Hot Wax Inc. v. Turtle Wax Inc.

• Decision Date: 15 September 1999
• Docket Number: No. 98-3981,98-3981
• Citation: 191 F.3d 813,52 USPQ2d 1065
• Parties: (7th Cir. 1999) Hot Wax, Inc., Plaintiff-Appellant, v. Turtle Wax, Inc., Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 813

191 F.3d 813 (7th Cir. 1999)

Hot Wax, Inc., Plaintiff-Appellant, v. Turtle Wax, Inc., Defendant-Appellee.

No. 98-3981

United States Court of Appeals, Seventh Circuit

Argued May 18, 1999

Decided September 15, 1999

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 97 C 3646--Ruben Castillo, Judge. [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before Coffey, Kanne, and Diane P. Wood, Circuit Judges.

Kanne, Circuit Judge.

Hot Wax, Inc., brought this action against Turtle Wax, Inc., for false advertising and false promotion under sec. 43(a) of the Lanham Act seeking damages and injunctive relief. The district court granted Turtle Wax's motion for summary judgment after concluding that the doctrine of laches barred Hot Wax's pursuit of all requested relief. Because we agree with the district court's conclusion that the doctrine of laches applies in this case, we affirm.

I. History

Hot Wax and Turtle Wax are competitors in the automated carwash/car wax industry. In the late 1960's and early 1970's, Edward Holbus began marketing Hot Wax products to carwashes nationwide. During that time, Holbus developed a self-described break-through product and a unique system of application that made it possible to apply genuine carnauba wax to the surface of automobiles in automatic carwashes. This system provides automobiles with both polish and protection. In 1975, Holbus incorporated Hot Wax, Inc., to sell Hot Wax products and the applicators for these products. Due to the physical characteristics of the wax and the manner in which the wax had to be applied, Hot Wax encountered high costs in integrating its wax into its line of carwash products. Hot Wax began experiencing diminished financial success and blamed declining sales on competing products that Holbus described as "cheater" waxes developed by competitors such as Turtle Wax.

Turtle Wax entered the automatic carwash market as a supplier of products in 1976. Turtle Wax has advertised and sold its products to consumers and retailers in the automatic carwash business under the product names Polyshell Triple Shine (Red, Blue, and Gold), Polish Wax and Cherry Polish Wax, Sealer Wax, and Super Foaming Sealer Wax. As with Hot Wax's "Hot Wax" products, these Turtle Wax products are typically sprayed onto the surface of an automobile at automatic carwash facilities.

According to Holbus, Hot Wax has suffered significant lost sales as a result of Turtle Wax's entry into the market. Hot Wax describes the products sold by Turtle Wax as non-wax spray products that Turtle Wax falsely promotes as wax for the automatic carwash industry because Turtle Wax's products contain mineral seal oils and wax emulsions that are less costly to produce than traditional natural and synthetic wax ingredients. Because Turtle Wax's products are less expensive to produce than Hot Wax's wax products, Turtle Wax has dominated the automatic carwash market to the point of becoming an industry leader. As a result of Turtle Wax's entry into this market, Hot Wax's presence in this market has been effectively reduced, and Hot Wax has experienced declining sales.

Holbus learned that Turtle Wax entered the automatic carwash market as a supplier sometime in the mid-1970's. It was also during this time that Holbus became aware of the nature of Turtle Wax's products; namely that the products sold by Turtle Wax neither contained natural or synthetic substances typically found in wax nor exhibited wax-like properties when applied to the surface of a car. Despite having this information, Holbus waited until 1993 to take any action with respect to his concerns.

In 1993, Holbus began a letter writing campaign directed at Turtle Wax and others accusing them of falsely advertising certain products for automatic carwashes as wax. In these letters, Holbus specifically accused Turtle Wax of having mislabeled its products for twenty years. In addition to sending a letter to Turtle Wax, Holbus also directed one of his letters to the Wisconsin Department of Agriculture, Trade and Consumer Protection requesting that it take action against the allegedly false advertising by Turtle Wax and other companies. In response to this letter, the Department informed Holbus that the term "wax" had grown to encompass a variety of substances, including those that fell outside the traditional definition of the term. The Department also stated that "it would [not] be possible to hold sellers of carwash products to a strict chemical definition of a word that has come to mean much more in everyday usage" and concluded that Turtle Wax had not violated any Wisconsin deceptive trade practice laws by labeling its automatic carwash products as waxes.

