By: Sophie Edbrooke
Fans have had a history of suing leagues when the competition is considered unfair – Spygate, Deflategate – just add -gate to a word, and you can find a lawsuit. These previous lawsuits have been dismissed and left fans no recourse for their frustrations. However, for the first time in recent years, disgruntled fans are taking on the Major League Baseball (“MLB”) in a more creative way: bettors are claiming that the MLB, the Houston Astros (“Astros”), and the Boston Red Sox’s (“Red Sox”) deceptive actions and lack of enforcement cost them greatly because false information encouraged them to spend money on daily fantasy sports.
In the 2017, 2018, and 2019 seasons, the Houston Astros started an electronic system for “stealing” pitcher’s and catcher’s signs that violated the MLB rules and regulations. The players in the dugout would allegedly watch a video feed of the catcher’s signals to the pitcher, and then bang a trash can telling the hitter what type of pitch was upcoming–referred to as the “Trash Can Scheme.” In 2017, the MLB had constructive notice and received multiple complaints about the deceptive behaviors, but they did not disclose or do anything to stop the behaviors.
The fans are suing the Houston Astros, the Boston Red Sox, the MLB, and the MLB Advanced Media for negligence, fraud, deceptive trade practices, and more. The two reasons that this class action differs from all previous fan class actions is because the fans are bettors, and the MLB had a minority ownership in DraftKings, where the majority of bettors were placing their money in daily fantasy sports. Fans argue that because of the ownership interest in DraftKings, the League had a higher duty to the fans–as bettors–than previous class actions that have been brought. The most applicable case law to this Mayer v. Belichick, where the Court found that a league does not have a duty to a spectator or ticketholder because the ticket is merely a license to enter the stadium.
On February 21, 2020, the MLB filed its response to the Complaints–on behalf of itself and the MLB Advanced Media Defendant. The MLB has five primary points of law that its arguing to say that the Plaintiff Class does not have a claim. Overall, the MLB argues that the Mayer precedent should apply, yet the MLB ignores the difference between the spectators and the bettors in the Plaintiff Class. Next, the MLB argues that the intricate relationship with DraftKings does not effect the promotional materials because it is the equivalent to league advertising and promoting ticket sales. However, the MLB failed to mention that it was knowingly promoting an unfair competition, which is similar to a seller knowingly selling a defective product to consumers.
The most interesting points that the MLB makes in its motion to dismiss is that (1) the class action cannot show a reliance on the deceptive practices, (2) the class cannot prove causation between the deceptive practices and betting competitions, and (3) the MLB as a league owed no duty to disclose “even material information that could affect the quality, intensity or fairness of athletic competition.” The first two prongs are a fact-finding mission that could be resolved during discovery if this case were to survive the motion to dismiss. The reliance and causation can be determined by trends of bettors to bet more money or more often when the teams were cheating and players statistics before and after the games during which they cheated.
The final argument is a question of law that has not been addressed before. The Court has repeatedly stated that a league owes no duty to spectators to enforce a fair competition because the ticket is merely a lease into the venue, not a promise of the quality of the competition. However, the two original Complaints and the Amended Complaint is imploring the Court to consider these plaintiffs as more than spectators, but as bettors who relied on the information that the MLB, the Astros, and the Red Sox were putting forth.
The Court has not been faced with this question of whether a corporation, with constructive knowledge of fraudulent and deceptive behaviors, has a duty to disclose information or discipline parties when that original corporation is directly benefitting from a minority ownership in a second corporation which encourages betting on the aforementioned fraudulent and deceptive actions. Therefore, it would be irresponsible of the Court to set the precedent that Leagues have no obligation to any party to enforce fair play by dismissing the Complaint. As such, the question of duty as a part owner of a betting organization must be heard.
Clifford Complaint ¶ 66, Olson v. MLB, No. 1:20-CV-00632-JSR (S.D.N.Y. 2020).
Complaint ¶¶ 43-44, Olson v. MLB, No. 1:20-CV-00632-JSR (S.D.N.Y. 2020).
Id.¶ 45; see also id.¶¶ 51-52 (explaining that the Boston Red Sox were also engaged in a similar “Replay Room Scheme,” which skewed the competition in its favor as well).
Amended Complaint ¶ 114, Olson v. MLB, No. 1:20-CV-00632-JSR (S.D.N.Y. 2020).
Complaint, supra note 2, ¶ 3.
605 F.3d 223 (3d Cir. 2010).
Id. at 230-31.
MLB Mot. to Dismiss at 1, Olson v. MLB, No. 1:20-CV-00632-JSR (S.D.N.Y. 2020).
Id. at 7.
Id. at 8.
See id. at 6, 9, 12.
605 F.3d at 230-31 (3d Cir. 2010).
See generally Complaint, supra note 2; Amended Complaint, supra note 4; Clifford Complaint, supra note 1.