Camel Hair and Cashmere Institute of America, Inc. v. Associated Dry Goods Corp.

• Decision Date: 02 September 1986
• Docket Number: No. 86-1054,86-1054
• Citation: 799 F.2d 6
• Parties: CAMEL HAIR AND CASHMERE INSTITUTE OF AMERICA, INC. Plaintiff, Appellant, v. ASSOCIATED DRY GOODS CORPORATION, d/b/a Lord & Taylor, et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 6

799 F.2d 6

231 U.S.P.Q. 39

CAMEL HAIR AND CASHMERE INSTITUTE OF AMERICA, INC. Plaintiff, Appellant, v. ASSOCIATED DRY GOODS CORPORATION, d/b/a Lord & Taylor, et

al., Defendants, Appellees.

No. 86-1054.

United States Court of Appeals, First Circuit.

Sept. 2, 1986.

Robert J. Kaler with whom Gadsby & Hannah was on brief for plaintiff, appellant.

Stephen M. Sheehy with whom Kaye, Fialkow, Richmond & Rothstein was on brief for defendants, appellees Associated Dry Goods Corp. d/b/a Lord & Taylor; Lord & Taylor, Inc.; Mr. Coats, Inc. and Mr. Coats for Her, Inc.

Andrew J. McElaney, Jr. with whom Lauren G. Gross and Nutter, McClennen & Fish were on brief for appellee Federated Dept. Stores, Inc. d/b/a William Filene's Sons Co.

Before CAMPBELL, Chief Judge, and BOWNES and TORRUELLA, Circuit Judges.

BOWNES, Circuit Judge.

Plaintiff, Camel Hair and Cashmere Institute of America, Inc., appeals from the denial of its motion for preliminary injunctive relief seeking to enjoin the defendants, Associated Dry Goods Corporation d/b/a Lord & Taylor (Associated), Lord & Taylor, Inc., Federated Department Stores, Inc. d/b/a Filenes (Federated), Mr. Coats, Inc., and Mr. Coats For Her, Inc., from selling or offering for sale a line of Mr. Coats For Her cashmere blend coats labelled 50 percent cashmere. The underlying action alleges trafficking in falsely described goods in violation of section 43(a) of the Lanham Trademark Act, 15 U.S.C. Sec. 1125(a) (1982), common law unfair competition and violations of the Massachusetts Unfair and Deceptive Trade Practices Act, Mass.Gen.Laws Ann. ch. 93A (1983). Plaintiff's complaint seeks compensatory and punitive damages and permanent injunctive relief. Two main issues arise on appeal: (1) plaintiff's standing to litigate this suit, and (2) the showing of injury required to establish a right to preliminary injunctive relief under the Lanham Act.

Background

Plaintiff is a nonprofit corporation. It was organized in March 1984 at a time when the camel hair and cashmere trade was in ferment because of the proliferation of mislabelled counterfeit luxury fibres. The corporation's aim was to promote the use of camel hair and cashmere fibres and to safeguard the interests of the cashmere and camel hair industry by educating the public, retail dealers and garment makers about what was or was not a legitimate cashmere or camel hair product. Plaintiff has no employees of its own. It is headed by Karl Spilhaus, an attorney employed as president of the Northern Textile Association, who serves as plaintiff's executive director. Plaintiff has five full members: Forte Cashmere Corporation (Forte); Amicale Industries, Inc. (Amicale); Jacques deLoux (deLoux); Warren Corporation (Warren); Joseph Dawson Limited (Dawson), and one associate member, Merin Brothers Coat Company (Merin). Members' annual dues range from $5,000 to $15,000, associate member dues are $1,000 per annum. All the plaintiff's members either manufacture or market camel hair and cashmere, or garments containing those fibres. Amicale derives approximately 10 percent of its business, and Warren approximately 5 percent, from manufacturing cashmere blend outerwear fabric, the fabric from which cashmere blend coats are made. Dawson and deLoux manufacture cashmere sweaters, Dawson being one of the largest users of cashmere in the world. Forte is a spinner and dehairer of luxury fibres, including camel hair and cashmere, and Merin manufactures coats of 100 percent cashmere.

