Relevant Sports, LLC v. U.S. Soccer Fed’n., Inc.: If You Don’t Succeed at First, Replead
(What follows is a story from the archives of Sports Litigation Alert, the nation’s leading sports law periodical.)
By Jeff Birren, Senior Writer
Relevant Sports, LLC. (“Relevant”) provides advertising and marketing services and is owned by Miami Dolphins owner Stephen Ross. Its website proclaims that it is “The Premier Soccer Events and Media Company in North America and Asia.” To date, Relevant has not received sanction from the United States Soccer Federation, Inc. (USSF”) to promote official games in the United States involving teams from other continents, as required by the Federation International de Football Association (“FIFA”). Stymied by international soccer’s rules, Relevant Sports lashed out at USSF with litigation.
FIFA governs the world of international soccer. Immediately under FIFA are six regional confederations that oversee soccer at the continental level. The Confederation of North, Central and Caribbean Association Football (“CONCACAF”) is the confederation for North America. Below the confederations are over 200 national associations and each of those is authorized to represent FIFA as the governing body at their national level. In the United States, that organization is USSF, and it exercises authority granted to it by Congress in 36 U.S.C. 220501 et seq, (Relevant Sports, LLC v. USSF, S.D.N.Y. Case No. 19-CV-8359 (VEC) (7-20-20) “Relevant Sports” at 3).
USSF has the authority to sanction “official games” that “count towards the competing clubs’ official league or tournament records” or “friendly games” that are not part of a regular season or official tournament. It is a “violation of FIFA statutes for a soccer club to play” in the U.S. without USSF’s sanction. Potential promoters must obtain multiple approvals to put on such games, including sanctions from USSF, the teams’ national association, the teams’ regional association and the host country’s regional association and some games even require FIFA’s approval (Id., FN. 1). Players who participate in unauthorized games may be banned from FIFA events, including the World Cup.
Promoters seeking official sanction must do so through a FIFA licensed match agent, a “natural person” who “agrees to FIFA’s Match Agent Regulations” (Id.). Relevant has used Charles Stillitano and through Stillitano, it “has organized and promoted numerous friendly games” in the U.S. (Id. at 4). In 2018 Relevant sought to promote an official league game involving Spanish teams FC Barcelona and Girona. FIFA’s president “expressed doubt whether FIFA would permit” such a game outside of the “teams’ home territory.” Consequently, the Spanish national association, CONCACAF and USSF “sought guidance from FIFA whether the game could occur” in the U.S. rather than Spain. FIFA said no, consistent with its rules that require official games to take place in the league’s home territory absent “exceptional circumstances” (Id.). Failure to comply with FIFA directives “may result in expulsion or discipline” and Barcelona withdrew from the proposed match.
Relevant then submitted “a sanctioning application to USSF, seeking” its approval to host an official game in Miami involving two clubs from Ecuador. The application had been approved by the Ecuadorian national association and the clubs’ league. USSF denied the application because such a match would “violate the FIFA directive prohibiting the staging” of official games outside of the clubs’ home territory (Id.). Relevant’s next stop was court.
The Litigation Games Begin
Relevant first sued USSF in New York State Court on April 22, 2019 (Relevant Sports LLC v. USSF, N. Y. Sup. Court, NYSCEF Index # 15404/2019, Verified Petition, Doc. #1). It sought an order “annulling and vacating the Respondents’ denial, or failure to grant approval;” have the court declare that the denial of Relevant’s application was “made in violation of lawful procedure and affected by errors of law, as arbitrary and capricious and an abuse of discretion; and Directing Respondents to sanction the Match, because Relevant has met all requirements for such sanction, and USSF is failing to perform a duty enjoined upon them by law” (Id. at 14). Relevant’s motion to dismiss without prejudice was granted later that year, and USSF’s cross motions to have it dismissed with prejudice and for costs and fees, and for sanctions were both denied (Id., Doc. #76 (12-5-19).
Relevant changed attorneys and filed an antitrust case in September 2019 (Relevant Sports, Doc. #2 (9-9-19)). This lawsuit was filed in New York Federal Court. The new case alleged that defendant USSF’s denial of the application “reflects an anticompetitive agreement with FIFA to limit the output” of official games in the U.S. by refusing to sanction such games outside of the clubs’ home territory. It claimed that USSF “entered into an anticompetitive agreement with FIFA and ‘horizontally competing’ regional confederations and national associations to boycott professional leagues, clubs and players” who participate in such games “without USSF sanction” (Id.). It further alleged that USSF “unlawfully exercises its sanctioning authority to enhance the competitive market position of USSF’s economic partner, Soccer United Marketing” (Id. at 4/5). Count 1 was a tort claim for interference with prospective relationships (Id at 5).
