Facts

In late 2000, Knit 2000 ("Knit") had agreed to sell a particularly spongy nylon fabric to a garment manufacturer, Paris Blues. To fill Paris Blues' fabric orders, Knit placed orders for first quality nylon textured yarn from Unifi Inc. and Unifi Sales and Distribution Inc. ("Unifi") through an independent sales representative in Los Angeles beginning in September 2000. Knit then contracted with independent knitting companies to knit the yarn into fabric. After knitting, Knit directed the knitter to ship the fabric to dye-houses for the fabric to be dyed a specific color and then finished. The dye-house then shipped the dyed fabric to Paris Blues. In late 2002 to early 2003, Paris Blues stopped doing business with Knit for this particular fabric.

Knit alleged that in mid-2001, the fabric being knitted with Unifi nylon began to show a striping defect called "barre." This defect became evident after dyeing. It further alleged that Paris Blues also complained about the feel, or sponginess, of the fabric being supplied by Knit.

Knit alleged that these fabric defects resulted from defective or low quality yarn, which was non-conforming to its purchase orders. Knit presented three experts to testify to that effect and to Knit's damages: Henry Basset of Swisstex California (dye expert); Yasser Gowayed, Ph.D. (fiber expert); Nitin Parekh, CPA (economic expert). Basset testified that dyeing simply could not cause barre. Gowayed testified, through deposition transcript, that he had found "minute" fiber differences in the yarn samples he tested. Parekh testified that Knit's damages were in excess of $2.5 million.

During litigation, Knit alleged that it became aware, for the first time that Unifi had changed the base material supplier for the nylon being sold to Knit. Because of the alleged concealment, Knit was unable to properly adjust its processing of the yarn into fabric, and thus, the defects occurred in the finished fabric. Knit alleged that these defects caused Paris Blues to cancel all business with Knit, which caused Knit significant past and future profits.

Unifi claimed the yarn was not defective or low quality. Unifi asserted that it disclosed all changes in base material suppliers both directly to Knit and publicly, via SEC and other publications.

Unifi called two experts: Iris Sharpe (fabric analysis expert) and Jack Marlowe (dye and finishing expert). Sharpe had performed physical and chemical tests on the fabric samples and determined that the cause of the "barre" defect was not from yarn, but from improper dyeing processes. Likewise, Marlowe had examined the fabric and tests results and concluded that poor dyeing techniques had caused "barre." Further, Marlowe testified that the feel of the fabric was not dictated by the yarn, but rather the finishing techniques and chemicals used by the dye-house.

Unifi claimed the yarn supplied to Knit was completely conforming and merchantable, if Knit had properly processed it. Therefore, Unifi was seeking payment for $67,252, Knit's outstanding balance for unpaid shipments of nylon.

Damages

PLAINTIFF/CROSS-DEFENDANT: past lost profits ($23,153); past profit interest ($8,207); future lost profits ($1,252,585); future interest ($343,593) plus punitive damages. DEFENDANTS/CROSS-COMPLAINANTS: Outstanding balance on contract price for yarn supplied ($67,252).

Other Information

The plaintiff's motion for new trial was denied. The plaintiff's motion to tax defendant's costs of $62,000 was denied resulting in defendant Unifi Inc. having a judgment against Knit 2000 for $62,000. The plaintiff has filed a notice of appeal.

Deliberation

4.5 hours

Poll

various

Length

13 days