Antitrust Law Daily Wrap Up, ADVERTISING—D.S.C.: Debt collection company’s Lanham Act claims properly tossed, (Feb 17, 2016)

By Greg Hammond, J.D.

A debt collection service provider was not entitled to reconsideration of an order dismissing the provider’s Lanham Act false advertising claim against a law firm for the alleged use of the provider’s trademarks in advertising for the law firm’s debtor representations services. In denying the motion to reconsider, the federal district court in Columbia, South Carolina, concluded that the provider presented new arguments seeking to recover for damages to its relationship with its own creditor customers, but those damages were based solely on statements that allegedly diverted, confused, or misled debtors (AMCOL Systems, Inc. v. Lemberg Law, LLC, February 16, 2016, Currie, C.).

AMCOL holds two marks, AMCOL and AMCOL SYSTEMS, for use in its debt collection services. Lemberg Law represents plaintiffs in actions against debt collectors and solicits potential clients at www.stopdebtcollector.com and www.debtbulldog.com. The law firm also operates a channel on YouTube.com that advertises its legal services and solicits potential clients. Lemberg Law’s websites and YouTube channel used AMCOL’s marks in its advertising, which AMCOL claims is likely to result and has resulted in consumer confusion, are defamatory, and have damaged AMCOL’s business and reputation as well as incited debtors to sue AMCOL. AMCOL asked the court to reconsider dismissal of the unfair competition claim. Lemberg moved to dismiss.

Unfair competition, false advertising. The court denied AMCOL’s motion to reconsider dismissal of the Lanham Act unfair competition and false advertising claim. AMCOL argued that the court construed the claim too narrowly by considering only whether the alleged misrepresentations led to direct diversion of creditors and failed to consider whether the alleged misrepresentations damaged AMCOL’s brand. This argument, however, ignored the injuries alleged under the cause of action, according to the court, including deception and misleading of debtors, revenue lost when debtors work with Lemberg to oppose collection rather than working with AMCOL to pay the debt, and legal expenses resulting when debtors sue AMCOL in what AMCOL describes as meritless lawsuits.

AMCOL, through its motion for reconsideration, also attempted to present a new argument seeking recovery for damage to its relationship with its own creditor customers. The court, however, rejected this argument, noting that while some allegations in the amended complaint suggest a possibility of a claim based on injury to AMCOL’s goodwill with its creditor customers, the damages sought under AMCOL’s Lanham Act claim are based solely on statements that allegedly diverted, confused, or misled debtors.

Trademark infringement, unfair competition. AMCOL’s common law trademark infringement and unfair competition claim was also dismissed. The court found that AMCOL appeared to have abandoned this claim because it did not respond to Lemberg’s arguments or otherwise address the viability of the claim.

The court also dismissed AMCOL’s South Carolina Unfair Trade Practices Act (SCUTPA) claim, finding that the claim failed to satisfy the Twombly pleading standards because it consisted of nothing more than boilerplate recitation of the elements of a SCUTPA claim. The defamation claim survived dismissal, however, because it was not clear whether the allegedly defamatory comments were posted by third parties.

The case is No. 3:15-3422-CMC.

Attorneys: Francis M. Ervin, II (Rogers Townsend & Thomas, PC) for Amcol Systems, Inc. Brian Joseph Headley (The Headley Law Firm) for Lemberg Law, LLC.

Companies: AMCOL Systems, Inc.; Lemberg Law, LLC

Cases: Advertising StateUnfairTradePractices SouthCarolinaNews