Fifth Circuit finds that gun manufacturer lawsuit did not toll prescriptive period

The US Court of Appeals for the Fifth Circuit has affirmed a district court’s decision to dismiss claims under the Louisiana Unfair Trade Practices Act (LUTPA), finding that a dispute against a related company did not toll the statute of limitations (Carbon Six Barrels LLC v Proof Research Inc, Case 22/30772, 29 September 2023, Clement, Elrod, Willett, JJ).

Case background

Proof Research and Carbon Six Barrels both manufacture gun barrels made of carbon fibre. Proof was the first of the parties to enter the market, and in 2013 it trademarked the unique mottled appearance of its barrels. Three years later, Proof discovered that Carbon Six intended to manufacture and sell similar-looking carbon-fibre barrels and sent a cease-and-desist letter. Carbon Six began production in 2017, sourcing barrel blanks from its sister company McGowen Precision Barrels. As a result, Proof filed a trademark infringement suit against McGowen - not Carbon Six - in the District of Montana. McGowen initiated a separate proceeding at the TTAB to cancel Proof’s trademark and was successful in doing so.

The dispute

After the TTAB cancelled Proof’s trademark, Carbon Six sued Proof in the Middle District of Louisiana, alleging that Proof fraudulently registered its mark, violated LUTPA and defamed Carbon Six during the initial litigation. McGowen brought a similar suit against Proof in the District of Montana.

Proof asserted several defences in the lawsuit filed by Carbon Six, including a Rule 12(b)(6) motion to dismiss for failure to state a claim, arguing that Carbon Six’s claims were both untimely and legally insufficient. The district court denied Proof’s other defences, but granted the Rule 12(b)(6) motion, finding that Carbon Six’s claims were time-barred by Louisiana’s one-year prescriptive period and that its LUTPA claim was legally insufficient. Carbon Six appealed.

Court decisions

The Fifth Circuit affirmed, explaining that there was no doubt that the violations alleged by Carbon Six occurred more than a year before it filed suit in early 2022. Further, the court reviewed all actions that could potentially give rise to liability under LUTPA. It stated that even if any of these acts gave rise to liability, all actions occurred over a year before Carbon Six’s suit, so they would be impermissible.

Carbon Six attempted to rely on the continuing tort doctrine, alleging that the acts continuously violated LUTPA up until the board cancelled Proof’s trademark in May 2021. Reviewing Louisiana law, the Fifth Circuit determined that the general principle of a continuing tort is a conduct-based question, “asking whether the tortfeasor perpetuates the injury through overt, persistent and ongoing acts”.

In light of this, the Fifth Circuit agreed with the district court that LUTPA’s prescriptive period is not suspended if a perpetuator of fraud fails to correct false statements – if accepted, this proposition would transform almost every business dispute into a continuing tort. The Fifth Circuit also determined that the district court’s conclusion that Carbon Six could not recover for Proof’s lawsuit against McGowan was correct; the law supported the position that a sister corporation cannot sue on behalf of another sister corporation. Further, the court found that Proof’s attempt to enforce a later-invalidated trademark did not violate LUTPA because Proof’s conduct fell short of the requirements necessary to support the claim.

Key findings

The Fifth Circuit determined that the defamation claims in Louisiana were subject to the same one-year prescriptive period and, like the LUTPA claims, were untimely. The court stated that the last allegedly defamatory remarks by Proof were from the board trial brief in late 2020, over a year before Carbon Six filed the defamation claim. Carbon Six attempted to avoid the prescriptive period by arguing that it should have been suspended until the board rendered its opinion, or until the Montana litigation was dismissed.

The court disagreed, explaining that Carbon Six could not rely on any exceptions since it was not a party to the Montana litigation. Further, the court explained that Proof’s statements did not arise out of the same set of operational facts set forth in the prior proceedings. The Fifth Circuit determined that Carbon Six would have been free to bring a defamation claim against Proof while the prior proceedings were ongoing, but could not now claim that the prescriptive period was suspended.