1

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 12-3219

THE KNIT WITH, 

A Pennsylvania Partnership,

 Appellant

v.

KNITTING FEVER, INC.; DESIGNER YARNS, LTD, A Corporation of England;

FILATURA PETTINATA V.V.G. DISTEFANO VACCARI & C. (S.A.S.), A Company 

of Italy; SION ELALOUF; DIANE ELALOUF; JEFFREY J. DENECKE, JR.; JAY 

OPPERMAN; DEBBIE BLISS

 (D.C.# 2-08-cv-04221)

THE KNIT WITH,

 Appellant

v.

EISAKU NORO & CO., LTD.; KNITTING FEVER, INC.;

SION ELALOUF; DIANE ELALOUF; JAY OPPERMAN

 (D.C. # 2-08-cv-04775) 

Appeal from the United States District Court

for the Eastern District of Pennsylvania

(Civ. Nos. 2-08-cv-04221/2-08-cv-04775)

District Judge: Hon. Ronald L. Buckwalter

Submitted pursuant the Third Circuit LAR 34.1(a)

May 23, 2014

BEFORE: McKEE, Chief Judge, CHAGARES, Circuit Judge, 

and THOMPSON, District Judge*

 

* The Honorable Anne E. Thompson, Senior District Judge for the United States District 

Court for the District of New Jersey, sitting by designation.
2

(Opinion filed: September 2, 2015)

OPINION**

McKEE, Chief Judge.

The Knit With (“TKW”) appeals several orders the district court entered in 

TKW’s suit alleging various claims under state and federal law. For the reasons that 

follow, we will affirm the district court.

I.

Because we write only for the parties who are familiar with the very involved 

procedural history of this matter, we need not discuss it in detail here.1 Following 

numerous decisions and orders of the district court, the only claims remaining are 

counterclaims that Knitting Fever, Inc., (“KFI”) brought for defamation and tortious 

interference with existing and prospective contracts. Thereafter, the parties filed cross 

motions for summary judgment. Although KFI sought summary judgment on its 

defamation claim only, the district court also addressed KFI’s tortious interference claim. 

In a Memorandum and Opinion, dated August 8, 2012, the district court denied both 

parties’ motions. The Knit With v. Knitting Fever, Inc., 2012 WL 3235108 (E.D. Pa. 

Aug. 8, 2012). 

 

** This disposition is not an opinion of the full court and pursuant to I.O.P. 5.7 does not 

constitute binding precedent

1The facts of this case have been recited in several of the district court’s opinions. See 

The Knit With v. Knitting Fever, Inc., 2008 WL 5381349, at *1-6 (E.D. Pa. Dec. 18, 

2008); The Knit With v. Eisaku Noro, 2008 WL 5273582 ,at *1-3 (E.D. Pa. Dec. 19, 

2008); The Knit With v. Knitting Fever, Inc., 2011 WL 891871 at, *1-2 (E.D. Pa. Mar. 10, 

2011). 
3

As of August 8, 2012, KFI’s counterclaims against TKW were outstanding. 

Nonetheless, on August 9, 2012, TKW filed a Notice of Appeal seeking review of all of 

the district court’s orders dismissing its claims against the various defendants or granting 

summary judgment to the defendants on its various claims. Clearly, as of August 9, 

2012, the orders appealed from did not dismiss all claims as to all parties and were not 

certified under Rule 54(b). However, on November 29, 2012, the district court entered an 

order accepting the parties’ stipulated dismissal with prejudice of KFI’s counterclaims 

against TKW pursuant to Rule 41(a)(1)(A)(ii).2 Thus, this court does have jurisdiction 

over TKW’s appeal.

II. DISCUSSION

TKW makes a number of arguments in support of its appeal. Each is discussed 

separately below.

A. The district court erred in granting summary judgment

to all defendants on the warranty claims.3

 

2 We cannot help but notice that after the parties executed the stipulated withdrawal of 

KFI’s counterclaims, KFI’s counsel wrote to the district court informing it of the 

stipulated withdrawal and further informing the district court that it was requesting leave 

to file a motion pursuant to 28 U.S.C. § 1927, seeking to impose excessive costs, 

expenses and attorneys’ fees against TKW. In response, the district court wrote the 

following in a letter to KFI’s counsel: “Continuing the litigation of this case by filing yet 

another motion is a subject to which, I hope, you would give serious consideration before 

incurring even more fees in what many times can become a rather lengthy proceeding 

itself.” 

 The court’s apparent frustration with counsel is understandable.

3

“We exercise plenary review over the District Court’s decision to grant summary 

judgment and will use the same test applied below.” Santana Prods., Inc. v. Bobrick 

Washroom Equip., Inc., 401 F.3d 123, 131 (3d Cir. 2005) (citation omitted). Summary 

judgment is appropriate where “the movant shows that there is no genuine dispute as to 

any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 
4

The district court granted summary judgment to all of the defendants on TKW’s 

warranty claims under the applicable statute of limitations. The Knit With v. Knitting 

Fever, 2012 WL 2466616, at *2 (E.D. Pa. June 27, 2012).

Under Pennsylvania law, the statute of limitations for a breach of warranty is four 

years. 13 Pa. Cons. Stat. Ann. § 2725(a). TKW filed its first complaint on September 8, 

2008. Therefore, for its warranty action to be timely, TKW had to show it purchased the 

yarns at issue from KFI after September 2004. TKW contended that there was one yarn 

delivery in the summer of 2005, on which the breach of warranty claims could proceed. 

