Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Pa.: Law firm’s false advertising claims against competing law firm can proceed, (Dec 16, 2013)

By Linda O’Brien, J.D., LL.M.

A law firm’s claim under the Lanham Act against a competing law firm for allegedly making false or misleading advertising statements to potential clients withstood dismissal; however, the law firm’s antitrust claims against the competitor were dismissed by the federal district court in Philadelphia has ruled (Larry Pitt & Associates v. Lundy Law, LLP, December 13, 2013, Rufe, C.).

Larry Pitt & Associates is a law firm that provides representation primarily in the areas of personal injury, social security disability, and worker’s compensation law, in the greater Philadelphia area. Lundy Law, LLP is a law firm that serves the same region and focuses on the same practice areas. The two firms directly compete for clients and for prime advertising opportunities that create name recognition. Prime advertising venues include: the exterior of public buses, radio time slots before and after traffic and weather updates, and inside sports arenas. Pitt had purchased advertising space on the exteriors and interiors of public transportation buses and trains, and on public transportation bus stops. Pitt had also advertised on a local radio station during rush hour. In 2012, Lundy obtained the exclusive right to advertise legal services on the exterior of public transportation buses in the greater Philadelphia area. Lundy also obtained exclusive contracts to advertise on the local radio station around weather and traffic updates in the desirable time slots and at a local sports and entertainment arena. Lundy received the exclusive contracts by paying premium advertising fees.

Pitt filed suit against Lundy alleging violations of the antitrust laws and the Lanham Act. Specifically, Pitt alleged that Lundy’s exclusive contracts precluded other law firms from advertising at the desirable venues and resulted in a decline of Pitt’s client referrals since Pitt was barred from advertising at those venues. Pitt also alleged that Lundy falsely advertised that it represented clients in social security disability and worker compensation cases when in fact Lundy referred such cases to other firms in exchange for a referral fee. Lundy moved to dismiss all claims.

In dismissing Pitt’s claims for monopolization or attempted monopolization of trade, the court found that, although Pitt adequately defined the proposed geographic market, it failed to sufficiently allege that Lundy was engaged in predatory or anticompetitive conduct with a specific intent to monopolize the legal market in those practice areas. The court noted that the objective of all advertising was to increase market share and effective advertising did not render its use as anticompetitive or predatory.

Pitt also failed to demonstrate that Lundy dominated or was in danger of monopolizing that legal market. Pitt presented no facts to show that Lundy’s clients may be charged higher prices due to Lundy’s superior market position, Lundy’s practices have limited consumer choice, or Lundy’s practices have created barriers to entry in the relevant market. Pitt’s allegations of fewer referrals showed only an injury to Pitt and not to consumer choice or competition for clients, according to the court. Pitt also failed to show that the entities Lundy exclusively contracted with colluded with each other to restrain competition for advertising space. The court declined to infer that Lundy’s exclusive contracts with three advertising venues constituted monopolization of the entire market for “mass reach, constant messaging, saturation advertising for legal services” since Lundy did not control all advertising venues for the greater Philadelphia region.

False advertising. Pitt sufficiently pleaded a violation of the Lanham Act by alleging that Lundy falsely advertised that it represented clients in social security and worker compensation cases when Lundy in fact referred such clients to other firms for representation in exchange for a referral fee. Pitt claimed that the deceptive statements were likely to influence potential clients in their decision to contact Lundy instead of a competitor, thereby causing injury to Pitt. In declining to dismiss this clam on the pleadings, the court concluded the claim was better decided on a complete factual record.

The case is No. 13-2398.

Attorneys: Carl W. Hittinger (DLA Piper LLP) for Larry Pitt & Associates. Brian Savage (Dechert LLP) for Lundy Law, LLP.

Companies: Larry Pitt & Associates; Lundy Law, LLP

Cases: Antitrust Advertising PennsylvaniaNews