Shields v. Fed'n Internationale De Natation

• Decision Date: 16 December 2019
• Docket Number: Case No. 18-cv-07393-JSC, Case No. 18-cv-07394-JSC
• Citation: Shields v. Fed'n Internationale De Natation, 419 F.Supp.3d 1188 (N.D. Cal. 2019)
• Court: U.S. District Court — Northern District of California
• Parties: Thomas A. SHIELDS, et al., Plaintiffs, v. FEDERATION INTERNATIONALE DE NATATION, Defendant. International Swimming League, Ltd., Plaintiff, v. Federation Internationale de Natation, Defendant.

419 F.Supp.3d 1188

Thomas A. SHIELDS, et al., Plaintiffs,

v.FEDERATION INTERNATIONALE DE NATATION, Defendant.

International Swimming League, Ltd., Plaintiff,

v.Federation Internationale de Natation, Defendant.

Case No. 18-cv-07393-JSC

Case No. 18-cv-07394-JSC

United States District Court, N.D. California.

Signed December 16, 2019

Neil A. Goteiner, Aviva Judith Gilbert, Carl Brandon Wisoff, Hilary Caryn Krase, Joshua William Malone, Farella Braun & Martel LLP, Eric B. Fastiff, Richard Martin Heimann, Valerie Denisse Comenencia Ortiz, Lieff Cabraser Heimann & Bernstein LLP, San Francisco, CA, Matthew Stephen Lee Cate, Ballard Spahr LLP, Washington, DC, for Plaintiffs.

Christopher S. Yates, Daniel Murray Wall, Aaron T. Chiu, Latham & Watkins LLP, San Francisco, CA, for Defendant.

ORDER RE: DEFENDANT'S MOTIONS TO DISMISS FOLLOWING SUPPLEMENTAL BRIEFING ON PERSONAL JURISDICTION

JACQUELINE SCOTT CORLEY, United States Magistrate Judge

Three world-class swimmers ("Class-Action Plaintiffs") bring a putative class action against the Federation Internationale de Natation("Defendant" or "FINA"), alleging federal antitrust violations and a state law tort claim arising out of FINA's control over international swimming competitions.(Dkt. No. 1(18-cv-07393).)¹International Swimming League, Ltd.("ISL") also sues FINA alleging the same claims arising out of the same conduct.²(Dkt. No. 1(18-cv-07394).)Now before the Court are Defendant's motions to dismiss both complaints pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6).(Dkt. Nos. 19(18-cv-07393) & 18 (18-cv-07394).)On June 4, 2019, the Court issued an order that deferred ruling on Defendant's motions pending jurisdictional discovery and supplemental briefing.(Dkt. No. 37(18-cv-07394).)³The parties have completed their discovery and submitted their supplemental briefing.(SeeDkt. Nos. 67 & 76.)The parties have also submitted several administrative motions to seal in conjunction with their supplemental briefing.(Dkt. Nos. 66; 74; 80.)After careful consideration of the parties' briefing and having had the benefit of oral argument on December 12, 2019, the Court DENIES Defendant's motions to dismiss and DENIES the parties' administrative motions to file under seal.

BACKGROUND

I.The Parties

A.Class Action

Thomas A. Shields is a professional swimmer and Olympic gold medalist who resides in Berkeley, California.(Dkt. No. 1 at ¶ 22(18-cv-07393).)Michael C. Andrew resides in Encitas, California, and "has been swimming professionally since 2013."(Id.at ¶ 23.)He has set multiple world records and won a gold medal "at the 2016 FINA Short Course World Championships."(Id. )Katinka Hosszu resides in Hungary, and "is a three-time Olympic gold medalist who has set or holds multiple world records."(Id.at ¶ 24.)She is also "[a] three-time FINA Swimmer of the Year."(Id. )

The Class-Action Plaintiffs bring their action on behalf of themselves and other "swimmers who comprise the input market of top-tier swimmers who have competed on the sport's highest stages or have otherwise performed at a high-enough level that they can earn invitations to premiere competitions and draw lucrative sponsorships."(Id.at ¶ 25.)

B. ISL

Plaintiff ISL⁴"is a corporation organized and existing under the laws of Switzerland," whose "primary goal is to promote swimming around the world by organizing and promoting competitions featuring an innovative team-based format at events around the world."(Dkt. No. 1 at ¶¶ 50-51(18-cv-07394).)To accomplish its goal, ISL "intends to create a worldwide, club-based swimming league and thereby expand the competitive and financial opportunities for the world's best swimmers."(Id.at ¶ 50.)ISL's plans for 2019 included holding "a 15-match, team-based series of meets featuring more than 300 top-tier swimmers."(Id.at ¶ 4.)

C. FINA

Defendant FINA "is an association organized and existing in accordance with the laws of Switzerland" that is recognized by the International Olympic Committee as the governing body for "Olympic swimming, diving, high diving, water polo, artistic swimming, masters and open-water swimming."(Id. at ¶¶ 22, 24, 27 (Dkt.No. 18-cv-07394).)It is one of "dozens" of international federations recognized by the International Olympic Committee that are charged with "administer[ing] their respective sports and establish[ing] and organiz[ing] the types and rules of competitions held at the Olympic Games."(Id.at ¶ 26.)Thus, FINA sets the "qualifying criteria" for swimmers to participate in the Olympics and "will recognize only those qualifying times that are met at FINA-approved qualifying events."(Id.at ¶ 27.)