However, the district court found that TKW failed to present any evidence of such a 

delivery. 2012 WL 2466616, at *10-16. 

TKW contends that the district court’s grant of summary judgment to the 

defendants on its warranty claims was error and makes a number of arguments in support 

of that contention. Its first argument is that the district court erred by determining a 

material factual dispute. TKW is referring to Internet postings on KFI’s website by 

Jeffrey Denecke, Manager of Operations for KFI (and a defendant/appellee here) on 

October 19, 2006, and April 1, 2010 and April 16, 2012 Declarations made by Denecke 

in support of KFI’s summary judgment motion. There, Denecke stated that TKW 

 

56(a). “Summary judgment is not appropriate, however, if a disputed fact exists which 

might affect the outcome of the suit under the controlling substantive law.” Santana 

Prods., 401 F.3d at 131 (citation and internal quotation marks omitted). “The moving 

party bears the burden to show that the non-moving party has failed to produce evidence 

sufficient to establish the existence of an element essential to its case.” Id. (citation and 

internal quotation marks omitted). 
5

purchased some of the yarns at issue here in June of 2005 (i.e., within the limitations 

period). TKW contends that KFI admitted the Internet posting was true, that this posting 

is direct evidence of a 2005 delivery, and that it is a sufficient basis to conclude that a 

delivery occurred within the limitations period. However, TKW claims that the district 

court weighed new inconsistent evidence and accepted the new evidence as true. In 

making this claim, TKW is referring to the two Declarations of Denecke, admitting the 

Internet posting, with the delivery date of 2005, but explaining, at length, that the 2005 

date was an error; how and why it was erroneously made; and that the actual purchase 

date was June of 2004. See 2012 WL 2466616, at *8 (reciting the content of the April 1, 

2010, Denecke Declaration). In short, contrary to TKW’s contention, KFI never admitted 

that there was a delivery to TKW in 2005. 

In the district court, TKW moved to strike Denecke’s Declarations, alleging a 

number of technical and procedural grounds in support of that motion. However, the 

district court denied that motion. 2012 WL 2466616, at *7-10. TKW does not challenge 

that denial in its appeal. However, TKW does contend that, by not striking the 

Declarations, the district court determined a material factual dispute, i.e., that there was 

not a delivery to TKW in 2005. However, the district court did no such thing. It simply 

denied TKW’s motion to strike the Declarations on the asserted technical and procedural 

grounds. 

TKW’s second argument is that the district court erred in granting summary 

judgment because it improperly weighed the evidence and accepted the Denecke 

Declarations as true. However, the district court found that the “evidence is so one-sided 
6

that no fair-minded jury could reasonably find in favor of [TKW] on the issue of 

delivery.” 2012 WL 2466616, at *15. In addition, the district court noted “the lack of 

[TKW’s] own paperwork regarding this alleged (2005) delivery” and TKW’s inability to 

present the testimony of any witness who personally observed the delivery of the 2005 

shipment” of the yarns at issue. Id. (emphasis in original).4

The district court concluded that “[t]he present matter is precisely the situation 

which the principles of Anderson and its progeny were designed to encompass.” Id.

5

Other than simply stating that the district court improperly weighed the evidence, TKW 

offers no substantive challenge to this ruling. 

TKW’s third argument is that the district court misapprehended the personal 

knowledge requirement. This refers to a statement made in a declaration by James 

Casale, its principal and its lawyer, by which TKW attempted to show a delivery of the 

yarns at issue in 2005. The district court opined: “[b]y his own words, Mr. Casale has no 

personal knowledge about the receipt of the [yarn] shipment in 2005, but rather ‘was 

informed’ by some unknown individual. This Declaration fails to create any issue of fact 

regarding the 2005 shipment.” 2012 WL 2466626, at *12. 

TKW contends that the district court’s definition of “informed,” is error because, 

the plain meaning of the term as defined in various dictionaries is “personal knowledge.” 

 

4 TKW offered a Declaration by Dawn Casale, presumably the wife of TKW principal 

James Casale and an employee of TKW, in which she averred that she had personal 

knowledge of the 2005 delivery. However, in her deposition, she admitted that she had 

no such personal knowledge. The district court granted KFI’s motion to strike her 

Declaration based on her lack of personal knowledge of any alleged 2005 delivery. 2012 

WL 2466616 at *3-7. TKW does not challenge that in its appeal. 

5 See Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986). 
7

TKW’s Br. at 18 (citing various standard English language dictionaries). However, we 

cannot say that the district court’s construction of “I was informed” to exclude personal 

knowledge was arbitrary, fanciful or clearly unreasonable. See Democratic Nat’l Comm. 

V. Republican Nat’l Comm., 673 F.3d 192, 201 (3d Cir. 2012). 

TKW’s fourth argument is that procedural irregularities permeate the judgment. 

TKW contends that the district court erred by considering the Denecke’s Revised April 

16, 2012 Declaration, in which he showed the printing error that led to him misread 

KFI’s sales records regarding the alleged 2005 delivery of the yarns at issue. However, 

we agree with the district court that this argument is baseless. The district court opined: 

“Mr. Denecke is a named defendant who has been timely identified as a witness in this 

case. [TKW] has had the opportunity to depose him. Accordingly, [TKW] has no legal 

foundation on which to object to his Revised Declaration.” 2012WL 2466616, at *9 n.6. 

