Latham Scores Big in Showdown over U.S. Soccer

The popularity of professional soccer boomed in the U.S. during the 1990s, thanks to America hosting the 1994 World Cup and Major League Soccer debuting in 1993. But by 2000 interest had started to wane, and Charlie Stillitano, the former general manager of New York’s MLS team, came up with a plan to regain America’s attention.

Stillitano’s upstart sports management company, ChampionsWorld LLC, started bringing hot European clubs like Manchester United and Real Madrid to American shores for matches. Some of the games were raucous sell-outs, but ChampionsWorld nonetheless declared bankruptcy in 2005. According to a lawsuit the company filed in 2006, that’s because the sport’s governing body in the U.S., the United States Soccer Federation, shook ChampionsWorld down for fees and falsely insisted that pro soccer matches couldn’t be held on U.S. soil without its approval.

On Friday USSF and its longtime lawyers at Latham & Watkins finally discredited those claims in federal court in Chicago. In an 82-page summary judgment ruling, U.S. District Judge Harry Leinenweber tossed ChampionsWorld’s suit, rejecting antitrust, racketeering, and unjust enrichment claims against USSF and MLS. ChampionsWorld is represented by Pryor Cashman.

Leinenweber affirmed a July 2011 opinion by the Switzerland-based Court of Arbitration for Sport, which held that soccer’s international governing body, FIFA, gave USSF sanctioning authority over all promoters of international games in the U.S. Because USSF had sanctioning authority under FIFA’s bylaws, Leinenweber concluded that the bulk of ChampionsWorld’s claims against USSF and MLA can’t succeed as a matter of law. The judge dismissed ChampionsWorld’s antitrust claims on separate grounds, ruling that the company failed to show a relevant market for its alleged antitrust injury.

Pryor Cashman’s complaint primarily blamed USSF for ChampionsWorld’s demise, arguing that the federation misrepresented its authority and forced promoters to pay “exorbitant” sanctioning fees and post “performance bonds.” USSF wanted to drive ChampionsWorld out of business, the complaint alleged, so that MLS could be the only show in town. According to ChampionsWorld, USSF gave MLS breaks on fees and bond payments, and consulted MLS for advice on what fees to impose on ChampionsWorld.

Latham, which has close ties with USSF, hoped to bounce the case on a motion to dismiss in April 2010, arguing that USSF is exempt from antitrust liability under a 1998 bill called the Ted Stevens Olympic and Amateur Sports Act. That Act requires national governing bodies of sports to ensure that amateur athletes can participate in the Olympics. In short, Latham argued that USSF had to be a member of FIFA in order to participate in Olympic soccer. Because FIFA, in turn, requires its member associations to exert authority over both amateur and professional leagues in their county, USSF argued that it had no choice but to exert authority over all pro soccer in the U.S.

Leinenweber rejected that novel argument in July 2010, writing that the 1998 law “gives USSF no more of an antitrust exemption or authority over professional soccer than necessary for it to oversee Olympic and related events.” Latham filed a motion to reconsider, which Leinenweber rejected as part of Friday’s ruling. That offers little consolation for ChampionsWorld, however, since Leinenweber still cast aside each of Pryor Cashman’s arguments for why he should set aside CAS’s 2011 arbitral ruling.

Once the judge deferred to CAS, ChampionsWorld’s RICO claims fell apart, because it couldn’t prove that USSF had committed any fraud. The unjust enrichment claims crumbled as well, because ChampionsWorld’s core argument–that it shelled out money to USSF and got nothing in exchange–was premised on the idea that USSF misrepresented its authority.

Latham’s lead counsel in the case, Los Angeles partner Russ Sauer, told us that his client is gratified by the ruling, and “welcomes the opportunity to develop this growing sport.” Pryor Cashman partner Jamie Brickell told us that he thinks Leinenweber erred in affirming CAS’s award, and that he intends to appeal to the U.S. Court of Appeals for the Seventh Circuit.

Major League Soccer is represented by a team from Proskauer Rose led by partner Bradley Ruskin.