Calling it the “third bite at the proverbial apple,” Philadelphia personal injury firm Lundy Law and advertising firm Titan have responded to competitor Larry Pitt & Associates’ second amended complaint in an ongoing antitrust battle by saying the Pitt firm has “stretched the facts as far as truth will allow—and beyond.”
The Pitt firm filed its second amended complaint Jan. 2 after U.S. District Judge Cynthia M. Rufe of the Eastern District of Pennsylvania issued a Dec. 13, 2013, opinion dismissing without prejudice the Pitt firm’s Sherman Act, unfair competition and tortious interference with contract claims, saying the plaintiff failed to show that Lundy Law’s exclusive advertising contracts with the Southeastern Pennsylvania Transportation Authority (SEPTA), KYW, the Wells Fargo Center and the Berks Area Regional Transportation Authority (BARTA) were unlawful.
Rufe said the Pitt firm “alleged no facts, beyond Lundy Law’s acquisition of discrete, albeit highly effective, advertising opportunities, in support of its claim that Lundy Law has engaged in predatory or anti-competitive conduct.”
“The goal of all advertising is to increase market share, and the fact that advertising is effective does not render its use anti-competitive or predatory,” Rufe said. “In fact, in seeking exclusive advertising opportunities, it appears that Lundy Law is responding to competition in the legal market.”
But in one of two accompanying orders, Rufe gave the Pitt firm until Jan. 3 to replead the dismissed antitrust claims, along with a claim that a federal trademark suit Lundy Law filed against the Pitt firm earlier this year and then dropped constituted an abuse of process.
While the Pitt firm has maintained the Dragonetti Act claim Rufe allowed to proceed in her Dec. 13 decision, the firm has dropped its abuse of process claim.
In the second amended complaint, the Pitt firm raised new allegations that Lundy Law has engaged in a “horizontal conspiracy” in which it refers work to other law firms in exchange for their agreement not to advertise on SEPTA buses.
The new complaint also named Titan, the advertising company that has the exclusive rights to sell advertisements on behalf of SEPTA, as a defendant.
On Feb. 12, Lundy Law and Titan jointly responded with a motion to dismiss the second amended complaint, calling the horizontal conspiracy allegations “implausible and insufficient” and saying the new complaint “largely repeats the same allegations that this court already found insufficient.”
“Enough is enough,” the defendants said in the motion. “Pitt has now had three opportunities to transform its factual allegations into actionable antitrust, unfair competition, and tortious interference claims, and clearly cannot do so.”
In its 85-page second amended complaint in Larry Pitt & Associates v. Lundy Law, the Pitt firm alleged Lundy Law entered into an agreement with Philadelphia workers’ compensation firm Pond Lehocky Stern Giordano in which Pond Lehocky refrains from advertising on SEPTA vehicles. SEPTA is Greater Philadelphia’s regional mass transit system.
In exchange, the new complaint alleged, Lundy Law falsely advertises itself as a Social Security disability and workers’ compensation firm and then refers much of the work it brings in from those advertisements to Pond Lehocky.
Pond Lehocky, meanwhile, allegedly pays Lundy Law a fee for these advertisements and referrals, according to the complaint, which also alleged Lundy Law has similar agreements with other firms, but did not name them.
The defendants said in their Feb. 12 filing that the Pitt firm “fails to plausibly explain how, if at all, any such arrangement harmed competition in its proposed legal services market, or how Pitt was injured as a result.”
“According to the SAC, the ‘conspiracy’ involved an agreement by other law firms ‘not to advertise against Lundy on, at least, SEPTA buses,’” the defendants said in the filing. “Such conduct would benefit Pitt—a firm that has ‘historically’ advertised with SEPTA.”
Reached via email Jan. 3, Pond Lehocky principal Samuel H. Pond called the allegations “bizarre.”
“We decided not to advertise in the interior of mass transit since we didn’t feel it fit into our marketing strategy, not because Len Lundy was on the exterior of buses,” Pond said in the email. “The Lundy firm never was in our thoughts or discussions in making our decisions.”
