Midwestern Midget Football Club Inc. v. Riddell, Inc.

Filing 78

MEMORANDUM OPINION AND ORDER denying defendant Riddell, Inc.'s 47 MOTION to Dismiss the 45 Second Amended Class Action Complaint. Signed by Judge John T. Copenhaver, Jr. on 6/17/2016. (cc: counsel of record; any unrepresented parties) (taq)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
MIDWESTERN MIDGET FOOTBALL
CLUB INC.,
Plaintiff,

v.

Civil Action No. 2:15-00244

RIDDELL, INC.,
Defendant.

MEMORANDUM OPINION AND ORDER

Pending is a motion to dismiss the Second Amended
Complaint, filed by defendant Riddell, Inc. (“Riddell”) on
September 3, 2015.

I.

Factual and Procedural Background1

Plaintiff Midwestern Midget Football Club, Inc.
(“Midwestern”) is a West Virginia citizen.

It is a non-profit

youth football organization operating in Kanawha County, West
Virginia.

Defendant Riddell, Inc. (“Riddell”), is an Illinois

citizen that designs, manufactures, markets, and sells a line of
cranial protection devices for football players known as the

1

The facts recited reflect the allegations of the Second Amended
Complaint. As discussed below, the court must accept these facts
as true for purposes of the motion to dismiss.

Revolution Helmets.

Approximately 150 youths participate in Midwestern’s
program every year.
participants.

It supplies the helmets for these

Every year Midwestern purchases between 12 and 24

new Revolution Helmets for its participants who are aged 14 years
or younger.

Riddell sells Revolution Helmets at a market price
reflective of its claim that they reduce the incidence of
concussion in comparison with its own, earlier helmet designs and
competitor helmets.

Specifically, the Revolution Helmets were

marketed as containing technology that putatively reduced the
incidence of concussions by up to 31%.

This claim was based on a

2002 study conducted at the University of Pittsburgh Medical
Center (“Pittsburgh study”) comparing concussion rates in high
school athletes wearing Revolution Helmets and traditional
helmets.

The Pittsburgh study did not include youth helmets of

the type purchased by Midwestern.

On December 2, 2014, Midwestern instituted this action
in the Circuit Court of Kanawha County against Riddell on its own
behalf, and that of a class of similarly situated consumers,2 with

2

Midwestern defines the proposed class, with certain limited
exclusions, as “All West Virginia residents who purchased a
Riddell Revolution football helmet for use in youth football in
the State of West Virginia during the period beginning four years
2

a single-count claim under the West Virginia Consumer Credit and
Protection Act ("WVCCPA").

West Virginia Code, section 46A-6-

106(a), provides in pertinent part:
Any person who purchases . . . goods . . . and thereby
suffers any ascertainable loss of money . . . as a
result of the use or employment by another person of a
method, act or practice prohibited or declared to be
unlawful by the provisions of this article may bring
an action in the circuit court . . . .
W. Va. Code § 46A-6-106(a).

On January 6, 2015, Riddell removed.

In its initial and

first amended complaint, Midwestern alleged that the claims
Riddell made to market Revolution Helmets were knowingly false.
To support this claim Midwestern contended that the Pittsburgh
study was statistically unsound, was paid for by Riddell, and was
co-authored by a Riddell employee.

Midwestern also alleged that

the study was publically criticized by third-party scientists and
that other studies indicated that Revolution Helmets made no
material difference to concussion risk as compared to traditional
helmets.

Midwestern asserted that as a result of Riddell's
alleged deceptive marketing, West Virginia consumers were exposed
to Riddell's false representations.

Midwestern claimed that those

same West Virginia customers who purchased Revolution Helmets at

prior to the date of filing of this Class Action Complaint through
the present (the “Class Period”).”
3

certain higher market prices reflecting their alleged concussionreducing benefits would have, without the false representations,
purchased alternative helmets at a lower market price.

On August 10, 2015, the court granted Riddell’s motion
to dismiss, without prejudice, concluding that the first amended
complaint failed to state a 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) (“In re GNC”).
The court granted Midwestern leave to file an amended pleading
stating an alternative theory, asserted only in its briefing, that
Riddell’s marketing statements, while literally true, were
misleading to consumers in violation of the WVCCPA.

