A federal court judge yesterday ordered discovery into how an eight-year-old ATP Tour bylaw that requires members to pay legal fees if they lose a lawsuit against the circuit had come into existence; rejecting for now the tour’s motion it be awarded nearly $20M in legal fees. The ATP’s Hamburg stop in '07 sued the ATP because the circuit demoted the event. The event lost the case, and the tour moved to collect the legal fees based on the bylaw, which was passed shortly before the new tour structure was put in place. U.S. Districy Court Judge Gregory Sleet originally rejected the tour’s effort under the theory that a loser pays outcome would undermine parties bringing antitrust cases like the Hamburg lawsuit. An appeals court later sent the fee case back, ruling before the antitrust question could be reached, the court needed to first assess whether the bylaw was even valid. To do that, Sleet asked a state court of Delaware (where the ATP is incorporated) if the bylaw was permissible. The state court ruled earlier this year theoretically it could be, but the facts of the case would dictate either way. The ATP had asked the federal court to award legal fees based on the state court’s decision, while counsel for Hamburg, which is partially owned by the Qatar Tennis Federation, argued discovery, and possibly a trial was necessary. Hamburg is trying to prove the bylaw was created specifically to deter litigation tied to the calendar restructuring, though it is unclear if that by itself would negate the bylaw. The federal court set Oct. 29 as a deadline for the two sides to arrive at an agreed upon roadmap for discovery.
