Monday, February 26, 2018

claiming to provide services then referring out can be false advertising, but P must still show harm

Larry Pitt & Associates v. Lundy Law LLP, No.. 13-2398, --- F.Supp.3d ----, 2018 WL 925011 (E.D. Pa. Feb. 15, 2018)

The parties are Philadelphia-area law firms that advertise for personal injury, social security, and workers’ compensation cases. Pitt sued Lundy Law and its managing partner, L. Leonard Lundy (“Lundy), asserting wrongful use of civil proceedings, false advertising, and trade secret misappropriation. Lundy sought and received summary judgment.

“In Pennsylvania, unlike in many other jurisdictions, an attorney or a law firm is permitted to refer a case to another attorney or law firm and earn a portion of the clients’ fees without performing any work on the case, so long as the arrangement is disclosed to the client and the fee is not excessive. However, a law firm may not actively advertise in its own name for certain categories of cases for the purpose of referring those cases to other law firms.”  Lundy Law, a personal injury law firm, has used the slogan “Remember this Name” and its mnemonic hotline number 1-800-LUNDYLAW for years.

Lundy had agreements with other firms that they’d share in the cost of Lundy Law’s advertising for social security disability cases in the Philadelphia area, and Lundy Law would refer all of its potential social security disability cases directly to the other firm in return for referral fees; the most recent version of the agreement involved Lundy hiring a part-time Social Security lawyer to handle up to five cases a month.  For workers’ comp, Lundy Law had a referral agreement with the Law Offices of Lenard A. Cohen, P.C., under which Lundy Law refers all its potential workers’ compensation cases in Pennsylvania to LOLAC in exchange for a referral fee. Cohen himself has been covered under Lundy Law’s liability insurance policy as “of counsel” to the firm since 2009 and keeps Lundy Law business cards and a Lundy Law email address, as well as other connections to Lundy Law.

Some Lundy Law ads featured 1-800-LUNDYLAW in large font with the words “Injury and Disability Lawyers” or “Injury, Disability & Workers’ Compensation lawyers,” in smaller font above or below the telephone number. Some ads feature dtestimonials from purported social security disability or workers compensation clients that they were glad they “remembered the name.”  Some TV ads specifically promoted workers’ compensation and social security disability services, e.g., “Lundy Law gets you the social security benefits you deserve.”  Pitt asserts that all of these ads were false and misleading because Lundy intended to refer, rather than handle, any potential workers’ compensation and social security cases.

Separately, Lundy Law purchased ad space on SEPTA buses, trains, and transportation stops for years, and throughout that time, Leonard Lundy’s daughter, Sara Lundy, was an account executive at an ad firm. She provided Lundy Law with photos of ads used by other law firms and information on their locations as well as transit ridership information. Pitt alleged that these disclosures constituted misappropriation of confidential information about the advertising strategies of Lundy Law’s competitors, including Pitt.

False advertising, workers’ comp: Pitt didn’t raise a genuine issue on material falsity/misleadingness.  Pitt didn’t show that the nature of Cohen’s relationship with Lundy “differed materially from a consumer’s reasonable understanding of the relationship between a law firm and its attorneys,” since a potential client “would meet with an attorney physically present in the office and would have recourse to Lundy Law’s malpractice insurance for the attorney’s conduct, if necessary.”

Social Security: There was no evidence of consumer deception, so Pitt had to rely on literal falsity. Most of Lundy’s statements were too general/ambiguous to qualify, but there were a few more specific statements in TV ads such as “Lundy Law gets you the social security benefits you deserve. • We’ll help you through the process. That’s what we do.”  Although Lundy argued that the ads didn’t indicate that Lundy employees would “themselves handle the viewers’ social security disability claims from beginning to end,” “when a law firm releases a commercial directed specifically at social security disability cases, and tells viewers that it will help them through the process of obtaining social security benefits because ‘that’s what [they] do,’ such a message necessarily implies that lawyers within the law firm handle their clients’ social security claims.” And if Lundy didn’t handle any aspect, that was literally false. So too with Lundy’s listing “social security” among its “practice areas”: “it unambiguously implies that attorneys at the firm handle cases within that practice area.”  Between late  2008 and late 2013, Lundy Law referred all of its potential Social Security cases directly to other law firms, creating a genuine issue on literal falsity.  But after that, a part-time attorney came on to handle Social Security cases; even if she handled only a few, the post-2013 ads didn’t “unambiguously represent that the firm would take on more than five cases per month.”

But Pitt couldn’t show damages: it had to show a causal link between its alleged injury and Lundy’s specific misrepresentations by showing that Lundy’s statements actually deceived and influenced consumers. Evidence that potential clients responded to Lundy Law’s advertisements wasn’t enough to show that the clients relied on any of the specific false representations. And there was no evidence linking an increased Social Security intake to the use of any specific ads; it might have resulted from Lundy’s non-false advertising, such as the firm’s more general “injury & disability lawyers” ads or its personal injury ads. This defeated Pitt’s damages claim, and also its request for disgorgement of profits and corrective advertising.  

There was no reason to proceed to trial for injunctive relief; though Lundy could once again farm out all its Social Security cases while misrepresenting that its attorneys handled those cases, there was no evidence that Lundy intended to do so.

The same analysis applied to the state UCL deceptive marketing claim.

The trade secret claim failed because, while the nepotism might concern Titan (the ad agency) and SEPTA, there was no evidence that any of the information Sara Lundy shared with Leonard was confidential.  “[T]he content and location of a law firm’s advertisements is generally intended to be public.”

The court concluded with a cautionary note: “In many instances, a complaint to the state attorney disciplinary boards may be the most effective means for quickly ending and sanctioning plainly unethical conduct. Thus the Court’s decision should not be read to condone or excuse Defendants’ alleged actions, but should instead serve as a reminder of the burden that plaintiffs bear when they choose to seek relief against their competitors in court.”

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