In addition, we note that TKW does not articulate any resulting prejudice from the district 

court’s consideration of the Revised Declaration. 

TKW’S fifth and final argument on the grant of summary judgment to the 

defendants on its warranty claims is that the district court abused its discretion by failing 

to toll the statute of limitations. See 2012 WL 2466616, at *11 n.9. As noted, the statute 

of limitations for a breach of warranty is four years. 13 Pa. Cons. Stat. Ann. § 2725(a). It 

begins to run when tender of delivery of the allegedly defective product occurs, 

“regardless of the aggrieved party’s lack of knowledge of the breach.” Id. § 2725(b); see 

also City of Phila. v. Lead Indus. Ass’n Inc., 994 F.2d 112, 121. n.7 (3d Cir. 1993). 
8

TKW asserts that there was substantial evidence before the district court of the 

defendants’ knowledge of and misrepresentation of the actual amount of cashmere in the 

yarns at issue, since at least 2006, and that this mislabeling demonstrates fraudulent 

concealment that would toll the statute of limitations.

TKW has not provided any case law or statutory provisions to support its claim

that the statute of limitations for warranty actions can be tolled by alleged fraudulent 

concealment. Indeed, the statute itself establishes this is not true. Section 2725(b) 

provides that ”[a] cause of action accrues when the breach occur, regardless of the 

aggrieved party’s lack of knowledge of the breach.” 13 Pa. Cons. Stat. § 2725(b) 

(emphasis added). Admittedly, § 2725(d) does state that “[t]his section does not alter the 

law on tolling of the statute of limitations. . . .” 13 Pa. Cons. Stat. § 2725(d). However, 

“this section” referred to is captioned “Statute of Limitations in contracts for sale.” Thus, 

§ 2725(b) seems to provide an exception to § 2725(d). 

For all of the above reasons, we hold that the district court did not err in granting 

summary judgment to all of the defendants on TKW’s warranty claims.

B. The district court erred in holding that TKW did not 

have RICO standing.

It is well-settled that the plaintiff cannot prevail under section 1962(c) absent 

injury in his business or property that is caused by the conduct constituting the RICO 

violation. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985). 

The Supreme Court has declared that Congress’s limitation of recovery to business 

or property injury “retains restrictive significance. It would for example exclude personal 
9

injuries suffered.’” Genty v. Resolution Trust Corp., 937 F.2d 899, 918 (3d Cir. 1991) 

(quoting Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979)). Moreover, injury to 

“valuable intangible property” is normally not the type of property injury that is capable 

of incurring a concrete financial loss. Anderson v. Ayling, 396 F.3d 265, 271 (3d Cir. 

2005). Therefore, to prove standing under 18 U.S.C. § 1964(c), a plaintiff must proffer 

“proof of a concrete financial loss and not mere injury to a valuable intangible property 

interest.” Maio v. Aetna, Inc., 221 F.3d 472, 483 (3d Cir. 2000) (citation omitted). 

Moreover, “[t]here must be a direct relationship between the injury asserted and 

the injurious conduct alleged,” and only where proximate cause exists does a plaintiff 

have standing to raise a RICO claim. Holmes v. SPIC, 503 U.S. 258, 269 (1992). Thus, a 

RICO plaintiff who complains of “harm flowing directly from the misfortunes visited 

upon a third person by the defendant’s acts” may not recover under §1964(c). Id. at 268-

69.

TKW claimed five types of RICO injury as a result of the alleged conspiracy to 

distribute allegedly mislabeled yarns: (1) attorneys’ fees; (2) the cost of investigating the 

allegations of mislabeling and recalling the yarns TKW believed to be mislabeled; (3) the 

cost of replacement goods; (4) harm to goodwill and reputation; and (5) the cost of and 

lost profits from the yarns at issue.” 2012 WL 2938992, at *4. The district court 

comprehensively and exhaustively explained why TKW’s enumerated damages either 

“do not constitute concrete financial loss to business or property or were not proximately
10

caused by the Defendants’ predicate acts in furtherance of the scheme.”6Id. at *5-14. We 

agree with the district court’s reasoning and analysis and we will affirm the court’s 

holding as to standing substantially for the reasons stated in the district court’s opinion.7 

C. The district court erred in dismissing the RICO conspiracy claims.

TKW contends that the district court erred in dismissing, its conspiracy claims 

pursuant to 18 U.S.C. § 1962(d) against Debbie Bliss, Diane Elalouf , Jeffery Denecke, 

Designer Yarns and Filatura pursuant to Fed.R.Civ.P 12(b)(6) and (c).

8

 

6 The defendants conceded the fraudulent scheme solely for the purpose of addressing 

whether TKW would have standing under RICO to seek redress for such a scheme. 2012 

WL 2938992, at *5 n.3. 

7 The district court expressly noted the absence of any argument from TKW on the 

subject of RICO injury. Id. at * 5 n.3. Given TKW’s failure to make any substantive 

arguments in support of its claimed injuries, we are hard-pressed to understand how 

TKW can now complain that the district court erred in holding that it did not have RICO 

standing. Nonetheless, as we stated above, the district court fully and exhaustively 

explained why TKW did not have RICO standing.

