N. Am. Soccer League, LLC v. U.S. Soccer Fed'n, Inc., 17–CV–05495 (MKB)

• Decision Date: 04 November 2017
• Docket Number: 17–CV–05495 (MKB)
• Citation: 296 F.Supp.3d 442
• Parties: NORTH AMERICAN SOCCER LEAGUE, LLC, Plaintiff, v. UNITED STATES SOCCER FEDERATION, INC., Defendant.
• Court: U.S. District Court — Eastern District of New York

296 F.Supp.3d 442

NORTH AMERICAN SOCCER LEAGUE, LLC, Plaintiff,

v.UNITED STATES SOCCER FEDERATION, INC., Defendant.

17–CV–05495 (MKB)

United States District Court, E.D. New York.

Signed November 4, 2017

David G. Feher, Isabelle Louise Mercier–Dalphond, Mark Edward Rizik, Jr., Jeffrey L. Kessler, Winston & Strawn LLP, New York, NY, for Plaintiff.

Christopher S. Yates, Latham & Watkins LLP, San Francisco, CA, Lawrence Edward Buterman, Latham & Watkins LLP, New York, NY, Russell F. Sauer, Latham & Watkins LLP, Los Angeles, CA, Alan J. Devlin, Latham & Watkins LLP, Washington, DC, for Defendant.

MEMORANDUM & ORDER

MARGO K. BRODIE, United States District Judge:

Plaintiff North American Soccer League, LLC ("NASL" or "Plaintiff") filed the above-captioned action on September 19, 2017, alleging violations of Section 1 and Section 2 of the Sherman Antitrust Act. (Compl., Docket Entry No. 1.) On September 20, 2017, Plaintiff moved for a preliminary injunction, seeking a Division II designation for the duration of this litigation.¹ (Pl. Mot. for Prelim. Inj. ("Pl. Mot."), Docket Entry No. 3; Pl. Mem. in Supp. of Pl. Mot. ("Pl. Mem."), Docket Entry No. 3–1.) Defendant United States Soccer Federation, Inc. ("USSF" or "Defendant") opposed the motion on October 16, 2017, and Plaintiff replied on October 23, 2017. (Def. Opp'n to Pl. Mot. ("Def. Opp'n"), Docket Entry No. 27; Pl. Reply to Def. Opp'n to Pl. Mot. ("Pl. Reply"), Docket Entry No. 30.) The Court heard oral arguments on October 31, 2017.² Although the Court finds that Plaintiff has shown irreparable harm, that the balance of hardships tips in its favor, and that an injunction would not harm the public interest, because as set forth below, the Court finds that Plaintiff has not made a clear showing of entitlement to relief, the Court denies Plaintiff's motion for a preliminary injunction.

I. Background

Plaintiff NASL is a men's professional soccer league located in the United States and Canada.³ (Compl. ¶ 2.) NASL formed in 2009 when several teams broke away from the United Soccer Leagues, another men's professional league, due to differing visions. (Id. ¶ 77; Stefan Szymanski Decl. in Supp. of Pl. Mot. ("Szymanski Decl.") ¶ 76, Docket Entry No. 3–3.) At that time, the United Soccer Leagues consisted of two divisions, USL First and Second Divisions ("USL–1" and "USL–2" respectively). (Sunil K. Gulati Decl. in Supp. of Def. Opp'n to Pl. Mot. ("Gulati Decl.") ¶ 113, Docket Entry No. 26–1.) After the formation of the NASL, the remaining teams in the United Soccer Leagues later created the current existing United Soccer League Pro ("USL"). (Id. ) From its inception, NASL has been organized under a club-centric model with each individual team retaining ownership and decision-making power. (Compl. ¶¶ 9, 77.)

Defendant USSF is a non-profit, membership organization which serves as the governing body for soccer in the United States. (Id. ¶ 16; Pl. Mem. at 1.) USSF asserts that it derives its authority to govern professional soccer from Fédération Internationale de Football Association ("FIFA"), a private international soccer federation.⁴ (Compl. ¶¶ 16, 59.) USSF also serves as the national governing body for U.S. Olympic and amateur soccer under the Ted Stevens Olympic and Amateur Sports Act ("Stevens Act"). (Id. ¶ 59 n.3.) In both capacities, USSF's stated mission is to "make soccer, in all its forms, a preeminent sport in the United States and to continue the development of soccer at all recreational and competitive levels." (Steven R. Peterson Decl. in Supp. of Def. Opp'n to Pl. Mot. ("Peterson Decl.") ¶ 44, Docket Entry No. 26–6.) The USSF membership is divided primarily into four categories: (1) a Youth Council, representing the interests of youth soccer; (2) an Adult Council, representing the interests of amateur soccer; (3) a Professional Council, representing the interests of professional leagues that are members of USSF; and (4) an Athlete's Council, representing soccer athletes. (Gulati Decl. ¶ 33.) These four councils, along with a few other eligible voters, make up the National Council, the legislative body of USSF. (Id. ¶¶ 32–35.)

