Appeals Court Affirms Dismissal of Antitrust, False Advertising Claims Brought by One Factoring Company Against Another

Appeals Court Affirms Dismissal of Antitrust, False Advertising Claims Brought by One Factoring Company Against Another

A federal court of appeals affirmed the dismissal of factoring company’s lawsuit against another factoring company over practices that allegedly violated antitrust, false advertising and other unfair trade practices.

The Ninth Circuit Court of Appeals last week affirmed the decision by the U.S. District Court for the Central District of California to dismiss the complaint filed by Novation Ventures, LLC, against J.G. Wentworth and affiliated companies, including Peachtree Financial.

About Novation’s antitrust claims, the Ninth Circuit said in Novation Ventures v. J.G. Wentworth Co., No. 16-55289, 2017 U.S. App. LEXIS 20570 (9th Cir. Oct. 19, 2017), that “even if the Wentworth Entities’ practices were somewhat misleading, that is far from a plausible pleading that the conduct is anti-competitive.”

Novation had alleged that the J.G. Wentworth companies (the “Wentworth Entities”) did not disclose to courts – which have been making decisions about whether to approve such transfers, pursuant to petitions filed in courts, seeking such approval under state structured settlement protection acts – the fact that J.G. Wentworth and Peachtree are controlled by the same entity, JGWPT Holdings, Inc.,  Further, Novation made allegations about the lack of such disclosure in advertising, such as on Google.  Novation’s complaint also said its market share of the business of obtaining rights to structured settlement payments at the time it filed its complaint was approximately 7%, while the Wentworth Entities was about 75% of that market.  (For more about the Novation lawsuit, see this Secondary Insurance Market Blog post, Factoring Company Violated Antitrust Law, Says Says Competitor’s Lawsuit, here.)

The lower court determined, and the Ninth Circuit Court of Appeals affirmed, that Novation had not alleged that the actions of the Wentworth Entities had caused Novation antitrust injury.  “Novation could not merely rely upon harm to consumers, if any there was, to establish its own standing to sustain an antitrust claim,” the Ninth Circuit said in its October 19 opinion.

Further, the lack of competition between Peachtree and J.G. Wentworth “precluded one or more of them from offering consumers a better price, that did not plausibly harm competition; indeed, it most likely would have benefitted Novation”, the appeals court said, without further elaborating.

In addition, said the appeals court, Novation had not alleged that the Wentworth Entities had “restricted or foreclosed Novation from competing in the market by preventing it from advertising its services” but “[r]ather, the whole advertising market was open to Novation – that market was not Google alone, and, at any rate, Novation could compete for Google advertising.”  Thus, said the Ninth Circuit, “competitors can still effectively compete by using their advertising dollars.”

The Ninth Circuit included a footnote in its opinion stating that “selling similar products under different brand names is not itself improper.”  The Ninth Circuit did not comment about selling the same product under different brand names.

In its opinion, the appeals court also said that the district court did not err when it dismissed Novation’s false advertising claims, because, “[e]ssentially, Novation does not plead any literally or implicitly false statement in any of the Wentworth Entities’ advertisements” and “[a]ll it pleads is that the separate entities did not advertise their affiliations.”

The full opinion is available here.

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