By Jeff Birren, Senior Writer
DNA Sports Performance Lab, Inc. has been busy suing. Its most recent case, filed against Major League Baseball, MLB Advanced Media, LP, Major League Baseball Enterprises, Inc. (collectively “MLB”) and the Major League Baseball Players Association (“MLBPA”) on Jan. 23, 2020, has not gone well. Recently the District Court dismissed the claims against MLBPA in a way that indicated the claims against MLB would suffer the same fate (DNA Sports Performance Lab, Inc. v. MLB et al, Opinion, U.S. D. C., N.D. Cal., Case No. C 20-00546 WHA (“DNA Sports”) (8-1-20) at 7). Unfortunately for the Lab and its owner, Neiman Nix (collectively “DNA Sports Lab”), this is nothing new.
Nix was a 29th round draft choice of the Cincinnati Reds out of Kingwood High School in Texas. He pitched five seasons with the Milwaukee Brewers and various minor league teams and retired in 2003 due to arm injuries. Nix started a baseball academy in 2006 that he later sold. In 2012 he opened DNA Sports Lab in Miami, a training center and sports medicine clinic. DNA Sports Lab sells “health supplements, ‘extracted from the shed tissue of elk antlers.’” This was claimed to be a ‘’naturally occurring, bio-identical form of IGF-1, a performance-enhancing substance” (Id. at 3). The Lab’s website states it specializes “in the integration of one’s genetic potential in all areas of natural human performance.” In 2013 MLB turned an unwanted gaze on IGF-1 and after an investigation, joined with MLBPA to ban IGF-1, whether natural or synthetic. With that, litigation began.
The Litigation Begins
DNA Sports Lab first sued MLB in Florida state court in February 2014. The complaint alleged the investigation was unfair and discriminatory. The plaintiffs “missed several case management conferences and failed to perfect service until” October. This led to a November 2014 dismissal for failure to prosecute (Id. at 3). The plaintiffs appealed, but that was dismissed without an opinion (Nix & DNA Sports Performance Lab, Inc. v. Office of the Comm’r of Baseball, Dist. Ct. of Appeal of Florida, 3rd District, 190 So. 3d 79 (4-27-15)).
A year later, DNA Sports Lab sued the Office of the Commissioner of Baseball and several of its employees, again challenging the investigation. This lawsuit, alleging tortious inference with prospective economic advantage, was filed in New York Federal Court. The defendants informed the court that they intended to file a motion to dismiss and to seek sanctions. The plaintiffs voluntarily dismissed the case (Nix and DN Sports Performance Lab, Inc. v. Office of Comm’r of Baseball, No. 16-CV-5604 (S.D.N.Y. July 14, 2016)).
Less than one month later, Nix and his company again sued MLB, this time in New York State Court. They claimed that the defendants had hacked the plaintiffs’ social media accounts, again included claims for tortious interference and added a defamation claim. The defendants removed the case to federal court based on the hacking claim. DNA Sports Lab voluntarily dismissed the hacking claim, so the case was sent back to state court. That court dismissed the complaint based on res judicata as the claims had previously been dismissed twice, that it was barred by the statute of limitations and that it failed to state a claim and granted sanctions (Nix v. MLB, Sup. Ct. of N. Y.,Case No. 06-04-2018, 2018 N.Y. Slip. Op. 31141 (N.Y. Sup. Ct. 2018 (6-4-18)). Nix’s motion to reargue the case was denied later that year (Nix v. MLB, 2018 NY Slip Op 33373(U) (12-28-18)).
DNA Sports Lab appealed. In January 2020 the Appellate Division of the Supreme Court of New York granted the motion of the plaintiffs’ lawyer to withdraw as counsel so Nix was a pro se litigant. It also reinstated the plaintiffs’ appeals of the dismissal, gave the plaintiffs until May 2020 to perfect the appeal and stated that no further extension would be granted (Nix. v. MLB, 2020 N.Y. Slip. Op. 60035 (N.Y. App. Div. 2020 (1-2-20)).
In March 2018 Nix and DNA Sports sued ESPN, USA Today and the Associated Press, claiming that the defendants had defamed them by “publishing or republishing a statement from the league” that claimed that Nix and DNA Sports Lab “admitted” they used “bio-identical insulin-like growth factor (IGF-1), which is derived from elk antlers” and is on MLB’s “list of banned substances” (DNA Sports at 4). The statement was supposedly defamatory “because it did not differentiate between natural and synthetic IGF-1, giving the readers the impression that DNA Sports had engaged in illegal or legal-but-banned drug sales” (Id.) The 15-page verified complaint also included a claim for intentional infliction of emotional distress and sought an injunction. The case was filed in Florida State Court, but the defendants removed the case to federal court.
