United States District Court, E.D. Pennsylvania
For LARRY PITT & ASSOCIATES, Plaintiff: CARL W. HITTINGER, LEAD ATTORNEY, ROBERT E. CONNOLLY, DLA PIPER LLP, PHILADELPHIA, PA; ADAM D. BROWN, LESLI C. ESPOSITO, DLA PIPER U.S. LLP, PHILADELPHIA, PA.
For LUNDY LAW, LLP, L. LEONARD LUNDY, Defendants: BRIAN SAVAGE, CAROLYN M. HAZARD, DECHERT LLP, PHILADELPHIA, PA; ROBERT C. HEIM, DECHERT, PHILADELPHIA, PA.
CYNTHIA M. RUFE, J.
Plaintiff Larry Pitt & Associates (" Pitt" ), a law firm, has sued a second law firm, Lundy Law, LLP, and its managing partner L. Leonard Lundy, Esq. (collectively " Lundy Law" ), as well as Titan Outdoor LLC (" Titan" ), an advertising firm, alleging federal antitrust violations and state law causes of action. Plaintiff voluntarily dismissed its initial complaint after Defendants filed a motion to dismiss, and filed an amended complaint. Defendants again moved to dismiss, and the Court granted that motion in substantial part. Plaintiff filed a Second Amended Complaint. Defendants have moved to dismiss the Sherman Act claims (Counts 1-4) and certain state law claims (Counts 6 and 7).
I. FACTUAL ALLEGATIONS IN THE SECOND AMENDED COMPLAINT
Plaintiff Pitt is a Pennsylvania-based law firm, with its office in Philadelphia, which provides representation to clients in the greater Philadelphia region. The firm provides representation primarily in the areas of personal injury, social security
disability, and workers' compensation law. Defendant Lundy Law is a Pennsylvania-based law firm with offices in Pennsylvania, New Jersey and Delaware. Lundy Law purports that it provides representation to individuals pursuing personal injury, social security disability, and workers' compensation claims.
It is alleged that potential clients who wish to retain a lawyer in the areas of personal injury, social security disability, and workers' compensation select their lawyers based upon brand name recognition or brand name recall. Accordingly, law firms such as Pitt and Lundy Law seek advertising opportunities which provide mass reach, constant messaging, and saturation, as such advertising creates name recognition and recall. 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. Television advertisements, phonebook listings, internet advertisements, roadside stationary billboards, and advertising posted inside buses and trains and at bus stops are all less cost effective.
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 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. For the period of the exclusive contract, other law firms cannot advertise on the exterior of SEPTA buses, even if the advertising space is not being used by Lundy or any other business. The SAC alleges that the exclusive contract with SEPTA is, in effect, renewable indefinitely, at Lundy's sole option. In consideration for this exclusive right, Lundy Law paid a substantial advertising fee, above the market prices SEPTA typically charges for such advertising space. Pitt (and other law firms) may (and do) continue to purchase advertising space inside SEPTA buses and trains and on SEPTA bus stops, but are allegedly foreclosed by terms of Lundy Law's exclusive contracts with SEPTA from entering into their own exclusive contracts with SEPTA. Pitt also alleges that Sara Lundy gave her father access to competitively sensitive information, as she was the point person for advertising sales for competing law firms, including Pitt.
Pitt claims 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 alleges that it 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 exclusive contracts to advertise on the exterior of Berks Area Regional Transportation Authority (" BARTA" )
buses, as well as New Jersey Transit buses and Delaware's DART buses. 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. 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.
As evidence of Lundy Law's market power, Plaintiff alleges that Lundy has been able to charge its clients higher contingency fees (as high as 45%), demand cash referral fees from doctors to whom Lundy refers clients, and enter into agreements with other law firms, pursuant to which other firms contribute to Lundy Law's advertising budget and pay Lundy Law referral fees, and Lundy Law runs ads for legal services that it does not provide (e.g. representation in social security and workers' compensation cases) and refers those cases to the other law firms.
As a result of all these 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 Aplain statement" does not possess enough substance to show that plaintiff is entitled to relief. 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. Courts are not bound to accept as true legal conclusions couched as factual allegations. 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."  Even in complex antitrust cases, courts must apply the plausibility standard and not a heightened standard. The Complaint must set forth direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory. The court has no duty " to conjure up unpleaded facts that might turn a frivolous . . . action into a substantial one." 
The Court notes that the additional factual allegations set forth in the SAC generally
fail to correct the pleading deficiencies discussed in the Court's December 13, 2013 memorandum opinion. The Court incorporates the relevant reasoning from that decision herein, and sets forth the following additional grounds for its ruling.
A. Antitrust Claims: Sherman Act, Section 2 Claims (Counts 1 and 3)
In Counts 1 and 3, Pitt alleges that Lundy Law has violated Section 2 of the Sherman Act, through unlawful monopolization or attempted monopolization of trade. A party can violate Section 2 through unilateral conduct which creates or attempts to create a monopoly, or by harmfully exercising monopoly power. Pitt argues that Lundy Law has achieved or has attempted to achieve a monopoly in the market for small personal injury and social security disability and workers' compensation law firms in the Greater Philadelphia Region. Pitt argues that Lundy Law has engaged in multiple anti-competitive schemes in restraint of trade in the legal market, causing injury to competitor law firms, including Pitt.
To state a claim under Section 2, a plaintiff must allege " (1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power."  As an essential part of its case, a plaintiff must define the relevant geographic market and product market, and explain a defendant's ...