Pollard Defeats Motion to Dismiss Lanham Act False Advertising Claims

In the latest chapter of an ongoing dispute between two medical staffing companies, a federal judge has denied a motion to dismiss firm client MedTemps’ false advertising lawsuit against an industry rival.  Since approximately June 2016, Delray Beach based MedTemps has been embroiled in multi-front litigation against Boca Raton based Nightingale Nurses.

The companies have a long and ugly history together:  MedTemps’s founder and majority owner formerly worked for Nightingale and MedTemps has hired various Nightingale employees, some of whom have non-compete agreements.  In June, in connection with contempt proceedings against a former employee who went to work for MedTemps, Nightingale sought to hold MedTemps in contempt as well.  Nightingale, represented by Proskauer Rose, asked the Palm Beach County Circuit Court for an order shutting down MedTemps and requiring MedTemps to pay millions of dollars in damages and attorneys fees.

In July, MedTemps counter-attacked, filing a lawsuit in federal court alleging that Nightingale was engaged in false advertising and a range of unfair and deceptive trade practices that gave it an unfair advantage in the market.  First, the complaint alleged that Nightingale forged various health documents in order to speed up its nurse placement process.  And while Nightingale held itself out as being certified by the relevant governing body – the Joint Commission – that representation was misleading because the company was not in compliance with various guidelines.  Second, the complaint alleged that Nightingale had engaged in a long-running tax evasion scheme based on the use of bogus per diem payments.  Rather than pay certain employees wages, Nightingale allegedly paid those employees in inflated per diems based on fraudulent travel distances.  This allegedly allowed the company to avoid payroll taxes.  MedTemps alleged that this pattern of conduct violated Florida’s Deceptive and Unfair Trade Practices Act.  Third, the complaint alleged that Nightingale paid kickbacks to various hospital staffers in order to curry favor and secure nurse placements.  Plaintiff also advanced this as a violation of FDUTPA.  Finally, the complaint sought a declaratory judgment holding various restrictive covenants unenforceable for lack of a legitimate business interest.

In response, Nightingale – represented by a separate team of lawyers from Proskauer Rose – moved to dismiss.  First, Nightingale argued that MedTemps could not make out a Lanham Act false advertising claim because its advertising wasn’t literally false.  Second, Nightingale argued that MedTemps couldn’t prove proximate causation of its damages.  Third, Nightingale argued (somewhat inexplicably) that competitors did not have standing to bring FDUTPA claims.  Finally, Nightingale argued for the dismissal of the declaratory judgment count (again, somewhat inexplicably), contending that there was no actual case or controversy.

On February 23, 2017, the United States District Court for the Southern District of Florida denied Nightingale’s motion to dismiss.  The Court held that the case would go forward in its entirety and that Nightingale’s arguments were better suited for summary judgment.  This marks the second time in three weeks that the firm has won significant victories in the multi-front litigation, all against the white shoe firm Proskauer Rose.  Earlier this month, the firm won an emergency stay of various contempt orders from Florida’s 4th DCA.  Those contempt orders could have shut MedTemps down and cost its owners millions.

Firm principal Jonathan Pollard and colleague Chris Prater represented MedTemps in both the federal Lanham Act case and the state court non-compete contempt proceedings.  Per Pollard, “The Lanham Act is a powerful tool for competitors.  If an industry rival is engaging in false advertising, whether literally or by implication, and its costing you serious money, you have to consider all options.  It’s not particularly difficult to secure Lanham Act standing and there is a broad range of damages available.  It’s an underutilized tool.  Another good day for justice.”

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Pollard PLLC is a litigation boutique based in Fort Lauderdale, Florida and focused on competition law. The firm and its attorneys have extensive experience litigating a variety of complex commercial cases, with a particular emphasis on non-compete, trade secret and trademark litigation. Pollard, who began his career at the litigation powerhouse Boies, Schiller & Flexner, is widely quoted on non-compete issues and has recently appeared in Bloomberg, FundFire, the Wall Street Journal and on PBS NewsHour among others. The firm’s office can be reached at 954-332-2380.

 

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