Carbon Six Barrels, L.L.C. v. Proof Research, Inc.

83 F.4th 320

CARBON SIX BARRELS, L.L.C., Plaintiff—Appellant, v. PROOF RESEARCH, INCORPORATED, Defendant—Appellee.

No. 22-30772

United States Court of Appeals, Fifth Circuit

FILED September 29, 2023

Appeal from the United States District Court for the Middle District of Louisiana, USDC No. 3:22-CV-90, Shelly Deckert Dick, U.S. District Judge

Kyle M. Keegan (argued), Amber Nicole Robichaux, Keegan Juban Lowe & Robichaux, Baton Rouge, LA, Plaintiff—Appellant.

Judy Y. Barrasso, Robert J. Dressel, Kyle Wallace Siegel (argued), Barrasso, Usdin, Kupperman, Freeman & Sarver, L.L.C., New Orleans, LA, for Defendant—Appellee.

Before Clement, Elrod, and Willett, Circuit Judges.

Jennifer Walker Elrod, Circuit Judge:

Proof Research, Inc. and Carbon Six Barrels, LLC both manufacture carbon-fiber gun barrels. Proof entered the market first and obtained a trademark for the unique appearance of its barrels. When Proof found out that Carbon Six intended to begin manufacturing and selling similar-looking carbon-fiber gun barrels of its own, Proof responded with litigation. However, Proof did not file suit against Carbon Six, but rather against McGowen Precision Barrels, LLC, Carbon Six's sister company. McGowen then initiated separate proceedings to have Proof's trademark cancelled.

McGowen was ultimately successful, and Proof's trademark for its carbon-fiber gun barrels was cancelled in 2021. On February 9, 2022, Carbon Six filed this lawsuit against Proof for defamation and violation of the Louisiana Unfair Trade Practices Act stemming from Proof's efforts to register, renew, enforce, and defend its previously valid trademark. However, Carbon Six brought its claims after the one-year prescriptive period imposed by Louisiana law had run.¹ On Proof's motion to dismiss under Rule 12(b)(6), Carbon Six failed to convince the district court that any of its claims were timely. The district court also held that Carbon Six's LUTPA claim was legally deficient. We agree with the district court on all fronts. Despite advancing several arguments to save its claims from prescription, Carbon Six was simply too late. The district court's judgment is AFFIRMED.

I

Proof manufactures carbon-fiber gun barrels with a unique, mottled appearance. In 2013, Proof successfully registered this look as a "trade dress" trademark with the U.S. Patent and Trademark Office. Proof is a Delaware corporation with its principal place of business in Montana.

Carbon Six is a Louisiana limited liability company with its principal place of business in Louisiana. Proof learned that Carbon Six was planning to enter the market for carbon-fiber barrels and, in June 2016, sent a cease-and-desist letter to Carbon Six's Louisiana address. Proof's letter warned that Carbon Six's planned manufacture and sale of carbon-fiber barrels would violate Proof's trademark. Undeterred, Carbon Six began manufacturing its carbon-fiber barrels in early 2017. Carbon Six sourced its barrel blanks from its sister company—McGowen—which is solely owned by the same Louisiana resident who solely owns Carbon Six. Proof then sent a second cease-and-desist letter to Carbon Six's counsel in South Carolina.

Carbon Six did not cease its activities, and in December 2017, Proof filed a lawsuit for trademark infringement in the District of Montana. However, for whatever reason, Proof named McGowen—and not Carbon Six— as the defendant. McGowen immediately initiated a trademark-cancellation proceeding before the Trademark Trial and Appeal Board, which led to a stay of the federal litigation. In 2018, while the cancellation proceeding was ongoing, Proof successfully applied to renew its trademark. After nearly four years, in May 2021, the TTAB rendered an opinion in the cancellation proceeding cancelling Proof's trademark.

Carbon Six had won a proxy victory before the TTAB, but it was still not satisfied. On February 9, 2022, Carbon Six brought the instant lawsuit against Proof in the Middle District of Louisiana, alleging that Proof: (1) fraudulently registered its trademark in violation of 15 U.S.C. § 1120; (2) violated the Louisiana Unfair Trade Practices Act by unfairly stymieing Carbon Six's entry into the market; and (3) defamed Carbon Six during the Montana litigation and the trademark-cancellation proceeding. McGowen brought a similar lawsuit against Proof in the District of Montana for, inter alia, malicious prosecution.

Proof moved to dismiss the lawsuit filed by Carbon Six under Rule 12(b)(2) for lack of personal jurisdiction, or to at least transfer the case under 28 U.S.C. § 1404(a) to the District of Montana. In the alternative, Proof moved to dismiss under Rule 12(b)(6) for failure to state a claim, arguing that all three of Carbon Six's claims were both untimely and legally insufficient.

