Conopco, Inc. v. Campbell Soup Co.

• Decision Date: 09 September 1996
• Docket Number: 1660,D,Nos. 1235,s. 1235
• Citation: 95 F.3d 187
• Parties: 1996-2 Trade Cases P 71,551, 40 U.S.P.Q.2d 1042 CONOPCO, INC., d/b/a Van Den Bergh Foods Company, Plaintiff-Appellant-Cross-Appellee, v. CAMPBELL SOUP COMPANY, Defendants-Appellee-Cross-Appellant. ockets 95-7905(L), 95-7963(XAP).
• Court: U.S. Court of Appeals — Second Circuit

Page 187

95 F.3d 187

1996-2 Trade Cases P 71,551, 40 U.S.P.Q.2d 1042

CONOPCO, INC., d/b/a Van Den Bergh Foods Company, Plaintiff-Appellant-Cross-Appellee, v. CAMPBELL SOUP COMPANY, Defendants-Appellee-Cross-Appellant.

Nos. 1235, 1660, Dockets 95-7905(L), 95-7963(XAP).

United States Court of Appeals,

Second Circuit.

Argued April 12, 1996.

Decided Sept. 9, 1996.

H. Peter Haveles, Jr., Cadwalader, Wickersham & Taft, New York City (Terence F. Gilheany, Ralph Berman, Manal Z. Khalil, Cadwalader, Wickersham & Taft, Arnold I. Friede, Van Den Bergh Food Co., on the brief), for plaintiff-appellant-cross-appellee.

Mari M. Gursky Shaw, Dechert Price & Rhoads, Philadelphia, PA (Andrew L. Fish, Dechert Price & Rhoads, John M. Coleman, James K. Baughman, Campbell Soup Co., on the brief), for defendant-appellee-cross--appellant.

Before: KEARSE and ALTIMARI, Circuit Judges, and MORAN, ^* District Judge.

ALTIMARI, Circuit Judge:

Plaintiff-appellant-cross-appellee Conopco, Inc. (d/b/a Van den Bergh Foods Co.) ("Conopco") commenced the present action against defendant-appellee-cross-appellant Campbell Soup Co. ("Campbell") for false advertising and misrepresentation under the Lanham Act, 15 U.S.C.A. §§ 1051-1128 (1976, 1983, 1982 & West Supp.1996) and state law. The United States District Court for the Southern District of New York (Preska, J.) granted a judgment on partial findings pursuant to Fed.R.Civ.P. 52(c), dismissing Conopco's case as barred by laches. The Court then denied Campbell's petition for attorneys' fees.

Conopco now appeals claiming, inter alia, that the district court failed to give sufficient weight to the public interest in preventing false advertising and consumer confusion and, thus, erred in dismissing the case under the doctrine of laches. Campbell asserts that it was entitled to a presumption of laches, and it cross-appeals contending that the court should have awarded it attorneys' fees pursuant to § 35(a) of the Lanham Act, 15 U.S.C. § 1117(a) (1994). Because we find both Conopco's and Campbell's arguments unavailing, we affirm the district court in full.

BACKGROUND

Conopco and Campbell are competitors in the pasta sauce market. Conopco produces Ragu brand sauces and Campbell produces pasta sauces under the brand name Prego. When Campbell entered the sauce market with Prego, Ragu was the dominant sauce, holding 60% of the pasta sauce market. Since Prego's entry into the market, many new brands and flavors of sauces have emerged, leading to heightened competition In March 1988, Campbell began an advertising campaign focusing upon the thickness of its Prego sauces. After testing various advertising strategies, Campbell's advertising agency, FCB/Leber Katz ("Leber Katz"), determined that the most effective way to establish Prego's thickness was to conduct a side-by-side comparison of Prego with the market leader--namely, Conopco's Ragu Old World Style sauce. Campbell's advertisements showed Prego next to Ragu Old World Style and stated that, as one could demonstrate in one's own home, Prego was thicker and chunkier than Ragu. While Conopco has conceded that Prego is, in fact, thicker and chunkier than Ragu Old World Style, Conopco asserts that the advertisements are misleading because they suggest that Prego is thicker than all of Conopco's Ragu sauces, not just the Ragu Old World Style variety. In fact, when compared with some of Conopco's thicker varieties of Ragu sauce (e.g., Ragu Thick & Hearty), Prego is notably thinner.

within the industry. This stiff sauce competition is not surprising in light of the fact that the sauce market now accounts for $1.3 billion in annual gross revenues.

Within two weeks of the first airing of the comparison advertisements, Conopco became aware of Campbell's campaign. Campbell's initial advertisements identified the sauces being compared as "Prego" and "Ragu Old World Style" in superimposed text; however, the commercials' voice-overs designated the sauces generally as "Prego" and "Ragu." In March 1989, Conopco lodged a complaint with the three major television networks, asserting that Campbell's comparison commercials were misleading. As a result of these complaints, Campbell modified its commercials' voice-overs to refer to Conopco's sauce as "Ragu Original Style." The networks took no steps to bar the modified commercials from being televised.

