Lawsuit: NASL declares it has 'team agreements' with eight new teams
- by Paul Kennedy @pkedit, Oct 24, 2017
The suit stems from the decision of U.S. Soccer's board of directors on Sept. 1 to not sanction the NASL as a Division 2 in 2018 after granting it provisional status in 2017.
Legal test. To succeed on a motion for a preliminary injunction -- the hearing is scheduled before U.S. District Court Judge Margo K. Brodie on Oct. 31 in Brooklyn -- the NASL must show four things:
-- The NASL will suffer "irreparable injury" if it isn't allowed to continue as a Division 2 league;
-- The NASL is likely to "succeed on the merits" of its case for a permanent injunction eliminating divisional sanctioning;
-- The NASL will suffer "more hardships" than U.S. Soccer if the injunction isn't granted;
-- It's in the "public interest" that the NASL doesn't fold.
Division 2 or bust. The NASL's response includes declarations from New York Cosmos owner Rocco Commisso, the chairman of the NASL's board of governors, and NASL interim commissioner Rishi Sehgal.
Their principal argument is that NASL teams won't want to continue if they aren't allowed to play as a Division 2 league, that revenues (ticket sales,
sponsorships) will suffer and players will be less inclined to play in the league if they have to play as a Division 3 league.
NASL v.
USSF: USSF's response
Commisso says in his
declaration that NASL business models were "premised on the NASL being -- at a minimum -- a Division 2 league but seeking to compete at the top tier of professional soccer as part of Division 1."
Division 3 would be 'deathblow.' Sehgal says becoming a Division 3 league like the USL was for six years wasn't an option as
"Division 3 sanctioning would likely amount to a deathblow to the NASL."
Commisso's declaration includes sealed team agreements from six teams -- believed to be currently amateur NPSL
teams, including popular Detroit City FC -- to join the NASL in 2018 and two more for 2019 on the condition that the league has Division 2 sanctioning.
Sehgal says he expects the NASL
will have "considerable success" in 2018 if it remains a Division 2 league. He says the six new teams "would bring the NASL 2018 club membership to 13."
In the NASL's application to U.S.
Soccer for Division 2 sanctioning, it listed eight teams: six of its eight current teams -- all but the San Francisco Deltas and FC Edmonton -- plus new teams in Orange County and San Diego. That
would mean one of the original eight teams it planned on having for 2018 won't be around.
That team is believed to be North Carolina FC though there has nothing from the NASL about the
future of Puerto Rico FC in the aftermath of Hurricane Maria, which has forced the club to finish the 2017 season on the road.
In an email to Commisso and Sehgal on Oct. 6, U.S. Soccer
president Sunil Gulati offered to go back to the board of directors if the NASL could show, among other things, it had eight "economically viable and separately-owned teams."
That
latter condition is the catch: What is not known because the documents are sealed to the public is who will own the teams or if they meet U.S. Soccer's Division 2 standards, but Commisso and other
current NASL owners are believed to be planning on funding most of if not all of the new teams.
SUM offer. Commisso's
declaration includes an email from New York City FC president Jon Patricof in which he presented as offer from SUM, the firm with ties to MLS and U.S. Soccer, to buy the Cosmos, then on the
brink of extinction, for $5 million.
To "avoid consumer confusion in the marketplace," the proposal required the Cosmos and its owners not own or operate a soccer team in the New York area under any name for 10
years.
Commisso's contention is that the offer to buy the Cosmos was intended to "eliminate the organization as a competitor." (U.S. Soccer will probably try to argue that the Cosmos were
a "failing company" and therefore was not a competitive threat.)
SUM statement issued Tuesday:
"Yesterday, in litigation that NASL and Rocco Commisso (the new owner of
NASL club the NY Cosmos) are pursuing against the United States Soccer Federation, Mr. Commisso placed in the public record a bid that Soccer United Marketing (SUM) made for certain intellectual
property and related assets of the NY Cosmos in 2016, before his purchase of the team.
"The facts behind that bid are that SUM, the marketing, licensing and commercial affiliate of
Major League Soccer, was informed that the Cosmos were going out of business and were trying to sell its commercial assets for as much money as possible to pay its creditors. Those assets included the
Cosmos name, a film library, the use of Pele’s likeness in connection with Cosmos-related merchandise, etc. As one of the leading soccer commercial companies in the United States representing a
wide variety of soccer properties, SUM placed a bid for these soccer-related commercial opportunities with the view that it could develop merchandise and other products for the public.
"As a part of its bid, SUM included common provisions that the seller–the prior owner of the Cosmos–would not devalue those assets and create consumer confusion by operating a new
team in the New York metropolitan area for 10 years. SUM’s bid was not successful, and it made no further efforts to buy the assets. Any suggestion by Mr. Commisso that SUM’s conduct was
in any way improper is without any merit."
