Tuesday, September 17, 2013

lawyer lacks Article III standing against ADR provider

Stahl Law Firm v. Judicate West, No. C13–1668, 2013 WL 4873065 (N.D. Cal. Sept. 12, 2013)

The court sua sponte ruled that it lacked Article III jurisdiction over this false advertising case, thus depriving it of the ability to rule on defendants’ anti-SLAPP motion (and to require fee-shifting). Judicate West is a provider of private dispute resolution services and sponsors neutrals, including retired judges such as defendant Di Figlia, to serve as mediators and arbitrators. Stahl alleged that defendants misrepresented their qualifications, experience, and reputation by failing to reveal a 2007 opinion of the Commission on Judicial Performance in which Di Figlia was issued a public admonishment.

Article III standing for false advertising under the Lanham Act exists “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.”  Direct competition makes a strong showing that injury isn’t conjectural or hypothetical.  Plaintiffs can show that they compete with defendants for revenue/sales, or rely on “actual market experience,” including lost sales data or “probable market behavior” that establishes a likely injury by “creating a chain of inferences showing how defendant’s false advertising could harm plaintiff’s business.”  General factual allegations of injury may suffice at the pleading stage, but bare legal conclusions aren’t enough.

Here, the court held, there were only bare legal conclusions.  Stahl didn’t allege competition for the same business or any other theory of harm.  His allegations that they completed to provide legal services were conclusory because he didn’t allege the type of legal services he provided.  He did not allege that he competed or intended to compete for the same pool of customers: “those seeking to purchase alternative dispute resolution services.”  Nor did he adequately plead a chain of inferences showing how defendants’ alleged misrepresentations about their ADR services could cause him competitive harm.

Stahl argued that they were clearly competitors, since both offered their services in California and their offices were merely 20 miles apart (ah, the wide open spaces; cf. Best Cellars v. Wine Made Simple, finding that it was unclear at best that NYC’s Upper East Side and Upper West Side were in the same geographic market).  But geography isn’t everything.  “It would not matter if Plaintiff and Defendants were located in the same building if each were providing a different form of legal service and therefore were not in competition with each other.”

At oral argument, Stahl’s answers reinforced the court’s skepticism.  He said he was in the business of mediation, though his website didn’t target that business.  He stated that he made such offers in person, and had pursued mediation among other lines of business.  But his example of ADR that he’d done was, as far as the court could tell, representing one party in a mediation.  Representing a client in ADR isn’t the same as being an ADR service provider such as Judicate West.  Thus, Stahl failed to allege Article III injury and the complaint was dismissed with leave to amend.

The court noted that, if Stahl refiled, it would require him to satisfy Rule 9(b).  (Trademark plaintiffs aren’t required to do so under the Lanham Act, despite virtually identical statutory language; why sauce for the goose isn’t sauce for the gander puzzles me.)   Given that the court lacked subject matter jurisdiction, it also lacked the authority to award attorneys’ fees under the anti-SLAPP statute (would that even apply to a federal Lanham Act claim?).

No comments:

Post a Comment