FINA "comprises 209 member federations" that "are themselves national umbrella groups involving representatives of the various aquatic-sports disciplines."(Id.at ¶ 28.)These national federations can "delegate sub-group entities to manage the FINA relationship as it pertains to the disciplines."(Id. )The United States' member federation (United States Aquatic Sports, Inc.) has designated USA Swimming, Inc.("USA Swimming") as the " ‘national governing body’ of swimming" in the country.(Id. )The member federations "exist primarily, if not exclusively, to prepare and present swimmers for competition in the Olympic Games."(Id.at ¶ 87.)

"FINA and its 209 member federations are governed primarily by a 25-member Bureau.The Bureau's day-to-day power, in turn, is vested in an eight-member executive committee."(Id.at ¶ 30.)Member federations can sometimes appeal Bureau decisions and rule interpretations to the FINA General Congress, which is recognized under FINA's governing rules as "the highest authority of FINA."(Id. )The General Congress meets every two years and its voting members "comprise two delegates from each member federation."(Id.at ¶¶ 30-31.)

Outside of the Olympic Games, FINA "and other entities that FINA approves organize and promote international competitions featuring the world's top swimmers."(Id.at ¶ 102.)"FINA grants itself complete authority under its rules to ban a swimmer from participating in events that serve as the Olympic Games qualifying events for no reason other than the swimmer competed in a top-tier international swimming event that FINA did not itself organize or approve."(Id.at ¶ 111.)

II.Complaint Allegations⁵

A.Allegations Underlying Both Actions

The gravamen of the complaints is that FINA uses its control over Olympic aquatic sports to determine the terms of compensation and competition for international swimming events outside of the Olympic games and FINA's own competitions.In doing so, FINA engages in anticompetitive conduct "to maintain its grip on both its monopoly power in the market for top-tier international swimming competitions and its monopsony power in the market for the supply of top-tier swimmers."(Dkt. Nos. 1 at ¶ 11(18-cv-07393;18-cv-07394).)

From September 2017 through December 2017, ISL and FINA negotiated regarding ISL's plan to host an international swimming competition in 2018.(Dkt. No. 1 at ¶ 62(18-cv-07394).)⁶Those negotiations were unsuccessful.(Id. )Thus, in the spring of 2018, ISL turned to FINA's member federations and began direct "discussions with USA Swimming for that national governing body to host, manage, and organize the ISL event in December 2018."(Id.at ¶ 63.)ISL and USA Swimming considered "Las Vegas's Mandalay Bay Resort and Casino or the University of Southern California as potential venues."(Id.at ¶ 8.)"As a result of these negotiations, ISL began planning to host its event in Las Vegas" and "work[ing] to obtain the support of FINA's member federations."(Id.at ¶¶ 63, 65.)In May 2018, "ISL entered into a memorandum of understanding with ... the FINA-recognized ‘continental federation’ comprising the European national federations."(Id.at ¶ 65.)ISL then "presented its plans to representatives of the federations from the United States, Australia, United Kingdom, Brazil, France, Russia, and Ukraine."(Id. )

ISL's outreach to FINA's member federations drew a response from FINA Executive Director Cornel Marculescu, who sent a letter to all FINA members "on or about June 5, 2018," stating that ISL "is neither recognized by nor affiliated [with] FINA."(Id.at ¶ 66(internal quotation marks omitted).)Mr. Marculescu warned the member federations that "FINA would monitor the matter closely, ... and sanction anyone who violated FINA's rule on unauthorized relations."⁷(Id. )Mr. Marculescu closed the letter by "express[ing] his hope that all who received it would come away from his message with a clear understanding of FINA's competence and jurisdiction in respect to international competitions."(Id.(internal quotation marks omitted).)

Roughly a week after Mr. Marculescu's letter, USA Swimming sent ISL a letter dated June 13, 2018, "express[ing] its deep concern that a December 2018 event without FINA's direct blessing would put U.S. swimmers at risk—especially if FINA sees th[e] December event as a challenge."(Id.at ¶ 67(internal quotation marks omitted).)The letter stated that USA Swimming "could not help ISL organize any competition until it received assurance ... that FINA is on board with the concept of the ISL and approves of the concept."(Id.at ¶ 67(internal quotation marks omitted).)USA Swimming thus "pulled out of negotiations for hosting the December 2018 competition in either [Las Vegas or the University of Southern California], or anywhere else."(Id.at ¶ 8.)

ISL then "tried to pair with British Swimming to host the [December 2018] competition in London."(Id.at ¶ 9.)However, "within weeks, and in direct response to Mr. Marculescu's June 5 letter, British Swimming likewise distanced itself from ISL's planned December 2018 competition."(Id.at ¶ 68.)ISL and FINA resumed direct negotiations in mid-summer 2018 to discuss the December 2018 competition and how the two organizations could co-exist.(Id.at...