Ironically, the largest injury claimed by TKW are attorneys’ fees in the amount of 

over $2 million billed by James Casale, TKW’s principal and its lawyer. The district 

court did not address the fact that TKW is effectively a pro se plaintiff, but it rejected the 

idea that attorneys’ fees were injury sufficient to confer RICO standing. It wrote: “[T]he 

Court finds that such damages in and of themselves are insufficient to confer RICO 

standing. Otherwise, [TKW], in the absence of any other injury caused by Defendants’ 

purported conspiracy, could obtain standing simply by initiating a lawsuit. Accordingly, 

these fees fail to provide the requisite concrete financial loss resulting from the alleged 

RICO violations from which this Court can find statutory standing.” Id. at *5. We agree. 

In fact TKW’s attempt to morph pro se attorney’s fees into a RICO injury is as novel as it 

is frivolous. 

8 TKW refers to these defendants as the “Supply Chain Conspirators.” 
11

18 U.S.C. § 1962(d) makes it unlawful for any person to conspire to violate 

subsections (a), (b), or (c) of RICO. Because there is no requirement of some overt or 

specific act, the RICO conspiracy provision is even more comprehensive than the general 

conspiracy offense. Salinas v. United States, 522 U.S. 52, 63 (1997). Thus, “a defendant 

may be held liable for conspiracy to violate section 1962(c) if he knowingly agrees to 

facilitate a scheme which includes the operation or management of a RICO enterprise.” 

Smith v. Berg, 247 F.3d 532, 538 (3d Cir. 2001). Nonetheless, “[u]nderlying a § 1962(d) 

claim is the requirement that plaintiff must show that defendants agreed to the 

commission of a ‘pattern of racketeering.’” Banks v. Wolk, 918 F.2d 418, 421 (3d Cir. 

1990). Those who innocently provide services will not incur § 1962(d) liability; rather, 

“liability will arise only from services which were purposefully and knowingly directed 

at facilitating a criminal pattern of racketeering activity.” Smith, 247 F.3d at 538 n.11.

Thus, pleading a § 1962(d) conspiracy requires a plaintiff to “set forth allegations

that address the period of the conspiracy, the object of the conspiracy, and the certain 

actions of the alleged conspirators taken to achieve that purpose.” Shearin v. E.F. Hutton 

Group, Inc., 885 F.2d 1162, 1166 (3d Cir. 1989), abrogated on other grounds by Beck v. 

Prupis, 529 U.S. 494 (2000). The supporting factual allegations “must be sufficient to 

describe the general composition of the conspiracy, some or all of its broad objectives, 

and the defendant’s general role in that conspiracy.” Rose v. Bartle, 871 F.2d 331, 366 

(3d Cir. 1989) (citation and quotation marks omitted). It is not enough for a complaint to 

simply make “conclusory allegations of concerted action but [be] devoid of facts actually 
12

reflecting joint action.”9 Abbot v. Latshaw, 164 F.3d 141, 148 (3d Cir. (1998). 

Moreover, “mere inferences from the complaint are inadequate to establish the necessary 

factual basis.” Rose, 871 F.2d at 336. “Plaintiff must allege facts to show that each 

Defendant objectively manifested an agreement to participate, directly or indirectly, in 

the affairs of a RICO enterprise through the commission of two or more predicate acts.” 

Smith v. Jones, Gregg, Creehan & Gerace, LLP, 2008 WL 5129916, at *7 (W.D. Pa. Dec 

5, 2008). “Bare allegations of conspiracy described in general terms may be dismissed.” 

Id. As we explain below, the allegations here fail to satisfy this standard as to any of the 

defendants. 

(i). Debbie Bliss.

The district court dismissed TKW’s complaint against Bliss in its entirety. The 

Knit With v. Knitting Fever, Inc., 2010 WL 4909929, at 1 (E.D. Pa. Dec. 1, 2010). In 

this portion of its appeal, TKW contends that the district court erred in so doing.10 

 

9 This analysis need not rise to the level of particularity required by Fed.R.Civ.P. 9(b) for 

allegations of fraud; rather it is governed by the more liberal pleading standards of Rule 

8. Rose, 871 F.2d at 366.

10 Under Rule 12(b)(6), a defendant bears the burden of demonstrating that the plaintiff 

has not stated a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6); see also 

Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). This court conducts a de 

novo review of a Rule 12(b)(6) dismissal of a compliant. See Phillips v. County of 

Allegheny, 515 F.3d 224, 230 (3d Cir. 2008). The Federal Rules of Civil Procedure 

require that a complaint contain “a short and plain statement of the claim showing that 

the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). To avoid dismissal, a complaint 

must set forth facts that raise a plausible inference that the defendant inflicted a legally 

cognizable harm upon the plaintiff. See Ashcroft v. Iqbal, 556 U.S.662, (2009); Bell Atl. 
13

TKW’s complaint alleges the existence of a conspiracy between KFI, Sion 

Elalouf, and Designer Yarns, as follows:

Upon information and belief – to effect “damage control” and 

to continue “pulling the wool over” the trade concerning the 

cashmere content [of the yarns at issue] – Mr. Elalouf and 

Designer Yarns agreed, after May 26, 2006 and certainly 

before June 20, to claim that the [yarns at issue], since 2001, 

always contained the requisite quantity of cashmere (or, 

conversely, to cover-up the absence of any cashmere content 

in the Debbie Bliss Cashmerino since 2001).

