Monday, August 29, 2016

laches period won't run before false advertising claimant suffers harm

Star-Brite Distributing, Inc. v. Gold Eagle Co., 2016 WL 4470093, No. 14-61841-CIV (S.D. Fla. Jan. 25, 2016)

The parties compete in the market for marine fuel additives.  Star-Brite argued that Gold Eagle’s false advertising counterclaim was barred by laches; the court refused to grant summary judgment because of material issues about the time at which Gold Eagle could have satisfied all the elements of a false advertising claim, especially showing harm from the falsity. 

The Lanham Act borrows a presumptive laches bar from coordinate state law causes of action; Florida’s relevant limitations period is four years.  Star-Brite argued that, as early as 2007, Gold Eagle had reports that Star-Brite’s product didn’t perform as advertised, and Gold Eagle was also aware of a false advertising counterclaim filed against Star-Brite in 2009.  Gold Eagle didn’t counterclaim until 2014.  Gold Eagle argued that, before 2010, Gold Eagle’s product testing was focused on benchmarking against competitors, not on whether Star-Brite’s claims were true, and that the other litigation created doubt that the relevant tests could falsify Star-Brite’s claims.  In addition, though Star-Brite emerged as a direct competitor in 2008, Gold Eagle didn’t start losing market share to Star-Brite until late 2010.

The court couldn’t conclude as a matter of law that Gold Eagle’s delay was unreasonable.  Gold Eagle’s evidence indicated that it filed its claims within four years of determining that it had provable claims; it was not until October 2010 that Star-Brite began gaining market share from Gold Eagle and Gold Eagle thus had evidence of harm, as required to prevail on a Lanham Act claim. Moreover, the earlier litigation between Star-Brite and a third party “reasonably deterred the filing of a false advertising claim until 2012, when the majority of marine engine OEMs agreed that the [tests at issue] were appropriate to use when testing all ethanol fuel additives, including [Star-Brite’s].” Finally, it was not until after Star-Brite sued Gold Eagle that Gold Eagle determined in discovery that Star-Brite’s product did not contain enzymes (relevant to falsity).

Likewise, Gold Eagle’s state law claims weren’t barred by the statute of limitations. Floriday follows the continuing tort rule, and the evidence showed that Star-Brite continued its allegedly false ads after the counterclaims were filed.  Thus, Gold Eagle could recover damages for tortious acts committed within the limitations period prior to the filing of suit, allowing a four-year look-back period as well as injunctive relief.

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