The district court denied Proof's motion to dismiss for lack of personal jurisdiction and denied Proof's motion to transfer. But the district court granted Proof's 12(b)(6) motion and dismissed Carbon Six's claims as time-barred by Louisiana's one-year prescriptive period. The district court also held that in any event, Carbon Six's LUTPA claim was legally insufficient. Carbon Six appealed the district court's dismissal of the LUTPA and defamation claims but not the federal fraud claim.

This appeal raises two issues: (1) whether Carbon Six's LUTPA claim is timely and legally sufficient; and (2) whether Carbon Six's defamation claim is timely.²

II

We review a dismissal under Federal Rule of Civil Procedure 12(b)(6) de novo. Henley v. Biloxi HMA, LLC, 48 F.4th 350, 353 (5th Cir. 2022). We must take the plaintiff's allegations to be true and construe all inferences in the plaintiff's favor, affirming dismissal only when those allegations fail to "state a claim to relief that is plausible on its face." Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). Dismissal based on a successful affirmative defense can be appropriate when that defense appears on the face of the complaint. Kelly v. Nichamoff, 868 F.3d 371, 374 (5th Cir. 2017) (citation omitted).

III

In its complaint, Carbon Six alleged that because Proof's trademark was never valid, Proof's trademark-enforcement actions violated LUTPA. The district court dismissed the claim as both untimely and legally insufficient. The district court was correct.

A.

LUTPA has a one-year prescriptive period. La. Stat. Ann. § 51:1409 (2022). And there is no doubt that the violations Carbon Six alleges occurred more than one year before Carbon Six filed suit on February 9, 2022. In its complaint, Carbon Six alleges that Proof violated LUTPA by sending the two cease and desist letters (in 2016 and 2017); registering and renewing its trademark (in 2013 and 2018, respectively); filing the trademark litigation (in 2017); and accusing McGowen of trademark infringement (at the latest on November 21, 2020, when Proof filed its trial brief in the cancellation proceeding).

Even if each of these actions could individually give rise to liability under LUTPA, an action for any of them would have been untimely on February 9, 2022 and would therefore be prescribed under Louisiana law. Carbon Six attempts to save these bases for LUTPA liability by relying on the continuing tort doctrine, which suspends prescription while the defendant's violations remain ongoing. Under Carbon Six's theory, all of Proof's actions relating to its trademark continuously violated LUTPA because they were premised on the falsehood that Proof's trademark was legitimate. In effect, Carbon Six argues that Proof had an ongoing duty to remedy this falsehood. The prescriptive period would thereby not have started to run until May 20, 2021, when the TTAB granted McGowan's petition to cancel Proof's trademark and the proceeding came to a close.

But Carbon Six immediately runs into a conceptual problem. Louisiana law recognizes a distinction between an ongoing action and ongoing damage resulting from an action. The Louisiana Supreme Court has stated that "the breach of a duty to right an initial wrong simply cannot be a continuing wrong that suspends the running of prescription, as that is the purpose of every lawsuit and the obligation of every tortfeasor." Hogg v. Chevron USA, Inc., 45 So. 3d 991, 1007 (La. 2010). As the district court noted, "Louisiana courts have long recognized that a continuing failure to remedy a tort is not a continuation of the underlying tortious action." Carbon Six Barrels, LLC v. Proof Rsch., Inc., No. 22-CV-90-SDD-RLB, 2022 WL 16727127, at *9 (M.D. La. Nov. 4, 2022).

The leading cases from the Louisiana Supreme Court involve the actions of landowners that caused lasting damage to neighboring properties. In Hogg, underground storage tanks leaked large amounts of gasoline into neighboring land. 45 So. 3d at 995. And similarly, in Crump v. Sabine River Authority, canal construction caused a neighbor's bayou to dry up. 737 So. 2d 720, 723 (La. 1999). In both cases, the damages persisted long after the underlying actions ended. The neighboring property in Hogg still had gasoline contamination after the storage tanks were removed, and the neighboring property in Crump still had a dry bayou long after the canal construction was completed. In both cases, the Louisiana Supreme Court held that the mere failure to remediate continuing damage resulting from these past acts did not transform the underlying torts into continuing ones. See Hogg, 45 So. 3d at 1006 ("As in Crump [sic], the presence of the gasoline in the soil and subsurface is simply the continued ill effect of the original tortious incident . . . ."); Crump, 737 So. 2d at 728-29.

Carbon Six argues that Hogg and Crump are distinguishable because they addressed harm to real property. Carbon Six points instead to a series of older Louisiana courts of appeal cases arising in the context of unfair competition. In those cases, the courts held that when businesses violated statutorily imposed disclosure...