Midwestern filed its second amended class action
complaint (“operative complaint”) on August 18, 2015.

The

operative complaint continues to allege a single count violation
of the WVCCPA, as well as an additional claim for unjust
enrichment.

The WVCCPA claim alleges that Riddell’s marketing

statements were knowingly misleading because Riddell marketed its
youth Revolution Helmets as reducing concussion risk, citing the
Pittsburgh study, despite the fact that the study did not test
youth helmets.

The unjust enrichment claim alleges that Riddell

was unjustly enriched to the extent it has retained a premium paid

4

by purchasers of youth Revolution Helmets based on its “Concussion
Reduction Technology.”3

In the operative complaint, Midwestern seeks, inter
alia, class certification, injunctive relief, and actual damages
or a statutory penalty, whichever is greater.

Riddell’s renewed

motion to dismiss argues that the operative complaint fails to
cure the defects based upon which the court granted its previous
motion to dismiss.

II.

Governing Standard

Federal Rule of Civil Procedure 8(a)(2) requires that a
pleader provide “a short and plain statement of the claim showing
. . . entitle[ment] to relief.”

Fed. R. Civ. P. 8(a)(2); Erickson

v. Pardus, 127 S. Ct. 2197, 2200 (2007).

Rule 12(b)(6)

correspondingly permits a defendant to challenge a complaint when
it “fail[s] to state a claim upon which relief can be granted . .
. .”

Fed. R. Civ. P. 12(b)(6).

3

In their briefing on the instant motion to dismiss, both
parties continue to offer a number of factual assertions beyond
the four corners of the operative pleading. In deciding this
motion to dismiss, the court will consider the complaint and
documents incorporated by reference therein, but does not look
beyond those documents to consider the parties’ factual
contentions made in memoranda and their exhibits. See E.I. du
Pont de Nemours and Co. v. Kolon Industries, Inc., 637 F.3d 435,
448-49 (4th Cir. 2011).
5

The required “short and plain statement” must provide
“‘fair notice of what the . . . claim is and the grounds upon
which it rests.’”

Bell Atlantic Corp. v. Twombly, 550 U.S. 544,

545 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957),
overruled on other grounds, Twombly, 550 U.S. at 563); see also
Anderson v. Sara Lee Corp., 508 F.3d 181, 188 (4th Cir. 2007).

In

order to survive a motion to dismiss, “a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’”

Ashcroft v. Iqbal, 129 S.

Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570); see also
Monroe v. City of Charlottesville, 579 F.3d 380, 386 (4th Cir.
2009).

Application of the Rule 12(b)(6) standard requires that
the court “‘accept as true all of the factual allegations
contained in the complaint . . . .’”

Erickson, 127 S. Ct. at 2200

(quoting Twombly, 127 S. Ct. at 1965); see also South Carolina
Dept. Of Health And Environmental Control v. Commerce and Industry
Ins. Co., 372 F.3d 245, 255 (4th Cir. 2004) (quoting Franks v.
Ross, 313 F.3d 184, 192 (4th Cir. 2002)).

The court must also

“draw[] all reasonable . . . inferences from th[e] facts in the
plaintiff's favor . . . .”

Edwards v. City of Goldsboro, 178 F.3d

231, 244 (4th Cir. 1999).

6

When making an allegation of fraud, more particularity
is required.

A plaintiff must meet the heightened pleading

requirements set forth in Rule 9.

Rule 9 requires a party to

“state with particularity the circumstances constituting [the]
fraud.” F.R. Civ. P. 9(b).

To satisfy Rule 9(b), a plaintiff

“must, at a minimum, describe the time, place, and contents of the
false representations, as well as the identity of the person
making the misrepresentation and what he obtained thereby.” United
States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370,
379 (4th Cir. 2008), see also U.S. ex rel. Nathan v. Takeda Pharm.
N. Am., Inc., 707 F.3d 451, 456 (4th Cir. 2013) (noting that the
Rule 9 standard set forth in Wilson is “as applicable in cases
brought under [the statute at issue in Wilson] as [it is] in other
fraud cases”) (emphasis added).

