SBJ/May 21-27, 2012/Leagues and Governing Bodies

ATP bylaw requiring lawsuit losers to pay legal fees at issue

The ATP, nearly four years after scoring a significant antitrust victory in a Delaware federal court, now must go back to that court to defend a key policy designed to make the federations that sued the tour pay the $20 million in legal fees.

The development comes as the ATP this month also sued its insurance carrier for $1.5 million, alleging the company has not made good on reimbursing the tour for some of those fees. While the ATP has waited for the courts to rule on whether the two groups that sued must pay the fees, it has tried to collect from the insurance carrier.

The tour is seeking payment from German and Qatari tennis federations, but the 3rd U.S. Circuit Court of Appeals earlier this month not only did not order those groups to pay the legal fees, but it also called into question the very bylaw the tour contends requires the payment.

“We have doubts that Delaware courts would conclude that (the bylaw) imposes a legally enforceable burden on Deutscher and Qatar,” said the 3rd Circuit opinion. The ATP is incorporated in Delaware.

“Determining whether (the bylaw) provides a basis for fee-shifting might require analysis of the possibility that it was adopted specifically to deter members from suing the organization.”

The bylaw, requiring ATP members to pay legal fees if they lose a lawsuit against the tour, was adopted in 2006 as the circuit implemented a new tour structure that disadvantaged certain tournaments, including the Hamburg, Germany, stop owned by the Qatari and German federations.

The appeals court sent the fee issue back to a lower Delaware federal court to decide whether the bylaw is legal. That lower court had already ruled federal antitrust law prevented the ATP from getting the fees, but the appeals court wants a ruling first on whether the underlying policy should even stand.

An ATP spokeswoman said, “We believe the bylaw is enforceable under applicable law.”

The German and Qatari tennis federations sued the ATP for demoting their event five years ago. A jury ruled against them in August 2008, and the fee dispute has been winding its way through the courts almost ever since.

The ATP in the interim filed with its insurance carrier, National Union Fire Insurance Company of Pittsburgh, a division of AIG, for $9.8 million the tour claimed in court filings it was owed under its policy. The insurer paid $8.3 million but has not paid any more since 2010, according to the claim filed in Florida federal court.

An AIG spokesman did not reply for comment. As of last Thursday, the insurance company had not responded in court papers to the ATP claim, which was filed May 2.

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