Tuesday, May 14, 2019

law firm alleging clients lost to competitor satisfies Lexmark, in part

Brave Law Firm, LLC v. Truck Accident Lawyers Group, Inc., No. 17-1156-EFM-JPO, 2019 WL 2073872 (D. Kan. May 10, 2019)

Brave, a personal injury firm, sued various parties for violating the Lanham Act and Kansas state law.  
It alleged that “from 2007 to at least 2017, Defendants created and disseminated false and misleading advertisements regarding the amount of money they obtained as settlements and jury verdicts for their clients.” For example, one ad claimed that they obtained a settlement of $9 million for a past client, but Brave alleged that they didn’t because they were fired by the client. They also allegedly falsely advertised gross recoveries of $4.1 million, $2.4 million, $2.1 million, $1.1 million, and $1.6 million.

Brave pled three specific examples of past clients who relied on the allegedly false advertising. One hired one of the defendants in 2011. “During mediation, the mediator told her that her case had a value of $360,000, but the highest settlement offer [defendant’s entity] AAPLO obtained was $225,000 in exchange for a full release to the tortfeasor. Consolver rejected that offer and terminated AAPLO as her legal counsel. …. Consolver then hired Brave, who pursued a different theory of recovery and obtained a settlement amount of $360,000.”  Defendants/their entities filed an attorney’s lien, reducing the amount of Brave’s fee.  The other examples were very roughly similar though more complicated.

The court rejected defendants’ arguments that the statute of limitations barred a Lanham Act claim relating to the first client and that it wasn’t sufficiently pled under Rule 9(b). On the limitations issue, the court borrowed the Kansas period for fraud, 2 years; Kansas uses a discovery rule, and Brave alleged that defendants’ injury-causing conduct wasn’t reasonably ascertainable until within the two-year period for filing.  Brave hadn’t pled itself out of court by alleging facts making it clear that a reasonably prudent person would have investigated Defendants’ actions in 2007 or 2012, when Consolver hired Brave.

Brave also identified specific allegedly false ads.  Although Brave didn’t allege which exactly Consolver viewed or when she viewed them, it was enough to allege that defendants “engaged in a false advertising scheme that exposed potential clients, such as Consolver, to numerous false advertisements over a period of time. The requirements of Rule 9(b) are relaxed when the alleged fraudulent acts are numerous and occur over an extended time period.  Here, it would be unduly burdensome to require Defendant to specify every false advertisement that Consolver relied upon and when she saw that advertisement.”

Brave also sufficiently alleged falsity by identifying specific claims about verdicts or settlements achieved by defendants and alleging that they were false. For example, ads reporting the $9 million settlement were allegedly “literally false” because “the person that actually reached the settlement had terminated [defendants/their entities] prior to any settlement being reached.” Defendants argued that the claim was true because they were able to assert an attorney’s lien against the former client when settlement was eventually reached and thus they contributed to the ultimate resolution.  The court wasn’t persuaded. The ad didn’t identify defendants as causally helping to obtain a settlement: it said that one of them did obtain it.

As to another client, defendants argued that the claim failed to satisfy Lexmark. The alleged “injury to a commercial interest in reputation or sales” was that because it had ended up embroiled in litigation about the attorney’s lien on that client’s recovery that (1) it “has been embroiled in litigation and forced to deal with the abandoned lien issue for years”; (2) it “has sustained injury to its reputation as well as been forced to spend considerable time and expense defending frivolous litigation”; (3) “the allegations that Brave Law Firm, LLC and its employees acted ‘illegally, unethically[,] and immorally’ have been disseminated far and wide and damaged its reputation both within the Kansas legal community and [with] potential clients.” Proximate cause ordinarily requires “economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that occurs when deception of consumers causes them to withhold trade from the plaintiff.” Here, the allegations of injury were “simply too remote” from the false advertising.  Brave didn’t allege losses of fees from an attorney’s lien, but rather from losses due to fighting with defendants about the underlying case.

As for the third client, it was sufficent to allege that Brave “likely” would have been her first choice in the absence of advertising; it was not required to allege that she definitely would have been. This third client’s claim was dismissed, allegedly because of defendants’ missed deadlines, and allegedly would have resulted in a multimillion-dollar recovery. Defendants argued that it wasn’t plausible to conclude that Brave would have won, and won so big.  But it was enough to allege that the client’s “case would not be one that was particularly difficult to win and, if properly handled, would have generated a substantial attorneys’ fee upon successful resolution.”

However, Brave didn’t successfully plead tortious interference. Even if Brave pled the existence of a business relationship or expectancy with the clients, nothing indicated that defendants were aware of that when those clients initially hired defendants.

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