III. Discussion

Riddell offers five arguments in support of its motion
to dismiss.

First, it contends that the operative complaint fails

to plead a plausible claim under WVCCPA § 46A-6-106(a), because
Midwestern continues to allege that Riddell’s advertisements were
false rather than that those advertisements were literally true
but misleading.

Second, it claims that the facts pleaded by

Midwestern fail to demonstrate causation or reliance.
claims Midwestern alleges no cognizable injury.
7

Third, it

Fourth, it

asserts that plaintiffs have failed to satisfy the heightened
pleading requirements for fraud claims under Rule 9(b).

Fifth, it

asserts that the operative complaint fails to adequately state a
claim for unjust enrichment.

The following discussion addresses

the arguments against Midwestern’s WVCCPA claim before taking up
the unjust enrichment claim.

A.

Pleading under Section 46A-6-106(a)
The necessary elements of proof for the claim pled by

Midwestern under WVCCPA section 46A-6-106(a) have been found to
be:

“(1) unlawful conduct by a seller; (2) an ascertainable loss

on the part of the consumer; and (3) proof of a causal connection
between the alleged unlawful conduct and the consumer's
ascertainable loss.”

White v. Wyeth, 227 W. Va. 131, 140, 705

S.E.2d 828, 837 (2010).

Additionally, “[w]here the deceptive

conduct or practice alleged involves affirmative
misrepresentations, reliance on such misrepresentations must be
proven in order to satisfy the requisite causal connection.”

Id.

One species of “unlawful conduct” under the WVCCPA
consists of “[u]nfair methods of competition and unfair or
deceptive acts or practices in the conduct of any trade or
commerce . . . .”

W. Va. Code § 46A-6-104.

The statute defines

several acts as “[u]nfair methods of competition and unfair or
deceptive acts or practices,” including, in pertinent part:
8

Representing that goods or services have . . . benefits
. . . that they do not have . . . .;
The act, use or employment . . . of any deception,
fraud, false pretense, false promise or
misrepresentation, or the concealment, suppression or
omission of any material fact with intent that others
rely upon such concealment, suppression or omission . .
. .; and
Advertising, printing, displaying, publishing,
distributing or broadcasting, or causing to be
advertised, printed, displayed, published, distributed
or broadcast in any manner, any statement or
representation with regard to the sale of goods . . .
which is false, misleading or deceptive or which omits
to state material information which is necessary to make
the statements therein not false, misleading or
deceptive.
W. Va. Code § 46A-6-102(7)(E), (M), (N).

The Fourth Circuit has observed that courts construing
the many statutes with prohibitions against false advertising have
come to a “broadly shared understanding” of the types of unfair or
deceptive practices those statutes cover:

“Courts uniformly

interpret [prohibitions of] ‘false or misleading’ [advertising] as
creating two different theories of recovery in a false advertising
claim:

A plaintiff must allege either (i) that the challenged

representation is literally false or (ii) that it is literally
true but nevertheless misleading.”

In re GNC, 789 F.3d at 514.

As noted above, Midwestern’s first amended complaint was
dismissed by the court because its allegations, resting on a
theory that Riddell’s marketing claims citing the Pittsburgh study

9

were literally false, were insufficient in light of the Fourth
Circuit’s holding that “marketing statements that accurately
describe the findings of duly qualified and reasonable scientific
experts are not literally false . . . .”

Id. at 509.

Consequently, Midwestern has abandoned its claim of literal
falsity, electing instead in the operative complaint to allege
that advertising and public statements made by Riddell were
misleading to consumers.

In particular, the operative complaint

alleges that advertisements which cited the Pittsburgh study and
suggested that Riddell’s youth helmets provided concussion
reduction benefits were misleading because the youth helmets were
not examined in the study.

Riddell argues that the operative complaint’s central
allegation, namely, that its marketing statements using the
Pittsburgh study were misleading, fails to support a plausible
WVCCPA claim under Twombly and Iqbal for several reasons.