In 1991, Conopco again challenged Campbell's comparison advertisements along similar lines, this time with the National Advertising Division of the Better Business Bureau ("NAD"). The NAD ruled that Campbell could not refer to "Ragu Old World Style" generically as "Ragu" in its commercials. Shortly thereafter, Campbell further modified its advertisements, referring to Conopco's sauce in both the voice-overs and script of its commercials as "Ragu Old World Style." Still believing the comparison advertisements to be misleading, Conopco brought this action on June 23, 1993--more than five years after Conopco first became aware of Campbell's advertising campaign--pursuant to Section 43(a) of the Lanham Act, 15 U.S.C.A. § 1125(a) (Supp.1996) and state law.

At the outset of its litigation, Conopco moved for a preliminary injunction against the further airing of Campbell's allegedly misleading commercials. On December 20, 1993, the district court granted a motion by Conopco to consolidate its motion for a preliminary injunction with a trial on the merits of Conopco's claim for permanent injunctive relief. On March 11, 1994, Campbell moved for summary judgment on the basis of laches. The district court denied Campbell's motion, finding that issues of material fact remained in dispute. A trial commenced to determine the appropriateness of injunctive relief. At the close of Conopco's case on May 31, 1994, Campbell moved for judgment on partial findings pursuant to Fed.R.Civ.P. 52(c), again asserting laches. By order dated March 17, 1995, the district court granted Campbell's motion and dismissed Conopco's case as barred by laches.

In post-trial submissions, Campbell moved for the award of attorneys' fees. The district court denied Campbell's motion, stating that attorneys' fees will only be awarded under the Lanham Act when the party seeking recompense has demonstrated bad faith on the part of the opposing party. See Universal City Studios, Inc. v. Nintendo Co., 797 F.2d 70, 77 (2d Cir.), cert. denied, 479 U.S. 987, 107 S.Ct. 578, 93 L.Ed.2d 581 (1986). Because Campbell could not demonstrate bad faith on the part of Conopco, the district court denied Campbell's motion.

On appeal, Conopco argues that the district court: (1) abused its discretion by failing to give the public interest sufficient weight in its laches determination; (2) incorrectly determined that Campbell had been prejudiced by Conopco's delay in bringing suit; and (3) improperly relied upon a hearsay

affidavit that had not been subject to cross-examination. Campbell asserts that the district court erred in finding that no presumption of laches applied and cross-appeals the denial of its motion for attorneys' fees.

DISCUSSION

I. Presumption of Laches

Although laches is an equitable defense, employed instead of a statutory time-bar, analogous statutes of limitation remain an important determinant in the application of a laches defense. Because the Lanham Act establishes no limitations period for claims alleging unfair competition or false advertising, and because there is no corresponding federal statute of limitations, we look to "the most appropriate" or "the most analogous" state statute of limitations for laches purposes. See Wilson v. Garcia, 471 U.S. 261, 266-68, 105 S.Ct. 1938, 1941-43, 85 L.Ed.2d 254 (1985); Ceres Partners v. GEL Assocs., 918 F.2d 349, 352-53 (2d Cir.1990); Adler v. Education Dep't of New York, 760 F.2d 454, 456 (2d Cir.1985); Gordon and Breach Science Publishers S.A. v. American Inst. of Physics, 859 F.Supp. 1521, 1528-29 (S.D.N.Y.1994). That statute of limitations then determines which party possesses the burden of proving or rebutting the defense.

"When a suit is brought within the time fixed by the analogous statute, the burden is on the defendant to show ... circumstances exist which require the application of the doctrine of laches. On the other hand, when the suit is brought after the statutory time has elapsed, the burden is on the complainant to aver and prove the circumstances making it inequitable to apply laches to his case."

Leonick v. Jones & Laughlin Steel Corp., 258 F.2d 48, 50 (2d Cir.1958) (quoting Reconstruction Fin. Corp. v. Harrisons & Crosfield, Ltd., 204 F.2d 366, 370 (2d Cir.), cert. denied, 346 U.S. 854, 74 S.Ct. 69, 98 L.Ed. 368 (1953)); see University of Pittsburgh v. Champion Prods. Inc., 686 F.2d 1040, 1045 (3d Cir.), cert. denied, 459 U.S. 1087, 103 S.Ct. 571, 74 L.Ed.2d 933 (1982). Therefore, prior to the running of the most closely analogous state statute of limitations there is no presumption of laches and the burden remains on the defendant to prove the defense. Alternatively, once the analogous statute has run, a presumption of laches will apply and plaintiff must show why the laches defense ought not be applied in the case.

In the case at hand, the district court determined, consistent with virtually every district court in this Circuit that has addressed the question, that a six year fraud statute, see N.Y. Civ. Prac. L. & R. 213(8) (McKinney 1990), is applicable in the context of misleading advertisement, see Gordon and Breach, 859 F.Supp. at 1529 (collecting cases). Campbell contends that the district court is mistaken and that the three year statute of limitations for injury to property, see N.Y. Civ. Prac. L. & R. 214(4) (McKinney 1990), should be applied as the governing statute, see Construction Technology, Inc. v. Lockformer Co., 704 F.Supp. 1212, 1219-21 (S.D.N.Y.1989). According to Campbell, injury to property is more properly analogous to a Lanham Act claim because neither...