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 The court disagreed, because that’s not how allegations in superseded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
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. 

from Blogger

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