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

Background

DNA Sports Performance Lab, Inc. and Neiman Nix sell supplements made from shed elk-antler tissue that contain naturally occurring IGF-1. The opinion says the league and the Major League Baseball Players Association banned both natural and synthetic IGF-1 under their Joint Drug Prevention and Treatment Program. DNA Sports sued over licensing and promotional relationships involving several nutritional products, alleging false advertising and unfair competition.

The court had previously dismissed the complaint. It allowed plaintiffs to seek permission to amend, but plaintiffs instead dismissed the entire action. The league and union then renewed requests for sanctions and attorney’s fees. The union requested $104,039.08 for 162.5 hours of work, and the league requested $33,407.17 for 39.5 hours of work.

Legal standards

The court considered sanctions under Federal Rule of Civil Procedure 11 and under its inherent authority. Rule 11 requires an attorney to make a reasonable inquiry and certify that a filing is not presented for an improper purpose and that its legal claims are supported by existing law or a nonfrivolous argument for changing the law. Rule 11 sanctions must be limited to what is sufficient to deter repetition. Sanctions under the court’s inherent authority require a finding of bad faith and are intended to compensate for harm caused by the misconduct.

Court’s analysis

The court found the complaint baseless. For the federal advertising claims, the plaintiffs needed to show a false statement of fact in a commercial advertisement, actual and material deception, and injury or likely injury, such as diverted sales or lost goodwill. State false-advertising claims also required allegations that the defendants participated in or controlled the misleading advertisements.

The court concluded that plaintiffs had not adequately alleged these elements. The opinion notes that plaintiffs admitted their own products contained natural IGF-1 and conceded that the league and union banned IGF-1 in natural and synthetic forms. The complaint challenged “certified for sport” statements about other products but did not adequately identify defendants who made, caused, or induced the alleged statements. It also did not show that the products competed with DNA Sports’ products, that the statements were false, or that the statements diverted sales or caused other recognized injury. The court further stated that an injunction could not address conduct that had already stopped.

The court also found that Attorney Reich failed to conduct an adequate pre-filing investigation. Plaintiffs consulted experts about whether certain whey-protein products contained natural IGF-1, but did not test the products and instead relied on what they and their experts considered common sense. The court said a basic investigation into the applicable advertising law would have revealed the requirements concerning the commercial speaker, deception, and injury.

Finally, the court found that the lawsuit was filed to harass the league and union. It relied on DNA Sports’ history of bringing and dismissing multiple suits arising from the same circumstances, including prior litigation concerning the league’s investigation, IGF-1, and related statements. The court stated that the history supported a finding of bad faith and that dismissal alone had not deterred the repeated litigation.

Disposition

The court granted the baseball union’s and baseball league’s motions for attorney’s fees. DNA Sports Performance Lab, Inc. and Neiman Nix, jointly, must pay the Major League Baseball Players Association $104,039.08 and Major League Baseball $33,407.17. The sums were ordered due November 20 at 5:00 p.m.; the opinion does not state a year for that deadline.

The court held the motion as to Attorney Reich in abeyance because the opinion describes this as his first appearance before Judge Alsup and says the court wanted to observe whether he engages in ongoing harassment. The court retained jurisdiction for that limited purpose.