447 F.Supp.3d 174
S.D.N.Y.2020Background
- Plaintiffs (five daily fantasy baseball players) sued MLB, MLB Advanced Media, the Boston Red Sox, and the Houston Astros alleging fraud, negligent misrepresentation, unjust enrichment, and consumer-protection claims tied to a sign‑stealing scandal and their entry in DraftKings MLB DFS contests.
- The Court granted defendants’ motion to dismiss the First Amended Complaint with prejudice (Apr. 3, 2020), identifying two fatal defects: (1) no plausible misrepresentation by defendants about fantasy baseball itself, and (2) an insufficient nexus between defendants and the plaintiffs’ fantasy‑contest transactions; unjust enrichment was also dismissed for lack of enrichment at plaintiffs’ expense.
- Plaintiffs moved for reconsideration and leave to amend, submitting a Proposed Amended Complaint (PAC) that adds: DraftKings’ Terms of Use language, an MLB–DraftKings licensing/marketing agreement, and a press release/letter from Commissioner Manfred.
- Plaintiffs argued the PAC (1) identifies new actionable misrepresentations, (2) shows a sufficient nexus between defendants and the transactions (via the MLB–DraftKings agreement and marketing/approval rights), and (3) cures the unjust‑enrichment defect.
- The Court applied the strict reconsideration standard but accounted for Rule 15’s liberal amendment policy, concluding that amendment would be futile because the PAC fails to cure the core defects identified in the prior opinion.
- The motion for reconsideration and for leave to amend was denied (June 5, 2020); the PAC does not plausibly allege (a) misrepresentations about fantasy baseball by defendants, (b) the required nexus to support fraud/consumer‑protection claims, or (c) unjust enrichment tied to plaintiffs’ entry fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether PAC alleges actionable misrepresentations about fantasy baseball | Terms of Use language and Manfred statements amount to misrepresentations plaintiffs relied on | Terms are DraftKings’ communications (not MLB’s), and Manfred’s statements concern MLB integrity, not fantasy contests | Rejected: PAC does not plausibly allege defendants made misrepresentations about fantasy baseball that would support reliance |
| Whether PAC shows a sufficient nexus between defendants and plaintiffs’ transactions to support fraud by omission / consumer‑protection claims | MLB–DraftKings agreement and MLB’s marketing/approval rights make MLB a substantive participant in the contests | Agreement shows licensing/co‑branding and approval rights, but DraftKings developed and operated contests; MLB was not the seller or creator of the contests | Rejected: PAC fails to plead the transactional relationship or substantial participation needed to impose a duty to disclose or consumer‑protection liability |
| Whether PAC states unjust enrichment | Defendants received fees, advertising revenue, and equity linked to MLB DFS and thus were enriched at plaintiffs’ expense | Documents show licensing fees, ad revenue, equity—but not receipt of plaintiffs’ entry fees or direct enrichment at plaintiffs’ expense | Rejected: Alleged enrichment is too attenuated to establish unjust enrichment based on plaintiffs’ contest payments |
| Whether reconsideration and leave to amend should be granted | PAC cures defects identified in the MTD Opinion and so amendment is not futile | Amendment would be futile because PAC fails to fix core pleading defects; finality favors denial | Denied: Motion for reconsideration and leave to amend denied as futile |
Key Cases Cited
- Shrader v. CSX Transp. Inc., 70 F.3d 255 (2d Cir. 1995) (strict standard for motions for reconsideration)
- Williams v. Citigroup Inc., 659 F.3d 208 (2d Cir. 2011) (courts should consider proposed amendments under Rule 15 when reviewing reconsideration requests)
- Carolco Pictures Inc. v. Sirota, 700 F. Supp. 169 (S.D.N.Y. 1988) (reconsideration doctrine aims to ensure finality and prevent plugging gaps with new matters)
- Loughridge v. Goodyear Tire & Rubber Co., 192 F. Supp. 2d 1175 (D. Colo. 2002) (manufacturer liability context cited by plaintiffs but found inapposite)
- Church & Dwight Co. v. Huey, 961 S.W.2d 560 (Tex. Ct. App. 1997) (product‑liability/consumer context cited as inapposite)
- In re TelexFree Secs. Litig., 389 F. Supp. 3d 101 (D. Mass. 2019) (consumer‑protection authority cited but not controlling here)
- Galstaldi v. Sunvest Communities USA, LLC, 637 F. Supp. 2d 1045 (S.D. Fla. 2009) (FDUTPA claim allowed where defendants directly participated in sales; relied on by plaintiffs as analogous)