Lawsuit highlights MLB has financial stake in DraftKings
By Pat Murphy
BridgeTower Media Newswires
BOSTON, MA — The cheating scandal rocking Major League Baseball has found its way to the courts in a national class action alleging the game’s concealment of electronic sign stealing by the Red Sox, Houston Astros and other teams violated state consumer protection laws to the detriment of fans who wager on fantasy baseball.
Filed Jan. 23 in the U.S. District Court for the Southern District of New York, Olson v. Major League Baseball alleges the league and other defendants “actively” induced fans to enter into fantasy baseball wagers while teams “secretly engaged in corrupt and fraudulent conduct … that produced player statistics distorted by cheating.”
The lead plaintiff in the case is reporter Kris Olson. According to the suit, Olson, like millions of other fans, wagered on the performance of MLB players through DraftKings, the fantasy sports betting provider.
The class action alleges neither “Plaintiff Olson, nor any other DraftKings’ contestants would have wagered on daily fantasy baseball contests if they had known that the players’ performance statistics on which their wagers were based were not honest.”
The plaintiff is represented by David S. Golub of Silver, Golub & Teitell in Stamford, Connecticut.
“The lawsuit is about Major League Baseball’s obligation to acknowledge that it has defrauded its fans who played fantasy baseball,” Golub says.
The complaint makes much of the fact that MLB has a financial stake in DraftKings, outlining how the league in 2013 made a “confidential” investment in DraftKings. In 2015, MLB upped its stake, becoming an equity investor in DraftKings and entering into a partnership agreement designating the sports betting provider as MLB’s official daily fantasy game.
Olson’s complaint paints a picture of the league turning a blind eye to whispers of cheating on the diamond as a way of protecting its investment in DraftKings.
“MLB wholly failed to properly investigate, deter, remedy or disclose its members’ misconduct and purposefully continued to encourage fan participation in what it knew to be corrupted fantasy baseball competitions,” the complaint states.
The suit proposes a class of all those who participated for a fee in DraftKings’ MLB daily fantasy sports contests between April 2, 2017, and Oct. 30, 2019. The plaintiff alleges violations of G.L.c. 93A as well as similar consumer protection laws in 47 other states and the District of Columbia.
A league rule bans the use of electronics in sign stealing, but the sports website The Athletic published a story in November exposing how the Houston Astros electronically stole signs during the team’s run to winning the 2017 World Series.
“What we do know is that other teams were making complaints to Major League Baseball about the Astros and that Major League Baseball wasn’t doing anything about it,” Golub says.
The news story triggered an investigation by MLB that culminated in a Jan. 13 report by Commissioner of Baseball Robert D. Manfred Jr. Finding that the Astros did indeed conduct an illegal scheme to steal signs during the 2017 season, the commissioner suspended the team’s manager and general manager (both were later fired).
The commissioner further found that the team’s bench coach, Alex Cora, was an “active participant” in the scheme. Cora later became manager of the Red Sox. The league is currently investigating whether the Red Sox engaged in electronic sign stealing in 2018 while Cora was manager. The Red Sox announced on Jan. 14 that Cora would not return to manage the 2020 team.
Apart from Major League Baseball, the defendants in the suit include the Red Sox, Houston Astros and MLB’s marketing arm, MLB Advanced Media.
Class action defense lawyer Melanie A. Conroy of Pierce Atwood in Boston notes that Olson does not name DraftKings as a defendant. She theorizes that that was a strategic move in the wake of a recent decision by U.S. District Court Judge George A. O’Toole Jr. in In re: Daily Fantasy Sports Litigation.
The judge ruled in the multi-district litigation that fantasy sports players are bound by DraftKings’ arbitration agreement. Conroy says she expects the defendants in the New York class action to still argue that those plaintiffs can be compelled to arbitrate their claims pursuant to the DraftKings user agreement.
Conroy adds that the plaintiffs may have difficulty showing they suffered injury both for purposes of standing for class certification as well as on the merits of their consumer protection claims.
“It isn’t immediately clear exactly how every class member has been injured in a concrete way, much less how the plaintiff will go about proving the exact dollar amount of losses that would be claimed by each class member from the same alleged harms,” Conroy says.
But Salem class action lawyer Matthew T. LaMothe sees viable consumer protection claims in the plaintiff’s complaint based on allegations regarding the close relationship between MLB and DraftKings, the reliance by fantasy players on the integrity of baseball player stats, and the league’s knowledge of cheating by certain clubs.
Assuming the allegations of the complaint are true, the Forrest LaMothe attorney says MLB had an obligation to come forward with what the league knew earlier than it did.
An MLB spokesperson said the league had no comment.
