Thursday, March 14, 2019

It wasn't malpractice to argue unauthorized use of name was false association, not false advertising

Majorsky v. Lieber, No. 798 WDA 2017, 2019 WL 1092543 (Pa. Super. Ct. Mar. 8, 2019)

Majorsky and two business partners, Douglas and Natale, purchased the D.J. Hess Advertising Company. “D.J. Hess is a partnership that sells promotional products, items such as keyrings and pens inscribed with a company’s name. Two years after acquiring the business, Douglas and Natale voted to change the compensation scheme for partners.” As a result, Majorsky left and formed other competing businesses, including, Peg’s Custom Products and sued Douglas and Natale for violations of the Pennsylvania Uniform Partnership Act, as well as damage to his business interests and reputation in the promotional products industry. Douglas and Natale counterclaimed, alleging that Majorsky’s new business competed with D.J. Hess in violation of his fiduciary duty to the partnership.

A consent verdict dictated that Douglas and Natale pay Majorsky $10,000 in damages. That action was discontinued, after which Majorsky retained Lieber’s legal services and filed a second suit premised on the dissolution of the partnership. A key cause of action was that Douglas and Natale allegedly continued to use Majorsky’s name on the company’s website during the previous litigation, in violation of the Lanham Act. 

The Lanham Act case was dismissed on summary judgment, and appeals were unsuccessful. The Majorskys then sued their attorneys for malpractice for failing to adequately argue a false advertising theory under the Lanham Act. The trial court dismissed the complaint.

On appeal, Majorsky argued that his attorneys should have argued “false advertising involving literal falsity” instead of a trademark infringement claim, and that failure to do so was malpractice. To win a malpractice case, a plaintiff must show by a preponderance of the evidence that they would have recovered a judgment in the underlying action—that is, that they had a viable claim. Thus, the court turned to the literal falsity theory.

Whereas a false association claim requires secondary meaning, false advertising does not.  However, the underlying claim here was “essentially a false association claim in disguise.” Majorsky didn’t allege untrue claims about the products D.J. Hess sold, only that he remained erroneously associated with the company due to the retention of his name on the company’s website. Thus, the false advertising claim was “groundless” and Lieber “wisely” limited the action.  [I don’t disagree with this result, not least because I think materiality is a barrier to a false advertising claim because of the lack of secondary meaning, but I must note that the Lanham Act covers material false statements about goods, services, and “commercial activities,” not just statements about products.]  The malpractice claim failed and the trial court’s decision was affirmed.

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