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Brave Law Firm, LLC v. Truck Accident Lawyers Group, Inc.

United States District Court, D. Kansas

May 10, 2019




         Plaintiff Brave Law Firm, LLC (“Brave”) brings this action asserting claims under the Lanham Act and Kansas state law based on allegations of false and deceptive advertising. Before the Court is Defendants Truck Accident Lawyers Group, Inc. (“TALG”), Brad Pistotnik Law, P.A. (“BPL”), and Bradley A. Pistotnik's Motion to Dismiss (Doc. 44). Defendants seek dismissal of this lawsuit under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim under which relief may be granted and Rule 12(b)(1) for lack of subject matter jurisdiction. For the reasons discussed below, the Court grants in part and denies in part Defendants' motion.

         I. Factual and Procedural Background [1]

         Brave is a law firm located in Wichita, Kansas, that offers legal services in the nature of personal injury work. Defendant Brad Pistotnik (“Brad”) is an attorney who offers competing legal services in the same geographic area. Pistotnik previously practiced law with his brother, Brian Pistotnik (“Brian”), under the Kansas professional corporation titled “Affiliated Attorneys of Pistotnik Law Offices, P.A.” (“AAPLO”).

         While Brad and Brian were practicing law together, Brad formed TALG to operate as a marketing company for AAPLO. TALG operates its own website, which primarily advertises legal services. Since its formation, Brad has been the only shareholder of TALG and has served as its president, secretary, and treasurer.

         In 2014, Brad left AAPLO to open his own law firm, BPL. Brad is BPL's only shareholder and serves as its president. Brad continues to operate TALG and its website, and when potential clients contact TALG, he sends them to BPL. AAPLO dissolved in January 2015.

         Brave generally alleges 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. These advertisements appeared in various media formats including television advertisements, print ads, phone book ads, website content, “pay-per-click” advertising, and direct mail brochures. The television advertisements appeared on local affiliate television stations as well as cable stations.

         As one example, Brave points to an advertisement run by Brad, TALG, Brian, and AAPLO stating that they obtained a settlement of $9 million for a past client. Brave alleges, however, that neither Brad, Brian, TALG nor AAPLO actually obtained a $9 million recovery because they were fired by the client. Brave also alleges that Defendants have falsely advertised in print ads, phone book ads, website content, “pay per click” advertising gross recoveries of $4.1 million, $2.4 million, $2.1 million, $1.1 million, and $1.6 million, when Defendants did not, in fact, obtain these amounts as gross recoveries for their clients.

         Brave filed this lawsuit on July 3, 2017, against AAPLO, TALG, BPL, Brad, and Brian. The Complaint asserted three claims: violation of the Lanham Act based on false and deceptive advertising, tortious interference with prospective business advantage, and civil conspiracy. Defendants moved to dismiss these claims, and the Court granted the motion concluding that Brave lacked standing under Article III, that Brave did not meet the statutory requirements under the Lanham Act to state a false advertising claim, and that Brave did not plead his Lanham Act claim with sufficient particularity. The Court declined to exercise supplemental jurisdiction over Brave's state law claims, but it also noted that these claims failed to state a claim under which relief may be granted. The Court granted Brave leave to amend its Complaint, and on July 9, 2018, Brave filed an Amended Complaint. The Amended Complaint asserts the same claims as the previous Complaint with the addition of more specific allegations regarding Defendants' allegedly false advertisements.

         In its Amended Complaint, Brave alleges that by the time it incorporated in 2010, Brad, Brian, TALG, and AAPLO had inundated the market for personal injury attorneys with their false advertisements. Brave contends that this false advertising scheme was successful because it caused clients to believe that Defendants were lawyers with an established track record of obtaining multi-million-dollar verdicts and settlements. Brave offers three specific examples of past clients who relied on this allegedly false advertising.

         The first example involves Mahnaz Consolver. On February 24, 2011, Consolver suffered injuries in an automobile accident. Consolver and her family had previously seen AAPLO, Brad, and Brian's advertisements and hired AAPLO for legal representation in April 2011. During mediation, the mediator told her that her case had a value of $360, 000, but the highest settlement offer 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. Following termination, AAPLO, Brad, and Brian, filed an attorneys' lien against any recovery made by Consolver for fees and expenses in the amount of $106, 771.20. Consolver then hired Brave, who pursued a different theory of recovery and obtained a settlement amount of $360, 000. If AAPLO, Brad, and Brian had not filed the attorney's lien, Brave would have received an attorney's fee of approximately $120, 000. But, because AAPLO, Brad, and Brian were paid $97, 101.08 on their lien, this reduced the amount of Brave's fee.

