Eat Right Foods Ltd. v. Whole Foods Market, Inc.

• Court: Court of Appeals for the Ninth Circuit
• Decided: July 29, 2019
• Docket: 18-35473
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION JUL 29 2019 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

EAT RIGHT FOODS LTD., No. 18-35473

Plaintiff-counter- D.C. No. 2:13-cv-02174-RSM defendant-Appellant,

v. MEMORANDUM*

WHOLE FOODS MARKET, INC.,

Defendant,

and

WHOLE FOODS MARKET SERVICES, INC.; WHOLE FOODS MARKET PACIFIC NORTHWEST INC.,

Defendants-counter- claimants-Appellees.

Appeal from the United States District Court for the Western District of Washington Ricardo S. Martinez, District Judge, Presiding

Argued and Submitted June 10, 2019 Anchorage, Alaska

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Before: TASHIMA, W. FLETCHER, and BERZON, Circuit Judges.

Eat Right Foods Ltd. (“Eat Right”) appeals the district court’s grant of

summary judgment to defendants Whole Foods Market Services, Inc., and Whole

Foods Market Pacific Northwest, Inc. (collectively, “Whole Foods”) and its denial

of Eat Right’s cross-motion for summary judgment in Eat Right’s suit for

trademark infringement and other related claims. We have jurisdiction under 28

U.S.C. § 1291, and we affirm.

“We apply a hybrid standard of review to grants of summary judgment on

the basis of laches.” Eat Right Foods Ltd. v. Whole Foods Mkt., Inc. (Eat Right I),

880 F.3d 1109, 1115 (9th Cir. 2018) (citing In re Beaty, 306 F.3d 914, 921 (9th

Cir. 2002)). We review de novo “whether the district court inappropriately

resolved any disputed material facts in reaching its decision.” Id. (internal

quotations and citation omitted). However, we review for abuse of discretion the

application of the laches doctrine to the undisputed facts of a particular case. Id.

Laches is an equitable doctrine “derived from the maxim that those who

sleep on their rights, lose them.” Miller v. Glenn Miller Prods., Inc., 454 F.3d 975,

997 (9th Cir. 2006) (per curiam). At the first step of the laches analysis, the court

identifies the most analogous state statute of limitations. Tillamook Country

Smoker, Inc. v. Tillamook Cty. Creamery Ass’n, 465 F.3d 1102, 1108 (9th Cir.

2 2006). “If the plaintiff filed within that period, there is a strong presumption

against laches. If the plaintiff filed outside that period, the presumption is

reversed.” Id.

We held in Eat Right I that “it was not an abuse of discretion for the district

court to rule that [Eat Right] had constructive knowledge of Whole Foods’ alleged

infringement prior to December 2010.” Eat Right I, 880 F.3d at 1117. Eat Right I

did not decide whether the district court accurately determined that Eat Right had

constructive notice in early 2010, specifically February or March 2010. See id.

We now hold that the district court could permissibly find Eat Right had

constructive notice of Whole Foods’ alleged infringement in early 2010, at which

point Whole Foods had publicized the Eat Right America campaign on its website

and rolled out the campaign in its stores. The district court therefore did not abuse

its discretion by identifying the start of the laches period as “early 2010,” and so

Eat Right’s delay in filing suit exceeded Washington state’s three-year statute of

limitation for trade name infringement. Id. at 1115–16. The strong presumption is

therefore that laches applies.

To rebut the presumption, Eat Right needed to “show that its delay in suing

was nonetheless reasonable.” Id. at 1117. In Eat Right I, we instructed the district

court to analyze the reasonableness of Eat Right’s delay “as if [Eat Right] delayed

3 filing suit because it was trying to settle its claims against Whole Foods.” Id. at

1119. We are not persuaded that the district court consistently followed this

command on remand. As in its prior summary judgment order, the district court

repeatedly characterized Eat Right as being motivated by a desire to capitalize on

Whole Foods’ efforts, rather than by a genuine desire to settle.

Nonetheless, we conclude that the district court did not abuse its discretion

in determining that Eat Right’s attempts to settle with Whole Foods, even if

genuine, were unreasonable. Settlement efforts only justify delay where those

efforts have “a fair chance of success.” A.C. Aukerman Co. v. Miller Formless Co.,

Inc., 693 F.2d 697, 700 (7th Cir. 1982). Here, Whole Foods repeatedly declined

Eat Right’s offers to sell its brand, including in August 2013, after the settlement

with a third party of Eat Right’s trademark registration dispute. The state statute of

limitations would have expired by then, so any further delay occurred within the

period that a strong presumption favoring a finding of laches was in effect. Eat

Right did not file suit until December 2013. Even if Eat Right “delayed filing suit

because it was trying to settle its claims against Whole Foods,” see Eat Right I, 880

F.3d at 1119, the district court could nonetheless find that Eat Right’s expectation

of a positive settlement outcome involving a sale of its brand had become

unreasonable by the time the state statute of limitations expired, and that in light of

4 the state of settlement negotiations, the presumption that further delay would

trigger a laches finding was not overcome.

A defendant asserting the laches defense must also show prejudice to itself

during the plaintiff’s delay in filing suit. Id. Although two types of prejudice can

give rise to laches, the district court only relied on expectations-based prejudice.

Expectations-based prejudice arises where “a defendant . . . took actions or

suffered consequences that it would not have, had the plaintiff brought suit

promptly.” Danjaq LLC v. Sony Corp., 263 F.3d 942, 955 (9th Cir. 2001).

Contrary to Whole Foods’ argument, “at least some reliance on the absence

of a lawsuit” is necessary to show prejudice. Seller Agency Council, Inc. v.

Kennedy Ctr. for Real Estate Educ., Inc., 621 F.3d 981, 989 (9th Cir. 2010). But

there is evidence of such reliance here. It is undisputed that Whole Foods said in

April 2012 that it would phase out the “Eat Right America” campaign to avoid a

trademark dispute. The district court acted within its discretion to rely on this

evidence and conclude that Whole Foods would have acted differently had Eat

Right filed suit earlier.

Contrary to Eat Right’s assertions, the doctrine of “willful infringement”

does not preclude the laches defense here. A plaintiff can prevail on the “unclean

hands” counter-defense to laches “only if the court is left with a firm conviction”

5 that the defendant acted willfully. Jarrow Formulas Inc. v. Nutrition Now Inc.,

304 F.3d 829, 842 (9th Cir. 2002). This is a demanding standard. See id. Eat

Right’s circumstantial evidence that Whole Foods must have known it was

infringing because it carried Eat Right cookies is not sufficient to show unclean

hands. As in Jarrow, though Whole Foods’ hands “are not as ‘clean as snow,’”

neither do “its actions rise to the level of unclean hands.” See id. (citation

omitted).

Because we affirm the district court on the basis of laches, we need not reach

the question whether Whole Foods was also entitled to summary judgment on the

basis of acquiescence and express no views as to that question.

AFFIRMED.