Compl. ¶ 60 (emphasis in original). Debbie Bliss’s alleged participation in this 

conspiracy is described in only three paragraphs of, and one exhibit to, the Complaint. 

See Compl. ¶¶11, 72, 129; Compl. Ex. 16.

Paragraph 11 describes Bliss’s background and how she came to design yarns and 

ultimately license her brand of yarns to defendant Designer Yarns. The paragraph ends 

with the conclusory allegation that “[a]t all times relevant to this Complaint, and certainly 

since September 2006, Mrs. Bliss has participated in and facilitated the racketeering 

 

Corp. v. Twombly, 550 U.S. 544, 556 (2007). Conclusory allegations of liability do not 

suffice. See Iqbal, 556 U.S. at 679. 

A court confronted with a Rule 12(b)(6) motion must accept the truth of all factual 

allegations in the complaint and must draw all reasonable inferences in favor of the 

nonmovant. Gross v. German Found. Indus. Initiative, 549 F.3d 605, 610 (3d Cir. 2008). 

Legal conclusions receive no such deference, and the court is “not bound to accept as true 

a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555. Although 

a plaintiff may use legal conclusions to provide the structure for the complaint, the 

pleading’s factual content must independently “permit the court to infer more than the 

mere possibility of misconduct.” Iqbal, 556 U.S. at 679.
14

scheme which has injured Plaintiffs’ business.” However, that is simply a legal 

conclusion which is entitled to no deference. 

Paragraphs 72 and 129, together with Exhibit 16, assert that Bliss evidenced her 

participation in the conspiracy by authoring an open letter to the yarn retailing 

community in 2006 addressing the rumors of mislabeling and expressing her “complete 

confidence in the honesty of all the parties from the mills that acquire and spin the fibers, 

to the distributors and agents who have all work so hard to make the brand so 

successful.” However, TKW’s sixty-page complaint fails to include any specific 

allegation that Bliss intended to facilitate a conspiracy or operate a RICO enterprise. 

Accordingly, the district court “declined to make the untenable leap that Defendant 

Bliss’s authoring of a letter – defending a line of yarns to which her name was attached . . 

. demonstrates . . . her agreeing to participate in a pattern of racketeering activity . . ..” 

2010 WL 49099289, at *7. Accordingly, the district court did not err in granting Bliss’ 

Rule 12(b)(6) motion and dismissing the complaint against her in its entirety.11

 

11 By Order, dated April 14, 2011, the district court denied TKW’s motion to vacate 

Bliss’s dismissal. TKW contends in its appeal that it presented newly discovered 

evidence to the district court that Bliss was “quoted as participating in specifying the 

[cashmere content in the yarns at issue] since inception of the branded product.” 

According to TKW, this newly discovered evidence is precisely the evidentiary fact 

required to subject Bliss to RICO conspiracy liability. 

TKW’s characterization of Bliss’s statement is inaccurate. The statement doesn’t 

mention the [yarns at issue at all]. Instead, the statement was made during an interview 

when Bliss, speaking generically and not with reference to any particular yarn, described 

her approach to creating designs as follows: “I might suggest to them, oh I would like uh 

perhaps a bit more wool in it, perhaps a bit more silk in it.” Bliss was not discussing the 

content of the yarns at issue here. Indeed, they contain no silk. Thus, this particular 

argument is meritless. 
15

(ii). Designer Yarns and Filatura.12

The district court found, and TKW does not disagree, that TKW’s complaint 

alleges two distinct schemes to defraud: (1) a conspiracy between the KFI defendants and 

Designer yarns to distribute the mislabeled yarns at issue and (2) a conspiracy between 

the KFI defendants and the remaining defendants to cover-up the initial fraudulent plans. 

2011 WL 891871, at *8. This is significant because the cover-up conspiracy is not 

alleged to have occurred until 2006, Compl. ¶¶ 60, 61. However, TKW admits that its 

last purchase of the yarns at issue occurred, at the latest, in the fall of 2005. Compl. ¶ 41. 

Thus, because the second conspiracy began after TKW bought the yarns at issue, it could 

not have caused TKW’s alleged injury, viz., the purchase of mislabeled yarns. 

Accordingly, the district court did not err in dismissing the RICO conspiracy claim 

against Filatura. Indeed, we note that TKW expressly admits that its business and 

commercial interests were harmed, not as result of the cover-up, but rather “[a]s a 

consequence of the false labeling of [the yarns at issue here].” Compl. ¶ 82. 

Apparently realizing the effect of having pled two separate conspiracies, as 

opposed to one continuous one, TKW now tries to avoid the results of its own 

allegations. TKW first contends that the district court’s reliance on Pyramid Securities,

Ltd. v. IB Resolution, 924 F.2d 1114 (D.C. Cir. 1991), is misplaced because Pyramid was 

a summary judgment case involving an evidentiary standard. However, the district court 

 

12 Throughout its brief, KFI refers to Filatura as “VVG.”
16

did not hold that TKW failed to prove necessary facts; it held that TKW failed to allege

them. 2011 WL 891871, at *11. 

Second, TKW contends that the district court erred in concluding that the second 

conspiracy is “unrelated” to the first. TKW is correct that a scheme to cover-up a 

conspiracy has some connection to the original conspiracy. However, TKW cites to no 

authority for the proposition that this connection alone sufficient to make two 

conspiracies part of the same pattern of racketeering. In fact, we have held that 

“allegations of concealment on the part of the RICO defendant do not constitute a basis 

for establishing an open-ended scheme or threat of repetition to satisfy the continuity 

requirement.” Davis v. Grusemeyer, 996 F.2d 617, 623 (3d Cir. 1993) (citation and 

internal quotation marks omitted).

