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ChampionsWorld LLC v. United States Soccer Federation

July 21, 2010

CHAMPIONSWORLD LLC, PLAINTIFF,
v.
UNITED STATES SOCCER FEDERATION, INC., MAJOR LEAGUE SOCCER, L.L.C. AND DOES 1 THROUGH 10, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Harry D. Leinenweber, Judge United States District Court

Hon. Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

Before the Court are Motions for Judgment on the Pleadings under Federal Rule of Civil Procedure 12(c) by Defendants United States Soccer Federation (the "USSF") and Major League Soccer ("MLS"). For the reasons stated below, the motions are granted in part and denied in part.

Also before the Court are USSF's Request for Judicial Notice and its Motion entitled "Objections and Request to Strike Portions of Plaintiff's Declaration." For the reasons stated below, the Request for Judicial Notice is granted. The motion "Objections and Request to Strike Portions of Plaintiff's Declaration" is denied.

I. BACKGROUND

Plaintiff ChampionsWorld, LLC is a now-defunct business entity which, from 2001 to 2005, sponsored professional, first-division soccer exhibitions in the United States involving international teams. Although ChampionsWorld filed for bankruptcy and ceased operations in 2005, its reorganization plan provides for the commencement and prosecution of this lawsuit as its only remaining material asset, to be liquidated and distributed among its creditors.

Defendant United States Soccer Federation ("USSF") is the National Governing Body for amateur soccer in the United States. Defendant Major League Soccer ("MLS") is a first-division professional soccer league in the United States.

At the heart of the controversy is the question of whether the USSF has the authority to oversee professional, as well as amateur, soccer in the United States. The USSF claims that it has this power. ChampionsWorld argues that USSF improperly arrogated this power to itself and used it to unreasonably restrain trade and to extract over $3 million in arbitrary and "back-breaking" fees from ChampionsWorld and to cause it many millions more in damages, substantially contributing to ChampionsWorld's demise.

ChampionsWorld alleges that USSF's actions were part of an anticompetitive scheme to create a window of exclusivity for MLS by preventing other soccer entities or leagues from applying for first-division status in the United States. ChampionsWorld claims that USSF saw ChampionsWorld as a competitor to MLS because ChampionsWorld's matches between 2003 and 2005 had triple the attendance of MLS's matches. ChampionsWorld alleges that USSF organized MLS and underwrote its operations with $5 million in seed money, which was never repaid. ChampionsWorld alleges that USSF and MLS have significant overlapping officers and board members and that the two entities have a "historically close and anticompetitive association."

Plaintiff's claims against Defendants sound in antitrust (Counts 1 through 3), the Racketeering Influenced and Corrupt Organizations Act ("RICO") (Counts 4 and 5), and contract (Counts 6 through 10). Defendants move for judgment on the pleadings on all counts.

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(c), a party may move for judgment on the pleadings "[a]fter the pleadings are closed -- but early enough not to delay trial." A court reviews the motion by using the same standard that applies when reviewing a motion to dismiss for failure to state a claim under Rule 12(b)(6). Buchanan-Moore v. County of Milwaukee, 570 F.3d 824, 827 (7th Cir. 2009). The Court views the facts in the complaint in the light most favorable to the nonmoving party and will grant the motion "only if it appears beyond doubt that the plaintiff cannot prove any facts that would support his claim for relief." Id. But the Court need not ignore facts set forth in the complaint that undermine the plaintiff's claim nor give weight to unsupported conclusions of law. Id

III. DISCUSSION

A. Judicial Notice

As a preliminary matter, USSF asks the Court to take judicial notice of certain public documents, such as excerpts of the Olympic Charter; statutes and regulations of the Fédération Internationale de Football Association ("FIFA"); Constitution and Bylaws of the U.S. Olympic Committee ("USOC"); and a decision by the Bureau of the Players' Status Committee of FIFA. Because these are public documents whose accuracy is easily verifiable and not subject to reasonable dispute, the request is granted. See, FED. R. EVID. 201(b); Menominee Indian Tribe of Wisconsin v. Thompson, 161 F.3d 449, 456 (7th Cir. 1998).

Also, before the Court are USSF's objections and motion to strike portions of the declaration and exhibits attached to ChampionsWorld's brief in opposition to USSF's motion on the pleadings. USSF's objections and motion do not appear to have been properly noticed under Local Rule 5.3(b) and are therefore denied. The Court notes, however, that none of the materials that USSF has asked to strike had any bearing on the decision the Court issues today.

B. United States Soccer Federation's Authority to Govern Professional Soccer in the United States

Because the issue of USSF's authority, or lack thereof, to govern professional soccer in the United States, is central to most of the claims and defenses in this case, the Court will address this issue before dealing with the motions for judgment on the pleadings on ChampionsWorld's separate claims.