The District Court dismissed the case in August 2018, holding that the statement was substantially correct, and the omission did not render the story untrue (Id.). DNA Sports Lab appealed, claiming that the District Court had been wrong to apply New York State law, “determining that the fair report privilege and wire service defenses warranted dismissal, and concluding that the statements at issue in the articles were true and did not have a defamatory implication” (Nix & DNA Sports Lab v. ESPN, et al, Eleventh Cir. Court of Appeals, Case No. 18-14107 (5-15-19)).
The case was decided without oral argument. The Eleventh Circuit affirmed in an unpublished opinion, holding that the case was barred by the one-year statute of limitations since it was filed 19 months after the articles had been published; that the story was substantially correct as it did not matter whether IGF-1 was natural or synthetic since MLB banned all versions of it; that they were protected as the re-publishers of an apparently reliable story; that the story was substantially true and that it “lacked a defamatory implication” (Id. at 16).
During that case, DNA Sports Lab’s new counsel contacted MLBPA seeking a sworn statement about an alleged prior phone call between the Lab’s former counsel and an MLBPA lawyer. Ultimately the requested help was not provided and MLBPA affirmed that the rules banned natural or synthetic IGF-1. MLBPA subsequently refused to provide its “factual position” as to whether IGF-1 was in rival’s product. This led to the current lawsuit.
The Current Case
DNA Sports Lab filed the case against MLB and MLBPA on Jan. 23, 2020. The lawsuit was based on MLBPA’s former licensing deal with Klean Athlete and its agreements with Gatorade, Muscle Milk and Eyepromise, a company that sells “nutritional supplements” (DNA Sports at 4). It asserted claims for alleged violations of the Lanham Act for false descriptions or representations in advertising, a false advertising claim under California law, and for unfair competition. MLBPA responded with a motion to dismiss and for sanctions under FRCP 11. The hearing was held telephonically. MLB also filed a motion to dismiss (Id.).
The Court Is Unimpressed
The Court began by quoting from FRCP 11 that an attorney “must certify to the best of his knowledge information and belief that” a pleading “is not being presented for any improper purpose” and that “the claims… are warranted by existing law …” It first addressed the issue of “whether the complaint states a claim for relief” prior to “determining the extent of any Rule 11 violation” (Id.).
The Court analyzed the claim that MLBPA’s “former licensing agreement with Klean Athlete violated the Lanham Act.” That was “without merit. The complaint lacks enough facts to even minimally allege the players union violated” the Act (Id at 5). It alleged that the MLBPA “misrepresented Klean Athlete as free from banned substances by endorsing the product.” This was based “solely on Klean Athlete’s April 2016 press release announcing its partnership with the union as evidence of false-by-necessary-implication advertising.” The implication was that when MLBPA “allowed Klean Athlete to use its logo” it was “an alleged misrepresentation by the union because Klean Athlete allegedly contains animal protein, and, thus, IGF-1” (Id.). The problems with the claim were many.
In the first place, DNA Sports Lab did “not sue the right defendant. In Lanham Act violations, defendants are typically those who made the allegedly false or misleading statement.” That was Klean Athlete, not MLBPA. The Ninth Circuit has not adopted the “contributory liability” for allegedly false statement but even assuming that “our court of appeals would approve of this liability extension” the “complaint still does not allege enough to make the players contributorily liable for any potential false advertising.” It had not alleged “any facts regarding the union’s specific licensing agreement” and MLBPA did not make “the accused statement nor conducted Klean Athlete’s product testing” (Id.). That was done by an independent third party. If the product contained a banned substance the error was with that lab and Klean Athlete violated the Lanham Act, not MLBPA. The complaint had “no facts to the union’s knowledge or material participation” in the process, or even that MLBPA “had knowledge of—or the capability to ascertain—the product’s compositions beyond” the “certification. This shortfall fundamentally undermines the claim” (Id.).
The Court then stated that the complaint alleged “no economic or reputational harm” and a Lanham Act claim requires “economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising [which] occurs when deception of consumers cause them to withhold trade from the plaintiff” (Id. at 5/6). That can be shown through lost sales or business reputation but “these typical injuries still require sufficiently detailed allegations” (Id. at 6). Even if Klean Athlete’s press release “constituted commercial advertising under the Lanham Act” there were no “factual allegations that this specific speech caused actionable harm.” Nor did it “assert causation” by alleging “a clear diversion from DNA Sports to Klean Athlete.” In fact, “the only press release alleged to have caused harm is the league’s 2016 statement” related to the lawsuit that stated that Nix “admits to selling products containing at least one banned performance enhancing substance” (Id.).