NASL has some difficult facts to deal with in maintaining its Division 2 professional league status.
1. NASL has been shrinking, including 2 clubs that left NASL to join USL, a Division 2 league with 2 conferences of 15 teams each, 30 total.
2. NASL alleges that it can reach 13 teams within 2 years, 1 more than the 12 minimum, by adding 6 presumeably amatuer teams to what is supposed to be a professional league with at least 12 professional teams.
With these facts, NASL's position looks pretty weak. The facts suggest that professional teams prefer playing in USL to NASL. Tough luck for NASL.
What is the financial difference for these teams if the NASL plays in Division 2 rather than Division 3? Other than whoever made the new contracts with the new teams stipulating that they will only join if in D2, is there much of a financial difference? There is no promotion and relegation. Why would sponsors care what division they are in? Can someone explain this?
Good question. Absent pro/rel, who cares about divisional structures? And why would US Soccer maintain them?
NASL should care about losing Division 2 status because it will continue to lose professional teams to USL.
Bob, don't be obtuse. NASL isn't "losing" teams to USL. There is nothing inherently attractive about USL other than the fact that it's an MLS toady on the Sunil/Garber side of the fight. NASL has been losing teams to MLS, and why wouldn't they? Now that Sunil has threatened the viability by announcing NASL division 2 status is in question, NASL teams are looking around for an escape plan. I blame this all on Sunil. In no other sophisticated international market are league poaching teams from other leagues. This is a closed system symptom and does nothing to advance the sport in our country. Sunil out!
2 teams went to the USL: Tampa Bay and Ottawa. Atlanta went to the NPSL. Minnesota and Montreal went to MLS. 4 other teams simply quit without playing elsewhere.
When you have owners of existing franchises financially supporting some, if not all, of those 6 amateur sides to make them viable...it is not a sustainable league.
When you have to give up your franchise fee and annual contribution payment to get them in your league, it's not a sustainable league.
No matter their legal arguments, using these 6 teams as proof of anything, is not going to help them.
If SUM & MLS are this dumb to create a "restrait of trade" and document it this case might have legs. And we can see inside the SUM "masterpiece" that has been created the last 20 years which is worth it. If they have 8 more clubs that changes a lot in this case. If any of this is true, whoever are SUM & MLS lawyers are so used to be on the easy side that they don't understand the risk in dealing with competition law. There is a ton of law backing up what can be done with media market properties (teams are basically that) its very hard to ship a team or manufacture a team etc..
Why the rush unless Mls doesn't like competition btw if the crew move to tx that pitch is going to look very dumb just setting there
This reply just further demonstrates the abusrdity of NASL. Adding a bunch of amateur teams to get to 12, and one of the new teams purportedly coming on board in 2018 is Atlanta? Seriously? The same city where Atlanta United just drew over 71,000 fans this week? Why are trying to challenge MLS teams in MLS markets instead of going where there are no professional soccer teams? Because they have delusions of grandeur and these delusions have resulted in NASL failing while USL has done it the right way and grown.
I hope the US Court realizes NASL is simply a sabotage amateur league and finally puts the NASL out of their misery and sent into oblivion to simply remember their "gloriuous" 70's era. Good riddance, NASL.
Stopped watching MLS years ago.
Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz
Credit to them for getting stadiums built and pulling in families. Nice day out with the kids.
Happy to see passionate fan groups and pagentry in some markets.
But the quality of the game?????
Heck, nevermind the EPL, I'd watch the English Championship over MLS.
Yes, I agree MLS is at the level of the bottom half or so of the Championship. That's not bad for a league that started from scratch 21 years ago.
while I'm not crazy about moving into taken markets these new clubs can't be that much of a financial burden on the others
The biggest sports collusion I've seen since the USFL. And the NFL lost that case in Federal court.
It's pretty simple: The USSF does the bidding of the MLS. The USSF really doesn't care about the pro game in this country other than having it be a hot house for national team talent and grassroots growth.
The MLS holds "inclusion" in its "club" via expansion as threat to all USL clubs and an enticement to NASL markets -- often run by small-time owners.
The NASL has cases where teams were lured into MLS. MLS has strategically targeted NASL markets to weaken it. Who wouldn't want to go up "the big league" in the country?
And, with teams such as Ottawa and Tampa abandoning the NASL -- just as Tampa applied for MLS expansion -- is suspicious as well. The MLS -- with wink-wink -- could imply that markets in the USL -- a farm club entity for the MLS -- would have a much better chance of gaining MLS expansion.
