304 F.3d 829 (9th Cir. 2002), 01-55154, Jarrow Formulas, Inc. v. Nutrition Now, Inc.

Docket Nº:01-55154.
Citation:304 F.3d 829
Party Name:JARROW FORMULAS, INC., Plaintiff-Appellant, v. NUTRITION NOW, INC., Defendant-Appellee.
Case Date:June 04, 2002
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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304 F.3d 829 (9th Cir. 2002)

JARROW FORMULAS, INC., Plaintiff-Appellant,

v.

NUTRITION NOW, INC., Defendant-Appellee.

No. 01-55154.

United States Court of Appeals, Ninth Circuit

June 4, 2002

Argued and Submitted Feb. 7, 2002.

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[Copyrighted Material Omitted]

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Neal T. Wiener, Beverly Hills, CA, argued the cause for the plaintiff-appellant.

John A. Lawrence, Radcliff Frandsen Dongell & Lawrence, LLP, Los Angeles, CA, argued the cause for the defendant-appellee. Matthew Clark Bures was on the brief.

Appeal from the United States District Court for the Central District of California Audrey B. Collins, District Judge, Presiding. D.C. No. CV-00-08839-ABC

Before ARCHER,[*] O'SCANNLAIN, and SILVERMAN, Circuit Judges.

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O'SCANNLAIN, Circuit Judge.

We must decide whether laches bars a manufacturer of nutritional supplements from suing its competitor for false advertising under the Lanham Act when the analogous state statute of limitations period has expired.

I

Nutrition Now, Inc. ("Nutrition Now") distributes PB8, a popular probiotic nutritional supplement designed to aid digestion. Since initial distribution in 1985, Nutrition Now has made three central claims. First, PB8 contains fourteen billion "good" bacteria per capsule. Second, PB8 contains eight different types of bacteria. Third, PB8 does not require refrigeration. Nutrition Now has always prominently displayed these claims on PB8's product label. The claims also have played a central role in Nutrition Now's marketing campaign, which totals "hundreds of thousands" of dollars per year and includes the use of national magazine advertisements.

Jarrow Formulas, Inc. ("Jarrow") offers a competing probiotic supplement. In 1993, Nutrition Now and Jarrow participated in an industry trade show. Jarrow Rogovin, the president of Jarrow, approached Martin Rifkin, the president of Nutrition Now, at the show. Rogovin vigorously complained to Rifkin that Nutrition Now's claims regarding PB8 were false and misleading.

A few months later, Jarrow filed a complaint with the Grievance Committee of the National Nutritional Foods Association. Jarrow alleged that Nutrition Now's claims were "false, unfair, misleading, and illegal" and amounted to "consumer fraud." Jarrow claimed that Institut Rosell ("Rosell"), the manufacturer of its competing product, had tested PB8 and verified that the claims were false. Jarrow urged the Committee to take appropriate action, including releasing a statement declaring the claims false and misleading.1

On the following day, Jarrow sent a letter to its customers urging them to avoid PB8. The letter explained that PB8 "has been tested, and each test has disclosed a dead, worthless product making ridiculous claims. It is a waste of money and cheats the consumer."

A few days later, Rogovin sent a letter to Nutrition Now on behalf of Jarrow. The letter stated, "I have every intention of putting an absolute and total end to the false claims of your company regarding PB8." Rogovin promised to send PB8 out for independent testing in order "to bury the' product.'" He stated, "I have given you . . . a lot of time to clean up your act. Time's up."

The following day, Rogovin sent a letter expressly threatening litigation. The letter stated, "I could be suing you for unfair competition already. I could also have just turned Nutrition Now in to the Federal Trade Commission (FTC) for consumer fraud."

Undeterred, Nutrition Now continued to make its claims about PB8. Indeed, Nutrition Now kept the product label unchanged and continued to use the claims as a central part of its marketing campaign. Jarrow, despite its threat of litigation in 1993, waited until August 2000 to file suit. In its suit, Jarrow asserts that Nutrition Now's claims are false and misleading in violation of § 43(a)(1)(B) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B). Jarrow also sued under California law for unfair competition, Cal. Bus. & Prof.Code § 17200,

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and for false advertising, id. § 17500.

Nutrition Now moved for summary judgment on the grounds that the statutes of limitation and laches bar Jarrow's claims. The district court held that Jarrow's action was barred by laches, and dismissed the suit. The court declined to address the statutes of limitation question.

In this timely appeal, Jarrow claims that (1) it did not exercise unreasonable delay in filing suit, (2) Nutrition Now would not suffer prejudice if the suit were to proceed, (3) laches, even if generally applicable, does not bar its claim for prospective injunctive relief, (4) the public interest would not be served by barring suit, (5) Nutrition Now is precluded by the unclean hands doctrine from asserting laches, and (6) the district court erred in failing to continue summary judgment pending additional discovery.