USSF responded by filing a motion to compel arbitration or in the alternative, to dismiss (Relevant Sports Doc. #33 (11-8-19)). The motion to dismiss was based on the plaintiff’s “prior covenant not to sue, that FIFA is an indispensable party” and for failure to state an antitrust claim (Relevant Sports at 5). Relevant Sports opposed the motion and USSF replied (Relevant Sports Docs. #35 & # 39). The hearing was by conference call. The Court began its analysis with the motion to compel arbitration.
The Motion to Compel Arbitration
USSF had moved to compel arbitration based on the “FIFA Match Agent Regulations, which require that any ‘dispute between a match agent and a national association’ must be submitted to the FIFA Players’ Status Committee for consideration and resolution” (Relevant at 5). Relevant resisted the motion on two separate grounds. First, it had never signed such an agreement. That was done solely by its match agent, Stillitano. It also asserted that FIFA lacked jurisdiction to hear its antitrust claim. The Court noted that the Federal Arbitration Act states that a written arbitration agreement “shall be valid, irrevocable, and enforceable, save upon grounds that exist at law or in equity for the revocation of any contract” (Id.). Any doubts should be resolved in favor of arbitration.
Relevant Sports claimed that it only “indirectly benefits” from Stillitano’s endeavors but the Court found that argument “unpersuasive.” It “can only stage matches, and reap the resulting financial rewards, through Stillitano.” Furthermore, “this precise issue was analyzed and decided in ChampionsWorld, LLC v. U.S. Soccer Fed’n, Inc., 487 F. Supp. 2d 980, 987 (N.D. Ill, 2007)” (Id at 5). In that case Stillitano was the match agent for ChampionsWorld and consequently it was “bound” by the match agent regulations and “its arbitration clause” (Id. at 6).
The Court also relied on ChampionsWorld in evaluating the motion as to the antitrust claim. In ChampionsWorld, FIFA’s legal director “clarified” that FIFIA was “not in a position to intervene” on the antitrust claim because such “claims were not within the categories of disputes that its regulations allowed its deciding bodies to hear” (Id.). The Court therefore denied the motion to compel arbitration of that claim, citing cases that denied arbitration motions “where the arbitral forum upon which the parties agreed is unavailable to arbitrate the dispute” (Id.).
The tortious interference claim asserted that USSF “ignored, delayed, and/or ultimately rejected all of Relevant’s attempts to obtain a USSF sanction” and this interfered with its preexisting business relationships. This claim “plainly constitutes a dispute between a match agent and a national association and is therefore subject to mandatory arbitration” (Id. at 7).
The Motion to Dismiss the Antitrust Claim
To survive such a motion, the claim must be “plausible on its face” and a court could consider anything in the complaint, attached to it or statements and documents incorporated in it by reference. For a Sherman Act Section 1 claim a plaintiff must allege direct or circumstantial evidence that reasonably proves that the defendant and others had a “conscious commitment to a common scheme designed to achieve an unlawful purpose.” The crucial question is whether there was such an agreement or merely independent action (Id.). Furthermore, if there is such an agreement, the next question is whether the alleged restraint is “unreasonable.” The Court adopted the Rule of Reason test rather than the stricter per seapproach (Id. at 8). The Rule of Reason “requires the plaintiff to ‘identify the relevant market affected by the challenged conduct and allege an actual adverse effect on competition’” in that market (Id.).
The Court determined that Relevant failed to allege a vertical agreement between the USSF and FIFA. USSF admitted that it had complied with FIFA’s directive, but that was “insufficient to constitute direct evidence of an unlawful agreement” (Id.). Relevant “alleges no facts to support the inference that in adhering to the FIFA directive, USSF actually entered into an agreement with FIFA to restrict output” (Id. at 9). The “repeated characterizations” of USSF’s “unilateral decision to comply with the FIFA directive as an anticompetitive agreement … are conclusory” (Id.).
USSF’s “adherence to the FIFA policy may be ‘consistent’ with a vertical agreement” but Relevant “must plead facts ‘to suggest than an agreement was made.’” Its “reliance on USSF’s unilateral compliance … falls short” as the Supreme Court has stated that a party “generally has a right to deal, or refuse to deal, with whomever it likes, as long as it does so independently” (Monsanto Co. v. Spray-Rite Serv. Corp. 465 U.S. 752, 761 (1984). Relevant “failed to allege an unlawful vertical agreement between USSF and FIFA sufficient to support an antitrust violation” (Id.). The Court then turned to the other antitrust theory.