         The second example involves Yudi Hernandez, a minor, who suffered injuries resulting from an automobile accident on June 15, 2013. Hernandez was placed in medically induced coma because of her injuries, and while she was in the coma, her father and older sister began investigating possible lawyers to assist with her case. The Hernandezes hired AAPLO, Brad, and Brian as a result of being exposed to Defendants' advertisements, although Brad later claimed that he had no involvement in the case. Throughout the litigation, AAPLO, Brad, and Brian failed to timely act on settlement offers and failed to carry out instructions regarding settlement, and therefore were terminated as counsel. The Hernandezes then hired Brave. AAPLO asserted an attorneys' lien against any recovery made by Yudi Hernandez for fees and expenses totaling $51, 002.83. After the lien was asserted, AAPLO was dissolved and a receiver was appointed to wind down its affairs. In November 2015, Yudi Hernandez sued AAPLO, Brian, and Brad for fraudulent charges contained in the lien and for violations of the Kansas Consumer Protection Act (“KCPA”). In response, Brian filed a countersuit against Yudi's father, two insurance companies, and Brave's employee, Stephen Brave, for wrongful conduct in failing to pay the AAPLO lien. Brian later tried to amend his petition to name Brave as a defendant to the lawsuit, but that motion was denied. Brave alleges that but for the false advertising scheme, the Hernandezes would not have hired AAPLO, Brad, or Brian to begin with, and Brave would have been its first choice of counsel. Brave further alleges that because of the false advertising it has been involved in litigation regarding the attorney's lien issue for years and has sustained injury to its reputation as well as considerable expense defending that litigation.

         The third example involves Bridget Eby, who hired BPL and Brad in May 2016 to represent her in a personal injury action. BPL and Brad, however, missed the expert witness deadline in her case rendering it worthless. Instead of communicating this mistake to Eby, Defendants advised her to drop the case. Eby refused, and over Eby's objections, Defendants entered into an agreement with defense counsel to dismiss the case. Eby's case was dismissed with prejudice in May 2017. After the dismissal, Eby hired Brave to either save her previous case or to sue Defendants for negligence, fraud, and violations of the KCPA. Brave alleges that but for Defendants' false advertising scheme, Brave likely would have been Eby's first counsel of choice to represent her. It further alleges it would have resolved her case for approximately $2.7 million and thus generated an attorney's fee of $907, 580.

         In response to Brave's Amended Complaint, BPL, TALG, and Brad have filed another motion to dismiss asserting that Brave's additional allegations in the Amended Complaint do not salvage its previous defunct claims. While this motion was pending before the Court, Brave dismissed all claims against Brian and AAPLO. Therefore, in resolving the Motion to Dismiss, the Court will only address Brave's allegations as they relate to TALG, BPL, and Brad.

         II. Legal Standard

         A. 12(b)(1) Standard of Review

         “Federal courts are courts of limited jurisdiction; they are empowered to hear only those cases authorized and defined in the Constitution which have been entrusted to them under a jurisdictional grant by Congress.”[2] A standing challenge is an attack on the Court's subject matter jurisdiction and analyzed under Rule (12)(b)(1).[3] Rule 12(b)(1) motions take two forms: (1) a facial attack on the sufficiency of complaint's allegations as to the court's jurisdiction or (2) a factual attack on the facts upon which subject matter is based.[4] This case involves a facial attack, and therefore, the Court must view the factual allegations in the Complaint as true but viewed through the Iqbal/Twombly plausibility standard.[5] The burden of proof is on the party asserting the court has jurisdiction.[6]

         B. 12(b)(6) Standard of Review

         To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.' ”[7] “[T]he mere metaphysical possibility that some plaintiff could prove some set of facts in support of the pleaded claims is insufficient; the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.”[8] The plausibility standard enunciated in Twombly, seeks a middle ground between heightened fact pleading and “allowing complaints that are no more than ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause action,' which the Court stated ‘will not do.' ”[9] A claim is facially plausible if the plaintiff pleads facts sufficient for the court to reasonably infer that the defendant is liable for the alleged misconduct.[10] The Court need only accept as true a plaintiff's “well-pleaded factual contentions, not his conclusory allegations.”[11]