USSF adopts, amends and applies the Professional League Standards ("PLS"), a set of requirements for professional soccer leagues seeking Division I, II, or III designation in the United States. Similar to the structure of the National Collegiate Athletic Association ("NCAA"), Division I status is the most desirable. (See Pl. Mem. at 2.) Division I status signifies the highest level of competition and overall status, conferring several competitive and financial benefits, including better positioning in international competitions and higher-quality sponsorships. (Compl. ¶¶ 41, 62–63.) NASL asserts that USSF adopted and applied the PLS in a discriminatory manner as part of a conspiracy to entrench Major League Soccer, LLC ("MLS"), a men's soccer league with long-standing ties to Defendant, and USL as the sole Division I and II soccer leagues in the United States, respectively.⁵ (Id. ¶¶ 2, 4, 7, 23, 52, 122.)

a. Development of MLS and ties to USSF

Professional "football" or soccer has had a long, troubled history in the United States. While USSF itself was initially formed in 1913 in part in combination with the American Football Association, an organization "compromised principally of professional leagues and teams," professional soccer leagues in the United States have failed to maintain lasting success. (Gulati Decl. ¶¶ 48, 69.) Until the 1990s, there were numerous leagues and teams, with the original North American Soccer League ("Original NASL") being most prominent.⁶ (Id. ¶ 48; Compl. ¶ 70.) Formed in 1968, the Original NASL folded in 1984, leaving a void in top-tier professional soccer leagues in the United States. (Compl. ¶ 70; Gulati Decl. ¶ 48.)

In 1988, FIFA awarded USSF the right to host the 1994 FIFA World Cup in the United States. (Gulati Decl. ¶ 50.) In exchange, FIFA demanded that USSF "facilitate the development of a sustainable first division outdoor professional men's soccer team." (Id. ¶ 50; Compl. ¶¶ 71–72.) With this mandate, USSF eventually formed World Cup USA 94 ("USA 94"), a separate legal entity, which was tasked with establishing first division professional soccer in the United States. (Gulati ¶¶ 52–54.) After review of plans submitted by three groups, the USSF Board of Directors (the "Board") selected Major League Professional Soccer, Inc. ("MLPS"), an entity backed by Alan I. Rothenberg, the then-President of USSF, to develop the league. (Id. ¶¶ 54, 90; Compl. ¶¶ 71–74.) After the 1994 World Cup, MLPS was reorganized into MLS. (Gulati Decl. ¶ 58.) With the help of a five-million-dollar loan from the United States Soccer Foundation, an entity created to manage the assets generated from the 1994 World Cup, MLS began league play in 1996. (Id. ¶¶ 56–59, 65; Compl. ¶ 74.) Given soccer's lack of popularity in the United States, USSF prioritized "stability and the avoidance of consumer confusion" in helping MLS take hold. (Gulati Decl. ¶ 64.) Thus, USSF made a conscious decision "to not sanction any other league as a first division (Division I) men's professional outdoor league until MLS had finished its second full season in 1997—to give it a ‘runway’ of sorts." (Id. ¶ 64.) MLS began league play with ten teams in 1996 and has operated continuously as a Division I league. (Id. ¶ 65; Compl. ¶ 21.) In contrast to NASL, MLS began play under a single-entity structure, reserving ownership and management power in the league itself. (Compl. ¶ 75.)

MLS and USSF have also maintained a business relationship, most notably through Soccer United Marketing ("SUM"), the marketing affiliate for MLS. (Id. ¶¶ 22, 32; Gulati Decl. ¶ 227.) In 2004, after "negotiations that were conducted at arms-length, [and] were lengthy and occasionally testy," USSF granted SUM sponsorship and broadcast rights to the Men's and Women's National Team games over which it controls.⁷ (Gulati Decl. ¶ 229.) These rights were then "bundle[d]" with MLS' rights to obtain a much more lucrative sponsorship and broadcast deal than MLS and Defendant could have gained standing alone. (Id. ¶ 230.) SUM negotiated an eight-year, $720 million broadcasting agreement with ESPN in 2014 for USSF's and MLS' joint package to run through 2022. (Compl. ¶ 106.) In 2015, USSF extended its marketing relationship with SUM for another eight-years.⁸ (Gulati Decl. ¶ 231.)

b. History of PLS and governance structure of USSF

The PLS were first developed in 1995, a year prior to MLS' inaugural season.⁹ (Id. ¶¶ 74, 78.) "The Division I PLS were adopted in 1995 and the Division II and III PLS were adopted in 1996." (Id. ¶ 78.) The PLS were revised in 2008, 2010 (for only Division II) and in 2014. (Id. ¶ 78; Szymanski Decl. ¶ 63.) There were also proposed changes in 2015 that were never implemented due to objections by NASL. (Gulati Decl. ¶ 78.)

Since 2008, the Professional League Standard Task Force (the "Standard Task Force") has been responsible for reviewing and proposing amendments to the PLS. (Id. ¶ 79.) The Standard Task Force is comprised of individuals that USSF believes are "familiar with professional soccer," excluding Board members and others "then-associated with any professional leagues." (Id. ¶ 79.) The Standard Task Force's recommendations are first submitted to the "then-existing" professional leagues for review and comment. (Id. ¶ 80.) After reviewing the comments provided by the leagues, the Standard Task Force provides the Board with a final set of proposed amendments. (Id. ¶ 80.) The Board then reviews and votes on the proposals, but excludes from voting all members who have a "then-current relationship" with any professional leagues. (Id. ¶ 81.)

Since at least 2009, USSF has required professional leagues to apply annually for a divisional designation. (Id. ¶ 108.) As part of this process, the leagues must submit an "annual report," including "the status of compliance" with the PLS,...