II

As a threshold matter, it must be observed that we have expressed inconsistent views of the proper standard of review of the grant of summary judgment on the basis of laches. In Jackson v. Axton, 25 F.3d 884, 888 (9th Cir. 1994), we remarked, "This court has reviewed a grant of summary judgment on grounds of laches both de novo and for abuse of discretion."2 The court cited Soules v. Kauaians for Nukolii Campaign Committee, 849 F.2d 1176, 1180 (9th Cir. 1988) as reviewing de novo and Corrington v. Webb, 375 F.2d 298, 298 (9th Cir. 1967) as reviewing for an abuse of discretion. The Jackson discussion was dicta, as the court avoided the question, holding that the result would be the same under either standard. 25 F.3d at 888.

Indeed, outside the context of summary judgment, we have expressed further conflicting statements as to the proper standard when the district court enters judgment on the basis of laches. In some cases we have reviewed the district court's laches determination for an abuse of discretion, while in others we have reviewed for clear error; in no cases have we conducted a de novo review. Compare, e.g., Telink, Inc. v. United States, 24 F.3d 42, 47 & nn. 10-11 (9th Cir. 1994) (abuse of discretion), Russell v. Price, 612 F.2d 1123, 1125 (9th Cir. 1979), and Kimberly Corp. v. Hartley Pen Co., 237 F.2d 294, 304 n. 9 (9th Cir. 1956), with Tagaropulos, S.A. v. S.S. Santa Paula, 502 F.2d 1171, 1171 (9th Cir. 1974) (clear error), Carter-Wallace, Inc. v. Procter & Gamble Co., 434 F.2d 794, 803 (9th Cir. 1970), and Crittenden v. Lines, 327 F.2d 537, 543 (9th Cir. 1964).

We disagree with Jackson's dicta that any of our cases have suggested that we review the district court's laches determination de novo. Jackson relied solely upon our decision in Soules, 849 F.2d at 1180. In Soules, the district court had granted summary judgment on the basis of laches. We broadly stated, "Reviewing this grant of summary judgment de novo . . . we affirm. . . ." Id. (internal citations omitted). After a thorough review of the district court's reasoning, we concluded, "that the district court did not err in barring appellants' . . . claim . . . on the ground of laches." Id. at 1182.

Contrary to Jackson's suggestion, Soules cannot be fairly read as applying a de novo standard to the district court's laches determination. When a district court grants summary judgment on the basis of laches, we review certain aspects of the district court's decision de novo. For example, we review de novo whether

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the district court inappropriately resolved any disputed material facts in reaching its decision. See Kling v. Hallmark Cards Inc., 225 F.3d 1030, 1035-36, 1041 (9th Cir. 2000); Brown v. Continental Can Co., 765 F.2d 810, 815 (9th Cir. 1985); see also Hot Wax, Inc. v. Turtle Wax, Inc., 191 F.3d 813, 819 (7th Cir. 1999); Exxon Corp. v. Oxxford Clothes, Inc., 109 F.3d 1070, 1082 n. 16 (5th Cir. 1997). We also review de novo whether laches is a valid defense to the particular cause of action. See Wyler Summit P'ship v. Turner Broadcasting Sys., Inc., 235 F.3d 1184, 1193 (9th Cir. 2000); Jackson, 25 F.3d at 886. However, the district court's application of the laches factors is entitled to deference, not to be reviewed de novo. See Bailey v. United States, 412 F.2d 320, 320 (9th Cir. 1969); Corrington, 375 F.2d at 298; see also Hot Wax, Inc., 191 F.3d at 818; Exxon Corp., 109 F.3d at 1082 n. 16.

Our decision in Soules is not to the contrary. Soules broadly stated that the district court's grant of summary judgment on the basis of laches is reviewed de novo. 849 F.2d at 1180. Soules made this statement in a single sentence with no further discussion or analysis. We do not read Soules to hold that all aspects of the district court's laches determination are reviewed de novo. If Soules intended to adopt this holding, we would expect the court to have discussed why an abuse of discretion or clear error standard was inappropriate. Indeed, such a holding would seemingly conflict with cases such as Corrington, 375 F.2d at 298, in which we reviewed application of laches on summary judgment for an abuse of discretion. However, Soules did not discuss, let alone attempt to distinguish, cases such as Corrington. Therefore, we read Soules's passing reference to a de novo standard as referring only to certain aspects of the district court's decision, and not to the application of the laches factors.

We are still left with the question of the proper standard of review of the court's laches determination. As Jackson noted, we have reviewed application of laches for an abuse of discretion on summary judgment. 25 F.3d at 888 (citing Corrington, 375 F.2d at 298); see also Bailey, 412 F.2d at 320. However, we have also reviewed laches for clear error in seemingly comparable circumstances. Tagaropulos Inc., 502 F.2d at 1171; Carter-Wallace, Inc., 434 F.2d at...

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