Relevant alleged a conspiracy between the “horizontally competing FIFA affiliated confederations, national associations, leagues and teams” that adhered to and enforced FIFA’s directive to boycott those that “participate in unsanctioned games in the United States” (Id. at 10). The Court was “not convinced that USSF” and the other mentioned entities “are, in fact competitors; the complaint summarily states that ‘[e]ach Confederation and National Association is a separate economic actor with distinct economic interests’… but does not actually allege that they are competitors” (Id.). That was not all.
More “significantly, the complaint is devoid of factual allegations to support an inference that Defendant entered into an agreement” with any other entity “to do anything, including to comply with or enforce the FIFA Policy. For example, the complaint makes no attempt to identify with which, if any, of the six regional confederations, over two hundred national associations, and countless leagues and teams Defendant allegedly conspired” (Id.). Instead, it “repeatedly refers simply to the alleged conspiracy” but such “conclusory statements are insufficient to allege the existence of a horizontal agreement” (Id. at 10/11).
Relevant’s “suggestion” that the other entities’ “admitted compliance with the FIFA directive somehow ‘culminates in the plausible allegation’’’ that they were involved in “‘concerted action and agreement to restrict entry into, and limit output of, the relevant market for international soccer events in the U.S.’ … is wholly unsupported and unavailing.” The mere repeated assertion of such a horizontal conspiracy “is a legal conclusion that the Court does not accept as true on a motion to dismiss” (Id. at 11). The Court was not done.
Furthermore, “even assuming that USSF does directly compete with the FIFA-affiliated” entities “(which is far from intuitively obvious) and assuming that each of these organizations similarly withholds a sanction for proposed international games in the United States in compliance with the FIFA directive, in the absence of any factual allegations supporting an inference of any actual agreement to restrict output, such conduct does not violate the Sherman Act.” Relevant had not alleged “facts to suggest that USSF ‘combined forces’ with regional confederations and national associations or that they had a ‘conscious commitment to a common scheme designed to achieve an unlawful directive’” (Id.).
The Court’s Conclusion
The Court reaffirmed that it had granted the motion to compel arbitration of the interference claim and that “litigation regarding Count II is stayed in the meantime. The parties must provide joint quarterly updates on the status of the arbitration proceeding” and the first update “is due by November 1, 2020; thereafter, reports are due every three (3) months of the first business day of the applicable month” (Id. at 11/12).
The motion to dismiss the antitrust claim was granted “without prejudice.” It gave Relevant until September 1, 2020 to move for leave to amend and if it sought an injunction, it “must allege facts sufficient to support the exercise of personal jurisdiction over FIFA. Alternatively, Plaintiff may choose to join FIFA to this action” (Id. at 12).
September Was Busy
Relevant filed its motion for leave to file an amended complaint against USSF and FIFA on September 1, 2020 (Relevant Sports, Doc. #51). A previously sealed letter from the Department of Justice in March 2020 was attached to the amended complaint that stated that its antitrust division had informed both USSF and FIFA that their rule prohibiting official games in the U.S. likely violated the antitrust laws (www.bakerlaw.com/alerts/doj-antitrust-takes-a-shot-at-fifa). USSF did not oppose Relevant’s motion for leave to amend (Doc. #54) and the Court gave Relevant until 9-15-20 to file its amended complaint. It did so (Doc. # 57). The Court also gave USSF, and FIFA (after it is served), sixty days to respond to the amended complaint (Doc. #56). After Relevant serves its antitrust case on FIFA the real fireworks may begin.
The case presents the question of the extent to which U.S. law can or should govern international sports. If the Olympics or a World Cup game was played in countries that insist that women in public wear a burka or niqab, can women competitors be required to compete in that gear? Soccer is growing in the U.S. but it has a long way to go to catch up to its popularity in other countries so it may seem strange to FIFA that U.S. lawyers seem to think that they should be able to use U.S. courts to overrule FIFA’s rules. In the meantime, Relevant’s lawyers received a lesson in pleading a Section 1 case, and USSF paid its lawyers to help Relevant possibly get past summary judgment by pointing out the faults in the complaint when it could be corrected. Law is a funny thing.
Jeff Birren is the former general counsel of the Oakland Raiders, an adjunct sports law professor, and senior writer at Hackney Publications.