Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Sanctions denied after law firm’s false advertising claims dismissed, (Jan 29, 2014)

By Linda O’Brien, J.D., LL.M.

After dismissing a law firm’s claims against a private dispute resolution service provider and one of the provider’s mediators for false advertising under the Lanham Act and California’s Unfair Competition Law (UCL), the federal district court in San Francisco decided that the services provider and mediator were not entitled to sanctions against the firm (Stahl Law Firm v. Judicate West, January 27, 2014, Henderson, T.).

Judicate West provides private dispute resolution services and sponsors neutral parties, including retired judges, to serve as mediators and arbitrators. The Stahl Law Firm filed suit against Judicate West and one of its mediators, Vincent Di Figlia, for unfair competition under the Lanham Act and UCL. Stahl claimed that the defendants misrepresented their qualifications, experience, and reputation on the company’s website. The complaint was dismissed in its entirety after Stahl’s state law claims were stricken under California’s anti-SLAPP statute. The plaintiff’s amended complaint was also dismissed, and Stahl was granted leave to amend the complaint to include specific factual allegations that could establish standing.

Stahl filed a second amended complaint, adding allegations that the law firm’s mediation services and ability to compete for mediation services were adversely impacted by Judicate West’s false and misleading advertising, and the defendants’ false and misleading statements about their services in their Internet advertising harmed Stahl’s ability to compete. The second amended complaint was dismissed for lack of standing to assert the UCL and Lanham Act claims. The court determined that Stahl failed to present allegations to support at least the inference of competition between the parties or that the firm was likely to be injured by the advertising. Di Figlia moved for sanctions based on the filing of the second amended complaint.

Rule 11 of the Federal Rules of Civil Procedure provides that, by presenting a pleading to the court, an attorney certifies that the pleading is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation, and that the factual contentions have evidentiary support. In rejecting the defendants’ argument that the addition of the two allegations showed an improper purpose, the court noted that sanctions were an extraordinary remedy to be exercised with extreme caution. Although Stahl’s evasive testimony and potential motives for bringing the suit were troubling, the filing of the second amended complaint was not conclusive that it was motivated by an improper purpose. While Stahl’s minimal additional allegations were insufficient to constitute an injury-in-fact, the amendments were not objectively frivolous to warrant sanctions, the court concluded.

The case is No. C13-1668 TEH.

Attorneys: Norbert Stahl (Stahl Law Firm) for Stahl Law Firm. Benjamin C. Koodrich (Murphy Pearson Bradley & Feeney) for Judicate West.

Companies: Stahl Law Firm; Judicate West

Cases: Advertising StateUnfairTradePractices CaliforniaNews