Seeking to capitalize and cash in on MLB’s sign-stealing scandal, a handful of fantasy baseball players using DraftKings sued Major League Baseball, the Houston Astros, and the Boston Red Sox in New York federal court. The fantasy players brought what they were hoping to be a nationwide class action, alleging theories of fraud, negligence, violation of consumer protection statutes, and unjust enrichment.
On April 3, Judge Rakoff of the Southern District of New York—a well-known New York Yankees fan—dismissed all claims. Although observing that the Astros and Red Sox broke rules and “the hearts of all true baseball fans,” the judge concluded that “the connection between the alleged harm plaintiffs suffered and defendants’ conduct is simply too attenuated to support any of plaintiffs’ claims for relief.”
As to the fraud claims, Judge Rakoff concluded that the defendants either did not make false statements or that, even if false statements had been made, the plaintiffs did not rely on those statements. “[H]ere,” Judge Rakoff wrote, “the complaint does not even allege that the plaintiffs ‘saw, read, or otherwise noticed’ any of the few actionable misrepresentations . . . .” The judge rejected the plaintiffs’ fraud-by-omission claims on the ground that the defendants had no duty to disclose certain facts to these particular plaintiffs because the disclosures were made to the “public at large unrelated to the fantasy baseball transaction plaintiffs entered.”
Judge Rakoff next rejected plaintiffs’ negligence claims on similar grounds, holding that the defendants owed plaintiffs no particularized duty of disclosure and that “plaintiffs have not demonstrated that defendants owed them a duty to take more action to prevent player misconduct related to the sign-stealing scheme.” The judge found that the relationship between the plaintiffs and defendants was too “attenuated” to impose a duty to disclose on defendants.
The court concluded that plaintiffs’ consumer protection claims failed because plaintiffs did not allege with any specificity “that they even saw or heard” defendants’ alleged misrepresentations or that those misrepresentations “could have caused them to enter [fantasy baseball] contests they otherwise would not have entered.” Like he did with respect to plaintiffs’ negligence claims, Judge Rakoff found that the relationship between the plaintiffs and defendants was too attenuated to establish a causal link between the defendants’ actions and the plaintiffs’ alleged harm.
Finally, Judge Rakoff dismissed plaintiffs’ unjust enrichment claim on the ground that there was no allegation that the defendants were enriched at plaintiffs’ expense. The judge rejected the plaintiffs’ contention that, by playing fantasy baseball, defendants benefitted defendants through “‘increased fan attendance, increased television and advertising revenues, and increased sales of MLB paraphernalia.’”
Other than the interesting context in which his decision was made, Judge Rakoff’s decision does not break any new ground. Instead, the decision is a straightforward application of settled pleading principles that required the plaintiffs to demonstrate a much closer nexus between their alleged harm and the defendants’ alleged actions.
Interestingly, unlike the former Toronto Blue Jays pitcher who claimed his career was ruined by the Astros’ cheating scandal (read an analysis here), the plaintiffs in this case did not appear to claim any direct, particularized harm from the cheating itself. That perhaps makes sense because any suggestion that cheating in any particular game caused specific financial harm to a fantasy player in that game would seem to be impossible to prove—just as it is impossible to prove that a pitcher’s poor performance in one game resulted in a shuttered MLB career.