Wednesday, April 09, 2014

Twiqbal doesn't apply to unclean hands defense

Newborn Bros. Co. v. Albion Engineering Co., No. 12–2999, 2014 WL 1272109 (D.N.J. Mar. 27, 2014)

Newborn sued its competitor Albion for allegedly falsely advertising its dispensing guns (used to apply sealants and adhesives) as made in the US when Albion knew they were made in Taiwan.  Late in the game, Newborn moved to strike Albion’s late-pled unclean hands defense (apparently that Newborn’s products were also falsely advertised as made in the US).  First, the court found that affirmative defenses aren’t required to be pled with the specificity required by Iqbal/Twombly.  Newborn also argued that Rule 9(b) applied to the extent that the counterclaim was fraud-like; the court was sympathetic, and indicated that it likely would have granted a Rule 9(b) motion with leave to amend if the issue had been raised before discovery. But given the timing, the court wasn’t going to let Newborn use 9(b) as a sword, “when it was designed to act as a shield against frivolous or unclear allegations of fraud.”  At this point, Newborn had adequate notice of the factual basis for the defense and opportunity to rebut it.

The court confirmed that unclean hands is a viable defense to Lanham Act claims.  If there was no factual support for the defense, Newborn had other remedies at the appropriate stage of litigation.

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