Pond Lehocky has not been named as a defendant.
The second amended complaint further alleged that Lundy Law has engaged in a scheme “since at least 2006″ in which it is paid by doctors and other health care providers for referrals, at a rate of up to $800 per patient.
“Because Lundy has become such an important source of patient referrals for doctors in the relevant legal services market due to his successful but false and misleading mass advertising, those doctors are willing to pay Lundy for his referrals, and many believe that their practices would not survive if they refused to make the payments, because competing doctors would make them instead,” the second amended complaint alleged.
But in their Feb. 12 response, the defendants said neither the false advertising allegations, the doctor referral allegations nor the Dragonetti Act claim formed an adequate basis for an antitrust suit.
The defendants said there is no evidence the Pitt firm suffered any injury from Lundy Law’s trademark suit, particularly since the Pitt firm had insurance to cover the fees and costs of that litigation.
“Moreover, if Pitt believes it has been harmed either by Lundy’s allegedly deceptive ads or by the payments Lundy has allegedly received from doctors, there is nothing to stop Pitt itself from using Lundy’s conduct to its own competitive advantage, such as by informing consumers of that conduct,” the defendants said in their Feb. 12 response.
The Pitt firm alleged in its original complaint in May 2013 that Lundy Law entered into contracts that give the firm exclusive rights to advertise on the exteriors of SEPTA and BARTA buses.
In its Jan. 2 complaint, the Pitt firm further alleged that Lundy Law has similar contracts with Delaware Area Rapid Transit and New Jersey Transit.
According to the original complaint, these contracts have foreclosed the Pitt firm from renewing its own contracts for exterior bus advertisements.
The first amended complaint filed in August 2013 added that, in March 2011, Lundy Law principal L. Leonard Lundy’s daughter began working as an account executive at Titan, after which Lundy Law entered into its exclusive contract with Titan and SEPTA.
Since then, according to the first amended complaint, the Pitt firm and other Lundy Law competitors have been told either by Lundy’s daughter or another Titan representative that they could not purchase advertisements on the exteriors of SEPTA buses.
According to the original complaint, the Pitt firm encountered similar roadblocks when it tried to secure contracts to advertise within the Wells Fargo Center and on KYW Newsradio during traffic and weather reports, traffic sponsorships and time checks.
In the second amended complaint, the Pitt firm further alleged that Right-to-Know Law requests show Lundy’s daughter has provided Lundy Law with “commercially sensitive” information about other firms Titan works with, including information related to those firms’ advertising purchases, strategies, spend and copy.
But the defendants maintained in their Feb. 12 response that any alterations made to the Pitt firm’s antitrust allegations in the second amended complaint were superficial and that the firm had failed for the third time to state antitrust, unfair competition or tortious interference claims.
“There is nothing in the SAC to suggest that Lundy’s exclusive contracts with Titan had any anti-competitive purpose or effect on Pitt’s proposed legal services market, and that omission is fatal to count IV and Pitt’s other antitrust claims,” the defendants said.
The defendants also called the Pitt firm’s assertions that Lundy’s contracts with Titan allow him to pay the same price for advertising with SEPTA every year “utterly and demonstrably false.”
“In fact, the documents establish that contract prices increased over time, and that nothing prevents Titan from raising prices further in the future,” the defendants said in their response. “If Lundy tries to renew but does not accept Titan’s price, Titan is free to negotiate an exclusive with another advertiser or to refrain from offering an exclusive altogether.”
But counsel for the Pitt firm, Carl W. Hittinger of DLA Piper in Philadelphia, called the accusation that his client had misrepresented the terms of Lundy’s contracts “specious.”
Hittinger said that, under the terms of those contracts, Lundy has paid the same weekly rate for advertising since January 2012.
Hittinger added that his client plans to file a brief responding to Lundy Law’s motion to dismiss March 12.
Counsel for Lundy Law and Titan, Robert C. Heim of Dechert in Philadelphia, said the Pitt firm has “not fixed the deficiencies identified by Judge Rufe and I don’t think they’re fixable.”
“This is their third and, I hope, last shot,” Heim said.