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SBJ/20100927/This Week's Issue
Judge clears way for suit against USSF, MLS
Published September 27, 2010
An Illinois judge has denied the U.S. Soccer Federation’s attempt to block a lawsuit that accuses it and Major League Soccer of fraud, racketeering and antitrust violations. The lawsuit, filed in 2006 by the now-defunct soccer promoter ChampionsWorld LLC, claims the USSF and MLS conspired to charge illegal and restrictive sanctioning fees to promoters who organize professional soccer events in the United States.
ChampionsWorld seeks more than $50 million in damages, claiming the fees destroyed its business and forced it into Chapter 11 bankruptcy in 2005. With the motion to dismiss blocked, Chicago-based USSF and ChampionsWorld could face off in court as early as this spring.
“USSF did not have the right to charge the fees that they charged, and their improper actions drove ChampionsWorld out of business,” said Jamie Brickell of Pryor, Cashman, Sherman and Flynn, the firm representing ChampionsWorld. “What ChampionsWorld brought was a great interest in soccer in the United States that may not have existed before.”
MLS President Mark Abbott said USSF and MLS officials are optimistic that, should the case go to trial, they will prevail.
“ChampionsWorld went out of business because it didn’t have a viable business model, and not as a result of any improper action by USSF or MLS,” Abbott said. “ChampionsWorld’s claims are without merit, and we are confident that we will prevail in the litigation.”
ChampionsWorld was owned and operated from 2001 to ’05 by longtime soccer marketer Charlie Stillitano, the ex-general manger of the MLS New York/New Jersey MetroStars. Stillitano, who also managed Giants Stadium when that venue hosted the 1994 FIFA World Cup, is now with CAA Sports and declined to comment for this story.
From 2002 to ’05, ChampionsWorld organized exhibition matches between top European clubs such as Manchester United, FC Barcelona and AC Milan at stadiums across the United States. By 2003, the company employed 15 people and had partnerships with MasterCard, Budweiser and Fox Sports World, now Fox Soccer Channel. A 2003 match between Manchester United and Juventus drew 79,000 fans at Giants Stadium. In 2003 and 2004, about 800,000 fans watched a ChampionsWorld match live — an average of 44,000 a match.
The USSF required ChampionsWorld to pay between 9 percent and 20 percent of its gross earnings as a sanctioning fee, and also made the promoter pay performance bonds for each match. The payment is part of the USSF’s operating procedures for hosting domestic and international matches, and is outlined on the USSF website. According to the lawsuit, when ChampionsWorld challenged the USSF about the fees, the governing body threatened to report the promoter as a “promoter in bad standing” to FIFA.
ChampionsWorld first filed the lawsuit in May 2006; however, it sat in various stages of arbitration before FIFA until this year. The lawsuit alleges that the USSF, in conspiracy with MLS, unlawfully claimed to have sole and exclusive authority to sanction all professional soccer matches played in the U.S., and used the fees against competitors of MLS.
Judge Harry Leinenweber of the Northern District Court of Illinois upheld nine of the lawsuit’s 10 counts in his ruling on July 21. Leinenweber said that the Ted Stevens Olympic and Amateur Sports Act did not grant the USSF the power to sanction professional games in the United States, and that neither FIFA nor the U.S. government had given the USSF the right to violate U.S. antitrust laws.
“ChampionsWorld has sufficiently alleged a pattern of racketeering activities by MLS,” Leinenweber wrote in his decision, adding that “the ASA does not give USSF authority to govern professional soccer in the United States, except to the extent necessary for USSF to govern the participation of professional players in the Olympics and related events.”
In 2001, the Los Angeles Memorial Coliseum filed a similar lawsuit against the USSF and MLS, charging the two with creating an unfair competitive field for non-MLS promoters. Marshall Grossman, who represented the coliseum, declined to comment on the lawsuit, but said the case was eventually settled for an undisclosed amount.
USSF officials declined to comment directly on the lawsuit.
The outcome of the lawsuit could change the promoting of soccer in the U.S. Officials do not know when the sanctioning fees came into existence, but John Guppy, a 20-year veteran of soccer promotion and former president of the MLS’s Chicago Fire, said he has always paid the USSF fees when promoting international matches, such as the Reebok Cup, which he promoted in 1997.
“They have been around as long as I can remember,” Guppy said. “Any promoter is well aware that a percentage of the gate needs to be paid to U.S. Soccer. That’s just part of promoting a game in the U.S.”