The USL, with its "B Team" relationship with the MLS should be DISQUALIFIED as a Second Division League. If anything, the independent operators of the USL and the NASL should combine to be that Second Division while the MLS Reserve Teams all compete vs. each other.
In many countries reserve teams compete in the lower divisions along with the first teams of smaller clubs. What's wrong with that?
Could a reserve team be promoted, and how far?
It varies by country but generally they can't be promoted above a certain level. For example, in Portugal, I recall Erik Palmer-Brown was playing for Porto B in the Portuguese second division and they won the second division. The next highest non-reserve team was promoted instead. I believe if Porto's first team were relegated, the Porto B team would also have to move down. I know this is done in Germany, Holland, Spain, Portugal and likely other European countries.
The one that has always gotten me is baseball's anti trust exemption which IMO is a joke !
If the ussf , Mls n Usl r big buds which wouldn't be a stunner then why not got rouge
Unless a "team agreement" includes considerable financial guarantees it doesn't mean anything.
Good point.
FPGN notes that MLS is probably a similar level of play as the English Championship. And recently released average attendance figures show the MLS is averaging 22k fans per game, compared to about 20k per game for the Championship (Newcastle United averages over 50k fans per match, and two teams in England's second division average less than 10k/match).
So, the first division in the United States is roughly on par with the second division in England. Sounds reasonable.
Thus, it might follow that a legitmate (and pro/rel worthy) second division in the US ought to compare with England's League One, the third division in old blighty. That league averages about 8k per game, with Sheffield United averaging over 20k/game (almost as much as the Portland Timbers, who sell out their stadium every game), and a handful of clubs under 5k/game. Neither the NASL nor the USL average above 5k/game, though a few teams therein do.
Given that--perhaps US Soccer ought to declare that both the NASL and the USL, as presently structured, compromise the 3rd Division of US soccer, and proclaim the 2nd division vacant? If we could find a collection of clubs that a) can average about 10k/game, and b) have facilities big enough for 15k-20k (there are MANY American football stadiums in this country that are at least that large, and wide enough to not be a joke for soccer, even if many of them aren't soccer-specific), then we might have a robust second division--at which talking about pro/rel makes sense.
But talking about promoting Louisville City FC or the Jacksonville Armada to MLS is premature in the extreme. I'm not talking about the soccer--money can go along way to acquiring talent--but the economics.
Good points, Scott. The structure that you propose is on its way when USL splits into I and II. The bigger markets will presumably be in I (second division) with the smaller markets -- and MLS reseerve teams -- in II (third division). By the time this split happens in 2019, there could easily be 20 teams in each.
It goes without saying that there is no need for NASL in order for this to happen. In fact, NASL looks to only be gumming it up.
Great points Scott. That's why I am in favor of pro/rel when we are ready for it but not yet. Because we don't have a robust second division. I think the way to get this started ultimately is for MLS to expand to 40 teams and have two 20 team divisions with pro/rel. I think this is possible in the next 15-20 years.
But USL's continued growth and forthcoming split into division II and III is a positive step too.
I conceed that you have a point FPGN, but I think the wiser business plan for MLS is to stick to running a 1st division competition. Like in other countries, let the clubs field teams in other competitions, lower division professional, youth, even amateur recreational if they want.
What I am thinking is that concentrating on improving 1st division competition will bring in bigger TV, sponser, and gate revenues. If we want the sport to grow at the elite and professional level, that is where the growth is most important. Let top division clubs invest in football lower in the pyramid, but not be the lower part of the pyramid.
I look forward to our new USSF president wrangling USL and NASL into a pro/rel arrangement. The sooner we focus on teams instead of leagues, the better off we will be. MLS doesn't want pro/rel but in 20 years it should be forced down Garber's throat. Wynalda is just the guy to do that. Cue the whinging from all the MLS bootlickers/Rec parents.
NASL will not exist by the time the new President's term begins next year. Good riddance. Pro/rel will come when the time is right and it makes sense. But now is not that time.
Pardon my ignorance, but what are the "franchise" requirements of both USL & NASL? Are they worlds apart? And, I'm guessing abject hatred for each other, but why don't they merge?
I don't know what you are quoting. USL and NASL are traditional leagues in which clubs compete and are separate business entities. MLS is a single business entity, combining league and clubs. MLS sells franchises and its owners own franchises. In that regard the MLS "owners" own a part of MLS and are not independent.
Are you asking what are the leagues' criteria for accepting teams to their competitions? I don't know the details, but usually there are requirements as to supplying match day facilities for home games, a commitment to field a team for a length of time, agreement to the rules of competition (which probably include roster requirements), and registration fees.
