Olson v. Major League Baseball

• Citation: 29 F.4th 59
• Decision Date: 21 March 2022
• Docket Number: 20-1841-cv,August Term 2020,Nos. 20-1831-cv,s. 20-1831-cv
• Parties: Kristopher R. OLSON, Christopher Clifford, Erik Liptak, Christopher Lopez, Warren Barber, Individually and on Behalf of All Others Similarly Situated, Plaintiffs-Appellants-Cross-Appellees, v. MAJOR LEAGUE BASEBALL, MLB Advanced Media, L.P., Defendants-Appellees-Cross-Appellants, New York Yankees Partnership, Interested Party-Appellee-Cross-Appellant, Boston Red Sox Baseball Club, L.P., Houston Astros, LLC, Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

29 F.4th 59

Kristopher R. OLSON, Christopher Clifford, Erik Liptak, Christopher Lopez, Warren Barber, Individually and on Behalf of All Others Similarly Situated, Plaintiffs-Appellants-Cross-Appellees,

v.MAJOR LEAGUE BASEBALL, MLB Advanced Media, L.P., Defendants-Appellees-Cross-Appellants,New York Yankees Partnership, Interested Party-Appellee-Cross-Appellant,Boston Red Sox Baseball Club, L.P., Houston Astros, LLC, Defendants-Appellees.^*

Nos. 20-1831-cv

20-1841-cv

August Term 2020

United States Court of Appeals, Second Circuit.

Submitted: December 14, 2020

Decided: March 21, 2022

David S. Golub (Steven L. Bloch, on the brief), Silver Golub & Teitell LLP, Stamford, Connecticut; John D. Radice, Kenneth Pickle, Natasha Fernandez-Silber, April Lambert, Radice Law Firm, P.C., Princeton, New Jersey (on the brief), for Plaintiffs-Appellants-Cross-Appellees.

John L. Hardiman (Benjamin R. Walker, Hannah Lonky Fackler, on the brief), Sullivan & Cromwell LLP, New York, New York, for Defendants-Appellees-Cross-Appellants.

Randy L. Levine, New York Yankees Partnership, Bronx, New York; Jonathan D. Schiller, Thomas H. Sosnowski, Boies Schiller Flexner LLP, New York, New York (on the brief), for Interested Party-Appellee-Cross-Appellant.

Katherine B. Forrest, Michael T. Reynolds, Lauren A. Moskowitz, Cravath, Swaine & Moore LLP, New York, New York, for Defendant-Appellee Boston Red Sox Baseball Club, L.P.

Hilary L. Preston (Clifford Thau, Marisa Antos-Fallon, on the brief), Vinson & Elkins LLP, New York, New York; Michael C. Holmes, Vinson & Elkins LLP, Dallas, Texas (on the brief), for Defendant-Appellee Houston Astros, LLC.

Before: Livingston, Chief Judge, Lynch and Bianco, Circuit Judges.

Joseph F. Bianco, Circuit Judge:

Plaintiffs-Appellants Kristopher R. Olson, Christopher Clifford, Erik Liptak, Christopher Lopez, and Warren Barber appeal from the judgment of the United States District Court for the Southern District of New York (Rakoff, J .), granting the motion to dismiss all claims against Major League Baseball ("MLB") and MLB Advanced Media, L.P. ("MLBAM," and together with MLB, the "MLB Defendants"), as well as the Boston Red Sox Baseball Club, L.P. (the "Red Sox") and Houston Astros, LLC (the "Astros," and together with the Red Sox, the "Team Defendants").

Plaintiffs assert claims for fraudulent misrepresentations and omissions, negligent misrepresentations, violations of various state consumer protection laws, and unjust enrichment. The gravamen of the lawsuit is that plaintiffs, along with a potential class of thousands of other contestants, paid to compete in fantasy baseball contests operated by non-party DraftKings Inc. ("DraftKings"), wrongly believing that they were engaging in "games of skill" based upon a fair gauge of player performance, while defendants fraudulently concealed that the player statistics were unreliable because of rule violations in the form of electronic sign-stealing by certain MLB teams during the 2017–2019 baseball seasons. Plaintiffs further allege that MLB intentionally took no action to address these rule violations in order to protect its reputation and financial interests, as well as its investment in DraftKings.

Defendants moved to dismiss all the claims in this action, and the district court granted that motion, dismissing the First Amended Complaint ("FAC") in its entirety without leave to amend. In a motion for reconsideration, plaintiffs moved to vacate the judgment and for leave to amend, attaching their proposed Second Amended Complaint ("SAC") to the motion, which purported to cure the deficiencies in the FAC by, inter alia , adding new allegations drawn from materials obtained during discovery. The district court denied the motion for reconsideration for substantially the same reasons it dismissed the FAC.

