Baby Trend Inc v. Playtex Products LLC
Filing
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ORDER that Playtexs Motion to Dismiss is GRANTED 27 . Given BabyTrends allegations in its First Amended Complaint, the Court sees no set of additional facts that could possibly cure the statute-of-limitations bar. Thus, this case is DISMISSED WITH PREJUDICE. The Clerk of Court shall close this case. by Judge Otis D. Wright, II .( MD JS-6. Case Terminated ). (lc). Modified on 8/7/2013 (lc).
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UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT OF CALIFORNIA
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Case No. 5:13-cv-647-ODW(RZx)
BABY TREND, INC.,
v.
ORDER GRANTING MOTION TO
DISMISS [27]
Plaintiff,
PLAYTEX PRODUCTS, LLC,
Defendant.
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I.
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INTRODUCTION
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Baby Trend, Inc. and Playtex Products, LLC each compete in the diaper-pail
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market. After Playtex began a national advertising campaign to market its pails as
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number one in controlling diaper odor, Baby Trend’s sales plummeted. On April 9,
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2013—five years after Baby Trend allegedly began suffering revenue losses as a result
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of that advertising claim—Baby Trend brought this action against Playtex for false
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advertising under § 43(a)(1)(B) of the Lanham Act.
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California’s three-year statute of limitations for fraud applies to bar Baby Trend’s
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Lanham Act claim, and thus the court GRANTS Playtex’ Motion to Dismiss.1 (ECF
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No. 27.)
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For the following reasons,
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Having considered the papers filed in support of and in opposition to this Motion, the Court deems
the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; L.R. 7-15.
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II.
BACKGROUND
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Baby Trend manufactures two diaper-pail systems—Diaper Champ and Diaper
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Champ Deluxe—which can be found at major national retail and online outlets. (FAC
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¶ 8.) These products allegedly compete with Playtex’s Diaper Genie II Elite diaper-
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pail system; and each of these products are sold on the same store shelves. (Id. ¶ 9.)
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Since at least as early as September 2008, Playtex nationally advertised that its Diaper
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Genie II Elite diaper-pail system is “Proven #1 in Odor Control” using various
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mediums. (Id. ¶ 10.) Playtex qualified its claim by adding, “when tested against other
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major competitors that use ordinary garbage bags and/or carbon refills under the most
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rigorous conditions of emptying the pail.” (Id. ¶¶ 10–11.)
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Following Baby Trend’s steady sales growth through 2007, its products
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experienced “steady and substantial sales declines” since 2008 when Playtex launched
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its Proven #1 campaign. (Id. ¶ 15.) Baby Trend asserts that the Proven #1 claim is
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literally false and also contends that if Playtex performed such a test, it was not
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performed “under the most rigorous conditions of emptying the pail.” (Id. ¶ 13.)
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Playtex now moves to dismiss the case and argues that the entire lawsuit is
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untimely because Baby Trend sat silent during the entire five-year period Playtex used
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the Proven #1 claim to advertise its products. (Mot. 1.) Baby Trend opposes the
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Motion and insists it had no reason to question the veracity of Playtex’s Proven #1
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claim until it learned of a verdict in an unrelated case against Playtex in July 2012.
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(FAC ¶ 14.)
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III.
LEGAL STANDARD
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Dismissal under Rule 12(b)(6) can be based on “the lack of a cognizable legal
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theory” or “the absence of sufficient facts alleged under a cognizable legal theory.”
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Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). A complaint
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need only satisfy the minimal notice pleading requirements of Rule 8(a)(2)—a short
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and plain statement—to survive a motion to dismiss for failure to state a claim under
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Rule 12(b)(6). Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003); Fed. R. Civ.
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P. 8(a)(2). For a complaint to sufficiently state a claim, its “[f]actual allegations must
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be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v.
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Twombly, 550 U.S. 544, 555 (2007). While specific facts are not necessary so long as
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the complaint gives the defendant fair notice of the claim and the grounds upon which
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the claim rests, a complaint must nevertheless “contain sufficient factual matter,
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accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v.
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Iqbal, 556 U.S. 662, 678 (2009).
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Iqbal’s plausibility standard “asks for more than a sheer possibility that a
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defendant has acted unlawfully,” but does not go so far as to impose a “probability
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requirement.” Id. Rule 8 demands more than a complaint that is merely consistent
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with a defendant’s liability—labels and conclusions, or formulaic recitals of the
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elements of a cause of action do not suffice. Id. Instead, the complaint must allege
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sufficient underlying facts to provide fair notice and enable the defendant to defend
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itself effectively.
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determination whether a complaint satisfies the plausibility standard is a “context-
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specific task that requires the reviewing court to draw on its judicial experience and
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common sense.” Iqbal, 556 U.S. at 679.
Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).
The
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When considering a Rule 12(b)(6) motion, a court is generally limited to the
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pleadings and must construe “[a]ll factual allegations set forth in the complaint . . . as
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true and . . . in the light most favorable to [the plaintiff].” Lee v. City of L.A., 250 F.3d
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668, 688 (9th Cir. 2001). Conclusory allegations, unwarranted deductions of fact, and
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unreasonable inferences need not be blindly accepted as true by the court. Sprewell v.
