The parties compete in the diaper pail market. Starting as early as September 2008, Playtex
nationally advertised that its Diaper Genie II Elite diaper-pail system was
“Proven # 1 in Odor Control.” Baby Trend
sued, alleging literal falsity causing it to suffer steady sales declines since
2008, in April 2013. The court dismissed
without leave to amend.
The court first ruled that California’s statute of limitations
for fraud applied. Because the Lanham
Act has no limitations period of its own, courts borrow from the analogous
state law cause of action, here fraud claims.
The Ninth Circuit hasn’t completely resolved the interplay between
laches and the statute of limitations, but held that “if a § 43(a) claim is
filed within the analogous state limitations period, the strong presumption is
that laches is inapplicable; if the claim is filed after the analogous
limitations period has expired, the presumption is that laches is a bar to the
suit.” Later cases at least suggested a
statute of limitations defense, so the court held that California’s limitations
period, which is three years. (This
seems like overreading to me and deprives laches of any independent force after
the limitations period has run, contrary to the language of “presumption”;
anything that would serve to toll the statute would also prevent laches.)
On these facts, Baby Trend’s Lanham Act claim was
time-barred. The period runs from when
the plaintiff knew or should have known about its cause of action. Fraudulent concealment to toll the statute
requires that the defendant affirmatively engaged in conduct that would lead a
prospective plaintiff to reasonably believe that he had no claim.. Silence or
passive conduct is not fraudulent. On
the face of the complaint, April 2010 (three years before filing) was more than
a year and a half after Playtex allegedly began its campaign, and more than a
year after Baby Trend first realized “steady and substantial sales declines.” Baby Trend also alleged direct competition,
and that the parties products were “commonly sold on the same store shelves.” Reasonable diligence should have discovered
the falsity of Playtex’s statements shortly after the ad campaign or sales
declines began. Baby Trend’s argument
that it didn’t question the truth of the “Proven #1” claim until it became
aware of the verdict in a related case “flies in the face of the purpose of
having statutes of limitations.”
The discovery rule also didn’t apply. The discovery rule requires (a) lack of actual
or constructive knowledge; (b) lack of means of obtaining knowledge earlier through
reasonable diligence; and (c) evidence of how and when the plaintiff actually
discovered the fraud. Baby Trend failed to allege that it took steps to
investigate the validity of Playtex’s claim, nor how it lacked means for
discovering the truth.
Because the court saw no additional set of facts that could
cure the statute of limitations bar, it dismissed the case with prejudice.
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