First,

Riddell objects to the plaintiff’s newly-asserted theory that the
marketing statements at issue were misleading rather than
literally false.

According to Riddell, this theory is factually

inconsistent with the plaintiff’s prior complaints and should be
rejected on that basis.

Second, Riddell asserts that Midwestern

fails to identify a statement as “literally true” but nevertheless
misleading, as described by In re GNC.

Finally, Riddell argues

that the operative complaint contains only bare allegations that
10

the marketing statements based on the Pittsburgh study were
misleading, without any explanation of how those statements may
have misled Midwestern.

As an initial matter, the court rejects the argument
that having previously pled that Riddell’s marketing statements
were knowingly false, the plaintiff should be foreclosed from
asserting its claim based on misleading advertising.

It is well-

established that, “[a]s a general rule, ‘an amended pleading
ordinarily supersedes the original and renders it of no legal
effect.’”

Young v. City of Mount Ranier, 238 F.3d 567, 572 (4th

Cir. 2001) (quoting In re Crysen/Montenay Energy Co., 226 F.3d
160, 162 (2nd Cir. 2000); see also 6 Arthur R. Miller & Mary Kay
Kane, Fed. Prac. & Proc. Civ. § 1476 (3d ed.) (“[P]laintiff may
file a new complaint that does not refer to or adopt any of the
deficient allegations in the original pleading”).

Even assuming

that the allegations in the first amended complaint and the
operative complaint are factually inconsistent, allegations made
in a superseded complaint are not treated as judicial admissions.
See 188 LLC v. Trinity Industries, Inc., 300 F.3d 730, 736 (7th
Cir. 2002).4

4

The court need not reach the question of whether statements made
in the first amended complaint, to the extent they are
inconsistent with Midwestern’s current allegations, might be
admissible at a later stage of this proceeding.
11

It is also of no import that Midwestern has not
specifically identified a statement made by Riddell as “literally
true.”

Riddell reads too much into the In re GNC court’s

observation that a false advertising claim must allege either that
a statement made by the defendant was false or “literally true but
misleading.”

The operative complaint identifies the statements

the plaintiff alleges were misleading — namely, the claims that
Riddell’s Revolution Helmets have been shown to reduce concussion
risk by as much as 31%.

The operative complaint alleges that the

use of these statements to market youth helmets was misleading
inasmuch as the Pittsburgh study did not include youth helmets.

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.

While Riddell argues that Midwestern

should have pled more specifically what the differences between
the youth helmets and the helmets included in the study are, this
would require more than necessary at the pleading stage.
Accepting the allegations in the operative complaint as true,
Midwestern has suggested that Riddell’s advertisements were
deceptive or misleading inasmuch as consumers were led to believe
that youth helmets were involved in the Pittsburgh study and that
those same helmets were shown to provide a safety benefit in the
12

form of reduced concussion risk, despite the fact that those
particular helmets were not part of the study.5

Next, Riddell argues that the operative complaint fails
to adequately allege causation, reliance and injury.

The

operative complaint includes, inter alia, the following:
“Riddell used the results of [the Pittsburgh] study to
claim that the Revolution Helmet reduced concussions,
and by up to 31%, in marketing its ‘Concussion Reduction
Technology’ to youth football participants and youth
football leagues. Riddell’s statements directed at
youth football participants and leagues were misleading
because the [Pittsburgh] study did not study concussion
rates among youth football players.” (Op. Compl. § 10).
“Unfortunately, these misleading statements were highly
successful in creating consumer confusion. Plaintiff
and others purchased Revolution Helmets at market prices
reflecting this illusory benefit of a reduced risk of
concussion in comparison with other helmets. . .” (Op.
Compl. § 3).
“Midwestern Football purchases Revolution Helmets and
the refurbishment of Revolution Helmets through contacts
with a Riddell representative in West Virginia.” (Op.
Compl. § 5).
“Because 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
5

Another court, considering the identical issue of whether
Riddell’s use of the Pittsburgh study to advertise youth helmets
was false or misleading, observed that “[Riddell’s] reference to a
statistic from a study which did not include any youth helmet
models is at least misleading or deceptive.” In re Riddell
Concussion Reduction Litigation, 121 F. Supp. 3d 402, 418 (D.N.J.
2015). While the New Jersey court addressed a range of issues not
relevant to the instant motion, its reasoning with respect to the
advertising of Riddell’s youth helmets is noteworthy.
13

price of approximately $50 for the Revolution Helmet,
which reflected the illusory safety benefit of its
‘Concussion Reduction Technology.’” (Op. Compl. § 20).