On November 16, 1984, the plaintiff bought a Mr. Coats For Her coat labelled 70 percent cashmere from a Filenes retail store and sent it to a research laboratory, Albany International Research Company (Albany), for chemical and microscopic analysis of its fibre content. The analysis indicated that the coat had less than a 10 percent cashmere content. On January 16, 1985, plaintiff bought a second Mr. Coats For Her cashmere blend coat, at a Lord & Taylor store. Though the coat was labelled 50 percent cashmere, it was found at Albany to contain only 12.4 percent cashmere. Plaintiff promptly notified the presidents of both Filenes and Lord & Taylor of the apparent mislabelling in Mr. Coats For Her cashmere blend coats and advised them that it would pursue legal remedies if the coats were not withdrawn from sale until properly labelled. Filenes referred the matter to Mr. Coats For Her in accordance with its usual practice of referring complaints of noncompliance with labelling laws to the vendor involved. Lord & Taylor also appear to have referred the matter to Mr. Coats For Her because the plaintiff did not receive a response from Lord & Taylor directly, but rather received a letter from Mr. Coats For Her's attorney on Lord & Taylor's behalf. The letter stated that Mr. Coats For Her were standing by their labels because tests it had requested on the coats from the University of Lowell Research Foundation (Lowell) indicated that the labels were substantially accurate.

Faced with this discrepancy between the Albany and Lowell test results, plaintiff convened a meeting between the experts from both institutions on February 27, 1985. According to the affidavit of Karl Spilhaus, Lowell's expert agreed at that meeting with the critique presented by Albany's expert of Lowell's test methods and results. Both experts examined together a sample of the fabric used in the coat plaintiff purchased in Filenes and, according to Spilhaus, Lowell's expert agreed to amend his report to reflect the fact that the sample was predominantly wool and not cashmere. Lowell, however, refused to acknowledge its expert's admissions and continued to stand by its original analytical methods and results.

The marketing of the Mr. Coats For Her cashmere blend coats continued. In the eight months following the meeting between the two experts plaintiff bought seven more Mr. Coats For Her cashmere blend coats from one or other of the defendants' stores and had each one tested at Albany. All the coats proved to have substantially less cashmere than was represented on their labels; one coat, bought from a Filenes store, marked 60 percent cashmere tested out as having only 33.5 percent cashmere, and the other six, all labelled 50 percent cashmere, tested out as having between 5 and 14 percent cashmere. On October 29, 1985, the plaintiff filed suit and an accompanying motion for a preliminary injunction. The court ordered the parties to file affidavits representing direct testimony and began hearings on the motion on November 22, 1985.

Proceedings Below

Up to the date the hearings commenced the defendants maintained that the 50 percent cashmere labels were accurate, relying on the Lowell reports. At the beginning of the hearings, however, plaintiff's counsel pointed out that a new affidavit had been submitted by defendants from Ray Robinson, a fibre analyst employed by the United States Testing Company, Textile Service Division, and that Robinson's affidavit stated that he had tested three sample coats and found them to contain 28, 28.5 and 29 percent cashmere respectively. Defendants then offered to stipulate that all coats then in the possession of Mr. Coats For Her, Inc., labelled Mr. Coats For Her and 50 percent cashmere, would not be sold until they had been relabelled to state a 25 percent cashmere content. With respect to the coats of this description in the possession of the other defendants, it was to be stipulated that they would be relabelled as quickly as possible to reflect a 25 percent cashmere content and that in no event would any such coats be available for sale in any of defendants' stores after Monday noon, November 25. Defendants' stated purpose in entering this stipulation was to avoid the adverse publicity that would follow if an injunction was issued against them. Plaintiff objected to the stipulation on the grounds that the coats had less than a 25 percent cashmere content. Plaintiff also argued that any stipulation should include an agreement not to sell any more of the coats while they were marked 50 percent cashmere, and that the defendants' decision to wait until after the weekend to remove the coats from sale for relabelling was evidence of bad faith. In light of plaintiff's opposition to the stipulation, the court determined to continue with the hearing. It was agreed, however, that the defendants would execute the stipulation even though it would not operate as a substitute for further proceedings.

After four days of hearings, the court concluded that the plaintiff's expert evidence was more credible than that of the defendants. It held that the plaintiff had shown a likelihood of success on the merits of its claim that the coats would be mislabelled even if relabelled as 25 percent cashmere. The court then instructed the parties to submit whatever evidence they had on the other prerequisites for preliminary injunctive relief.

On the fifth and final day of hearings counsel for Federated, who had taken over the representation of Federated from Mr. Coats For Her's counsel, informed the court that Filenes and Filenes Basement (a separate division of Federated) had ceased offering the coats at issue for sale, and that all their Mr. Coats For Her cashmere blend coats had been returned to the vendor. Federated submitted two affidavits from Filenes' Divisional Merchandise Manager, Barry Gilbert, confirming that the coats had been removed from the floor of Filenes on Monday, November 22, and from the floor of Filenes Basement on Tuesday, November 26. Irving Baker, president of Mr. Coats For Her, also testified that Filenes and Filenes Basement had returned the coats and had been reimbursed by Mr. Coats For Her for them. The court then asked the plaintiff to define its theory of injunctive relief against Federated, stating that it saw no justification for imposing the potential harm of an injunction on Federated if Federated had been marketing the coats in good faith. Plaintif...