DNA Sports Performance Lab, Inc. v. Major League Baseball

Background

Neiman Nix and DNA Sports Performance Lab, Inc. sold health supplements made from shed elk-antler tissue. The supplements allegedly contained naturally occurring insulin-like growth factor 1, or IGF-1, which Major League Baseball and the Major League Baseball Players Association had banned under their drug program.

DNA Sports sued the players’ union based on the union’s former licensing relationship with Klean Athlete. DNA Sports alleged that the union’s permission for Klean Athlete to use the union’s logo and announce a partnership falsely suggested that Klean Athlete products were free of banned substances. DNA Sports also relied on licensing relationships involving other products, but the order focused on the allegations concerning Klean Athlete.

The union moved to dismiss and sought sanctions under Federal Rule of Civil Procedure 11, which requires attorneys to certify that filings are not improper and that their legal claims have a reasonable legal basis. The court said it would first consider whether the complaint stated claims for relief and would address sanctions later. The court also noted that the league had filed its own motion for dismissal and sanctions, but that motion was not addressed in this order.

Claims and analysis

Lanham Act false advertising. The first claim alleged that the union’s licensing agreements with Klean Athlete violated the federal Lanham Act’s ban on false or misleading commercial advertising. The court held that the claim was inadequately pleaded for several reasons.

First, the complaint did not allege sufficient facts showing that the union made the allegedly false statement or knowingly caused or materially participated in Klean Athlete’s advertising. The complaint did not describe the union’s specific licensing agreement, show that the union conducted the product testing, or allege that the union knew—or could determine—that the products contained banned substances. The court noted that an independent organization, NSF International, had certified the identified products, while Klean Athlete made the “certified for sport” representation.

Second, the complaint did not adequately allege economic or reputational injury caused by the union’s advertising. Although it claimed $1 million in lost revenue and damages, it did not support that figure or allege facts such as diverted sales or lost contracts caused by the Klean Athlete press release. Third, the court concluded that the April 2016 press release fell outside the applicable three-year limitations period, and the complaint identified no exception. The court also stated that the former licensing relationship had ended and that conduct no longer occurring could not support an injunction.

California false advertising. The second claim relied on California Business and Professions Code section 17500. The court held that this claim also failed because the complaint did not show the union’s personal participation in, or control over, Klean Athlete’s alleged false advertising. The complaint did not allege facts showing that the union knew or should have known that the products contained banned substances or controlled Klean Athlete’s certification determination.

Unfair competition. The third claim arose under California Business and Professions Code section 17200 and was based on the same alleged advertising. The court held that the claim failed because the underlying advertising claims were inadequately pleaded and time-barred. It also held that the requested remedies were unavailable on the allegations presented: DNA Sports could not seek restitution because it had not conducted business with the union, and injunctive relief was unavailable because the Klean Athlete licensing relationship had ended and was unlikely to recur.

Disposition

The order states that the union’s motion for dismissal and sanctions was granted “to the following extent.” It found all three claims deficient as pleaded, but before deciding whether to impose sanctions, it allowed plaintiffs to seek permission to file an amended complaint by August 20, 2020, at noon. Any such motion had to explain how the defects were cured and attach proposed and redlined amended complaints. The order stated that a later order would address sanctions after the pleadings were settled or abandoned. Judge William Alsup signed the order.