1. Olympic and Amateur Sports Act

It is undisputed that USSF has the authority to govern amateur, though not necessarily professional, soccer in the United States. This authority over amateur sports derives from the Ted Stevens Olympic and Amateur Sports Act, 36 U.S.C. §§ 220501 et seq. (the "ASA"). Congress enacted the ASA in 1978 to create a vertical structure for the management of certain amateur sports in the United States and to "rectify the factional nature of amateur sports organizations in this country at that time." Behagen v. Amateur Basketball Ass'n, 884 F.2d 524, 527 (10th Cir. 1988). Congress placed the U.S. Olympic Committee (the "USOC") at the head of this vertical structure as a coordinating body for amateur sports in which Americans compete internationally. Eleven Line, Inc. v. N. Tex. State Soccer Ass'n, Inc., 213 F.3d 198, 203 (5th Cir. 2000). Immediately below the USOC in the chain of command are National Governing Bodies (the "NGBs") for each sport included in the Olympic Games or Pan-American Games. Id. The USOC recognizes one, and only one, amateur sports organization to act as NGB for each sport. 36 U.S.C. § 220521(a); Behagen, 884 F.2d at 528.

USSF is the NGB for soccer in the United States. As such, the USSF establishes national goals for soccer, is the coordinating body for amateur soccer in the United States, and represents the United States in the international soccer federation known as the "Fédération Internationale de Football Association" ("FIFA"). See, 36 U.S.C. § 220523(a). USSF has been a member of FIFA since 1913. In its role as NGB, USSF sets standards for eligibility and exercises jurisdiction over amateur soccer activities in the United States and American soccer teams in the Olympic, Paralympic, and Pan-American Games. See id.

In 1998, the ASA was amended to reflect changes in the conduct of Olympic events. The statute was revised to prohibit NGBs from having "eligibility criteria related to amateur status or to participation in the Olympic Games, the Paralympic Games, or the Pan-American Games that are more restrictive than those of the appropriate international sports federation." 36 U.S.C. § 220522(a)(14). Senator Ted Stevens, for whom the act is named, said, "The addition of the word 'Olympic' to the popularly used title 'Amateur Sports Act' is meant to take into account the participation of professional and quasi-amateur athletes in some of the sports of the Olympic Games and Pan-American Games, but at the same time continue to reflect the unique role the USOC and national governing bodies have in the national framework of truly amateur sports activities." 144 Cong. Rec. S5434-02, 1998 WL 259708, at *S5450.

The ASA gives NGBs what has been called "monolithic control" over the amateur sports that they govern. Behagen, 884 F.2d at 529. This type of control would normally violate the antitrust laws. See, Sherman Act, 15 U.S.C. §§ 1 and 2. Congress may, however, explicitly exempt an organization from the antitrust laws. See, e.g., 15 U.S.C. § 1291 (exempting certain sports telecasts from antitrust laws). The ASA does not expressly state that NGBs have such an exemption in the governing of amateur sports, but courts have consistently found that Congress implicitly exempted NGBs, in the oversight of amateur sports, from the antitrust laws. See, Behagen, 884 F.2d at 529-30; Eleven Line, 213 F.3d at 203-04; JES Properties, Inc. v. USA Equestrian, Inc., 458 F.3d 1224, 1230-31 (11th Cir. 2006).

2. Defining "Amateur" and "Professional"

USSF claims, however, that it also has monolithic control over professional soccer in the United States. USSF argues that it derives this power from, surprisingly, the very same ASA that gives it power over amateur sports. At first glance, this argument seems counterintuitive, as the ASA (known as the "Olympic and Amateur Sports Act") repeatedly uses the word "amateur" to qualify such terms as "athlete," "competition," and "sports organization." See, e.g., 36 U.S.C. § 220501(b). The entire statute is, in fact, peppered with the word "amateur," while the word "professional" hardly, if ever, appears. See, e.g., 36 U.S.C. §§ 220523 and 220524 (defining authority and duties of NGBs).

USSF argues that "amateur" is a term of art and must not be read in its ordinary sense. Cf. Behagen, 884 F.2d at 526 n.1. USSF reaches the conclusion that it has authority over professional U.S. Soccer through the following line of reasoning:

(1) The International Olympic Committee ("IOC") rules provide that the international federation for each sport has responsibility for determining eligibility requirements for its sport in the Olympic games.

(2) FIFA, the international federation for soccer, has allowed paid professionals to participate in Olympic soccer teams since 1984.

(3) Under the ASA, an "amateur athlete" is one who meets the eligibility standards of his or her sport's NGB. ...


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