After nearly a three-hour hearing where NASL and USSF counsel took turns at explaining why the other side was completely wrong, down to the definitional meaning of words, Judge Margo Brodie of the Eastern District of New York stated that she will make a ruling later this week, pending an additional round of documentation filing by USSF (submitted November 2nd – a little later than expected) and a letter from NASL counsel in reply to the USSF’s filing. It is possible due to the delay in filing that a ruling may arrive over the weekend or early next week.
Attending the hearing included NASL interim Commissioner Rishi Seghal, NASL Director Of Public Relations Neil Malone, NASL Board of Governors Chair and New York Cosmos owner Rocco Commisso, Joseph Commisso (Rocco’s son), New York Cosmos Chief Operating Officer Erik Stover, New York Cosmos Senior Vice President (and NPSL Chairperson) Joe Barone, New York Cosmos counsel Victoria Andersen. Also in attendance were New York Cosmos players Lucky Mkosana and David Ochieng.
Representing media engaged with lower-division soccer, attendees included Steve Hamlin, Midfield Press’ Chris Kivlehan, Front Row Soccer’s Michael Lewis, The False Nine’s Hugo Greenhalgh, Empire of Soccer’s Jake Nutting, 343 Podcast’s John Pranjić and First Team Podcast’s John Frusciante and James Izurieta. Some Cosmos supporters, including Patrick Infurna, were also in the gallery.
There to offer a friendly face to the United States Soccer Federation were three men believed to be lawyers from Major League Soccer (MLS).
Chris Kivlehan published a wonderful Midfield Press article containing his concise notes on the hearing. Inspired by his example, I’ll assemble my notes from the hearing on the chance that less narrative and more details might be of use to someone. There will be two or three parts to this. The first part will cover the opening remarks from US Eastern District of New York Court Judge Margo Brodie, as well as NASL’s chief counsel Jeffrey Kessler’s arguments. The second part will focus on USSF counsels’ arguments against granting the NASL a preliminary injunction relief. Apologies in advance to real journalists and lawyers out there for any errors in my interpretation or misapplication of legal terminology below. Suggestions for corrections are welcome, as this feels important enough to warrant updates for clarity/accuracy.
Some interesting facts that appeared during the hearing:
- The USSF board voted in September on NASL’s application for Division Two sanction in 2018 arrived at a vote of 9-1. The lone dissent was John Motta, president of the United States Adult Soccer Association.
- Average revenue loss for NASL teams in 2016 was approximately five million, with one unnamed team’s losses at eleven million. Factoring in the San Francisco Deltas’ loss of approx. ten million, remaining teams’ losses average around three million.
- It was stated in the court that the San Francisco Deltas would not continue in their current form in 2018
- North Carolina FC will be seeking to join the USL in 2018. In light of NCFC’s owner Steve Malik being recently seated as a United States Soccer Federation board member and his resistance to the NASL’s pursuit of a lawsuit against the USSF. Malik’s motivations and behavior within the NASL organization since being seated on the USSF board were ascribed as suspect and in poor faith in conversations outside the courtroom.
- The NASL referred to a (sealed) contract submitted into the record between USSF and Soccer United Marketing (SUM) as evidence that financial incentives for the USSF exist that are tied to MLS revenue; that these incentives prove motivation for the regulatory body to favor a specific league over any others; that these contractual ties invalidate the USSF’s role as impartial regulator as any subsequent USSF rule-setting constitutes an agreement for the purposes of conspiracy. To this, Judge Brodie commented that “clearly there is a difference in treatment [between the leagues] and raises issues in the court’s mind.”
- USSF counsel attempted to downplay the financial implications, asserting they amounted to no more than ‘around’ 20% of USSF revenue.
- There was confirmation of recent leaked details surrounding six new teams indicating their intent and agreement to join the NASL
- They were sealed letters from six NPSL teams documenting both intent and agreement to play in 2018, conditional to the NASL retaining their Division Two sanction.
- These six teams’ entry would be financed by “current NASL owners” as part of a process to place independent owners for them
- The USSF asserted that the two teams who announced themselves as joining the 2018 season prior to the recent controversy – California United FC and the 1904 FC – do not meet the D2 team ownership wealth requirements
Judge Brodie entered the courtroom at 10:05am, and opened with some positions based on her reading of the submitted evidence, and invited challenge or support as to their relevance.A mandatory injunction was in alignment with NASL’s request for preliminary relief, not a return to the status quo.
- This seemed largely predicated on the USSF’s choice to format sanctions in an annual term subject to re-approval; had the sanction been issued and then revoked, preliminary relief might have been possible through return to status quo
- USSF has market power, which is necessary for NASL to demonstrate irreparable harm
- NASL has demonstrated irreparable harm
- NASL still needs to demonstrate concerted action or agreement of a conspiracy to unlawfully restrain trade
- USSF has demonstrated that the Professional League Standards (PLS) have a pro-competitive purpose.
- USSF revisions of Professional League Standards (PLS) is demonstrative of some concerted action, of ‘smoke’, but not an anti-competitive action on the face of it
- Judge Brodie’s characterization of NASL claim is that USSF board members’ conflict of interest is sufficient to suggest anticompetitive action, but Judge Brodie does not agree.
