Thursday, June 28, 2018

Direct competition + literally false advertising don't equal standing without more

Brave Law Firm, LLC v. Truck Accident Lawyers Gp., Inc., No. 17-1156-EFM-GEB, 2018 WL 3122172 (D. Kan. Jun. 26, 2018)

Brave sued its personal injury law firm rivals (TALG) under the Lanham Act and Kansas state law based on allegations of false and deceptive advertising. The court ruled that Brave hadn’t sufficiently alleged injury—furthering my suspicion that Lexmark reasoning has made it easier to proceed against disparagement and harder to proceed against false claims a defendant makes about itself, even though the latter was the core of what the Lanham Act false advertising provisions tried to cover.

Brave and TALG offer competing legal services in the same geographic area. An example of the allegedly false advertising is an ad depicting a woman holding a check with the words “$2.4 MILLION” displayed in bold text, with a disclaimer stating, in part: “Amounts are gross recovery before fees and expenses.” Brave alleged that this ad was false because the actual “gross recovery” before fees and expenses was $387,018, or 16% of what was advertised.

The court found that Article III wasn’t satisfied. The allegations of injury were conclusory, alleging mostly that the false advertising was intentional. The court declined to apply a presumption of injury to standing even if the advertising was literally false.  Brave failed to allege that it lost potential clients to TALG, that it lost revenue from the false ads, or that TALG strengthened its market position through the ads. The motion to dismiss on standing was granted with leave to amend.

Because of the leave to amend, the court addressed zone of interests/proximate causation under Lexmark as well. As with standing, Brave failed to sufficiently allege injury to a commercial interest in reputation or sales (zone of interests). Brave argued that it was seeking injunctive relief, so it didn’t have to show injury. But that’s not right. However, if Brave successfully amended to assert an injury to a commercial interest in reputation or sales, the proximate cause test would most likely be met, given that Brave’s scenario would fit into the “classic Lanham Act false-advertising claim.”

Finally, Brave’s pleadings didn’t satisfy FRCP 9(b) in identifying the when, where, and how: though it provided a screenshot of an alleged ad, it didn’t allege when or how the ad was disseminated, or when/how (in terms of medium) other ads were or who ran those or what those other ads specifically said.

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