Antitrust Law Daily Wrap Up, ADVERTISING—D. Md.: Bank has standing to pursue Lanham Act false advertising claims against law firm, (Apr 23, 2014)

By Linda O’Brien, J.D., LL.M.

A financial institution had standing to pursue false advertising claims under the Lanham Act against a law firm for mail advertisements sent by the firm to bank customers, promoting mortgage reduction services and representation in class action litigation, according to a magistrate judge in the federal district court in Baltimore. The magistrate judge also recommended granting the plaintiff’s motion for sanctions and for entry of a default judgment (First Mariner Bank v. The Resolution Group, P.C., April 22, 2014, Gauvey, S.).

The law firm, The Resolution Law Group (RLG), sent mail advertisements to customers of First Marine Bank, a community financial institution. First Marine filed suit against RLG, alleging false advertising in violation of the Lanham Act, unfair competition, and defamation. The bank asserted that the mailers stated that RLG was investigating First Marine - suggesting that the bank was engaging in illegal and improper banking practices - and indicated that some banks were in settlement negotiations with government agencies. The advertisements also stated that the government was seeking monetary damages for individuals and reductions in home loans, principal balances, and interest rates. Recipients were urged to contact RLG. First Marine alleged that RLG’s mailers were untrue and sought to scare recipients into engaging RLG for non-existent mortgage reduction services and representation in sham litigation. RLG’s motion to dismiss the complaint was denied. After RLG failed to comply with the court’s discovery orders, First Marine moved for sanctions and for entry of a default judgment.

Standing. First Marine had standing to bring false advertising claims against the law firm, the magistrate judge recommended. In Lexmark Int’l, Inc. v. Static Control Components, Inc., Dkt. 12-873, the U.S. Supreme Court adopted, as a framework for analyzing standing under the Lanham Act, that a plaintiff must allege an injury to a commercial interest in reputation or sales and an economic or reputational injury flowing directly from the defendant’s deceptive advertising, occurring when the deception causes customers to stop doing business with the plaintiff.

The bank’s claims fall squarely within the Lexmark case framework to establish standing, according to the magistrate judge. First Marine alleged that, as a result of RLG’s false advertising, the bank has incurred and will likely continue to incur substantial commercial injury in the form of lost sales, market share, and good will. First Marine also alleged that the mailers disparaged its business by deceiving customers into believing that the bank has engaged in unlawful fraudulent lending practices. The bank’s allegations were sufficient to establish standing to pursue false advertising claims.

Motion for Sanctions. The magistrate judge recommended that the bank’s motion for sanctions be granted and the sanction of default be entered against RLG. A court may order dismissal or judgment by default “when a party deceives a court or abuses the process at a level that is utterly inconsistent with the orderly administration of justice or undermines the integrity of the process,” according to the magistrate judge. RLG had repeatedly demonstrated its bad faith by obstructing discovery since its inception, had already been subject to numerous sanctions, and had received warnings from the court to cease discovery misconduct. RLG’s repeated and ongoing discovery misconduct consumed an inordinate amount of judicial resources and resulted in significant procedural and prejudice to the plaintiff. The entry of a default judgment against the defendant as to all counts of the plaintiff’s complaint for its egregious misconduct was warranted to uphold the integrity of the judicial process, the magistrate judge recommended.

The case is No. MJG-12-1133.

Attorneys: Christopher J. Lyon (Astrachan Gunst Thomas PC) for First Mariner Bank. Vincent Anthony Jankoski (Vincent A. Jankoski, Esq.) for The Resolution Law Group, P.C.

Companies: First Mariner Bank; The Resolution Law Group, P.C.

Cases: Advertising MarylandNews