         III. Analysis

         A. Brave's Lanham Act Claim

         Brave asserts a false advertising claim under § 43(a) of the Lanham Act. Section 43(a) of the Lanham Act states as follows:

(1) Any person who . . . in connection with any . . . services . . . uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which-
. . .
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's . . . services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.[12]

         Brave alleges that Defendants are liable under this statute because Defendants disseminated false advertisements concerning the amount of their clients' recovery to Brave's detriment. More specifically, Brave alleges that three of its clients-Consolver, Hernandez, and Eby-were deceived by Brave's allegedly fraudulent advertising and thus hired Defendants rather than Brave. Defendants assert numerous grounds as to why Brave's claim fails, including statute of limitations, failure to plead with sufficient particularity as required by Rule 9(b), failure to plead one of the essential elements of the claim, and lack of Article III standing. The Court will address Brave's Lanham Act claim as it relates to the three individual clients identified in the Amended Complaint and as it relates to Brave's general allegations of liability.

         1. Brave's Lanham Act Claim Related to Consolver

         Defendants argue that Brave's Lanham Act claim relating to Consolver fails because (1) it is barred by the statute of limitations; (2) it does not satisfy the pleading requirements set forth in Rule 9(b); and (3) Brave has not specified any false ads upon which Consolver could have relied. None of these arguments are persuasive.

         a. Statute of Limitations

         The Lanham Act does not contain a statute of limitations for false advertising claims. Therefore, the Court must use an analogous state limitations period.[13] Courts that have considered this issue have applied the statute of limitations applicable to claims for fraud.[14] The parties do not dispute that this limitations period is analogous, and therefore, the Court will apply Kansas' two-year statute of limitations for fraud.[15]

         Under K.S.A. § 60-513(a)(3), the statute of limitations for fraud does not begin to run until the fraud has been discovered.[16] The statute further provides that an action for fraud does not accrue “until the act giving rise to the cause of action first causes substantial injury, ” or if the injury is not reasonably attainable for some time, then the limitations period begins when “the fact of injury becomes reasonably ascertainable to the injured party.”[17] Kansas courts have explained that “[i]n an action for relief on the ground of fraud, the statute of limitations does not start to run until the plaintiff discovers the fraud, or until he learns such facts as would lead a reasonably prudent person to investigate.”[18]

         Brave filed this lawsuit on July 3, 2017. Brave alleges that Defendants' wrongful conduct was not reasonably ascertainable until November 2016, and thus the statute of limitations does not bar its claim. But, Defendants argue that Brave's own contentions as well as facts derived from two state court decisions discussing Brad's representation of Consolver bely these allegations.[19]Consolver hired Brave on June 28, 2012. Approximately three years later, on July 9, 2015, Brave filed a second suit on behalf of Consolver and a class of similarly situated individuals alleging violations of the KCPA relating to Brad's advertisements on behalf of AAPLO. The claims in that case were premised on the general proposition that “Consolver was gulled out of a fair opportunity to select a different lawyer.” Defendants argue that based on the filing of the second Consolver lawsuit, the false advertising acts causing Brave's injury were known to Brave at some point before July 9, 2015, and thus, the statute of limitations bars Brave's claim.

         Brave has produced, however, evidence in the public record showing that it did not assert its KCPA claim until July 30, 2015, when it filed an amended petition. The filing of the amended petition is well within two years of Brave filing the Complaint in this case. Thus, Defendants cannot rely on the filing of the second Consolver lawsuit as affirmative evidence that Brave knew or should have known of Defendants' false advertisements two years before filing this suit.

         Defendants also argue that Brave's own allegations in the Amended Complaint show that Defendants' alleged fraud was reasonably ascertainable beginning in 2007 and that Brave's injury was reasonably ascertainable in 2012 when Consolver hired it. But, the Court must determine whether the facts, as they are stated in the Amended Complaint, indicate whether a reasonably prudent person would have investigated Defendants' actions in 2007 or 2012, and there are no facts in the Amended Complaint demonstrating that such an ...

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