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Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Yet, a complaint should be
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dismissed only if “it appears beyond doubt that the plaintiff can prove no set of facts”
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supporting plaintiff’s claim for relief. Morley v. Walker, 175 F.3d 756, 759 (9th Cir.
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1999).
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As a general rule, leave to amend a complaint that has been dismissed should be
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freely granted. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when
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“the court determines that the allegation of other facts consistent with the challenged
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pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well
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Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see Lopez v. Smith, 203 F.3d
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1122, 1127 (9th Cir. 2000).
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IV.
DISCUSSION
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Plaxtex advances three arguments in its Motion to Dismiss. First, Playtex
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argues that Baby Trend’s Lanham Act claim is time-barred and urges the Court to
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borrow the limitations period from the most closely analogous action under California
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law. Second, Playtex argues the doctrine of laches should preclude Baby Trend’s
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claim. Third, Playtex moves to dismiss on the basis that Baby Trend fails to plead its
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Lanham Act claim under the heighten Rule 9(b) pleading standard. Finally, Playtex
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moves to strike Baby Trend’s request for injunctive relief on the theory that Playtex
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removed the advertising claim at issue from its product packaging in February 2011.
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As set forth in detail below, Baby Trend’s claim is time-barred because California’s
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three-year statute of limitations for fraud applies to Baby Trend’s Lanham Act claim.
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Therefore, the Court need not reach Playtex’s other grounds for dismissal.
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Baby Trend contends that Playtex’s claims constitute false and deceptive
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advertising in violation of § 43(a)(1)(B) of the Lanham Act, 15 U.S.C.
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§ 1125(a)(1)(B). Section 43(a)(1)(B) authorizes suit against persons who make false
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and deceptive statements in a commercial advertisement about their own or another’s
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product. Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir.
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1997). Baby Trend asserts that Playtex made the challenged claims about its Diaper
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Genie II Elite product in September 2008, and that it began suffering substantial and
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steady revenue losses that year.
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A.
California’s statute of limitations for fraud applies to Lanham Act claims
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The Lanham Act “contains no explicit statute of limitations,” so federal courts
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“presume that Congress intended to ‘borrow’ the limitations period from the closely
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analogous action under state law.” Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304
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F.3d 829, 836 (9th Cir. 2002) (citing Reed v. United Transp. Union, 488 U.S. 319,
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323–24 (1989)). Federal courts consult the relevant state statute-of-limitations period
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for fraud claims, which are closely analogous to false-advertising claims arising under
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Section 43(a)(1)(B). See, e.g., Karl Storz Endoscopy-Am., Inc. v. Surgical Techs.,
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Inc., 285 F.3d 848, 857 (9th Cir. 1992) (applying California’s three-year fraud statute
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of limitations to Lanham Act claims); Conopco, Inc. v. Campbell Soup Co., 95 F.3d
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187, 191 (2d Cir. 1996) (applying New York’s six-year fraud statute of limitations to
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a Lanham Act false-advertising claim because “it is clear that both intent and fraud
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play an important role in all Lanham Act claims”).
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The Ninth Circuit in Jarrow noted that “[t]he proper interplay between laches
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and the statute of limitations is somewhat elusive,” but did not resolve whether a
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statute of limitations defense may be applied to a claim under the Lanham Act.
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Jarrow, 304 F.3d at 836–37. Nevertheless, in applying the equitable doctrine of
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laches to a Lanham Act claim, the court held that “consistent with the views of our
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sister circuits . . . if a § 43(a) claim is filed within the analogous state limitations
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period, the strong presumption is that laches is inapplicable; if the claim is filed after
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the analogous limitations period has expired, the presumption is that laches is a bar to
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the suit.” Id. at 837.
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Since the Jarrow decision, courts in the Ninth Circuit have recognized that the
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closely analogous statute of limitations may be a distinct defense to Lanham Act
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claims. See ThermoLife Int’l, LLC v. Gaspari Nutrition, Inc., 871 F. Supp. 2d 905,
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909–11 (D. Ariz. 2012); Levi Strauss & Co. v. Papikian Enters., Inc., No. C 10-05051
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JSW, 2011 WL 3739550, at *4 (N.D. Cal. Aug. 24, 2011). Although both courts in
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ThermoLife and Levi Strauss declined to dismiss the underlying actions as time-barred
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under the applicable statute of limitations because the defendants’ activities continued
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through the statutory period, these cases suggest that a statute-of-limitations defense to
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Lanham Act claims exists separate and apart from a laches defense. Moreover, the
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Ninth Circuit has held—without further explanation—that Arizona’s three-year statute
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of limitations for fraud should apply to Lanham Act claims. Au-Tomotive Gold Inc. v.
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Volkswagen of Am., Inc., 603 F.3d 1133, 1140 (9th Cir. 2010). The Court sees no
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need to depart from this line of reasoning and holds that California’s statute of
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limitations for fraud should apply to Lanham Act claims.