Third, and finally, TKW contends that the alleged cover-up conspiracy was also a 

conspiracy to allow the continued sale of mislabeled yarn. However, in support of this 

contention, TKW cites to “facts” that it did not allege in its complaint. See TKW’s Br. at 

41-42. When assessing a motion to dismiss or motion for judgment on the pleadings, 

however, a court may only consider the “allegations contained in the compliant, exhibits 

attached to the compliant, and matters of public record.” Pension Benefit Guar. Corp. v. 

White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). 

With regard to Designer Yarns, TKW contends that the factual allegations at ¶¶ 5, 

11 and 36 “give the grounds” for Designer Yarns “mislabeling conspiracy liability.”

TKW’s Br. at 44. Paragraph 5 alleges only that Designer Yarns has a license to use the 

Debbie Bliss trademark and a distributor relationship agreement with KFI. Paragraph 11 
17

provides only background information regarding Bliss and alleges that she licensed her 

name to Designer Yarns. TKW provides no legal authority for claiming that merely 

holding a trademark license and entering into a distribution agreement permits the 

inference of an agreement to conspire. 

Paragraph 36 does allege that “certainly before June 9, 2011 and on a date more 

specifically known only to Defendants, Mr. Elalouf and Designer Yarns entered into an 

agreement to substitute the 0% cashmere version for the Cashmerino spun of 12% 

cashmere.” However, aside from this legal conclusion, the compliant identifies no 

factual bases upon which a court could make the reasonable inference that Elalouf and 

Designer Yarns affirmatively and knowingly entered into some sort of plan or scheme to 

commit the requisite predicate offenses. 

TKW asserts that “Designer need not agree to or participate in Elalouf’s corrupt 

acts.” TKW’s Br. at 44. According to TKW, “controlling authority requires only 

Designer be aware of the enterprises’ activities.” Id. at 44-45 (citing Smith v. Berg, 247 

F.3d 532 (3d Cir. 2001). However, nothing in the cited authority abrogates the wellestablished principle that liability under § 1962(d) is available only for services “which 

were purposely and knowingly directed at facilitating a criminal pattern of racketeering 

activity.” Smith, 247 at 537 n.11. While an alleged conspirator need not agree or 

participate in each of the predicate acts, it must conspire “to violate RICO – that is, to 

conduct or participate in the activities of a corrupt enterprise.” Zavala v. Wal-Mart 

Stores, Inc., 691 F.3d 527, 539 (3d Cir. 2012) (citing Salinas v. United States, 552 U.S. 

52, 62 (1997). We agree with KFI that TKW’s allegations that Designer Yarns held a 
18

trademark license, entered into distribution agreements to sell products using that 

trademark, and a boilerplate allegation of an agreement to conspire do not permit the 

inference that Designer Yarns agreed to conduct or participate in the activities of a 

racketeering enterprise.

Finally, we reject TKW’s contention that Designer Yarns was part of the cover-up 

conspiracy. TKW asserts that “[n]o controlling precedent requires Designer to know who 

orchestrated the cover-up.” TKW’s Br. at 46. TKW’s factual allegations consist only of 

a conclusory allegation of Designer Yarns’ participation in a cover-up (Compl. ¶ 60) and 

allegations regarding: obtaining yarn samples for testing (Compl. ¶¶ 62-63); and 

transmitting the results to its sub-licensee and distributor (Compl. ¶ 65). As correctly 

noted by the district court, “such allegations fail to imply Designer Yarns’s knowledge 

that his analysis was part of any alleged cover-up orchestrated by Elalouf – especially 

since the testing showed cashmere in the yarns. . . .” 2011 WL 891871, at *10. 

(iii). Diane Elalouf and Jeffrey Denecke.

TKW submits that its complaint contains two factual allegations against Elalouf 

that are sufficient to state a claim under § 1962(d) for her participation in the original, 

mislabeling conspiracy, viz., Compl. ¶¶ 8 and 35. TKW contends that Paragraph 8 

alleges that she was an officer and shareholder of KFI and it contends that Paragraph 35 

alleges that she was the “sole KFI employee with access to suppliers’ invoices specifying 

product fiber content at variance from the products’ labeled compositions.” In TKW’s 

view, these two allegations sufficiently suggest that Diane Elalouf knew of, agreed to, 

and facilitated the mislabeling conspiracy.
19

In support of its submission, TKW cites to two cases. However, neither is helpful. 

In United States v. Ali, 2005 WL 2989728 (E.D. Pa. Aug. 19, 2005), the government pled 

that the defendant personally committed predicate acts and participated in the 

association-in-fact enterprise. Id. at *2. Here, TKW pled nothing in this regard with 

respect to Diane Elalouf. Granewich v. Harding, 985 P.2d 788, 792 (Or. 1999) is no 

stronger. It does not involve a RICO conspiracy and it does not support the assertion that 

merely benefitting from the alleged RICO enterprises’ activity is sufficient to state a 

claim under § 1962(d). 

TKW’s argues that it did allege that Diane Elalouf was the “sole KFI employee 

with access to suppliers’ invoices specifying product fiber content at variance from the

products’ labeled compositions.” However, TKW mischaracterizes its own complaint. 

