Boston Red Sox Win Appeal Affirming Dismissal of Putative Electronic “Sign-Stealing” Class Action Lawsuit

On March 21, 2022, the U.S. Court of Appeals for the Second Circuit affirmed the U.S. District Court for the Southern District of New York’s dismissal of a purported class action lawsuit brought by fantasy sports contestants against Cravath client Boston Red Sox Baseball Club, L.P. (the “Red Sox”), as well as Major League Baseball and MLB Advanced Media, L.P. (collectively “MLB”) and the Houston Astros, LLC (the “Astros”).

The named plaintiffs in the suit were five individuals who, between 2017 and 2019, participated in daily fantasy baseball contests hosted by DraftKings Inc. (“DraftKings”). On behalf of themselves and similarly situated DraftKings participants, plaintiffs alleged that the Red Sox and Astros engaged in electronic sign‑stealing in violation of MLB rules and that the MLB failed to prevent, remedy and disclose the violation. They further alleged that the electronic sign‑stealing schemes improperly impacted player statistics, which form the basis for fantasy contests, and thereby corrupted the DraftKings contests promoted by defendants. Plaintiffs asserted various fraud, negligence, unjust enrichment and consumer protection law claims based on alleged harm arising from the electronic “sign-stealing” scandal.

The plaintiffs appealed U.S. District Judge Jed S. Rakoff’s decision to grant Cravath’s motion to dismiss the case and the district court’s denial of their motion for reconsideration, which the Second Circuit rejected. Writing for the three‑judge panel, U.S. Circuit Judge Joseph F. Bianco explained that “[a]t its core, this action is nothing more than claims brought by disgruntled fantasy sports participants, unhappy with the effect that cheating in MLB games may have had on their level of success in fantasy sports contests.” The Second Circuit held that the plaintiffs failed to state a plausible misrepresentation about fantasy baseball by the defendants, and that any reliance by plaintiffs on a purported lack of electronic sign‑stealing in participating in the DraftKings contests was unreasonable as a matter of law. The Circuit Court further declined to recognize a “broad and all‑encompassing duty” on behalf of sports organizations to affirmatively disclose everything that could affect a player’s performance on the field. In rejecting the consumer protection law claims, the Court noted: “When it comes to sports competitions, the one thing that a spectator or consumer can expect is the unexpected.”

The Cravath team was led by partners Michael T. Reynolds and Lauren A. Moskowitz, and included senior attorney Hector J. Valdes and associates Zachary W. Jarrett, Ravinder Singh and Feyilana Lawoyin.

The case is Olson v. Major League Baseball, Nos. 20‑1831, 20‑1841 (2d Cir.).