New Allegations Raised in Ongoing Pitt-Lundy Dispute
Just shy of three weeks after a federal judge tossed personal injury firm Larry Pitt & Associates' monopoly claims against competitor Lundy Law with the opportunity to replead them, the Pitt firm has raised new allegations that Lundy Law is 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 Pitt firm has also expanded on its previous allegation that Lundy Law refers its clients to doctors and other health care providers in exchange for cash payments.
In its 85-page second amended complaint in Larry Pitt & Associates v. Lundy Law, filed Jan. 2, the Pitt firm alleges Lundy Law entered into an agreement with Philadelphia workers' compensation firm Pond Lehocky Stern Giordano in which Pond Lehocky refrains from advertising on Southeastern Pennsylvania Transportation Authority vehicles. SEPTA is Greater Philadelphia's regional mass transit system.
In exchange, the new complaint alleges, 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, pays Lundy Law a fee for these advertisements and referrals, according to the complaint, which also alleges Lundy Law has similar agreements with other firms, but does not name them.
"The intent and effect of Lundy's conspiracy with partner advertising law firms, like Pond Lehocky, which are held out to the public as competitors, but in fact are working in concert, is to expand Lundy's already dominant marketing position through combination with its partners, and further foreclose competition in the market for legal services provided by small personal injury and Social Security disability and workers' compensation law firms in the Greater Philadelphia region from other competitors, including Pitt," the second amended complaint said.
The second amended complaint said that emails between Lundy Law and Titan, the advertising company that has the exclusive rights to sell advertisements on behalf of SEPTA, obtained through Right-to-Know Law requests, show that Lundy Law principal L. Leonard Lundy told the advertising firm that his "'advertising partners'" had decided not to advertise on SEPTA buses around the same time that Pond Lehocky told Titan that it did not want to advertise on the interior of buses.
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."
The second amended complaint names Titan as a defendant in addition to Lundy Law and Leonard Lundy. Pond Lehocky is not named as a defendant.
Scott E. Goldsmith, executive vice president and chief commercial officer of Titan, could not be reached for comment Jan. 3.
The second amended complaint further alleges 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 alleges.
Counsel for the defendants, Robert C. Heim of Dechert in Philadelphia, said Jan. 3 that the second amended complaint "seems a bit desperate."
"To borrow from two overused but apt cliches, the judge has given Mr. Pitt every inch of rope and a third bite at the apple," Heim said, adding that his clients plan to move to dismiss the latest complaint.
Specifically addressing the doctor referral fee allegations, Heim called the claims "simply not true."
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—Berks Area Regional Transportation Authority—buses.
In its Jan. 2 complaint, the Pitt firm further alleges that Lundy Law has similar contracts with Delaware Area Rapid Transit and New Jersey Transit.
According to the original complaint, these contracts have foreclosed Pitt & Associates from renewing its own contracts for exterior bus advertisements, which are considered to be among "the most effective forms of advertising for legal services for small personal injury, Social Security disability and workers' compensation law firms to use in order to achieve name recognition."
"Specifically, when plaintiff Pitt Law attempted to renew its contract for the highly coveted advertisements on the exterior of SEPTA buses, it was informed that defendant Lundy's advertising contract with SEPTA prevented SEPTA from contracting with any other legal service providers for advertising anywhere on the exterior of buses, for at least one year, with unlimited one-year renewal options," the complaint alleged, adding that Pitt & Associates received the same response when it tried to renew its contract with BARTA.
The first amended complaint filed in August 2013 added that, in March 2011, Lundy's daughter began working as an account executive at Titan, the advertising company that has the exclusive rights to sell advertisements on behalf of SEPTA.
Before Lundy's daughter joined Titan, several local personal injury firms, including the Pitt firm, advertised on the exteriors of SEPTA buses, according to the first amended complaint.
"Less than a year after L. Leonard Lundy's daughter began working for Titan, an agreement was entered into among SEPTA, Titan and defendant Lundy, under which no legal service provider except defendant Lundy would be permitted to place any advertisements on the exteriors of buses," the first amended complaint said.
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 alleges that RTKL 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.
The defendants argued in their Sept. 12, 2013, motion to dismiss that the Pitt firm "does not and cannot allege that Lundy has tied up all (or even a substantial portion) of the countless advertising opportunities that exist in the proposed market."
"There is simply no harm to competition when firms like Pitt retain hundreds or thousands of ways to reach their potential clients," the defendants said.
The defendants said the Pitt firm's assertion that it has seen a decrease in net income, annual fees and SEPTA-based referrals also fails because there are a number of potential reasons, aside from advertising, why a firm's financial performance might change from year to year.
"Furthermore, at most, Pitt's assertions about its declining financial performance allege harm to Pitt—a particular competitor—not harm to the competitive process," the defendants said. "Indeed, Pitt appears to be using this lawsuit in an effort to avoid competition. Pitt wants to enjoin Lundy from entering into advertising contracts providing limited exclusive rights because Pitt itself does not want to pay for such rights."
In a Dec. 13, 2013, opinion, U.S. District Judge Cynthia M. Rufe of the Eastern District of Pennsylvania dismissed 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 KYW, the Wells Fargo Center, SEPTA and 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."
"Although Lundy Law may well wish to dominate that legal market, it has not been adequately pled that Lundy Law has engaged in predatory or anti-competitive conduct to achieve that goal," Rufe said. "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. 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 the claim that a federal trademark suit Lundy Law filed against the Pitt firm earlier this year and then dropped constituted an abuse of process.
The Pitt firm's original complaint had cited as an example of additional "predatory conduct" the suit Lundy Law filed against Pitt & Associates in March 2013, which had claimed Pitt & Associates' "Remember This Number" slogan was too close to Lundy Law's "Remember This Name" slogan.
According to court records, Lundy Law voluntarily dismissed that suit April 18, 2013.
In its original complaint, the Pitt firm alleged Lundy Law's suit had "no good-faith basis in law and fact" and was filed "for anti-competitive purposes."
In its second amended complaint, the Pitt firm alleges Lundy Law dropped the suit a few hours after learning that the Pitt firm had insurance to cover the fees and costs associated with the litigation.
While Rufe, in her Dec. 13 opinion, had allowed the Pitt firm to continue with its Dragonetti Act claim, she said the firm failed to adequately plead an abuse of process claim, which pertains to a perversion of the civil process after a suit is filed but not to the actual filing of a suit.
In its second amended complaint, the Pitt firm has maintained the Dragonetti Act claim but has dropped the abuse of process claim.
Counsel for the Pitt firm, Carl W. Hittinger of DLA Piper in Philadelphia, told The Legal that the second amended complaint "speaks for itself."