Court finds Lanham Act laches on the pleadings given p’s delay

Lifeway
Foods, Inc. v. Millenium Products, Inc., No.
CV 16-7099-R, 2016 WL 7336721, — F.
Supp. 3d – (C.D. Cal. Dec. 14, 2016)
Lifeway
sued defendants under federal and state false advertising law for allegedly
selling a product that didn’t contain the ingredients represented on the label.
The court found that, on the pleadings and the facts subject to judicial notice,
the claims were
time-barred
by the applicable statutes of limitations and the doctrine of laches.
 Here, the key documents of which the court
took judicial notice were a
June 3, 2013 “Close Out Letter” from the FDA to defendant CocoKefir; CocoKefir’s trademark application; a declaration filed
earlier in
the case by Lifeway’s Vice
President of Communications,
stating
that Lifeway was aware of CocoKefir in 2011
; and social media posts by
CocoKefir
,
offered

for the fact that Lifeway could have observed CocoKefir’s public activity from
2011 until
now.
Under
California law, the statute of limitations for claims of false advertising is
three years
, and
for
unfair
competition under § 17200
it’s
four years.
Statutes of limitations
accrue when a plaintiff discovers the wrongful conduct or a reasonable person
in plaintiff’s position would have discovered the wrongdoing.
” 
Lifeway discovered CocoKefir in 2011, at which point the statute of
limitations accrued, meaning that the limitations period expired long before
Lifeway sued.  Lifeway argued that its
delay was justified because
CocoKefir withdrew from the market “not long after
the FDA’s warning letter” in November 2011
, but that allegation was directly contradicted by
evid
ence
subject to judicial notice: the
FDA continued to pursue action against CocoKefir
after its initial warning letter in November 2011
; CocoKefir applied to register a mark in
October 2015; and its
social media pages contained consistent posts promoting
and advertising the company from 2011 until present day
…. This Court makes no
determination as to the substance of these posts, but their mere existence
renders the allegation that CocoKefir withdrew from the market implausible.
 A reasonable
company concerned with a competitor’s erosion of its market share
would have discovered CocoKefir’s continued marketing.
That
took care of the state law claims.  What
about laches under the Lanham Act?
 Without another explanation to
justify Lifeway’s delay, the court found the delay unreasonable.  Lifeway’s only response to defendants’
argument that they were prejudiced by the delay was that they hadn’t been
active in the market since 2011, but that was contradicted by the judicially
noticed evidence.
 Defendants
have relied on the FDA’s Close Out Letter approving of their labels and
proceeded to develop their business accordingly. They would not have continued
to invest in their brand had they known that Plaintiff would bring suit five
years after discovery of their brand.
”  Thus, laches barred the claim.  [I appreciate the reasoning here but I’m not
entirely sure about the finding of prejudice based on the pleadings.  Were defendants prejudiced as a matter of
law? The court’s statements about investment in the brand sure sound like
factual findings, but maybe they are really policy statements.  Or maybe this is what plausibility means post-Twiqbal–even though I’m not sure anything about prejudice was alleged in the pleadings either way.]

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