I would guess due to the circumstances, both leagues have been "flexible" about enforcing their requirements. The circumstances being USL's rapid expanision and NASL's fall below the minimum 12 teams necessary for Division 2 status.
There is a strong sense that NASL, or at least one owner therein, is trying to force his way into MLS using pro/rel as the wedge--demanding that MLS implement pro/rel NOW, and that the best NASL team (which he expects will be his) be allowed into the league (and presumably one existing franchise booted out, excuse me, relegated).
All without him having to pay a franchise fee.
On the face of it, it sounds like a good argument, and pro/rel has many advantages. But again--for it to work, the MLS must no longer be a joint venture of its team. The entire North American franchise model of pro sports simply is incompatible with a pro/rel system. And existing owners have a very good argument--some of them paid a substantial sum to join MLS; why should that investment be flushed down the toilet?
For pro/rel to happen in the US, one of several things probably needs to happen (in addition to a credible second division forming):
1) The MLS needs to separate from its teams, much as the Premier League is a separate entity from Manchester United, FC Liverpool, and the rest; rather than a privately held corporation in which each team has a 5% stake. Which means some large investor, with several billion dollars, is going to have to a) convince a majority of owners to sell, and b) purchases each owner's stake in the league, making each team essentially a "free agent".
*OR*
2) Relegation and promotion must be subject to the incoming team purchasing the relegate team's share of the league, for a set price, ikely in the tens or hundreds of millions of dollars. In other words, if Miami FC gets promoted and the LA Galaxy gets relegated (heh), then the deal is not complete until Riccardo Silva writes the Anschultz Entertainment Group a rather large check to purchase their stake in MLS. If they can't come up with the funds by a certain date, then the 2nd best 2nd Division team gets a shot--and if no qualifying team can, then the Galaxy get to remain.
Anything else simply ignores the economics of MLS. Pro/rel proponents may not care, viewing MLS owners as a bunch of greedy b***ards that have earned their prize and thus should have pro/rel jammed down their throats, regardless of how much it costs them--but the legal and political system won't see it that way.
And if the US political legal and political system has proven one thing, it considers itself under no obligation to FIFA whatsoever. Which is why Hector Trujillo is now going to prison, and he's likely only the first of many.
Bob,
If I'm not mistaken, the NASL is a joint venture of its clubs, simlar to how the NBA and NFL are organized. This is different than the MLS "single entity" model, but it is also different from USL. USL is organized more like a European soccer league--it is owned by an entity called NuRock Soccer Holdings, and its teams contract with it, but are separate corporate entities.
Generally speaking a joint venture is a common undertaking by 2 or move business entities. It is a project, not an entity. But there will be a formal joint venture agreement setting out the terms, especially how profits of the venture are to be distributed. A Joint Venture would be a very awkward business arrangement for a league. Essentially a new JV agreement would have to be signed everytime a club was added or changed.
I'm using the phrase "joint venture" a bit loosely. The NFL, for instances, is organized as a trade organization with the 32 NFL teams as members. Not sure of the exact corporate structure of the other pro leagues (i.e. whether teams hold stock, or are legal partners, or what).
The important point remains--these leagues are not independent entities that bargain with teams at arm's length. They're joint assets, or whatever, of the constitutent teams. Which makes relegation, specifically, rather messy. It's like a condo assocation trying to evict a resident, in a case where the deed restrictions and covenants he signed at purchase time don't provide for such an outcome. Even if they can force him to sell his share, he'll have a right to a fair price for it.
European leagues, and I suppose USL, are more like apartments (rental flats). Any tenant can be told to get out without cause upon termination of his lease, or upon 30 days notice if renting month to month.
You got me interested. When I visited the NFL website I didn't see anything directly explaining its structure, but at the bottom of the page were mention of an NFL Enterprises LLC and NFL Productions LLC, the latter apparently owns the copyright to the broadcasts. This suggests to me that the NFL has a corporate structure. That doesn't mean that the various corporations don't have joint venture agreements.
One problem with a lot of "joint venture" (again loosely defined) pro leagues, is they often consider the particulars of their legal arrangements to be a trade secret. As whatever legal apparatus they choose is neither publicly traded or nonprofit, there is no public disclosure requirement, so the details are generally opaque to fans and outsiders.
One of the side-effects of the Donald Sterling brouhaha in the NBA (former LA Clippers owner Sterling was expelled from the leauge and essentially forced to sell the Clippers after substantial allegations of misconduct became public) is that the NBA publlished its Constitution and By-Laws, two documents which had been up to that point kept secret, in order to document it's right to discipline Sterling as it did. Deadspin, as often, had the scoop:
https://deadspin.com/that-secret-nba-constitution-is-now-online-1569509012