Paragraph 35 simply does not allege that the supplier invoices to which she allegedly had 

sole access “specif[ied] product fiber content at variance from the products’ labeled 

composition.” Rather, Paragraph 35 alleges only that Diane Elalouf had sole access to 

the manufacturers’ stated content of the yarns at issue and “could prevent” KFI 

employees from “learning the invoiced purchase values,” the “true source of products” 

and “learning, as disclosed by the manufacturer, the actual fiber content of goods 

imported and resold by KFI.” Compl. ¶ 35. Nowhere does the compliant allege that 

these invoices would reveal a variance with the labeled content. As the district court 

observed: “Noticeably missing from the allegations is any indication that Diane Elalouf 

had any actual knowledge of the alleged corrupt enterprise’s activities.” 2011 WL 

1161716, at *7.
20

Finally, we note that, with respect to Diane Elalouf and Jeffrey Denecke, TKW 

does not contest the district court’s conclusion that TKW did not suffer any injuries by 

reason of the alleged cover-up conspiracy.13

Accordingly, for all of the above reasons, we hold that the district court did not err 

in dismissing the RICO conspiracy charges against Diane Elalouf and Jeffrey Denecke.

D. The district court erred in dismissing the Lanham Act

false advertising claims.

In The Knit With v. Knitting Fever, Inc., 2008 WL 5381349 (“Knit With I”) (E.D. 

Pa. Dec. 18, 2008) and The Knit With v. Eisaku Noro and Co., Ltd., 2008 WL 5273582 

(“Knit With II”) (E.D. Pa. Dec. 19, 2008), the district court granted the defendants’ Rule

12(b)(6) motions to dismiss the Lanham Act false advertising claims on standing 

grounds. The district court analyzed whether TKW had standing pursuant to the factors 

set forth in Conte Bros. Auto. Inc. v. Quaker-State Slick 50, Inc., 165 F.3d 221 (3d Cir. 

1998). Knit With I, 2008 WL 5381349 at *12-17. The district court concluded that all 

but one of the Conte factors “counsel[] this Court to dismiss Plaintiff’s Lanham Act 

claim” and as a result, it found that TKW “lacks prudential standing to maintain a cause

of action . .. under § 43(a) of the Lanham Act” against the defendants named in Knit With 

I. Id. at *17.

Section 1125(a)of Title 15 of the United States Code creates two distinct bases of 

liability: false association, § 1125(1)(A), and false advertising, § 1125(1)(B). See Waits 

 

13 TKW does argue that Denecke’s dismissal must be vacated because the original 

conspiracy and the cover-up conspiracy are related. However, as discussed above, the 

two conspiracies are not one continuous conspiracy. 
21

v. Frito-Lay, Inc., 978 F.2d 1093, 1108 (9th Cir. 1992). In Conte Bros., we created a test 

for deciding whether a plaintiff has prudential standing to bring a Lanham Act false 

advertising claim. See Conte Bros., 165 F.3d at 231-35.

However, in Lexmark International, Inc. v. Static Control Components, Inc., ___ 

U. S. ___, 134 S. Ct. 1377, the Court established a new analytical framework for 

determining a party’s standing to bring Lanham Act false advertising claim, which 

abrogated our Conte five-factor test. In Lexmark, the Court held that “a direct application 

of the zone-of-interests test and the proximate cause requirement supplies the relevant 

limits on who may sue.” Id. at 1391. The Court held: 

to come within the zone of interests in a suit for false 

advertising under § 1125(a), a plaintiff must allege an injury 

to a commercial interest in reputation or sales. A consumer 

who is hoodwinked into purchasing a disappointing product 

may well have an injury-in-fact cognizable under Article III, 

but he cannot invoke the protection of the Lanham Act – a 

conclusion reached by every Circuit to consider the question. 

Even a business misled by a supplier into purchasing an 

inferior product is, like consumers generally, not under the 

Act’s aegis.

Id. at 1390 (citations omitted) (emphasis added). In view of the final sentence of the 

above-quoted paragraph, it seems apparent that TKW, a yarn retailer who alleges to have 

been misled by its supplier into purchasing mislabeled yarn, is not within the zone of 

interests protected by the Lanham Act. Thus, TKW lacks standing to bring a Lanham 

Act false advertising claim.14

 

14 TKW contends that the Court’s decision in Pom Wonderful LLC v. Coca-Cola Co., 134

S. Ct. 2228 (2014) applies here. However, Pom Wonderful has no application here. The 

district court did not dismiss TKW’s Lanham Act claims as precluded by the Wool 
22

E. The district court erred by misapplying the “gist-of-the-action”

doctrine and dismissing the deceit action.

KFI, Diane and Sion Elalouf filed motions for judgment on the pleadings pursuant 

to Fed.R.Civ.P. 12(c) contending that TKW’s deceit claim was actually a tort claim and 

was barred by the gist of the action doctrine and/or the economic loss doctrine. The 

district court granted the motions and dismissed the deceit action under both doctrines. 

The Knit With v. Knitting Fever, Inc., 2009 WL 3427054, at *8-16 (E.D. Pa. Oct. 20, 

2009). 

