Daily Fantasy Players Picked Off by Federal District Court in Sign-Stealing Suit

14 April 2020 Publication
Authors: Gregory A. Marino

While baseball fans might be deprived of peanuts and Cracker Jacks at the ballpark this spring, the season’s first strikeout was recorded on April 3 by a federal district court in New York in Olson v. MLB. The batter was Kristopher Olson—a daily fantasy sports player—who brought a putative class action against Major League Baseball, the Houston Astros, and the Boston Red Sox premised on the two teams’ widely reported “sign-stealing” schemes during the 2017 and 2018 seasons. Olson alleged that, by perpetuating the sign-stealing schemes, the league and the teams breached a broad duty of care to ensure that the games were played fairly within the rules.  It was a swing and a miss for Olson.  In a well-reasoned decision, the federal court granted the defendants’ motion to dismiss and tossed the lawsuit, leaving Olson to join a long line of sports consumers and spectators who have tried—and failed—to sue leagues, teams or other live event presenters over the manner in which their games or events are played or conducted. 

The License Approach

All sports fans experience the agony of defeat, but what duty—if any—is owed by sports leagues and teams, or other game or event presenters, to fans or consumers who, by some event or circumstance (e.g., a missed call or rules infraction), feel cheated out of their underlying assumption of fair play, which is so integral to the integrity (and enjoyment) of competition? Courts have previously taken up this question, mainly to address complaints made by aggrieved ticket holders, and have typically applied a so-called license approach to the question: a ticket-holding customer is owed only the right to view a given ticketed event—exclusive of any expected outcome associated with the event—and therefore no cognizable injury can arise where the game or event simply does not meet the customer’s expectations with respect to fair play, results, excitement, or experience. With his lawsuit, Olson begs the questions whether and how the license approach and its principles might apply and extend to daily fantasy sports players.

In re Pacquiao-Mayweather Boxing Match Pay-Per-View Litig., pay-per-view purchasers of a highly anticipated Manny Pacquiao-Floyd Mayweather boxing match sued both fighters, the fight’s promoters, and HBO (the pay-per-view broadcaster) for fraudulent misrepresentation based on Pacquiao’s post-fight revelation about his pre-fight arm injury. The plaintiffs argued that they would not have purchased the pay-per-view event but for the defendants’ implicit representations that Pacquiao was fully healthy before and during the match. In affirming the district court’s dismissal of the case, the U.S. Court of Appeals for the Ninth Circuit found that, with their pay-per-view purchase, plaintiffs had only the reasonable expectation of experiencing a regulation boxing match on television, and also a “measure of unpredictability that makes spectator sports exciting.”  These boxing fans had no cognizable claims against defendants arising out of a boxing match that fell short of expectations—however unpredictably poor or compromised that match may have been.

In Mayer v. Belichick, the U.S. Court of Appeals for the Third Circuit affirmed the district court’s dismissal of breach of contract and fraud claims brought by a New York Jets season ticket holder based on a theory that the New England Patriots—who had been caught videotaping their opposition’s sidelines to garner a competitive advantage—had harmed Jets’ ticket holders who had anticipated viewing a game played in compliance with all NFL rules. The claims were dismissed based on the license approach—the plaintiff ticket holder possessed only a right to a seat to watch a professional football game and no further specific obligations from either of the competing teams. 

In Bowers v. Federation Internationale de l’Automobile, Formula One race fans filed a class action suit in an Indiana federal court for breach of contract where two-thirds of the cars scheduled to compete in a race were forced to withdraw due to a manufacturing defect in their tires. The race went on, but with only six competing cars—giving rise to a breach of contract claim by aggrieved ticket holders who had expected to watch the whole field compete. The U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s dismissal of the breach of contract and tort claims, and applied a license approach in reasoning that each race ticket conveyed only “a contractual right to a regulation Formula One Race” and the myriad of unforeseeable consequent outcomes.

State courts also have functionally adopted the license approach. In Castillo v. Tyson, a New York State appellate division court affirmed the trial court’s dismissal of plaintiff pay-per-view purchasers’ claims that Mike Tyson’s disqualification for biting Evander Holyfield’s ear in a heavyweight bout interfered with their purchased right to view a legitimate fight. The court held that the plaintiffs had “received what they paid for—namely the right to view whatever event transpired.”  In Le Mon v. National Football League, the Louisiana Supreme Court similarly held that season ticket holders had “no right to action” to challenge a referee’s missed call during an NFL playoff game between the New Orleans Saints and the Los Angeles Rams, holding that a missed call in no way interfered with the plaintiffs’ right of entry and seat at the game. 

The Olson Decision and Beyond

The Olson lawsuit is distinct from these predecessor cases because it was brought by an aggrieved daily fantasy sports player with no contractual relationship (whether as a ticket-holding or pay-per-view customer) with any of the defendants. Olson claimed that the sign-stealing scheme had the effect of subverting the integrity of daily fantasy games in which participants endeavor to predict player, team, and game statistics generated by fair play.  Olson alleged that, in the absence of fair play caused by the sign-stealing scheme, millions of daily fantasy players suffered monetary damages to be recovered from the defendants under a variety of asserted legal claims, including fraud, negligence, unjust enrichment, and the violation of statutory consumer protection laws.

In a colorful opinion, District Court Judge Jed Rakoff predictably dismissed these claims with prejudice.  Without excusing the sign-stealing schemes, Judge Rakoff concluded that the allegedly deceptive behavior described was unsupported by plausible claims of reliance or of any contractual relationship between plaintiffs and defendants—who were customers of the daily fantasy games, not of the defendants. In short, Judge Rakoff deemed the legal footing of Olson and his putative classmates even more infirm than direct customers like ticket holders and pay-per-view purchasers whose similar claims have failed under the license approach.  

While Olson’s claims failed, it appears he may have succeeded in further clarifying the legal relationship between fans and sports providers like leagues, broadcasters and athletes according to the license approach theory, and its extension to fantasy sports players.  Indeed, the court in Olson had no need to apply or analyze the license approach, as Olson (like fantasy sports players generally) had no contractual relationship with the defendants via game-day ticket or pay-per view and thus could not—and did not—assert any breach of contract. Even so, the court referenced the Pacquiao, Belichick, and Bowers decisions to make a broader point about the tenuous standard of care owed by sports organizers to fans, noting that “three federal circuits have declined to hold that sports organizations owe similar duties even to their direct customers, ticket holders.” Judge Rakoff went on to explain that the Second Circuit had yet to take up the license approach question, but his positive treatment of the doctrine in Olson seems to signal support of its application in the future. 

The relationship between daily fantasy players and the defendants in Olson was far more attenuated than that between a ticket buyer and a traditional sports organizer or broadcaster. Imposition of a heightened duty of care on the Olson defendants based on such extraneous relationships could therefore not be logically or legally supported, and did not require a thorough analysis of the license approach theory employed in Pacquiao, Belichick, or Mayer. Even so, the ruling’s positive treatment of the theory could signal a further broadening of its use in future disputes between sports presenters and fans—a movement that should be monitored as these relationships continue to grow more complex, integrated and digital. For now, the message is clear: sports fans are owed only a view of the competition they pay to see, not the results or experience they anticipate or predict. 

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