As part of its order denying plaintiffs’ motion for reconsideration, the district court discussed a September 14, 2017 letter, referenced in the proposed SAC and filed under seal, which was sent by the Commissioner of the MLB to the General Manager of the New York Yankees Partnership (the "Yankees") and related to the results of an internal investigation by MLB. In a separate order, after application of the three-part analysis required by our precedent, the district court determined that the letter should be unsealed, but permitted the MLB Defendants and the Yankees to submit a redacted version to protect the identity of the individuals mentioned therein, and then stayed the unsealing order to allow the Yankees to appeal to this Court.

We affirm the district court's dismissal of the FAC and its denial of plaintiffs’ motion for reconsideration. At its core, this action is nothing more than claims brought by disgruntled fantasy sports participants, unhappy with the effect that cheating in MLB games may have had on their level of success in fantasy sports contests. We hold that alleged misrepresentations or omissions by organizers and participants in major league sports about the competition itself—such as statements about performance, team strategy, or rules violations—do not give rise to plausible claims sounding in fraud or related legal theories brought by consumers of a fantasy sports competition who are utilizing a league's player statistics.

More specifically, among other pleading defects, plaintiffs have not plausibly alleged, either in the FAC or the proposed SAC, actual or reasonable reliance upon the alleged fraudulent and negligent misrepresentations about player performance and electronic sign-stealing. Apart from actual reliance, no consumer of fantasy baseball competitions could plausibly allege that, in paying to participate in the competition, they reasonably relied upon these statements in believing that the sport of major league baseball was free from intentional violations of league rules by teams and/or individual players. Instead, any reasonable spectator or consumer of sports competitions—including participants in fantasy sports contests based upon such sporting events—is undoubtedly aware that cheating is, unfortunately, part of sports and is one of many unknown variables that can affect player performance and statistics on any given day, and over time.

The claims under the various state consumer protection laws fail for a similar reason—that is, the alleged statements by defendants about the integrity of their sport (including the electronic sign-stealing issue) do not rise to the level of a deceptive or unfair practice that would plausibly mislead the reasonable consumer under these circumstances. In addition, with respect to the unjust enrichment claim, there is no plausible claim that any alleged benefit to MLB was unjust. Thus, the FAC was properly dismissed, and the motion for reconsideration was properly denied because the additional allegations in the proposed SAC do not cure these pleading defects, as the claims in this particular case are based on fundamentally-flawed legal theories.

We likewise affirm the district court's order unsealing the September 14, 2017 letter sent by the MLB Commissioner to the Yankees’ General Manager about the results of an internal investigation, which plaintiffs allege contradicted a subsequent MLB press release on the same subject. In light of plaintiffs’ attempted use of the letter in their proposed SAC and the district court's discussion of the letter in explaining its decision to deny them the leave to amend requested in their reconsideration motion, and because a substantial portion of the substance of the letter has already been disclosed in the press release about the investigation issued by MLB, we conclude that the district court did not abuse its discretion in unsealing the letter with redactions.

Accordingly, we AFFIRM the district court's dismissal of plaintiffs’ FAC without leave to amend and the district court's denial of plaintiffs’ motion for reconsideration. We also AFFIRM the district court's unsealing order.

BACKGROUND

I. Factual Background¹

DraftKings was founded in 2012 to operate daily and weekly fantasy sports contests—across multiple sports including baseball—through its website and mobile applications. Less than a year after DraftKings’ founding, MLB, acting through and in a partnership or joint venture with MLBAM,² acquired an equity stake in DraftKings.

As part of the partnership, DraftKings offers daily fantasy sports baseball competitions ("MLB DFS") and requires "contestants to select a lineup of MLB players pursuant to a ‘salary cap’ draft." Joint App'x at 80. DraftKings participants accumulate fantasy points based on the performance of their "drafted" players in real life on the particular day or week covered by the contest; at the end of the contest, the total points accrued determines who wins a cash prize. As outlined in the FAC, MLB DFS, like other fantasy sports competitions offered by DraftKings, are defined as "games of skill," which are exempt from federal prohibitions on illegal gambling, pursuant to the Unlawful Internet Gambling Enforcement Act ("UIGEA"), 31 U.S.C. § 5361, et seq . (2006). The DraftKings’ "Terms of Use" include a "Conditions of Participation" provision, which states that "[W]inners are determined by the individuals who use their skill and knowledge of relevant sports information and fantasy sports rules to accumulate the most points according to the corresponding scoring rules." Joint App'x at 460. Participants pay DraftKings an entry fee to join a contest, a portion of which is kept by DraftKings and a portion of which funds the contests’ prizes.

Plaintiffs Olson, Lopez, Barber, Clifford, and Liptak are residents of Massachusetts, California, Texas, Florida, and Colorado, respectively. Each plaintiff participated in these contests and alleged in the proposed SAC that he received and relied upon the MLB fantasy baseball contests’ Conditions of Participation, which stated that the contests were conducted as games of skill, in deciding to pay to participate in these...