As a general rule, Pennsylvania courts are cautious about permitting tort recovery 

on contractual breaches. Glazer v. Chandler, 200 A.2d 416, 418 (Pa. 1964). “A claim 

should be limited to a contract claim when the ‘parties’ obligations are defined by the 

terms of the contracts, and not by the larger social policies embodied in the law of torts.” 

Bash v. Bell Tel. Co., 601 A.2d 825, 829 (Pa. Super. 1992). Whether the gist-of-theaction-doctrine applies in any particular setting is a question of law. Id. 

After an exhaustive analysis, the district court concluded that “the true nature of 

the dispute between the parties arises out of their contract for the sale of handknitting 

yarns that should, but purportedly did not, contain a certain percentage of cashmere. As 

such, . . . the gist of the action doctrine . . . cabin[s] [TKW’s] permissible claims to those 

sounding in contract.” 2009 WL 3427054, at *18. Accordingly, the district court 

dismissed the deceit claim asserted against KFI, Diane Elalouf and Sion Elalouf.

 

Products Labeling Act. Rather, as explained above, the Lanham Act claims were 

dismissed due to TKW’s lack of standing.
23

TKW challenges only the district court’s conclusion that the gist-of-the-action 

doctrine barred the deceit claim. 

TKW’s first argument is that the district court erred by applying the gist-of-theaction doctrine to “strangers, like the Elaloufs, to the TKW-KFI contract.” TKW’s Br. at 

62. If TKW had not alleged that KFI was the alter ego of the Elaloufs, there would be no 

basis for asserting a claim against them personally for an alleged misrepresentation made 

by the corporate entity. 2009 WL 3427054, at *17. However, because TKW claimed 

that the Elaloufs were the alter egos of KFI, the district court held that TKW could not 

claim that the Elaloufs were strangers to the KFI contract. Accordingly, the district court 

held that the gist-of-the-action doctrine applied to bar TKW’s claims against the Elaloufs. 

Id. (citing Mikola v. Penn Lyon Homes, Inc., 2008 WL 2357688, at *7 (M.D. Pa. June 4, 

2008). Significantly, TKW provides no authority to the contrary, and we have found 

none.

TKW’s second argument is that the district court erred by applying the gist-of-theaction doctrine to KFI. TKW contends that the Wool Products Labeling Act (WPLA), 

specifically 15 U.S.C. § 68(c), imposes a “duty to label [that is] independent of any 

obligation KFI assumed in its contractual relationship with TKW.” TKW’s Br. at 63.

However, as the district court recognized: “There is no private right of action to enforce 

these provisions [of the WPLA] and thus cannot be an independent source of duties that 

would grant [TKW] standing to pursue its tort claims absent a contract creating privity 

between the two parties.” 2009 WL 3427054, at *15, n.15. 
24

TKW contends that this court’s recent decision in Delaware & Hudson Rwy. Co. 

v. Knoedler Mfrs., Inc., 781 F.3d 656 (3d Cir. 2015), applies to its appeal. We disagree. 

Knoedler was concerned with whether state law claims based on a federal standard of 

care are preempted by the provisions of a federal statute. However, preemption was 

never an issue in this case and KFI never even asserted a preemption argument with 

regard to TKW’s deceit action. 

TKW next contends that the district court “erred again by assuming the KFI-TKW 

contract expressly incorporates representations concerning the products’ fiber content.” 

TKW’s Br. at 64. However, the district court did not assume that the contract terms 

specified fiber content. Rather, TKW pled that “[a]t the time of contract, Plaintiff 

purchased and sought delivery of handknitting yarns spun with 12% cashmere – products 

which Plaintiff did not receive from Defendants.” Compl. ¶ 88. In addition, contrary to 

TKW’s suggestion, the district court did not assume that KFI fulfilled those contractual 

duties but rather held only that “any failure of the yarns to contain the represented 

amount of cashmere violated the clear terms of the contract and constituted a breach of 

express warranty.” 2009 WL 3427054, at *14. 

Finally, TKW argues that the district court erred in dismissing its deceit claim 

because the common law of unfair competition provides an action for practices 

determined by law to be an unfair method of competition. TKW’s Br. at 62-64 (citing 

Restatement (Third) of Unfair Competition § 1). However, as the district court correctly 

noted: “Nothing in this section grants standing to a merchant retailer simply due to the 
25

supplier’s failure to sell the goods promised in a contract.” 2009 WL 3427045, at *15, 

n.14. 

F. The district court abused its discretion in

supervising discovery.

Finally, TKW challenges the district court’s rulings: (1) allowing the entry of a 

confidentiality agreement requested by FKI; (2) appointing a discovery master; (3) 

denying motions to compel; and (4) adhering to the Federal Rules’ timing for expert 

disclosures. “We review a district court’s discovery orders for abuse of discretion, and 

will not disturb such an order absent a showing of actual and substantial prejudice.” 

Anderson v. Wachovia Mortg. Corp., 621 F.3d 261, 281 (3d Cir. 2010). 

Even if it is assumed for argument’s sake that the district court’s discovery rulings 

constituted an abuse of discretion, TKW, aside from simply claiming prejudice, has not 

come close to making the required showing that it suffered “actual and substantial 

prejudice” as a result of the district court’s holdings. Thus, we also reject this argument.

III. CONCLUSION

For all of the above reasons, we will affirm the district court.15

 

15 As we noted at the outset, and as we detailed in note 1, supra, this dispute has had a 

tortured and protracted history. We hope that the resolution of this appeal will now bring 

some resolution to it.