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B.
Baby Trend’s Lanham Act claim is time-barred
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California law provides a three-year statute of limitations for fraud. Cal. Civ.
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Proc. Code §338(d). For Lanham Act false-advertising claims, this three-year period
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“runs from the time the plaintiff knew or should have known about his § 43(a) cause
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of action.” Jarrow, 304 F.3d at 838 (citing Gen. Bedding Corp. v. Echevarria, 947
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F.2d 1395, 1397 n.2 (9th Cir. 1991)).
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In the absence of fraudulent concealment, the plaintiff bears the burden of
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determining—within the statutory period—whether and whom to sue. Davis v. United
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States, 642 F.2d 328, 331 (9th Cir. 1981).
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concealment, a plaintiff must allege facts establishing that a defendant affirmatively
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engaged in conduct that would lead a prospective plaintiff to reasonably believe that
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he had no claim, although a defendant’s silence or passive conduct is not fraudulent.
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Rutledge v. Boston Woven Hose & Rubber Co., 576 F.2d 248, 250 (9th Cir. 1978).
To successfully establish fraudulent
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Baby Trend’s claim is barred if it knew or should have known about its § 43(a)
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cause of action before April 9, 2010—three years before it filed this action. Baby
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Trend claims Playtex began using the Proven #1 claim on its product packaging in
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September 2008. (FAC ¶ 10.) Baby Trend also alleges that its Diaper Champ
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products “have experienced steady and substantial sales declines since 2008 when
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Playtex launched its Proven #1 Claim.” (Id. ¶ 15.) Thus, on the face of the First
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Amended Complaint, Baby Trend’s claim must have accrued sometime prior to the
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April 9, 2010 bar date: this date is more than a year and a half after Playtex allegedly
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began using the Proven #1 claim, and more than one year after Baby Trend first began
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realizing “steady and substantial sales declines.”
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Baby Trend also alleges that its Diaper Champ product “compete[s] directly”
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with Playtex’s Diaper Genie II diaper pails, and that the products are “commonly sold
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on the same store shelves.” (Id. ¶ 9.) If Baby Trend knew Playtex was its direct
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competitor, then Baby Trend, in the exercise of reasonable diligence, should have
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discovered the falsity of Playtex’s statements shortly after Playtex began using the
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Proven #1 claim or after Baby Trend began experiencing “substantial sales declines.”
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(Id. ¶¶ 10, 15.) It is reasonable to expect that a company in a competitive market
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would, at a minimum, exercise reasonable diligence in determining why it was
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experiencing a decline in sales, including investigating a direct competitor’s
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advertising claim. Baby Trend’s argument that it did not “question the veracity of
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[Playtex’s] Proven #1 Claim until after it became aware of the verdict” in a related
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case “flies in the face of the purpose of having statutes of limitations.” Glassman v.
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S.F. City & Cnty., No. C 06-02304 WHA, 2006 WL 2644890, at *4 (N.D. Cal. Sept.
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15, 2006).
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Finally, an important exception to the general rule of determining when a cause
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of action accrues is the “discovery rule,” which tolls accrual “until the plaintiff
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discovers, or has reason to discover, the cause of action.” Grisham v. Phillip Morris
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U.S.A., Inc., 40 Cal. 4th 623, 634 (2007). To invoke the discovery rule, plaintiffs are
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required to plead and prove facts showing: (a) lack of knowledge; (b) lack of means of
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obtaining knowledge (in the exercise of reasonable diligence the facts could not have
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been discovered at an earlier date); and (c) how and when the plaintiff actually
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discovered the fraud. Gen. Bedding, 947 F.2d at 1397. Constructive notice equates to
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knowledge under this rule.
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investigate the validity of Playtex’s advertising claim. Nor does Baby Trend allege
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any explanation for how they lacked means of obtaining that knowledge or how the
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facts could not have been discovered at an earlier date. See, e.g., McCready v. Am.
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Honda Motor Co., No. C 05-5247 SBA, 2006 WL 1708303, at *4–5 (N.D. Cal. June
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19, 2006) (refusing to invoke the discovery rule and dismissing claim where plaintiffs
Id.
Baby Trend fails to show that it took steps to
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failed to plead facts regarding their lack of knowledge and why they lacked the means
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to discover their cause of action). Thus, the discovery rule is not appropriately applied
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here.
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V.
CONCLUSION
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Because Baby Trend fails to show fraudulent concealment or properly invoke
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the discovery rule, its Lanham act claim is time-barred under the three-year statute of
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limitations. Therefore, Playtex’s Motion to Dismiss is GRANTED. Given Baby
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Trend’s allegations in its First Amended Complaint, the Court sees no set of
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additional facts that could possibly cure the statute-of-limitations bar. Thus, this case
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is DISMISSED WITH PREJUDICE. The Clerk of Court shall close this case.
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IT IS SO ORDERED.
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August 7, 2013
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____________________________________
OTIS D. WRIGHT, II
UNITED STATES DISTRICT JUDGE
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