted and burdensome.
Insufficiently supported efforts to prolong the resolution of pending claims will not be
entertained. The Court finds that the interests of judicial economy and efficiency are served by
maintaining KFI’s dual Lanham Act counterclaims in a single action. While the Court refrains
from holding at this stage on the reach of Cascade’s unclean hands defense, it notes that this
issue can be readily resolved through a motion in limine, as already filed by both parties in
anticipation of trial. Dkt. ## 977, 978. KFI has failed to convince the Court that, were it to find
that Cascade’s unclean hands defense reaches no further than KFI’s country of origin
counterclaims, a jury instruction would not cure any potential jury confusion and prevent
prejudice to KFI’s case.
Consolidation
Federal Rule of Civil Procedure 42(a) permits consolidation of actions “involving a
common question of law or fact.” Courts have broad discretion to consolidate cases pending in
the same district. Investors Research Co. v. U. S. Dist. Court for Cent. Dist. Of Cal., 877 F.2d
777, 777 (9th Cir. 1989). In determining whether consolidation is warranted, courts look to the
existence of common questions of law or fact and weigh the interests of judicial economy against
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ORDER ON MOTIONS - 6
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any delay or prejudice that could result. See In re Adams Apple, Inc., 829 F.2d 1484, 1487 (9th
Cir. 1987); Monolithic Power Systems, Inc. v. O2 Micro Intern. Ltd, 2006 WL 2329466, *1
(N.D. Cal. 2006)(granting consolidation where common questions of law and fact exist and
judicial economy would be served).
Having denied Defendants’ motion to sever country of origin counterclaims, the Court
finds that consolidation is warranted. It is within the broad discretion of the Court to determine
whether consolidation of the two actions pending before it is appropriate. Here, the two actions
involve identical parties and mirror-image claims of unfair competition regarding KFI and
Cascade’s respective labeling practices as to country of origin of certain of their yarns. Common
questions of law unquestionably exist, as claims in both actions are brought under the Lanham
Act and identical provisions of Washington common law. As Plaintiff maintains, its intended
unclean hands defense to KFI’s counterclaims invokes questions of fact identical to those that are
relevant to its country of origin claims in Cascade II. Both cases will likely involve overlapping
fact and expert witnesses as to all claims. Far from prejudicing either party, consolidation avoids
the danger that two juries reach inconsistent results in two separate trials. See Dusky v. Bellasaire
Investments, 2007 WL 4403985 (C.D. Cal. 2007)(“The purpose of consolidation is to enhance
court efficiency and avoid the danger of inconsistent adjudications.”). Judicial economy is
undoubtedly advanced by consolidating these related actions into a single trial and moving them
both toward resolution of a long-protracted dispute. See, e.g., E.E.O.C. v. HBE Corp., 135 F.3d
543, 551 (8th Cir. 1998)(holding that it was “appropriate to consolidate [] claims and avoid the
inefficiency of separate trials involving related parties, witnesses, and evidence.”); Sanchez v.
Diaz, 2012 WL 3308954, *2-3 (E.D. Wash. 2012).
KFI’s argument that consolidation is inappropriate as it will result in unreasonable delay
is unavailing. KFI claims that the difference in the maturity of the actions militates against
consolidation, relying for support on Interscope Records, 05-cv-1149, at 3. However, KFI
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ORDER ON MOTIONS - 7
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overlooks critical differences between the present actions and those for which the Interscope
court denied consolidation. While the present actions involve identical parties, Interscope
concerned actions with two different defendants, one of whom had not yet answered plaintiff’s
complaint. Defendant in Cascade II has not only answered the complaint but also filed a motion
to dismiss, which has been denied by the Court. See Cascade II, Dkt. # 25. The Interscope court
was also swayed by the fact that, as the parties in the more mature action had not demanded jury
trial, consolidation would not appreciably conserve judicial resources should the defendant in the
second action make a jury demand. See Interscope Records, C05-1149, at 4. By contrast, jury
demand has been made in both Cascade I and Cascade II. Contrary to KFI’s assertions, review
of the factors considered by the Interscope court in fact militates in favor of consolidation here.
Moreover, consolidation of the instant actions will cause only a brief delay. Trial in Cascade I
has already been rescheduled due to a conflict in the Court’s trial calendar and discovery for
Cascade’s country of origin claims will be limited to a brief period so as to maintain expeditious
resolution of all claims.
Relief from Deadline to Conduct Discovery
As the Court has decided that consolidation is warranted, a new scheduling order for the
consolidated action will be issued permitting a brief discovery period related to Cascade’s
country of origin claims asserted in Cascade II. The reopening of discovery for the consolidate
action thereby moots Cascade’s motion for relief from deadline to conduct discovery to support
its unclean hands defense in Cascade I.
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Conclusion
For the foregoing reasons, the Court DENIES Plaintiff’s motion to strike (Dkt. # 968),
DENIES Defendant’s motion to sever (Dkt. # 976), and GRANTS Plaintiff’s motion to
consolidate (Dkt. # 963). Plaintiff’s motion for relief from deadline to conduct discovery (Dkt. #
967) is DENIED as moot. The instant action is hereby CONSOLIDATED and MERGED with
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ORDER ON MOTIONS - 8
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Cascade Yarns, Inc. v. Knitting Fever, Inc., et. al., C13-674RSM. All future pleadings and orders
regarding these cases will be filed under Cascade Yarns, Inc. v. Knitting Fever, Inc., et. al., C10861RSM. The Court will set a new trial date and related dates for the consolidated case to allow
for a period of expedited discovery regarding Plaintiff’s country of origin claims against KFI.
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Dated this 13th day of November 2013.
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RICARDO S. MARTINEZ
UNITED STATES DISTRICT JUDGE
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ORDER ON MOTIONS - 9
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