Monday, December 02, 2013

lawyer who doesn't mediate lacks standing against mediators

Stahl Law Firm v. Judicate West, 2013 WL 6200245, NO. C13-1668 (Nov. 27, 2013)

Previous ruling on plaintiff’s lack of Article III standing.  Here the court finds that the amended complaint does not address the deficiencies identified earlier, denies defendants’ motions for fees under California’s anti-SLAPP statute for want of jurisdiction, but says it will consider defendants’ Rule 11 motion later.

Stahl’s Lanham Act claim is that defendants misrepresented their qualifications, experience, and reputation as private dispute resolution service providers by failing to disclose a public admonishment of retired judge DiFiglia, one of Judicate West’s mediator/arbitrators.  But Stahl didn’t claim to be a provider of private dispute resolution or mediation services, which meant that there couldn’t be ordinary substitution (which would have been enough for Article III injury).

In this round, Stahl “acknowledged that he: has never sponsored another neutral, aside from himself; has not had any cases where he served as a mediator under the definition provided by the Court … ; and has only been involved in mediations where has represented a client as opposed to acting as a neutral. He represented that he advertises his services as a mediator to individuals over the phone or in person, but has not had any cases come in from the public in this manner.”  This was not enough for Article III injury.

Under, “[i]n a false advertising suit, a plaintiff establishes Article III injury if some consumers who bought the defendant’s product under a mistaken belief fostered by the defendant would have otherwise bought the plaintiff’s product.”  Here, Stahl failed to allege facts to support “at least the inference of competition.”  (Whatever the Supreme Court decides in the Lexmark case next week will bear on this, but it’s not clear to me what Stahl’s injury story would be under any of the offered tests.)

In the Ninth Circuit, a plaintiff can prove injury through “actual market experience and probable market behavior.”  Evidence of direct competition is strong proof of injury.  Without lost sales, testimony and survey evidence could also establish a chain of inferences showing how defendant’s acts could harm plaintiff’s business.  At the motion to dismiss stage, a plaintiff isn’t necessarily expected to prove lost sales or present evidence, but still must allege facts “that plausibly show how he could be injured as a competitor, which might include allegations of injury through probable market behavior or by creating a chain of inferences that show how Defendants’ actions could injure Plaintiff’s business.”  Here, though, Stahl alleged only generally that the parties competed for legal services, that he offered mediation services, and that his ability to compete for mediation services was adversely impacted by defendants’ allegedly false advertising.  These were threadbare allegations, not enough to get beyond bare legal conclusions.  Stahl needed to allege some facts showing how he competed with them in their respective sub-specialties, especially given that he was previously unable or unwilling to give direct answers to the court’s questions about his exact services at a previous hearing.  “Plaintiff acknowledged that he has never sponsored another neutral and has never served as a neutral in a mediation where he did not represent an existing client.” 

Unlike the plaintiff with standing in ALDF, which found that a vegan pate producer had standing to sue a goose liver pate producer, Stahl didn’t allege that he competed with defendants for the specific services they provide; he didn’t present survey data describing the likely marketplace; and he didn’t allege facts sufficient to show that he might be competing for the same pool of potential customers.  He didn’t explain how defendants’ alleged false advertising might siphon customers away from him.  Although he could conceivably compete with defendants in the future, he didn’t allege facts relating to that in the complaint, and without more “such an assertion is the precise type of hypothetical or conjectural – rather than actual or imminent – injury that the standing doctrine seeks to constrain.”

Likewise, Stahl failed to plead a Lanham Act false advertising claim because he didn’t plead more than conclusory statements that he was likely to be injured, either by direct sales diversion or a lessening of goodwill.  Stahl alleged that they competed in the same California market, 20 miles apart, and that both offered mediation services.  But he didn’t allege facts supporting his assertions that he’d suffer sales diversion or lessened goodwill.  Formulaic recitation of the elements was insufficient.

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