World Nutrition Incorporated v. Advanced Enzymes USA ( 2020 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 World Nutrition Incorporated, No. CV-19-00265-PHX-GMS 10 Plaintiff, ORDER 11 v. 12 Advanced Enzymes USA, et al., 13 Defendants. 14 AST Enzymes, 15 Counter-claimant, 16 v. 17 World Nutrition Incorporated, 18 Counter-defendant. 19 20 Pending before the Court is Defendant Cal-India Foods International’s 21 (“Cal-India”) Motion to Dismiss (Doc. 89) and its accompanying Requests for Judicial 22 Notice (Docs. 90, 98). Also before the Court is Plaintiff World Nutrition Incorporated’s 23 (“World Nutrition”) Request for Judicial Notice. (Doc. 94). For the following reasons, 24 Cal-India’s Motion to Dismiss is denied and the Requests for Judicial Notice are denied as 25 moot. 26 BACKGROUND 27 World Nutrition is engaged in the business of selling nutraceuticals, including 28 Vitalzym, an enzyme product. Cal-India manufactures custom formulated enzymes and 1 sells its products to Defendant Advanced Supplementary Technologies Corporation 2 (“AST”), a direct competitor of World Nutrition. World Nutrition alleges that Cal-India 3 and AST falsely state that their products contain enteric-coated Serrapeptase and enteric- 4 coated Nattokinase. 5 World Nutrition brings this action asserting false advertising in violation of the 6 Lanham Act and unfair competition. In its Second Amended Complaint, World Nutrition 7 added Cal-India as a defendant. Cal-India moves to dismiss both claims against it on the 8 grounds of laches. 9 DISCUSSION 10 I. Legal Standard 11 To survive dismissal for failure to state a claim pursuant to Federal Rule of Civil 12 Procedure 12(b)(6), a complaint must contain more than a “formulaic recitation of the 13 elements of a cause of action”; it must contain factual allegations sufficient to “raise the 14 right of relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 15 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). When analyzing a complaint 16 for failure to state a claim, “allegations of material fact are taken as true and construed in 17 the light most favorable to the non-moving party.” Smith v. Jackson, 84 F.3d 1213, 1217 18 (9th Cir. 1996). However, legal conclusions couched as factual allegations are not given a 19 presumption of truthfulness, and “conclusory allegations of law and unwarranted 20 inferences are not sufficient to defeat a motion to dismiss.” Pareto v. F.D.I.C., 139 F.3d 21 696, 699 (9th Cir. 1998). 22 II. Analysis 23 Laches bars a claim where the plaintiff unreasonably delays in bringing suit and the 24 defendant is prejudiced by the delay. Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 25 F.3d 829, 838 (9th Cir. 2002). A party with unclean hands, however, may not assert laches. 26 Id. at 841. “The unclean hands doctrine ‘closes the doors of a court of equity to one tainted 27 with inequitableness or bad faith relative to the matter in which he seeks relief.’” Id. 28 (quoting Precision Instr. Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945)). 1 To prevail on a defense of unclean hands, a defendant must demonstrate “that the plaintiff’s 2 conduct is inequitable” and “that the conduct relates to the subject matter of [the plaintiff’s] 3 claims.” Fuddruckers, Inc. v. Doc’s B.R. Others, Inc., 826 F.2d 837, 847 (9th Cir. 1987). 4 “[O]nly a showing of wrongfulness, willfulness, bad faith, or gross negligence, proved by 5 clear and convincing evidence, will establish sufficient culpability for invocation of the 6 doctrine of unclean hands.” Pinkette Clothing, Inc. v. Cosm. Warriors Ltd., 894 F.3d 1015, 7 1029 (9th Cir. 2018) (quoting Pfizer, Inc. v. Int’l Rectifier Corp., 685 F.2d 357, 359 (9th 8 Cir. 1982)). Additionally, for Lanham Act false advertising claims, a plaintiff prevails on 9 the unclean hands doctrine “only if the court is left with a firm conviction that the defendant 10 acted with a fraudulent intent in making the challenged claims.” Jarrow Formulas, Inc., 11 304 F.3d at 842. “The application of the unclean hands doctrine raises primarily a question 12 of fact.” Dollar Sys., Inc. v. Avcar Leasing Sys., Inc., 890 F.2d 165, 173 (9th Cir. 1989). 13 In its Second Amended Complaint, World Nutrition alleges Defendants Cal-India 14 and AST “worked together” to produce the false statements about their products. (Doc. 86 15 ¶ 28.) World Nutrition asserts Cal-India had a “significant role” in the claims that the 16 Serrapeptase and Nattokinase are enterically coated and “knowingly participated” in the 17 false advertising. Id. ¶ 30. World Nutrition also alleges Cal-India and AST have made 18 continuing false statements about the products since at least 2012. Id. ¶ 37. Additionally, 19 World Nutrition argues that Cal-India and AST’s conduct is “driven by an evil mind” and 20 “intended to deceive the public.” Id. ¶ 42. Drawing all reasonable inferences in favor of 21 World Nutrition, World Nutrition has plausibly alleged that Cal-India acted with unclean 22 hands. Therefore, Cal-India’s Motion to Dismiss is denied. 23 CONCLUSION 24 As World Nutrition sufficiently alleged unclean hands, Cal-India’s Motion to 25 Dismiss is denied. In addition, it is not necessary to rule on the Requests for Judicial Notice 26 as this Court’s ruling did not require consideration of the documents contained therein. 27 Accordingly, 28 IT IS THEREFORE ORDERED that Defendant Cal-India Foods International’s 1 || Motion to Dismiss Plaintiff's Second Amended Complaint (Doc. 89) is DENIED. 2 IT IS FURTHER ORDERED that Defendant’s Request for Judicial Notice || Pursuant to Federal Rule of Evidence Rule 201 (Doc. 90) is DENIED as moot. 4 IT IS FURTHER ORDERED that Plaintiff World Nutrition Incorporated’s || Request for Judicial Notice Pursuant to Rule 201, Federal Rules of Evidence (Doc. 94) is 6 || DENIED as moot. 7 IT IS FURTHER ORDERED that Defendant’s Request for Judicial Notice in 8 || Support of Reply in Support of Motion to Dismiss Plaintiff's Second Amended Complaint (Doc. 98) is DENIED as moot. 10 Dated this 4th day of December, 2020. i - 12 A Whacrsay Fotos 13 Chief United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -4-