Antitrust Law Daily Wrap Up, ADVERTISING—D.N.J.: False advertising claims dismissed for failing to state consistent theory of liability, (Jan 20, 2015)

By Dan Selcke, J.D.

Claims that Riddell, Inc. falsely advertised its football helmets as being able to reduce the rate of concussions were dismissed by the federal district court in Camden, New Jersey for not alleging a consistent theory of liability or facts indicating how much the plaintiffs paid for the helmets or which allegedly false representations they were exposed to. The plaintiffs filed a class action suit against Riddell and several of its affiliates, asserting that the companies had violated the consumer protection laws of New Jersey, Illinois, Florida, California, and Arizona. They also brought claims for unjust enrichment, quasi-contract, and declaratory relief (In re Riddell, January 15, 2015, Simandle, J).

Football helmet debate. Riddell designed, manufactured, and marketed a line of football helmets that it claimed reduced concussions by 31%. In making this claim, Riddell relied on a 2006 study comparing its line of helmets to traditional helmets. Several other studies contested the results, and claimed either that no kind of football helmet was better at preventing concussions than any other kind or that football helmets did not prevent concussions at all. Nevertheless, Riddell continued to market its helmets by claiming that they lowered the risk of concussions. Among other things, Riddell put up videos on its website touting the helmets’ "concussion reduction technology," highlighted the concussion-reduction properties on the packaging, and advertised this feature on Facebook and other social media outlets. Because it was selling an allegedly superior product, Riddell sold its helmets at premium prices.

Procedural background. The plaintiffs, a group that included several individuals and a school district, were all exposed to Riddell’s claims that the helmets offered increased protection from concussions. They bought the helmets at premium prices and alleged that they had suffered economic harm after discovering evidence that the helmets did not actually offer the promised protection. The individual plaintiffs filed separate class actions, but they were eventually consolidated and advanced as a single suit. Riddell filed a motion to dismiss the case for failure to comply with Federal Rules of Civil Procedure 8, 9(b), and 12(b)(6).

Dismissal on pleadings. The court began by considering whether the plaintiffs’ amended complaint should be dismissed under Federal Rule of Civil Procedure 8, which required "a short and plain statement of the claim showing the pleader is entitled to relief" sufficient to give the defendant fair notice of the claim and the grounds upon which it rests. Despite Riddell’s arguments that the amended complaint lumped it and all of its affiliate defendants together and failed to specify the specific misconduct committed by each of them, the plaintiffs met this standard. The amended complaint alleged that "each Defendant" was either involved in the creation and dissemination of the misleading marketing materials or profited from the sale of the helmets. It also accused "each Defendant" of concealing facts concerning the ability of the helmets to reduce concussions.

This was enough to put all of the Riddell defendants on notice. The fact that the plaintiffs collectively referred to them as "Riddell" throughout the amended complaint did not matter, since it was clear that they were all interrelated. They were all owned by the same private equity firm, represented by the same counsel, accepted service as a single entity, and were joined in their motion to dismiss. Their specific roles in the scheme could be found out during discovery.

Heightened pleading standard. Next, the defendants argued that, because the plaintiffs’ claims asserting violations of state consumer protection laws were based on fraud, they had to be judged under Federal Rule of Civil Procedure 9(b). To the extent that was true, the plaintiffs’ claims did not stand up under Rule 9(b)’s heightened pleading standard, which required them to "state with particularity the circumstances constituting fraud." The plaintiffs did not allege enough to put the defendants on notice of "the precise misconduct with which they are charged." Seville Indus. Machiery Corp v. Southmost Machinery Corp. (742 F.2d 786, 791).

For one thing, the amended complaint did not specify which plaintiffs were exposed to which misleading statements, of which there were several. Some of Riddell’s marketing materials expressly claimed that the helmets would reduce concussions by 31%, some claimed that they would reduce concussions but did not mention the statistic, and some only touted the helmets’ concussion reduction technology. This was not sufficient to put Riddell on notice as required by Rule 9(b). Although the plaintiffs identified several ways in which Riddell delivered its misleading messages (web videos, Facebook ads, packaging, etc.), they did not specify which statements were delivered by which method.

Also, the plaintiffs failed to specifically identify a discrete omission about which Riddell knew. They presented studies indicating that no football helmet was any better at reducing concussions than any other football helmet, and that no football helmet could reduce concussions at all. The amended complaint did not specify which of these facts Riddell allegedly knew about and ignored, and until it did the case could not proceed under Rule 9(b).

Finally, the plaintiffs did not plead causation or injury with enough specificity. They did not allege when each of them was exposed to the marketing materials, where they purchased the helmets, and how much they paid. The price point was especially important, since they were claiming they suffered economic harm by paying more for the helmets than they were worth. In general, the pleadings were conclusory.

Consistent theory of liability. The court also held that the amended complaint should be dismissed under Federal Rule of Civil Procedure 12(b)(6) for many of the same reasons it was dismissed under Rule 9(b). Generally, the plaintiffs failed to assert a consistent theory of liability against Riddell. As noted above, they alleged both that it was impossible for any football helmet to reduce concussions and that Riddell overstated the ability of its helmets to reduce concussions as compared to other kinds of helmets. These theories were internally inconsistent, which made the plaintiffs’ claims implausible. Also, the plaintiffs failed to specify which of Riddell’s representations were false. Rather, all the plaintiffs did was point out flaws in the study on which Riddell based those representations. Without a clear theory of liability, the court would need to engage in guesswork to discovery what relevance, if any, the plaintiffs’ own studies had in relation to the truth or falsity of Riddell’s marketing representations.

Individual state law claims. The analysis above disposed of most of the plaintiffs’ state law claims, but the court looked the viability of their claims brought under the New Jersey Consumer Fraud Act and the Florida Deceptive and Unfair Trade Practices Act more specifically. Dismissal of those claims was warranted because, as noted above, the plaintiffs had not given information on much they had paid for the helmets, which made it impossible to calculate their injuries. The court dismissed the plaintiffs’ claims without prejudice. The only exception was the school district’s claim under the Illinois Consumer Fraud Act (ICFA). The school district did not have standing to bring a cause of action under that statute, so its ICFA claim was dismissed with prejudice.

The case number is: 13-7585

Attorneys: Joseph A. Boyle and Michael Andrew Innes (Kelley Drye & Warren LLP) for Riddell, Inc. James E. Cecchi and Caroline F. Bartlett (Carella Byrne Cecchi Olstein Brody & Agnello, P.C.), and Stephen A. Corr (Stark & Stark) for plaintiffs.

Companies: Riddell, Inc.; Riddell Sports Group; Easton-Bell Sports, LLC; EB Sports Corporation; RBG Holdings Corporation; All American Sports Corporation

Cases: Advertising StateUnfairTradePractices NewJerseyNews