As a result of the ineffectiveness of his letter writing campaign, Holbus filed suit on behalf of Hot Wax in 1997 against Turtle Wax and eight other companies involved in selling products to the automatic carwash industry. Holbus accused Turtle Wax of misrepresenting the qualities of its products and sought both damages and injunctive relief. After the district court dismissed all defendants except for Turtle Wax because of improper joinder, Hot Wax filed an amended complaint alleging that Turtle Wax violated sec. 43(a)(2) of the Lanham Act, 15 U.S.C. sec. 1125, because its products, including Polish Wax, Cherry Polish Wax, Sealer Wax, Super Foaming Sealer Wax, Poly Sealant, and Poly Shell Triple Shine, contained no wax and did not protect or polish the surface of an automobile in the same manner as traditional wax products do.

Before the district court, the parties submitted cross motions for summary judgment. In support of these motions, the parties provided competing expert testimony regarding the industry definition of "wax" and whether Turtle Wax's products fell within this definition. The parties' experts also disputed the effectiveness of the products at issue and whether the products provided the type of protection typically associated with wax.

In addressing the motions for summary judgment, the district court concluded that neither Turtle Wax nor Hot Wax provided conclusive evidence regarding whether Turtle Wax's products falsely represented that they had certain qualities that would be material to a consumer's decision to purchase the product. The district court based this conclusion on the fact that the parties presented conflicting testimony and data regarding the effectiveness of Turtle Wax's products, the carwash industry's and consumer's understanding of the term "wax", and the appropriate definition of the term wax. For this reason, the district court denied both parties' motions to the extent the motions sought a dispositive ruling on the merits of Hot Wax's Lanham Act claims.

Despite not reaching the merits of Hot Wax's Lanham Act claims, the district court entered summary judgment in favor of Turtle Wax after concluding that the doctrine of laches barred these claims. The district court found that Hot Wax unduly delayed in pursuing its claims against Turtle Wax in light of the fact that Holbus admitted that he believed as early as the mid- 1970's that Turtle Wax misrepresented the character and quality of its products, yet did not file suit until 1997. The district court determined that this unexplained delay prejudiced Turtle Wax due to the substantial investment Turtle Wax made both in product development and in promoting its products as waxes. The district court reasoned that, had Hot Wax filed its suit in a timely manner, Turtle Wax could have promoted its products as less costly but more effective alternatives to natural wax products. In finding the doctrine of laches applied, the district court rejected Hot Wax's arguments that laches should not preclude Hot Wax from maintaining its suit because: (1) the statute of limitations had not run; (2) Hot Wax's claim was akin to a claim at law for damages; (3) Turtle Wax's alleged unclean hands; and (4) laches is not an appropriate subject for summary judgment in Lanham Act false advertising cases. Hot Wax now appeals the district court's grant of summary judgment in favor of Turtle Wax on this issue.

II. Analysis

A. Standard of Review

We typically review a district court's grant of summary judgment de novo, drawing our own conclusions of law and fact from the record before us. See Thiele v. Norfolk & Western Ry. Co., 68 F.3d 179, 181 (7th Cir. 1995). Summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In determining whether a genuine issue of material fact exists, courts must construe all facts in the light most favorable to the non-moving party and draw all reasonable and justifiable inferences in favor of that party. See Bombard v. Fort Wayne Newspapers Inc., 92 F.3d 560, 562 (7th Cir. 1996). "A genuine issue of fact exists only when a reasonable jury could find for the party opposing the motion based on the record as a whole." Roger v. Yellow Freight Sys., Inc., 21 F.3d 146, 149 (7th Cir. 1994).

The traditional standard of review in summary judgment cases must be considered in light of the notion that a district court enjoys considerable discretion in determining whether to apply the doctrine of laches to claims pending before it. See Hawxhurst v. Pettibone Corp., 40 F.3d 175, 181 (7th Cir. 1994); Lake Caryonah Improvement Ass'n v. Pulte Home Corp., 903 F.2d 505, 509 (7th Cir. 1990) ("The decision of the trial court to invoke the doctrine of laches will not be disturbed absent a clear abuse of discretion."). To this end, in cases "in which there is no dispute as...