claiming to provide services then referring out can be false advertising, but P must still show harm

Larry Pitt & Associates v. Lundy Law LLP, No.. 13-2398,
— F.Supp.3d —-, 2018 WL 925011 (E.D. Pa. Feb. 15, 2018)
The parties are Philadelphia-area law firms that advertise
for personal injury, social security, and workers’ compensation cases. Pitt
sued Lundy Law and its managing partner, L. Leonard Lundy (“Lundy), asserting
wrongful use of civil proceedings, false advertising, and trade secret
misappropriation. Lundy sought and received summary judgment.
“In Pennsylvania, unlike in many other jurisdictions, an
attorney or a law firm is permitted to refer a case to another attorney or law
firm and earn a portion of the clients’ fees without performing any work on the
case, so long as the arrangement is disclosed to the client and the fee is not
excessive. However, a law firm may not actively advertise in its own name for
certain categories of cases for the purpose of referring those cases to other
law firms.”  Lundy Law, a personal injury
law firm, has used the slogan “Remember this Name” and its mnemonic hotline
number 1-800-LUNDYLAW for years.
Lundy had agreements with other firms that they’d share in
the cost of Lundy Law’s advertising for social security disability cases in the
Philadelphia area, and Lundy Law would refer all of its potential social
security disability cases directly to the other firm in return for referral
fees; the most recent version of the agreement involved Lundy hiring a
part-time Social Security lawyer to handle up to five cases a month.  For workers’ comp, Lundy Law had a referral
agreement with the Law Offices of Lenard A. Cohen, P.C., under which Lundy Law
refers all its potential workers’ compensation cases in Pennsylvania to LOLAC
in exchange for a referral fee. Cohen himself has been covered under Lundy
Law’s liability insurance policy as “of counsel” to the firm since 2009 and
keeps Lundy Law business cards and a Lundy Law email address, as well as other
connections to Lundy Law.
Some Lundy Law ads featured 1-800-LUNDYLAW in large font
with the words “Injury and Disability Lawyers” or “Injury, Disability &
Workers’ Compensation lawyers,” in smaller font above or below the telephone
number. Some ads feature dtestimonials from purported social security
disability or workers compensation clients that they were glad they “remembered
the name.”  Some TV ads specifically promoted
workers’ compensation and social security disability services, e.g., “Lundy Law
gets you the social security benefits you deserve.”  Pitt asserts that all of these ads were false
and misleading because Lundy intended to refer, rather than handle, any
potential workers’ compensation and social security cases.
Separately, Lundy Law purchased ad space on SEPTA buses,
trains, and transportation stops for years, and throughout that time, Leonard
Lundy’s daughter, Sara Lundy, was an account executive at an ad firm. She
provided Lundy Law with photos of ads used by other law firms and information
on their locations as well as transit ridership information. Pitt alleged that
these disclosures constituted misappropriation of confidential information about
the advertising strategies of Lundy Law’s competitors, including Pitt.
False advertising, workers’ comp: Pitt didn’t raise a
genuine issue on material falsity/misleadingness.  Pitt didn’t show that the nature of Cohen’s
relationship with Lundy “differed materially from a consumer’s reasonable
understanding of the relationship between a law firm and its attorneys,” since
a potential client “would meet with an attorney physically present in the
office and would have recourse to Lundy Law’s malpractice insurance for the
attorney’s conduct, if necessary.”
Social Security: There was no evidence of consumer
deception, so Pitt had to rely on literal falsity. Most of Lundy’s statements
were too general/ambiguous to qualify, but there were a few more specific
statements in TV ads such as “Lundy Law gets you the social security benefits
you deserve. • We’ll help you through the process. That’s what we do.”  Although Lundy argued that the ads didn’t
indicate that Lundy employees would “themselves handle the viewers’ social
security disability claims from beginning to end,” “when a law firm releases a
commercial directed specifically at social security disability cases, and tells
viewers that it will help them through the process of obtaining social security
benefits because ‘that’s what [they] do,’ such a message necessarily implies
that lawyers within the law firm handle their clients’ social security claims.”
And if Lundy didn’t handle any aspect, that was literally false. So too with
Lundy’s listing “social security” among its “practice areas”: “it unambiguously
implies that attorneys at the firm handle cases within that practice area.”  Between late  2008 and late 2013, Lundy Law referred all of
its potential Social Security cases directly to other law firms, creating a
genuine issue on literal falsity.  But
after that, a part-time attorney came on to handle Social Security cases; even
if she handled only a few, the post-2013 ads didn’t “unambiguously represent
that the firm would take on more than five cases per month.”
But Pitt couldn’t show damages: it had to show a causal link
between its alleged injury and Lundy’s specific misrepresentations by showing
that Lundy’s statements actually deceived and influenced consumers. Evidence
that potential clients responded to Lundy Law’s advertisements wasn’t enough to
show that the clients relied on any of the specific false representations. And
there was no evidence linking an increased Social Security intake to the use of
any specific ads; it might have resulted from Lundy’s non-false advertising,
such as the firm’s more general “injury & disability lawyers” ads or its
personal injury ads. This defeated Pitt’s damages claim, and also its request
for disgorgement of profits and corrective advertising.  
There was no reason to proceed to trial for injunctive
relief; though Lundy could once again farm out all its Social Security cases
while misrepresenting that its attorneys handled those cases, there was no
evidence that Lundy intended to do so.

The same analysis applied to the state UCL deceptive marketing claim.
The trade secret claim failed because, while the nepotism
might concern Titan (the ad agency) and SEPTA, there was no evidence that any
of the information Sara Lundy shared with Leonard was confidential.  “[T]he content and location of a law firm’s
advertisements is generally intended to be public.”
The court concluded with a cautionary note: “In many
instances, a complaint to the state attorney disciplinary boards may be the
most effective means for quickly ending and sanctioning plainly unethical
conduct. Thus the Court’s decision should not be read to condone or excuse
Defendants’ alleged actions, but should instead serve as a reminder of the
burden that plaintiffs bear when they choose to seek relief against their
competitors in court.”

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