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Design Resources, Inc. v. Leather Indus. of America

United States Court of Appeals, Fourth Circuit

June 18, 2015

DESIGN RESOURCES, INC., Plaintiff - Appellant,
v.
LEATHER INDUSTRIES OF AMERICA; DR. NICHOLAS J. CORY; ASHLEY FURNITURE INDUSTRIES, INC.; TODD WANEK, Defendants - Appellees

Argued May 13, 2015.

Page 496

Appeal from the United States District Court for the Middle District of North Carolina, at Greensboro. (1:10-cv-00157-WO-LPA). William L. Osteen, Jr., Chief District Judge.

ARGUED:

John Raymond Neeleman, LANE POWELL, PC, Seattle, Washington, for Appellant.

William Andrew Copenhaver, WOMBLE CARLYLE SANDRIDGE & RICE, LLP, Winston-Salem, North Carolina; Richard Dominick Milone, Jr., KELLEY DRYE & WARREN LLP, Washington, D.C., for Appellees.

ON BRIEF:

Kristin Beneski, LANE POWELL, PC, Seattle, Washington, for Appellant.

Cameron Argetsinger, KELLEY DRYE & WARREN LLP, Washington, D.C., for Appellees Leather Industries of America and Dr. Nicholas J. Cory; Brent F. Powell, WOMBLE CARLYLE SANDRIDGE & RICE, LLP, Winston-Salem, North Carolina, for Appellees Ashley Furniture Industries, Inc. and Todd Wanek.

Before NIEMEYER, DUNCAN and THACKER, Circuit Judges. Judge Duncan wrote the opinion, in which Judge Niemeyer and Judge Thacker joined.

OPINION

Page 497

DUNCAN, Circuit Judge:

Plaintiff-Appellant Design Resources, Inc. (" DRI" ), appeals the district court's entry of summary judgment in favor of Defendants-Appellees Leather Industries of America (" LIA" ) and Ashley Furniture Industries, Inc. (" Ashley" ), on DRI's false advertising claim under the Lanham Act, 15 U.S.C. § 1125(a). DRI alleged that an advertisement placed in a trade magazine by Ashley (the " Ashley Ad" ), as well as two statements by Dr. Nicholas Cory, director of LIA's research laboratory, which ran in articles in the same publication, were false and misleading. The district court granted summary judgment to LIA and Ashley, concluding that DRI had not presented sufficient evidence to establish a Lanham Act claim. For the reasons that follow, we affirm.

I.

A.

Appellee Ashley is the fifth largest furniture manufacturer in the United States. J.A. 116. In addition to manufacturing furniture, Ashley operates and licenses retail locations that bear its name, and it sells its furniture to other retailers, such as Costco and Walmart. J.A. 986-88. Appellee LIA is a leather industry trade association, which owns the Leather Research Laboratory (the " Laboratory" ).[1] Dr. Nicholas Cory is a leather chemist and the director of the Laboratory. He and his lab provide labeling advice to companies who market leather and leather-look products, as well as testing services to determine such products' leather content for purposes of federally mandated disclosure to consumers.

Appellant DRI develops furniture coverings and sells its products to furniture manufacturers. In late 2006, DRI developed a " synthetic leather-look furniture covering product, which it initially called 'Veneto'" and later renamed as " NextLeather® ." Appellant's Br. at 8. NextLeather® is " composed of 61% polyurethane, 22% poly/cotton, and 17% leather."

Page 498

Id. " [I]t has a polyurethane face on a fabric core and is backed with a thin layer of leather fibers adhered (i.e., bonded) to its base or underside." Id. The use of leather fibers as backing, as opposed to " single-piece leather 'splits' . .., represented an improvement in the ability of a leather-look product to mimic real leather . . . because it made the material more pliable and allowed it to drape more fluidly over a furniture frame." Appellant's Br. at 8.

In December 2006 and January 2007, DRI requested labeling advice and composition testing of its NextLeather® product from Dr. Cory at LIA's laboratory. Dr. Cory advised that the product could " ABSOLUTELY NOT!" be characterized or marketed as leather. J.A. 261. He cited the Federal Trade Commission's Guides for Select Leather and Imitation Leather Products (" FTC Guides" ), which specify that products containing ground or shredded leather, rather than comprising " wholly the hide of an animal[,] should not be represented, directly or by implication, as being leather." J.A. 261 (quoting 16 C.F.R. § 24.2(f)[2]). Instead, Dr. Cory suggested, DRI could label NextLeather® as " [n]ot leather," " [r]econstituted leather," or " [b]onded leather." J.A. 261.

In early 2007, DRI began marketing NextLeather® as " bonded leather," disclosing the product's composition on a label in compliance with the FTC Guides. DRI viewed its product as innovative and believed that " NextLeather® was the first and only such product marketed as 'bonded leather.'" J.A. 1289-90. In preparation for the Spring High Point Market in North Carolina--an important, annual furniture industry event--DRI sold samples of NextLeather® to 25 leading furniture manufacturers. Those manufacturers would then debut furniture products made with NextLeather® at the Spring High Point Market, from March 26 to April 1, 2007.

In the weeks leading up to and following the Spring High Point Market, Ashley placed a series of full-page ads in Furniture Today, a widely read trade magazine. According to DRI, one of the ads--which ran in the March 12, March 31, and April 30, 2007 issues--contained false statements about DRI and NextLeather® . In relevant part, the text of the ad read as follows: " Is It REALLY LEATHER? . . . Some upholstery suppliers are using leather scraps that are mis-represented as leather . . . . Know What You Are Buying[.] REMEMBER . . . The Overseas Manufacturer Has NO Liability In The U.S.A. You Do!" J.A. 274, 281, 283 (third ellipsis in original).

On July 2, 2007, Furniture Today published an article written by Joan Gunin and entitled, " Chemist fears confusion over imitators may hurt category." J.A. 86. This article (the " Gunin Article" ) quoted Dr. Cory as saying the following: " To call [leather alternatives such as bonded leather] 'leather' is outright deception, outright fraud. . . . It's not leather. . . . It's a synthetic that has leather fibers glued to the underside." J.A. 86 (second ellipsis in original).

A week later, on July 9, 2007, Furniture Today published an article written by Susan Andrews and entitled, " For consumers' sake, let's not call it 'bonded leather.'" J.A. 108. This article (the " Andrews Article" ) referred to " [n]ew composite fabrics now called 'bonded leather,'" which " have a ...


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