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 company plans to reorganize in bankruptcy proceedings.
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. Power Balance, founded in 2007, sold its silicone bracelets for $30, which were worn by professional athletes including Bryant, Lamar Odom, David Beckham and Drew Brees, according to the Register.
Power Balance Spokesman Chris Thonis told the Orange County Register that Power Balance recently settled one lawsuit for $1 million and that reports originating from the celebrity-gossip website TMZ that the settlement was for $57.4 million are incorrect.
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; and entities representing Los Angeles Lakers forward Kobe Bryant, $400,000; pro skateboarder Ryan Sheckler, $25,000; Clippers center 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 earning a $11.7 million profit last year.
The Orange County Register noted that Australian regulators last year objected to the company's 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.”
The company stood by its products in the United States, Hall said. Company President Keith Kato issued a statement at the time,: “While our previous claims in marketing ads are not up to Australia's ACCC standards we stand behind our products. The belief of thousands of consumers and athletes who wear our products are not wrong.
“A preliminary study recently conducted on the product's performance variables was commissioned and the findings have determined that the product does in fact provide a 'statistically significant' result on the wearer's performance. We are committed to further evaluating the product's performance parameters so that we can continue to provide products that enhance the wearer's lifestyle.”
In September, Power Balance 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.