US Soccer Trial to Begin in Defunct League’s Monopoly Suit (1)

US Soccer and Major League Soccer will go to trial this week to defend themselves against claims they colluded to eliminate the North American Soccer League from the upper tiers of US men’s professional soccer.

NASL asserts that US Soccer and MLS violated antitrust law by conspiring to ensure MLS held onto its monopoly power as the sole top “Division I” league. Whether US Soccer’s denial of NASL’s request for Division I status amounted to illegal conduct will be a key question for the jury.

The outcome of the trial, set to begin Monday with jury selection in the US District Court for the Eastern District of New York, could have implications for how the sport is governed and poses a crippling threat to US Soccer, a nonprofit organization that has for decades built up the sport.

US Soccer said the 2016 rejection was because NASL didn’t meet the proper requirements, but NASL alleges that US Soccer saw it as a competitive threat to MLS—a business partner of US Soccer.

US Soccer then stripped NASL of its original Division II status, ultimately driving the league out of business in 2017.

MLS, formed in 1995, has been the only sanctioned Division I men’s league since US Soccer’s formation.

A verdict against US Soccer and MLS “would send a meaningful message about the place of soccer in our country,” said Christopher R. Deubert, senior counsel for Constangy, Brooks, Smith & Prophete LLP in Boston and a former counsel for D.C. United, which competes in MLS.

“It would demonstrate that MLS requires collusive behavior to protect itself from competition in ways that sports leagues in this country definitely do not need,” Deubert, who isn’t involved in this case, said.

NASL ‘Chose Litigation’

NASL is seeking treble damages of more than $500 million, an amount that would harm the organization and MLS, especially in light of similar litigation that US Soccer recently settled, Deubert said.

US Soccer said in a statement it has been committed to fostering a broad, healthy ecosystem of professional soccer leagues across all divisions.

“This trial will show that despite US Soccer’s repeated efforts to help NASL, the league regularly failed to meet the minimum standards for professional soccer leagues,” the statement said. “Unfortunately, rather than work with U.S. Soccer to put the league on solid ground, NASL’s owners chose litigation.”

Jeffrey Kessler, attorney for NASL with Winston & Strawn LLP, said the jury will get to hear direct and circumstantial evidence from NASL. “We think we can prove our case, otherwise we wouldn’t be here,” he said.

Opening arguments are expected Tuesday with Judge Hector Gonzalez presiding. The trial will last around three weeks.

The defunct league sued US Soccer in 2017 under Sections 1 and 2 of the Sherman Act, which prohibits agreements that restrain trade and monopolization attempts.

A judge denied a preliminary injunction sought by NASL in 2017, a decision affirmed by the Second Circuit in 2018.

NASL then amended its complaint, bolstering its claims of a conspiracy.

It also claims that US Soccer’s standards for classifying the different leagues, in place since 1995, are inherently unlawful.

Division I Denial

US Soccer originally sanctioned NASL as a Division II league in 2011, when it began play.

NASL said it grew rapidly and its teams won matches against MLS teams, leading it to apply for a Division I status.

US Soccer denied NASL’s application to enter Division I in March 2016, saying it didn’t meet professional standards requiring top-tier games to be played in stadiums that seat at least 15,000 people.

Clubs left NASL as a result of that rejection, the league said. When NASL was able to apply for re-sanctioning as a Division II league for the season commencing in 2018, after having provisional Division II status in 2017, US Soccer allegedly seized the opportunity to deny that status and end the competitive threat posed by NASL to MLS.

US Soccer counters by saying the standards it uses to designate leagues as Division I, II, and III have led to stable, sustainable soccer leagues, after others had gone out of business.

Division I, the highest level of play, requires numerous teams that are geographically dispersed across the country. Division II is the next tier down, with the standards requiring games played in stadiums that seat at least 5,000 in at least two time zones.

NASL also argues that US Soccer’s relationship with MLS is far too cozy, due to joint marketing rights that have given US Soccer an incentive to protect the MLS monopoly.

The case moved ahead in June when Judge Brian M. Cogan denied a motion by US Soccer and MLS for summary judgment. The case was reassigned to Gonzalez.

Settlement Ahead?

A settlement between US Soccer and NASL is possible, though it would be far less than the treble damages sought, Deubert said, adding that between $3 million and $5 million is a more likely amount.

“They can do the whole case and then settle right before the jury comes out,” he said.

In 2022, US Soccer struck a $24 million deal to settle a women’s equal-pay suit.

The organization is also litigating a case by soccer promoter Relevent that accused it and FIFA, the sport’s worldwide governing body, of preventing foreign teams from playing official matches in the US and shielding MLS from outside rivals. FIFA has settled.

In the NASL case, US Soccer would be wise to avoid a jury verdict, which “makes much bigger news than a settlement,” Deubert said.

NASL is also represented by Pearson Warshaw LLP. US Soccer is represented by Latham & Watkins LLP and Proskauer Rose LLP.

The case is N. Am. Soccer League LLC v. U.S. Soccer Fed’n, E.D.N.Y., No. 1:17-cv-05495.