Commentary

Legal primer explains past and (possible) future of soccer litigation

By Paul Kennedy
(@pkedit)

The lawsuit filed by U.S Soccer against U.S. Women's National Team Players Association in U.S. District Court in Chicago has made plenty of news, but it will be a short case.

The federation and players are arguing over two things: does a valid labor agreement exist and do the players have the right to strike? The case will be moot at the end of the year as the terms they negotiated in 2013 -- for playing on the national team, in the Olympics and in the NWSL -- only go through the 2016 season.

Soccer litigation, though, has dragged on for years. Fraser v. Major League Soccer -- the battle MLS players fought against the league in an unsuccessful bid to strike down the single-entity system -- lasted more than five years.

NASL v. NFL -- the old NASL's suit to strike down the NFL's rule that owners could not own teams in more than one league -- went almost six years. It went on so long that the NASL was almost dead when the case ended in its favor. The jury award: $1.

As Ted Philipakos, player agent and professor at New York University, notes in his book On Level Terms: 10 Legal Battles that Tested and Shaped Soccer in the Modern Era, the ultimate beneficiary of the NASL v. NFL decision was MLS.

It allowed Lamar Hunt, who was suing so he could retain his ownership interests in both the NASL (Dallas Tornado) and NFL (Kansas City Chiefs), to become a founding investor in MLS, along with Robert Kraft (owner of the New England Revolution and Patriots).

Legal cases make strange bedfellows, and a party to all three suits is Jeffrey Kessler. The longtime labor and anti-establishment attorney, perhaps best known for his suit against the NCAA, represented the NASL against the NFL, the MLS Players Association against MLS and now the WNTPA against U.S. Soccer. (Kessler also represents the current NASL, unhappy with proposed changes to U.S. Soccer's Division I sanctioning.)

Kessler's first two cases, it could be argued, were test cases that had nothing to do with soccer but used the sport in his long-standing fight against the NFL. The NFL's cross-ownership ban covered multiple sports; the MLS players' suit was funded by the NFL Players Association to attack the concept of the single entity it feared would spread to its sport.

USSF v. WNTPA, while at its core a straightforward case, represents the future for soccer litigation: the fight over the sport's rising power and growing revenues. The two battle grounds will be U.S. Soccer's power to control the American soccer market and MLS's single-entity status, in essence their monopoly control of the market.

Legal costs represent huge hurdles -- it has been suggested that the MLS Players Union's only chance for significant gains is through the courts but they'd require protracted litigation and appeals the players could never afford -- for those trying to take on U.S. Soccer (with reserves of $82 million) or MLS (backed by billionaire owners).

Philipakos' soccer case studies include the two key cases that upheld the power of U.S. Soccer and MLS -- ChampionsWorld v. USSF and Fraser v. MLS -- but his study of the cases shows they were not absolute victories.

ChampionsWorld involved the collapse of the summer international circuit operated by Charlie Stillitano in which creditors of the bankrupt ChampionsWorld claimed damages on the grounds that U.S. Soccer's power to sanction international matches violated various Federal laws and U.S. Soccer's "backbreaking" international games fees triggered its collapse.

Basically, U.S. Soccer argued that FIFA and the U.S. Olympic Committee gave it blanket authority over soccer in the United States. The District Court judge ruled that U.S. Soccer's authority it derived from the USOC was limited to amateur soccer and the operation of national teams, but any number of factors worked against the case presented by ChampionsWorld.

The court found ChampionsWorld had agreed to arbitrate any disputes with the FIFA Players' Status Committee, which ruled in favor of U.S. Soccer, and that ruling was affirmed by the Court of Arbitration for Sport. ChampionsWorld argued other legal theories -- fraudulent inducement, unconscionability -- but those claims were rejected on the basis that it knew what it was doing -- it was a "sophisticated player" -- and it was getting something for its money from U.S. Soccer -- that famous "contracts law" term, consideration.

(ChampionsWorld lasted six years in the courts, but the legal repercussion dragged on as MLS was back in court in 2014 -- this time in state court with MLS v. FIC -- arguing and winning its claim against its insurance carrier that its $6 million insurance policy covered it from the ChampionsWorld suit.)

In Fraser v. MLS, MLS players sought to challenge MLS's single entity, MLS founder Alan Rothenberg's legal structure that was designed, in part, to insulate MLS from antitrust suits. Anti-competitive conspiracy by definition involves more than one entity, and a single economic actor is technically incapable of conspiring with itself.

The U.S. Court of Appeals did not affirm MLS's single entity structure -- it termed MLS "a hybrid" but ruled that the "single-entity problem need not be answered definitively in this case" -- but the players' case collapsed because they'd never be able to prove essential elements of the case.

Philipakos says U.S. Soccer's initial sanctioning of MLS as the country's Division I league "was, at best, a bit awkward," but any argument that MLS's formation was anti-competitive was rejected because there was no existing market for Division I soccer. (The existing APSL didn't count.) And any claim that MLS monopolized the player market was rejected on the grounds that the player market is a worldwide market and MLS did not possess monopoly power.

Here's the important takeaway:

Philipakos argues that while MLS won its case in Fraser -- Fraser is Canadian Iain Fraser, for those wondering -- the league does remain vulnerable to another antitrust challenge, in light of the Court of Appeals rejection of single-entity status, as well as his view that "MLS clubs' diversity of interests has greatly expanded since Fraser." However, Philipakos makes clear that "MLS players still would have to find a way to demonstrate that MLS possesses market power."
3 comments about "Legal primer explains past and (possible) future of soccer litigation".
  1. Wooden Ships, February 11, 2016 at 1:12 p.m.

    Thanks Mr. Kennedy for an excellent recap of soccer and its court-legal history. I'm somewhat accomplished in duscussing games, player selections and so forth. My hats off to you for being more than just an occasional punching bag with subjects most of us can contribute. Thanks for what you do. Now that I'm reminded of my limitations in intellect, its after noon somewhere isn't it? Cheers sir!

  2. Footballer Forever, February 11, 2016 at 1:49 p.m.

    "the MLS players' suit was funded by the NFL Players Association to attack the concept of the single entity it feared would spread to its sport."

    I am skeptical about the eggball league overall and I doubt their only intention to fund MLSPA was to simply attack the single entity concept as suggested.

  3. James Madison, February 12, 2016 at 6:01 p.m.

    Hi Paul: One issue is whether a collective bargaining agreement exists. The second is its terms: Is it subject to early termination at the option of the players? If not, is there a no-strike clause? The latter provision, whether express or implied, would be unusual in the absence of a clause providing for arbitration of grievances, because historically the availability of the latter as a vehicle for addressing mid-term grievances has been regarded as the trade-off for giving up the right to strike mid-term.

Next story loading loading..

Discover Our Publications