Firm that refers instead of represents might be falsely advertising

Larry Pitt & Associates v. Lundy Law, LLP, No. 13–2398, 2013 WL 6536739 (E.D. Pa. Dec. 13, 2013)

The parties compete to represent clients in the greater Philadelphia area, primarily in the fields of “small personal injury, social security disability, and workers’ compensation law.”  Such clients allegedly select lawyers based on brand name or name recall, making advertising vital to business success.  Law firms seek “[m]ass reach, constant messaging, [and] saturation,” ideally on 1) the exterior of buses; 2) radio time slots just before and after traffic and weather updates; and 3) inside sports arenas.  Other alternatives, such as phonebooks, internet ads, billboards, and inside-bus/bus stop ads are allegedly less effective.

Pitt historically bought ad space on the exteriors of SEPTA transit vehicles and bus stops, sold by a national ad agency, Titan.  Lundy’s daughter Sara Lundy is an account executive at Titan, responsible for SEPTA ads.  Titan gave Lundy the exclusive right to advertise legal services on the outside of SEPTA buses, for which Lundy paid above market price.  The contract is one-year and renewable.  Pitt didn’t allege that it couldn’t make its own offer for an exclusive contract, nor did it allege that SEPTA rejected higher offers for exclusive contracts in favor of Lundy Law. Pitt received 142 client referrals from SEPTA ads (presumably including both interior and exterior ads) in 2008, 160 in 2009, 197 in 2010, and 146 in 2011, but only 16 in 2012 and 12 in 2013 after it was barred from bus exteriors.  Lundy made a similar exclusive deal to advertise on the exterior of BARTA buses, another area company; obtained an exclusive contract for rush hour ad slots around weather and traffic updates on the KYW radio station; and had an exclusive contract with the Wells Fargo Center sports and entertainment arena, all by paying “unusually high” advertising fees. Naturally, Pitt’s antitrust claims failed.

However, its false advertising claim survived: Lundy Law allegedly “advertises itself as a law firm representing clients in Social Security disability and workers’ compensation cases, when in fact it refers such cases to other firms in exchange for a referral fee, and does not actually represent clients in such cases.”  This was sufficient to state a claim under the Lanham Act: if the facts were as described such statements could be misleading and even literally false, and Pitt sufficiently pled that advertising influences purchase decisions.  However, Pennsylvania state law unfair competition claims require acts that “substantially interfere[ ] with the ability of others to compete on the merits of their products.” Because the antitrust claims failed, so did the unfair competition claims. (This seems to ignore the Restatement (Third) of Unfair Competition, which Pennsylvania follows, which provides that unfair competition can come either from such interference or from acts/practices actionable under federal or state statutes—which clearly includes the Lanham Act, the federal law of unfair competition; given that the Lanham Act claims survived, the state law claims should have too.)

The court also dismissed Pitt’s tortious interference claim for failure to sufficiently allege prospective contractual relationships or wrongful interference—exclusive contracts aren’t inherently tortious.

Pitt also alleged that Lundy filed a meritless trademark infringement lawsuit against Pitt for Pitt’s use of the phrase “Remember this Number” in ads (a phrase Lundy also uses). Within hours of Lundy’s discovery that Pitt’s insurer was defending the claim, the complaint alleged, Lundy voluntarily dismissed the suit.  “Pennsylvania’s Dragonetti Act allows a civil suit for wrongful initiation of civil court proceedings without probable cause and for a purpose other than securing adjudication of a legal claim, when the proceedings end in favor of the defendant.”  Lundy argued that the voluntary dismissal, early in the case, was insufficient to count as termination in Pitt’s favor, but a motion for preliminary injunction was fully briefed and pending and a hearing was scheduled.  Thus, the claim could continue.  However, the related abuse of process claim was dismissed, because improper purpose was insufficient for abuse of process without costs of defending beyond what was required to address the merits.  Plus, Pitt’s costs were covered by its insurer, and it didn’t allege any other injury.
This entry was posted in antitrust, http://schemas.google.com/blogger/2008/kind#post, insurance, tortious interference, trademark. Bookmark the permalink.

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