The Court was not done. Klean Athlete’s April 2016 press release was “outside’s California’s three-year statute of limitations for fraud.” The Lanham Act does not “contain a statute of limitations” but “the most analogous state-law action governs. For false advertising, that is fraud.” Thus, the statute of limitations for the release expired in April 2019. DNA Sports Lab responded that the press release was “merely an example” of MLBPA’s commercial advertising and that MLBPA “continues to engage in false advertising, even though the union’s licensing agreement with Klean Athlete ended in December 2017.” The injunction request “should have included examples of such in their complaint that fell within” the statute of limitations. MLBPA “cannot be enjoined from doing what it already ceased on its own accord. Any potentially false-advertising is not occurring and, therefore, cannot be proscribed” (Id.).
The False Advertising Claim
This second claim “is also without merit.” It “wholly fails to identify the union’s participation in the alleged false-advertising scheme” (Id.). It was based on “the same April 2016 press release” and asserted that MLBPA “made false or misleading statements in advertising violating California Business and Professions Code § 17500.” That section bans “advertising that is ‘untrue or misleading’” and which was known or should have been known to be so. However, “liability requires a defendant’s personal ‘participation in the unlawful practice’ and ‘unbridled control’ over the offending practices.” Liability may not be based “on vicarious liability.” The complaint did not “show how the union participated in Klean Athlete’s false advertising” nor did it “allege any facts relating to how the union knew or should have known” that the products “contained banned substances (if it did). Nor do plaintiffs allege how the union exerted control over Klean Athlete’s ‘certified for sport’ determination” (Id. at 6/7). Furthermore, DNA Sport Lab “and their counsel admitted ‘it is not clear that the selective enforcement [of sports supplemental products] is done at the direction of the association’” (Id. at 7). The claim therefore “entirely fails to satisfy the pleading requirement” (Id.).
The Final Claim Against MLBPA For Unfair Competition
The third claim, based on California Business and Professions Code § 17200, alleged that “the union engaged in unfair competition” based on both the Lanham Act claim and the false-advertising claims already dismissed. These claims were barred by “California’s statute of limitations.” Furthermore, the claims were “inadequately pled” and “as the claims are substantially congruent, plaintiff’s baseless Lanham Act claim yields a baseless § 17200 claim” (Id.). The Court did not stop there.
The remedies “requested are unavailable here. Section 17200 plaintiffs are limited to restitution and injunctive relief which requires ongoing injury” (Id.). However, plaintiffs “cannot request restitution since they never conducted business with the union.” Furthermore, based on a non-competition agreement with the purchasers of his baseball academy, “Nix never sold or marketed its product to league players” and “it is not clear that Klean Athlete diverted customers from DNA Sports.” If Klean Athlete contained a banned substance “any consumers who were seeking to purchase a league-approved supplement would thus avoid both Klean Athlete and DNA Sports” (Id.).
Moreover, DNA Sports Lab “cannot receive injunction relief because the alleged harm—the union’s licensing agreement—is over and will likely not be repeated.” That agreement ended in 2017 and “the union has not sought to renew its endorsement suggesting that it will not pursue future business with Klean Athlete. In sum, DNA Sports’ unfair competition claim also fails out of the gate” (Id.).
The Court’s “Conclusion”
Before “deciding whether to impose sanctions against anyone” the Court would allow the plaintiffs an opportunity to amend. They “are not required to amend, and their better course might be walk away.” However, “if they do amend, they should not only try to cure the defects identified here, but should also cure the further possible defects identified in the union’s motion.” The Court gave DNA Sports Lab until Aug. 20, 2020 to “move for leave to file” and to explain “how the defects have been cured, appending a copy of the proposed amended complaint.” They “should be sure to plead their best case and take into account all criticisms made by the union, including those not reached in this order.” The Court ended with the ominous statement that “[O]nce the pleadings are settled (or abandoned), a further order will address sanctions” (Id.).
Still Not Over
Just three days later DNA Sports Lab filed a notice of voluntary dismissal against all of the defendants (DNA Sports Doc. #54 (8-4-20)). Victory in hand, MLB filed a motion for sanctions that will be heard on Sept. 24, 2020 (Doc. #56 (8-21-2)).
Nix had also sued a former employee, Kyle Boddy. Boddy “attended plaintiff’s baseball training camp in 2008 and stole plaintiff’s innovative pitching form/theory and the training system he had developed to teach it to college and professional players.” Nix asserted various claims including among others, misappropriation of trade secrets and unfair trade practices, and unjust enrichment against Boddy and his company. In November 2019 the defendants’ summary judgment motion was denied (Nix v. Boddy et al, U. S. Dist. Ct., W. D. Wash., Case No. C18-992RSL (11-19-19). Except for Boddy, the courts have not been home sweet home to Nix and his lab.
Their website now contains a warning to athletes:
“Please consult your regulating officials before use of possession or purchase of any dietary supplement. While our products are all natural and no prescription is needed, we strongly recommend that all athletes and drug tested individuals clear any future use with their governing bodies. Recent court rulings in reference to Major League Baseball have stated that all forms of IGF-1 (regardless of the nature: natural or synthetic) are banned in MLB.”
Litigation is unlikely to change that any time soon.
