Power Balance LLC, the maker of Power Balance bracelets worn by NBA players and celebrities, filed for bankruptcy protection in federal court in Santa Ana, CA. The filing is the result of numerous lawsuits that allege misleading advertising about the hologram-embedded rubber bracelets, Power Balance said in a statement.
The Laguna Niguel, CA-based company said in its statement, “Due to the unauthorized marketing tactics of an independent distributor in Australia and the proliferation of counterfeit operations of which we obviously have no control, Power Balance has become the target of number of class action lawsuits. Although we find the lawsuits to be baseless, they have cost the company millions of dollars in legal fees and continue to threaten the core business. The company has gone through extensive efforts to ensure that its marketing messages are supportable and compliant with local laws. However, lawsuits continue to surface against Power Balance at a tremendous cost to the organization.
“Power Balance cannot wait for these issues to resolve themselves or to go away. After many months of extensive legal analysis and exhaustive research, the company has determined that the only viable option at this time is to seek assistance available to us through bankruptcy laws and the protection of the courts.”
Power Balance spokesman Chris Thonis told the O.C. Register the company recently settled a lawsuit for $1 million and that reports that the settlement was for $57.4 million are incorrect.
Advertisements claim that the wristbands improved balance, strength and flexibility. The products are based on the idea of optimizing the body's natural energy flow, similar to concepts behind many holistic and Eastern philosophies. Power Balance, founded in 2007, sold its silicone bracelets for $30, which were worn by professional athletes including Kobe Bryant, Lamar Odom, David Beckham and Drew Brees, as well as numerous celebrities.
According to documents filed in federal court in Santa Ana, the company has assets of less than $10 million and debts of $10 million to $50 million. Among the biggest creditors are the Los Angeles Kings Hockey Club, owed $250,491; the Sacramento Kings, $100,000; Los Angeles Lakers guard Kobe Bryant, $400,000; pro skateboarder Ryan Sheckler, $25,000; and Los Angeles Clippers power forward Blake Griffin, $20,000, among others. The company showed a net loss of more than $9 million in the 10 months ending in October after posting a $11.7 million profit in 2010.
The Orange County Register noted that Australian regulators last year objected to the company's marketing claims, and by late 2010, Power Balance issued a statement on its Australian website (the link no longer works): “In our advertising we stated that Power Balance wristbands improved your strength, balance and flexibility. We admit that there is no credible scientific evidence that supports our claims and therefore we engaged in misleading conduct in breach of s52 of the Trade Practices Act 1974.”
That reportedly led to class-action lawsuits in the U.S.
But the company defended its product following the incident. Company President Keith Kato said in a statement released in January 2011, “Contrary to recent assertions in the Australian press, Power Balance has made no claims that our product is ineffective. This is simply untrue. The truth is that, apparently, some previous marketing claims and ads in Australia were not up to ACCC standards. Changes were voluntarily made immediately, approved and the issues were believed to have been resolved. We were obviously surprised to see the recent press coming out of Australia followed by a class action lawsuit here in the United States.”
He added at the time that “millions of people around the globe are wearing Power Balance products and are thrilled with the results,” including dozens of NBA basketball players.
Kato said, “Frankly, we know there will always be critics of new technologies, but our products are used by those with open minds who experience real results. Our company is absolutely committed to further evaluating the technology behind its products' performance so that we can continue to offer products that enhance people's lifestyle.”
In September 2011, Power Balance reportedly agreed to settle a class action lawsuit filed in federal court in Los Angeles. Under the terms of the settlement, anyone who bought a wristband would be eligible for a refund of the $30 purchase price, plus $5 for shipping, according to federal court documents.
