Antitrust Law Daily Wrap Up, ADVERTISING—D.N.J.: Unclean hands defense properly filed against false advertising claims, (Mar 31, 2014)

By Jody Coultas, J.D.

In a Lanham Act false advertising and false patent marketing action brought by Newborn Bros. Co. against Albion Engineering Company, the latter firm properly asserted an affirmative defense of unclean hands, the federal district court in Camden, New Jersey has ruled (Newborn Bros. Co., Inc. v. Albion Engineering Company, March 27, 2014, Hillman, N.).

Both companies import and distribute dispensing guns made for the application of sealants and adhesives. Newborn Bros. alleged that Albion falsely and misleadingly advertised, labeled, and packaged its products in violation of Section 43(a) of the Lanham Act. Specifically, Albion allegedly stated that its manual dispensing guns and caulking accessories were made and manufactured in the United States, when they were actually made in Taiwan. This misrepresentation of origin was allegedly used by Albion in order to differentiate its products from those of Newborn Bros. and to secure sales to those who prefer American-made products.

In response to these claims, Albion asserted an affirmative defense of unclean hands, contending that Newborn itself was misleading distributors and consumers regarding its products country of origin. Newborn made a motion to strike this affirmative defense for lack of timeliness, failure to meet the pleading standard, and insufficiency of pleading.

Timeliness. Newborn’s motion to strike was properly filed and timely, according to the court. A motion to strike must be filed within 21days of service of the amended answer. Albion noted that Newborn Bros. was aware of affirmative defense for over a year because it was pleaded in the original answer Albion filed, and argued that Newborn’s lack of diligence in moving to strike the unclean hands defense required the court to deny Newborn Bros.’s motion. Although Newborn could have acted more diligently and filed its motion to strike approximately a year earlier in response to Albion’s original answer, this lack of diligence by Newborn was insufficient to deny the motion to strike.

Pleading requirements. The court held that a party asserting an affirmative defense under Federal Rule of Civil Procedure 8(c) must “affirmatively state any avoidance or affirmative defense.” Albion argued that courts in the District of New Jersey do not apply the heightened Twombly/Iqbal pleading standard to affirmative defenses. Rather than requiring that an affirmative defense be plausible to survive a motion to strike, Albion argued that the New Jersey courts only require that the affirmative defense provide fair notice of the issue involved. The court agreed and applied the Rule 8(c) standard.

Sufficiency of the pleadings. Newborn Bros. failed to show that Albion’s unclean hands defense would not bar Newborn Bros. from recovering on its claim for false advertising and product marking under the Lanham Act, according to the court. An affirmative defense is insufficient if it is not recognized as a defense to the cause of action or if the defense could not possibly prevent recovery under any pleaded or inferable set of facts. Albion’s unclean hands defense was essentially that Newborn Bros. did not properly advertised and marked its foreign-made products to accurately reflect their country of origin. Whether Newborn Bros. similarly misled consumers about its products could potentially prevent recovery by Newborn Bros.

Newborn Bros. was also not prejudiced by the affirmative defense, according to the court. Had Newborn Bros. truly sought to strike the defense in order to avoid devoting legal and financial resources to defeating an unsupported affirmative defense, it would not have willingly engaged in substantial discovery before moving to strike. Had Albion not filed an amended complaint, Newborn Bros. would not even had a chance to challenge the sufficiency of the unclean hands defense.

The case is No. 12-2999 (NLH/KMW).

Attorneys: John-Paul Madden (Madden & Madden) for Newborn Bros. Co., Inc. Kerri E. Chewning (Archer & Greiner, PC) for Albion Engineering Company.

Companies: Newborn Bros. Co., Inc.; Albion Engineering Company

Cases: Advertising NewJerseyNews