Direct competition + literally false advertising don’t equal standing without more

Brave Law Firm, LLC v. Truck Accident Lawyers Gp., Inc., No.
17-1156-EFM-GEB, 2018 WL 3122172 (D. Kan. Jun. 26, 2018)
Brave sued its personal injury law firm rivals (TALG) under
the Lanham Act and Kansas state law based on allegations of false and deceptive
advertising. The court ruled that Brave hadn’t sufficiently alleged
injury—furthering my suspicion that Lexmark
reasoning has made it easier to proceed against disparagement and harder to
proceed against false claims a defendant makes about itself, even though the
latter was the core of what the Lanham Act false advertising provisions tried
to cover.
Brave and TALG offer competing legal services in the same
geographic area. An example of the allegedly false advertising is an ad depicting
a woman holding a check with the words “$2.4 MILLION” displayed in bold text,
with a disclaimer stating, in part: “Amounts are gross recovery before fees and
expenses.” Brave alleged that this ad was false because the actual “gross
recovery” before fees and expenses was $387,018, or 16% of what was advertised.
The court found that Article III wasn’t satisfied. The
allegations of injury were conclusory, alleging mostly that the false
advertising was intentional. The court declined to apply a presumption of
injury to standing even if the advertising was literally false.  Brave failed to allege that it lost potential
clients to TALG, that it lost revenue from the false ads, or that TALG
strengthened its market position through the ads. The motion to dismiss on
standing was granted with leave to amend.
Because of the leave to amend, the court addressed zone of
interests/proximate causation under Lexmark
as well. As with standing, Brave failed to sufficiently allege injury to a
commercial interest in reputation or sales (zone of interests). Brave argued
that it was seeking injunctive relief, so it didn’t have to show injury. But
that’s not right. However, if Brave successfully amended to assert an injury to
a commercial interest in reputation or sales, the proximate cause test would
most likely be met, given that Brave’s scenario would fit into the “classic
Lanham Act false-advertising claim.”
Finally, Brave’s pleadings didn’t satisfy FRCP 9(b) in
identifying the when, where, and how: though it provided a screenshot of an alleged
ad, it didn’t allege when or how the ad was disseminated, or when/how (in terms
of medium) other ads were or who ran those or what those other ads specifically
said.

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