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Larry Pitt & Associates v. Lundy Law, LLP

United States District Court, Third Circuit

December 13, 2013

LARRY PITT & ASSOCIATES, Plaintiff,
v.
LUNDY LAW, LLP, et al., Defendants.

MEMORANDUM OPINION

CYNTHIA M. RUFE, District Judge.

Plaintiff, a law firm, has sued a second law firm and its managing partner, alleging state and federal causes of action. Defendants[1] have moved to dismiss all claims. For the reasons set forth herein, the motion will be granted in part and denied in part.

I. FACTS ALLEGED IN THE AMENDED COMPLAINT

Plaintiff Pitt is a Pennsylvania-based law firm which provides representation to clients in greater Philadelphia area, including Philadelphia and its Pennsylvania, New Jersey, and Delaware suburbs. The firm provides representation primarily in the areas of "small personal injury, social security disability, and workers' compensation law."[2] Defendant Lundy Law is a Pennsylvania-based law firm serving the same region and advertising that it provides representation to individuals pursuing personal injury, social security disability, and workers' compensation claims. The two firms directly compete for clients, and for prime advertising opportunities used to attract clients.

Consumers wishing to retain a lawyer in the areas of personal injury, social security disability, and workers' compensation select their lawyers based upon brand name or name recall. Accordingly, effective advertising such that consumers become familiar with the name of a law firm is important to the business success of that firm. Law firms such as Pitt and Lundy seek advertising opportunities which provide "[m]ass reach, constant messaging, [and] saturation, "[3] as such advertising creates name recognition. According to Pitt, the most highly coveted advertising venues are: 1) the exterior of buses; 2) radio time slots just before and after traffic and weather updates; and 3) inside sports arenas. Phonebooks, internet advertisements, roadside stationary billboards, and advertising posted inside buses and trains and at bus stops are all less effective.[4]

Historically, Pitt purchased advertising space on the exteriors and interiors of Southeastern Pennsylvania Transportation Authority ("SEPTA") buses and trains, and on SEPTA bus stops. SEPTA advertisements are sold by a national advertising agency called Titan. Defendant L. Leonard Lundy's daughter, Sara Lundy, has been an Account Executive at Titan since March 2011, and is responsible for selling advertisements for SEPTA. Since approximately January 2012, Lundy Law has had the exclusive right to advertise legal services on the outside of SEPTA buses, pursuant to one-year, renewable contracts with SEPTA. In consideration for this exclusive right, Lundy Law paid a substantial advertising fee, above the market prices SEPTA typically charges for such advertising. For the period of the contract, Pitt and other law firms[5] cannot advertise on the exterior of SEPTA buses, even if the advertising space is not being used by Lundy or any other business. Pitt and other firms may purchase advertising space inside SEPTA buses and trains and on SEPTA bus stops. Pitt alleges that Lundy's exclusive contract with SEPTA for exterior advertising is renewable indefinitely, but does not allege that the contract requires either party to renew at the end of each one year term.[6] Pitt has not alleged that it has been or will be denied the opportunity to make its own offer for an exclusive contract with SEPTA at the expiration of Lundy's one-year exclusive contract, [7] nor has it alleged that SEPTA has rejected higher offers for exclusive contracts in favor of Lundy Law.

Pitt notes that exterior bus advertisements are very effective, and are unique in that they serve as moving billboards, reaching more prospective clients than stationary billboards or interior bus and train advertisements. Pitt provides no data with regard to how many individuals in the greater Philadelphia area see interior versus exterior SEPTA ads each day, but does note that average weekday ridership on SEPTA-operated vehicles is over 1 million passengers, and overall ridership is 3.9 million passengers annually. Pitt received 142 client referrals from SEPTA advertisements (presumably including both interior and exterior advertisements) in 2008, 160 in 2009, 197 in 2010, and 146 in 2011, but only 16 in 2012 and 12 in 2013 after it was barred from running advertisements on the exteriors of SEPTA buses.

In addition to the SEPTA contract, Lundy has entered into a one-year exclusive contract to advertise on the exterior of Berks Area Regional Transportation Authority ("BARTA") buses. The BARTA system serves 3.1 million riders annually in and around Reading, Pennsylvania. In the past, Pitt has advertised on the KYW radio station during rush hour, but now Lundy has an exclusive contract for rush hour advertising slots scheduled around weather and traffic updates on KYW, precluding other law firms from buying advertising in those desirable time slots on that station for at least one year.[8] Finally, Lundy has an exclusive contract with the Wells Fargo Center sports and entertainment arena, which precludes advertising by competing law firms for at least one year. Lundy obtained all of these exclusive contracts by paying "unusually high" advertising fees, well above market rates.[9] These facts form the basis of Pitt's antitrust and unfair competition claims.

Pitt's false advertising claim is premised on the fact that Lundy Law advertises itself as a law firm representing clients in Social Security disability and workers' compensation cases, when in fact it refers such cases to other firms in exchange for a referral fee, and does not actually represent clients in such cases.

Finally, the Amended Complaint alleges that Lundy Law, which uses the phrase "Remember this Name" in its advertising, filed a meritless trademark infringement lawsuit against Pitt for Pitt's use of the phrase "Remember this Number" in its advertising. The suit was filed on March 4, 2013. The parties submitted briefs on Lundy Law's motion for a preliminary injunction and began discovery efforts. Then, on April 18, 2013, Lundy Law voluntarily dismissed the trademark infringement suit within hours of learning that Pitt's insurance carrier was covering the costs of litigation for Pitt. The Amended Complaint notes that "Remember this Name" is not a registered trademark.

As a result of these above described activities, Pitt has suffered a decrease in net income, whereas in the years before Lundy Law entered into the exclusive advertising contracts, Pitt had typically seen an increase in net income from year to year.

II. STANDARD OF REVIEW

Dismissal of a complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted is appropriate where a plaintiff's "plain statement" does not possess enough substance to show that plaintiff is entitled to relief.[10] In determining whether a motion to dismiss is appropriate the court must consider those facts alleged in the complaint, accepting the allegations as true and drawing all logical inferences in favor of the non-moving party.[11] Courts are not bound to accept as true legal conclusions couched as factual allegations.[12] Something more than a mere possibility of a claim must be alleged; the plaintiff must allege "enough facts to state a claim to relief that is plausible on its face."[13] Even in complex antitrust cases, courts must apply the plausibility standard and not a heightened standard.[14] The Complaint must set forth direct or ...


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