Friday, June 24, 2016

class action complaint survives GNC in 4th Cir. by pleading misleadingness

Midwestern Midget Football Club Inc. v. Riddell, Inc., 2016 WL 3406129, No. 2:15-00244 (S.D. W. Va. Jun. 17, 2016)

Midwestern is a nonprofit youth football organization, and Riddell makes helmets for football players.  Midwestern bought 12-24 Riddell Revolution Helmets per year; the market price allegedly reflects Riddell’s claim to provide greater concussion reduction compared to other helmets. Midwestern sued for false advertising under the West Virginia Consumer Credit and Protection Act.  Initially, the court dismissed the claim because “marketing statements that accurately describe the findings of duly qualified and reasonable scientific experts are not literally false ....” In re GNC Corp., 789 F.3d 505, 509 (4th Cir. 2015).  (Ugh.)

Midwestern refiled, claiming misleadingness and unjust enrichment.  [Discussion of GNC’s wrongheaded description of state consumer protection statutes omitted.]  Given GNC, Midwestern’s amended complaint alleged misleadingness, claiming that ads that cited the study on which Riddell relied were misleading because the youth helmets at issue were not examined in the study.

Riddell argued that Midwestern’s theory of misleadingness contradicted its earlier claims of literal falsity (since Midwestern had to concede that the claims were “literally true” but misleading). The court disagreed, because that’s not how allegations in superseded complaints work.  Also, Midwestern didn’t need to identify any particular statement as “literally true”; it was enough under GNC to identify a statement that was misleading.  “This central allegation, that Riddell used the Pittsburgh study to suggest a safety benefit for youth Revolution Helmets even though it was a different class of helmets that was subject to testing, provides enough basis to plausibly support a claim for false advertising.”  Midwestern didn’t need to plead with more specificity what the differences between the helmets were.

For causation, reliance, and injury, it was enough to plead that,

[b]ecause Riddell’s claims were included in advertisements, marketing, and sales presentations, a reasonable consumer would likely be misled into believing that the Revolution Helmet will reduce concussions, and may do so by 31%. This allowed Riddell to capitalize on consumer confusion and charge a premium price of approximately $50 for the Revolution Helmet, which reflected the illusory safety benefit of its “Concussion Reduction Technology.”

The complaint also satisfied Rule 9(b) by alleging that Midwestern purchased Revolution Helmets on an annual basis since 2002 and that Riddell made concussive reduction technology claims through a number of advertising channels at that time and up to the present day.

Likewise Midwestern plausibly stated a claim for unjust enrichment under West Virginia law by alleging that a benefit was conferred on the defendant when it knowingly collected a market premium for its youth helmets thanks to its misleading marketing claims. 

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