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Daniels v. Fanduel, Inc.

United States District Court, S.D. Indiana, Indianapolis Division

September 29, 2017

AKEEM DANIELS, CAMERON STINGILY, and NICHOLAS STONER, Plaintiffs,
v.
FANDUEL, INC., and DRAFTKINGS, INC., Defendants.

          ENTRY ON DEFENDANTS' MOTIONS TO DISMISS AMENDED COMPLAINT

          TANYA WALTON PRATT, JUDGE

         This matter is before the Court on the Defendants' Motions to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6). (Filing No. 26; Filing No. 28.) Also before the Court is Plaintiffs Motion for Leave to file a Surreply. (Filing No. 61.) The Plaintiffs, Akeem Daniels, Cameron Stingily, and Nicholas Stoner (collectively, “Plaintiffs”) are individuals who played football at the collegiate level. They have filed suit against Defendants FanDuel, Inc. (“FanDuel”) and DraftKings, Inc. (“DraftKings”) (collectively, “Defendants”), companies that run fantasy sports websites and mobile apps. Plaintiffs allege that FanDuel and DraftKings used their names and likenesses in operating and promoting online fantasy sports contests without Plaintiffs' consent, and that doing so was a violation of their right of publicity under Indiana law. Defendants argue that Plaintiffs have not stated a claim upon which relief can be granted, because a series of statutory exceptions, the First Amendment to the United States Constitution, and federal copyright law all shield Defendants from liability under Indiana's right-of-publicity statute. For the reasons that follow, the Court grants the Defendants' Motions to Dismiss and denies as moot, the Plaintiffs Motion for Leave to file a Surreply.

         I. BACKGROUND

         The following facts are not necessarily objectively true. But as required when reviewing a motion to dismiss, the Court accepts as true all factual allegations in the Amended Complaint and draws all reasonable inferences in favor of Plaintiffs as the nonmoving party. See Bielanski v. County of Kane, 550 F.3d 632, 633 (7th Cir. 2008).

         Defendants run daily fantasy sports companies, operated via websites and mobile platforms. (Filing No. 17 at 4.) In these daily fantasy sports games, a customer pays Defendants an entry fee, and in exchange receives virtual currency. (Filing No. 17 at 4.) To create the fantasy competition, Defendants assemble a group of select collegiate players to appear on a list of available athletes, and they assign each player a fictitious “salary.” (Filing No. 17 at 7.) Using his virtual currency, a customer can then purchase the services of individual athletes to complete his team roster for each fantasy contest, subject to a “salary cap” assigned to each customer. (Filing No. 17 at 7.) Defendants have developed systems by which certain numbers of points are awarded for selected statistically tracked athletic achievements. (Filing No. 17 at 4.) Based on the athletes' real-life performances in sporting events, each athlete on the fantasy team scores a certain number of points in each contest. (Filing No. 17 at 4.) For example, an athlete may receive points for scoring a touchdown in football or making a three-point shot in basketball. (Filing No. 17 at 4.) Those points are then aggregated, and a customer is eligible to win cash prizes if his fantasy team's performance exceeds the performance of other customers' teams. (Filing No. 17 at 4.)

         Plaintiffs are individuals who played football at the collegiate level for institutions governed by the constitution and bylaws of the National Collegiate Athletic Association (“NCAA”). (Filing No. 17 at 2-3; Filing No. 17 at 5-6.) The three named Plaintiffs were featured on Defendants' sites. (Filing No. 17 at 11-23.) Their names appeared on the roster of available players on at least one occasion. (Filing No. 17 at 11-23.) They were each assigned fictitious salaries during the weeks that they were featured as available athletes. (Filing No. 17 at 11-23.) Commentary regarding Plaintiffs' likely performance, as compared to their assigned salaries (their “value”), also appeared on the sites. (Filing No. 17 at 11-23.)

         It is estimated that the daily fantasy sports industry generated roughly $3.0 billion in customer entry fees in 2015. (Filing No. 17 at 1.) Defendants use sophisticated marketing campaigns to attract users to their websites, and they use athletes' names and likenesses in that marketing. (Filing No. 17 at 16; Filing No. 17 at 23.) Numerous media outlets produce weekly fantasy sports-related broadcasts, offering strategy and advice for success in fantasy competition. (Filing No. 17 at 25.)

