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 evidence 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.]