Design Resources Sues for Defamation

March 3, 2010  by in UnCategorized   

By Home Furnishings Business in Legal on March 4, 2010

Design Resources Inc. has filed a lawsuit for damages against Ashley Furniture Industries Inc.; Todd Wanek, president and CEO of Ashley; Leather Industries of America; and Dr. Nicholas Cory, a leather chemist and director of the non-profit Leather Industry of America's Leather Research Laboratory at the University of Cincinnati.

The lawsuit, filed in U.S. District Court for the Middle District of North Carolina in Greensboro, N.C., charges the furniture maker and retailer, jointly with the LIA and Cory, with false advertising, defamation, product disparagement and public condemnation of the labeling, advertising and sale of DRI's NextLeather products as purposefully unfair and deceptive under the Federal Lanham Act.

DRI said it introduced its new niche of "bonded leather" upholstery, NextLeather in January 2007. The company hired the foremost leather research laboratory in the U.S to conduct a series of tests to accurately provide the consumer naming and labeling as required by the Federal Trade Commission's Guidelines for Select Leather and Imitation Leather Products; and that Cory advised DRI on Dec. 11, 2006, that its NextLeather product needed to be labeled as "bonded leather," which was confirmed by analysis testing in February 2007.

The lawsuit referred to an Ashley ad published in March 2007 headlined "Caveat Emptor Buyer Beware €¦ Is It REALLY LEATHER?" that warned buyers to beware of upholstery suppliers "using leather scraps that are misrepresented as leather"; and featuring photos of Ron Wanek and Todd Wanek next to a small reproduction of a letter implying that a cease and desist order had been issued by a federal agency.

The letter featured in the ad is dated July 26, 2006--prior to the introduction of NextLeather, nearly one year before the product was even available to consumers, and actually addresses an unrelated mattress fabric safety issue.

"When Ashley ran the ad, DRI was the only supplier marketing bonded leather," said Alan Naness, president of DRI. "The ad clearly attacked our NextLeather bonded leather and the statements regarding misrepresentation and poor quality were simply false. In effect, Ashley€™s ad created doubt in the minds of buyers and caused us many problems in the market."

In 2007, Cory was quoted in an article calling bonded leather products "outright deception, outright fraud."

DRI said the LIA used confidential DRI photography and testing information in its written submission in support of requested revisions to the FTC Guides, arguing that products like NextLeather should not be labeled, advertised or sold as "bonded leather.  On May 30, 2008, by a unanimous 4-0 vote, the FTC agreed with DRI that the existing guides "effectively prevents deception which could be caused by the term 'bonded leather' and that the truthful content information gives consumers the facts they need to make an informed decision regarding bonded leather and similar materials." The report also cited a lack of consumer complaints.

DRI noted that, in January 2008, Ashley introduced UltraHide, its own "bonded leather" product.

"From the start, we recognized our public obligation to accurately label and advertise our NextLeather products," Naness said. "We took the step to verify our labeling to be absolutely certain that we were in full compliance with the law. We hired the best in the field to conduct a series of tests necessary to ensure accurate labeling and clearly disclosed consumer information. We sought out additional testing to determine our product€™s strength, abrasion and sunlight resistance to ensure that our bonded leather products performed satisfactorily and to determine the compositional breakdown of the product for labeling purposes.

"Ashley's false advertising deprived DRI of a unique opportunity to properly position our novel product and create a new, emerging market niche in the furniture industry," he continued.