These allegations serve to frame up the elements
required for a section 46A-6-106(a) claim.

The allegations give

rise to the theory that Riddell was able to demand a higher market
price for youth Revolution Helmets by claiming the devices reduced
the rate of concussive injuries experienced with traditional
helmets.

Midwestern alleges that because the Pittsburgh study did

not examine youth helmets, Riddell had no basis to claim such a
benefit.

As a result, Midwestern suffered a loss when it

purchased Revolution Helmets at an inflated price -- relying on
Riddell’s safety claims -- instead of purchasing the lower-priced
traditional helmets that were not represented as having the
enhanced concussion protection.

Riddell argues that any inflation

of its market prices is purely speculative without reference in
the complaint to what comparable helmets were available.

While

expert testimony may be required to establish the but-for market
price, such proof need not be offered in the pleading.6

6

Riddell argues that Midwestern should be required to plead
precisely what it paid for the helmets and what the price of
comparable products would have been, relying on a decision in the
related litigation in New Jersey discussed above. See In re
Riddell Concussion Reduction Litigation, 77 F. Supp. 3d 422, 436
(D.N.J. 2015). However, the operative complaint’s inclusion of a
$50 figure for the retail mark-up alleged provides a sufficient
basis under Rule 12(b)(6) and Rule 9(b) to support a plausible
claim. In the New Jersey litigation cited, the court’s holding
14

Finally, Riddell claims that the operative complaint
does not meet the heightened pleading standard of Rule 9(b),
because it fails to allege the specific time, place and contents
of the misleading representations made by the defendant.

The

court concludes that the operative complaint sets forth the
plaintiff’s claim with the particularity required by Rule 9(b).
The operative complaint alleges Midwestern purchased Revolution
Helmets on an annual basis.

It asserts that the Revolution

Helmets were first offered for sale in 2002, with concussive
reduction technology claims made through a number of advertising
channels at that time and up to the present day.
8, 20).

(Op. Compl. ¶¶

These allegations, together with the portions of the

complaint quoted above, adequately set forth the time, place, and
contents of the misleading representations at issue, satisfying
the requirements described by our court of appeals in Wilson and
Nathan.

The court concludes that the operative complaint
adequately states a claim under the WVCCPA.

Midwestern has

plausibly alleged that it suffered a loss due to Riddell’s
misleading statements respecting the youth helmets it purchased.
These allegations include facts sufficient to establish causation,

was based, at least in part, on the plaintiffs’ failure to specify
what the alleged “price premium” amounted to.
15

reliance, and cognizable injury and to satisfy the particularity
requirements of Rule 9(b).

Consequently, the motion to dismiss

the WVCCPA claim lacks merit.

B.

Claim for Unjust Enrichment

The elements of a claim for unjust enrichment in West
Virginia are: “(1) a benefit conferred upon the [defendant], (2)
an appreciation or knowledge by the defendant of such benefit, and
(3) the acceptance or retention by the defendant of the benefit
under such circumstances as to make it inequitable for the
defendant to retain the benefit without payment of its value.”
Employer Teamsters-Local Nos. 175/505 Health and Welfare Trust
Fund v. Bristol Myers Squibb Co., 969 F. Supp. 2d 463, 471 (S.D.W.
Va. 2013) (citations and internal quotations omitted) (alteration
in original).

The benefit or property at issue “must have been

acquired by means of fraud or other similar circumstances which
negate the property holder’s continued retention of the subject
property.”