         Plaintiffs have filed an Amended Complaint in this Court, alleging that Defendants violated Plaintiffs' rights of publicity under Indiana Code Section 32-36-1-1 et seq. (Filing No. 17.) Defendants have each filed Motions to Dismiss pursuant to Fed.R.Civ.P. 12(b)(6), arguing that Plaintiffs have failed to state a claim upon which relief may be granted. (Filing No. 26; Filing No. 28.) The motions are ripe for the Courts consideration.

         II. LEGAL STANDARD

         Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal if the complaint fails to set forth a claim upon which relief can be granted. “The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide the merits.” Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990). Accordingly, when analyzing a Rule 12(b)(6) motion to dismiss, a court construes the complaint in the light most favorable to the plaintiff, accepts all factual allegations as true, and draws all reasonable inferences in favor of the plaintiff. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008).

         At a minimum, the complaint must give the defendant fair notice of what the claim is and the grounds upon which it rests; and the factual allegations must raise a right to relief above the speculative level. See Bissessur v. Ind. Univ. Bd. of Trs., 581 F.3d 599, 602-03 (7th Cir. 2009); Tamayo, 526 F.3d at 1081, 1083. While a complaint need not include detailed factual allegations, a plaintiff has the obligation to provide the factual grounds supporting his entitlement to relief; and neither bare legal conclusions nor a formulaic recitation of the elements of a cause of action will suffice in meeting this obligation. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“the pleading standard Rule 8 . . . demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation” and “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice”).

         Although this does not require heightened fact-pleading, it does require the complaint to contain enough facts to state a claim to relief that is plausible on its face. Twombly, 550 U.S. at 570; Tamayo, 526 F.3d at 1083 (“[a] plaintiff still must provide only enough detail to give the defendant fair notice of what the claim is and the grounds upon which it rests, and, through his allegations, show that it is plausible rather than merely speculative, that he is entitled to relief”).

         III. DISCUSSION

         Indiana Code Section 32-36-1-8(a) provides that a “person may not use an aspect of a personality's right of publicity for a commercial purpose during the personality's lifetime or for one hundred (100) years after the date of the personality's death without having obtained previous written consent from a person specified in section 17 of this chapter.” Ind. Code § 32-36-1-8(a). The statute defines a person's right of publicity as “a personality's property interest in the personality's: (1) name; (2) voice; (3) signature; (4) photograph; (5) image; (6) likeness; (7) distinctive appearance; (8) gestures; or (9) mannerisms.” Ind. Code § 32-36-1-7. Plaintiffs allege that Defendants have violated Ind. Code § 32-36-1-8(a) by featuring Plaintiffs on their fantasy sports sites.

         Defendants have moved for dismissal, raising three arguments as to why Plaintiffs' claims cannot succeed: (1) that four statutory exceptions remove the subject materials from the coverage of the right-of-publicity statute; (2) that Defendants' First Amendment rights trump any publicity rights that Plaintiffs may have; and (3) that Plaintiffs' claims are preempted by federal copyright law.

         A. Statutory Exceptions

         Indiana Code Section 32-36-1-1 designates the applicability of the chapter regarding the right of privacy under Indiana law. Subsection (c) specifies that the chapter, and therefore Indiana Code Section 32-36-1-8(a), does not apply to, inter alia, the following:

1. The use of a personality's name, voice, signature, photograph, image, likeness, distinctive appearance, gestures, or mannerisms in material that has political or newsworthy value. Ind. Code § 32-36-1-1(c)(1)(B) (emphasis added).
2. The use of a personality's name, voice, signature, photograph, image, likeness, distinctive appearance, gestures, or mannerisms in connection with the broadcast or reporting of an event or a topic of general or public interest. Ind. Code § 32-36-1-1(c)(3) (emphasis added).
3. The use of a personality's name, voice, signature, photograph, image, likeness, distinctive appearance, gestures, or mannerisms in literary works. Ind. Code. § 32-36-1-1(c)(1)(A) (emphasis added).
4. The use of a personality's name to truthfully identify the personality as the performer of a recorded performance. Ind. Code § 32-36-1-1(c)(2)(B) (emphasis added).

