Power Balance LLC, a Lake Forest company that made a big splash linking its performance bracelets to professional athletes, has filed for protection in federal bankruptcy court in Santa Ana.
The filing is the result of numerous lawsuits that allege misleading advertising about the hologram-embedded rubber bracelets and the company will continue to operate during reorganization, Power Balance said in a prepared statement.
Spokesman Chris Thonis said Power Balance recently settled one lawsuit for $1 million and that reports seemingly originating with TMZ that the settlement was for $57.4 million are incorrect.
The company, incorporated in Delaware, has assets of less than $10 million and debts of $10 million to $50 million, according to court filings. Among the biggest creditors are the Los Angeles Kings Hockey Club, $250,491; Sacramento Kings basketball team, $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.
In a prepared statement released Tuesday the company said:
“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.”
Troy and Josh Rodarmel founded Power Balance in 2007. They told Register health reporter Courtney Perkes in 2010 that the bracelets, which sell for $30, are based on an Eastern philosophy to allow users to achieve their best. “It absolutely is never to be a substitute for hard work,” Rodarmel said. “It’s about making you the best you can be.”
Register sports columnist Marcia Smith reported that the bracelets were the hottest fashion accessory for such world-class athletes as Bryant and Lamar Odom of the Lakers, David Beckham of the Los Angeles Galaxy soccer team; and Super Bowl MVP Drew Brees.
In January, Register reporter Landon Hall said that Australian regulators 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 on Businesswire: “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.”