Gaddy Engineering Co. v. Bowles Rice McDavid Graff &

Love, LLP, 231 W. Va. 577, 587 (2013) (citing Annon v. Lucas, 155
W. Va. 368, 382 (1971)).

In Employer Teamsters, the court dismissed a claim for
unjust enrichment resulting from the defendant’s sale of a
pharmaceutical based on marketing claims representing that the
product was more effective than its competitor.
16

There, the court

noted that plaintiff failed to “allege how Defendant’s retention
of payments for a product that was effective in its ordinary
purpose -- though perhaps not as effective compared to other drugs
as claimed -- rises to the level of constituting unjust
enrichment.”

969 F. Supp. 2d at 472.

Riddell argues that this

case is similar, because while Midwestern alleges that the
Revolution Helmets it purchased are not more effective than other
helmets at reducing the risk of concussion for youth athletes,
there is no allegation that the helmets were ineffective
generally.

However, Employer Teamsters is distinguishable from

the instant case.

There, the court dismissed the plaintiffs’

underlying tort claim and noted that “the [complaint did] not
allege, let alone plausibly, whether any prescriptions were
written based on a misunderstanding of [the drug’s] efficacy.”
969 F. Supp. 2d at 472.

By contrast, the operative complaint

plainly alleges that members of the proposed class were misled by
Riddell’s misleading statements and purchased Revolution youth
helmets as a result of those statements.

Accepting the facts alleged in the operative complaint
as true and drawing all reasonable inferences in the plaintiff’s
favor, the court concludes that Midwestern has plausibly stated a
claim for unjust enrichment under West Virginia law.

Midwestern

alleges that a benefit was conferred on the defendant when it
knowingly collected a market premium for its youth helmets thanks
17

AT CHARLESTON
THOMAS PARKER,
Plaintiff,
to its misleading marketing claims.
v.

Under the circumstances,
Civil Action No. 15-14025

Midwestern has plausibly alleged that it would be inequitable for
THE DOW CHEMICAL COMPANY LONG TERM DISABILITY PROGRAM,
an Employee Welfare Benefits Plan,
Riddell to retain that benefit. While it remains to be seen
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON,
a Massachusetts Corporation, and
whether Midwestern can show that it would be inequitable or
DOES 1 THROUGH 10, inclusive,
unconscionable for Riddell to retain the payments it has received,
Defendants.
dismissal of the unjust enrichment claim at this stage would be
ORDER AND NOTICE
premature.

See Realmark Developments, Inc. v. Ranson, 208 W. Va.
Pursuant to L.R. Civ. P. 16.1, it is ORDERED that the
following dates are hereby fixed as the time by or on which
717, 721-22 (2000) (reversing summary judgment on unjust
certain events must occur:

01/28/2016
Motions under further P. 12(b), together on
enrichment claim to allow forF.R. Civ. factual development with
supporting briefs, memoranda, affidavits, or other
such inequitable or unconscionable for defendant to
whether it would be matter in support thereof. (All motions
unsupported by memoranda will be denied without
retain benefit prejudice pursuant to L.R. Civ. P. 7.1 (a)).
received).
02/08/2016

Last day for Rule 26(f) meeting.

02/15/2016

Last day to file Report of Parties= Planning
IV. Conclusion
Meeting. See L.R. Civ. P. 16.1.

02/22/2016
Scheduling stated, it is ORDERED that Riddell’s
For the reasons conference at 4:30 p.m. at the Robert C.
Byrd United States Courthouse in Charleston, before
the undersigned, is, denied.
motion to dismiss be, and herebyunless canceled. Lead counsel
directed to appear.
02/29/2016
Entry of scheduling order.
The Clerk is directed to transmit copies of this written
03/08/2016
Last day to serve F.R. Civ. P 26(a)(1) disclosures.
opinion and order to all counsel of record and any unrepresented
The Clerk is requested to transmit this Order and
parties.
Notice to all counsel of record and to any unrepresented
ENTER:
June 17, 2016
parties.
DATED:

January 5, 2016

John T. Copenhaver, Jr.
United States District Judge

18