         Defendants argue that these enumerated statutory exceptions remove their conduct from the coverage of the right of publicity statute. (Filing No. 29 at 21-22; Filing No. 27 at 5-6.) Defendants argue that if the Court concludes that even one of those exceptions applies, Plaintiffs' claims fail as a matter of law. Plaintiffs respond that none of the statutory exceptions apply. (Filing No. 44 at 28-40.) Plaintiffs further argue that even if any of the exceptions would otherwise apply, they do not in this instance because Defendants were engaged in illegal gambling activities. (Filing No. 44 at 20-28.) Because this issue is dispositive, the Court begins its analysis by addressing the exceptions.

         1. Newsworthiness Exception

         Indiana Code § 32-36-1-1(c)(1)(B) specifies that the right to publicity does not apply to “[t]he use of a personality's name, voice, signature, photograph, image, likeness, distinctive appearance, gestures, or mannerisms in material that has political or newsworthy value.”

         a. Definition of “Newsworthy”

         Defendants contend that the statutory exception for “material that has political or newsworthy value” removes their conduct from the ambit of the right-of-publicity statute. (Filing No. 27 at 10; Filing No. 29 at 22.) They assert that under Indiana law, “newsworthiness” is broadly construed and includes the material that is disseminated via their websites. (Filing No. 27 at 10; Filing No. 29 at 23.) Defendants further argue that courts have concluded that entertainment falls within the newsworthiness exception, which includes the conduct at issue here. (Filing No. 27 at 10-12; Filing No. 29 at 23-24.)

         Plaintiffs respond that the newsworthiness exception does not apply to shield Defendants' conduct, because that exception applies only to non-commercial speech. (Filing No. 44 at 29-44.) They also contend that case law supports applying the newsworthiness exception to news or media outlets, but not to entities such as Defendants, who are not “reporting” information. (Filing No. 44 at 30-31.) In addition, they argue that Defendants made representations that were distinct from the dissemination of news and statistics by assigning Plaintiffs fictitious salaries, and that those representations would not be encompassed by the exception. (Filing No. 44 at 32.)

         On reply, Defendants argue that the exceptions enumerated in Indiana Code § 32-36-1-1 must apply to commercial speech, because the right-of-publicity statute explicitly applies only to commercial speech. (Filing No. 51 at 8; Filing No. 52 at 12-13.) In other words, non-commercial speech is already immune from treatment by the statute, so exceptions applying only to noncommercial speech would be superfluous and unnecessary. (Filing No. 51 at 8; Filing No. 52 at 13.)

         The Court begins by underscoring that, by its terms, Indiana Code § 32-36-1-8(a) provides that a person may not, without consent, “use an aspect of a personality's right of publicity for a commercial purpose during the personality's lifetime or for one hundred (100) years after the date of the personality's death…” Ind. Code § 32-36-1-8(a) (emphasis added). The Court agrees with Defendants that, by the statute's own plain and explicit language, § 32-36-1-8(a) applies to the use of a person's right of publicity when that use has a commercial purpose. Therefore, the universe of prohibited conduct is, from the outset, limited to material that is used for a commercial purpose. The enumerated exceptions then carve out certain categories of uses that will not trigger liability. Because the statue only applies to uses with a commercial purpose, the exceptions must apply to uses that are commercial in nature.

         The first key issue, then, is to determine the contours of the term “newsworthy” under Indiana law. Notably, neither the parties nor the Court uncovered any cases addressing the newsworthiness exception under Indiana Code § 32-36-1-1(c)(1)(B). Sitting in diversity, the court's role “is not to create state law, but rather to follow the principles enunciated by the state courts and to predict what the Indiana Supreme Court would hold in such a situation.” Miller v. Pardner's, Inc., 893 F.2d 932, 934 (7th Cir. 1990). This Court must predict how the Indiana Supreme Court “would decide the case, and decide it the same way.” MindGames, Inc. v. W. Publ'g Co., 218 F.3d 652, 655 (7th Cir. 2000) (citations omitted). Because neither the Indiana Supreme Court nor the Indiana Court of Appeals have weighed in on this issue, this Court must base its decision on whatever authority is available. A determination of what is newsworthy may be made as a matter of law. See Dillinger, LLC v. Electronic Arts, Inc., 795 F.Supp.2d 829, 835 (S.D. Ind. 2011) (determining whether “literary works” exception applied at the motion for judgment on the pleadings stage).

         Defendants argue that under Indiana law, the term “newsworthy” is “broadly construed.” (Filing No. 29 at 22.) They contend that the definition articulated by this Court in Time Inc. v. Sand Creek Partners, L.P.,825 F.Supp. 210 (S.D. Ind. 1993) illustrates ...


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