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Cascade Yarns, Inc. v. Knitting Fever, Inc.

United States District Court, Ninth Circuit

November 13, 2013

CASCADE YARNS, INC., a Washington Corporation Plaintiff,
v.
KNITTING FEVER, INC., KFI, INC., DESIGNER YARNS, LTD., SION ELALOUF, JAY OPPERMAN, DEBBIE BLISS, EMMEPIEFFE SRL, and DOES 1-50, Defendants,
v.
ROBERT A. DUNBABIN, SR., JEAN A. DUNBABIN, ROBERT A DUNBABIN, JR., and SHANNON M. DUNBABIN, Third Party Defendants.

ORDER ON MOTIONS

RICARDO S. MARTINEZ, District Judge.

This matter comes before the Court for consideration of Plaintiff Cascade Yarn, Inc.'s Motion to Consolidate Cases (Dkt. # 963) and Motion for Relief from Deadline to Conduct Discovery and Continue Trial Date (Dkt. # 967), as well as Motion for Relief from Deadline to Sever Country of Origin Counterclaims by Defendants Knitting Fever, Inc. and KFI, Inc. (collectively, "KFI")(Dkt. # 976). Plaintiff moves the Court to consolidate this action (" Cascade I") with another action filed by Plaintiff in - against the KFI Defendants, Cascade Yarns, Inc. 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.

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 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 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.

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 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 ...

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