My sense on Judge Brodie, based on the hearing, was that while she walked into the landscape uninformed she asked insightful questions that will get her up to speed. She took to task both counsels at various points for different behaviors (NASL usually for over-talking and over-exurberance; USSF for not answering a question or when they were repeating verbatim a case detail contained in the submitted evidence). Judge Brodie told them when and where she thought their arguments were problematic. She also was clear that she was open to being shown where her understanding of fact or arguments were wrong, and that both sides would receive as much time as they felt they needed to state their arguments in full. In the final analysis, I felt she was slightly less convinced of the USSF’s arguments, and seemed a little more open to NASL counsel’s challenging of positions. This however does not add up to a sense that she favors NASL’s arguments over that of USSF’s. Whether the challenges are enough to overcome and find that the mandatory injunction standard was still necessary and, if so, whether the NASL met its requirements for preliminary relief, the judge offered little hint.
NASL counsel Jeffrey Kessler began speaking soon after. His remark highlights include:
- Challenging the setting of standard for mandatory injunction; referring to a case citation’s language as being inclusive of another benchmark of ‘extreme or very serious harm’ and asserting this returns preliminary relief to a more relaxed standard
- Asserts that “going out of business” and “the murder of an organization” constitutes ‘extreme or very serious harm’
- Differentiated between irreparable harm and extreme/very serious harm – defining irreparable as being harm that cannot directly be made whole but may not be existential in nature, whereas ‘extreme or very serious’ harm may very well be existentia
- Asserts that NASL owners’ declarations that they will go out of business without D2 sanction support the claim of ‘extreme or very serious’ harm
- Asserts six new teams’ letters of intent to join the league, conditional on the NASL retaining D2 sanction; suggesting that this condition highlights the harm potentially caused by the USSF’s sanctioning decisions
- Arguing for a return to the status quo, as defined by the moment before the controversy, as the USSF suffers no harm in doing this. Judge Brodie reiterates that status quo in this situation is defined by a non-D2 sanctioned status, not by August 2017.
- Asserting the USSF has no statutory authority for its self-appointed regulatory role in professional soccer; that leagues should control standards as its done around the world.
Judge Brodie asked NASL counsel why they did not pursue subsequent offer from Gulati to revisit D2 sanction process. Kessler responded, Gulati only offered to recommend to the USSF board that they reconsider a revised NASL application. Kessler contended that what is essentially a meaningless offer with an unknown timeline does not help NASL survive in the short term. Also, Kessler points out that at the time of the application rejection, NASL interim Commissioner Seghal was told, when he asked if an appeal or resubmission might be possible, by a USSF board member that an appeal was not possible. The inference is that Gulati asking board to reconsider is not a substantial remedy.
Taking up the question of USSF’s role as a regulatory body, Kessler argues, sometimes a little unclearly, as to the legitimacy of, as Kessler characterizes, USSF’s self-appointed role. When pressed by Judge Brodie, Kessler frames his position as that the USSF is ‘not entitled to a presumption of special authority, or to any protection from complying with antitrust law’. Judge Brodie suggests the possibility that soccer, being a global sport, may have global standards that do not work in the United States. This to me felt like the judge was ‘stress-testing’ an idea. Kessler’s persistent referrals to global standards in this tranch seemed to irk the judge. She reiterated to Kessler that NASL must show that the USSF violate anti-trust law.[Lucky Mkosana and David Ochieng enter the courtroom at 10:45am.]
Judge Brodie suggests that the agreement is not the standard for meeting the first prong of section 1 of the Sherman (Antitrust) Act. Kessler argues that agreement, if it unreasonably restrains trade, does meet standard regardless of intent; that rules constitute agreement; citing cases, that safety cannot be claimed as a procompetitive element. Interestingly, Kessler then goes on to highlight how the USSF uses the very word ‘procompetitive’ is inaccurate on the face of it. Kessler asserts that something cannot be considered procompetitive simply because the regulator says so. It must have a reason, and the solitary reason the USSF has documented to support any of their divisional sanction requirements is to mitigate the risk of instability stemming from competition. The USSF’s use of the word ‘procompetitive’, Kessler claims, is literally the opposite of what the word means – to foster competition. The judge appeared to be listening intently.
At this point, the USSF lawyers’ blink rate involuntarily elevated.
Judge Brodie asks if the USSF has no right to regulate if one takes the NASL position to its logical extension. Kessler will later refine this distinction, but at this juncture stumbles slightly. Kessler replies in the negative, specific to the context of the sanction standards because they restrict competition, and that USSF has brought no true pro-competitive rationale for their requirements. Judge Brodie asks for proof of USSF intent to restrict trade for the benefit of the MLS. She appears to grow impatient with Kessler’s search for the best argument. He splits hairs perhaps, making a distinction that the USSF as a private group can impose standards but does not have the statutory authority to do so, especially if it restrains trade.
Moving on to specific requirements’ legitimacy Kessler assails the arbitrary nature of numbers of teams, stadium sizes and time zone residency requirements as indicative of standards with no pro-competitive purpose. Citing examples of early MLS history operating with 8-10 teams and decades of waivers, or comparisons to various EPL clubs not able to meet such requirements, Kessler states that the USSF has the burden to demonstrate they are not anti-competitive and they have not.
“Every time we get close to something the standards change,” he said. “it raises issues, no question. It is designed to make it harder for people to compete.”
‘Let markets decide where to put stadiums and teams!’ ‘Some rules meet rule of reason, like anti-doping, anti-competitive rules. USSF rules like these are not anti-competitive.’
“This is simply to give an injunction, so we cannot [be driven] out of business,” Kessler said. “There will not be a league left to continue the challenge.”
Kessler closes his remarks at 11:10am.
We’ll pick up with the USSF remarks in Part two shortly.
Please leave any comments or corrections below. Thanks for reading!