The opinion of the court was delivered by: Hon. Harry D. Leinenweber
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant U.S. Soccer Federation's Petition to Confirm an Arbitral Award; Plaintiff's Motion for Partial Summary Judgment; Defendants' Motion to Exclude the Expert Opinion of Rodney Fort; and Defendants' Motions for Summary Judgment on Plaintiff's Antitrust, RICO, and State Law Claims. For the reasons stated herein, the arbitral award is confirmed; Plaintiff's Motion for Partial Summary Judgment is denied; Defendants' Motions to Exclude and for Summary Judgment on the Antitrust claim are granted; and Defendants' Motion for Summary Judgment on the RICO and State Law Claims is granted in part and denied in part.
A. Parties and Related Entities
Due to the size and complexity of this case, the following background is necessarily incomplete. Nonetheless, the Court provides a brief summary of the case, generally noting where there is a significant dispute (such a notation does not, however, constitute a ruling on what is or is not properly disputed under Local Rule 56.1).
Plaintiff ChampionsWorld was formed in 2000 by Carmelo "Charlie" Stillitano ("Stillitano"), its CEO throughout its existence. From 2001 through 2005, ChampionsWorld organized and promoted soccer matches between prominent international men's professional soccer teams, played (with a few exceptions) on U.S. soil.
The Federation Internationale de Football Association ("FIFA") is the international governing body for soccer, and is responsible for such international competitions as the World Cup. FIFA is not a party to this litigation.
Defendant United States Soccer Federation, Inc. ("USSF") is a membership organization. USSF is the FIFA National Association member for the United States, and claims to have held that role since the early 20th century. It is a member of the Confederation of North, Central American and Caribbean Association Football ("CONCACAF"), and is the national governing body for soccer recognized by the United States Olympic Committee ("USOC"). USSF is governed by a National Council comprised of elected representatives from USSF's constituent groups, and also has a Board of Directors, similarly comprised. USSF maintains that its sanction is required for any match played on U.S. soil involving foreign, FIFA-affiliated teams; it also charges substantial sanctioning fees.
Defendant Major League Soccer, LLC ("MLS") is the Division I professional men's soccer league based in the United States, and a member of USSF. It has an unusual structure for a sports league, with a joint Board of Governors and several investor-operators responsible for various teams (the parties sometimes refer to these as the MLS "owners.") For additional history, see Fraser v. Major League Soccer, L.L.C., 284 F.3d 47, 47-55 (1st Cir. 2002).
In 2002, a group consisting of most of the MLS investors formed Soccer United Marketing (SUM), a marketing and promotion entity which now, among others, represents MLS and USSF.
A few more introductions are in order. Sunil Gulati ("Gulati") is, since 2006, President of USSF. Before that, he was USSF Vice President, and is the President of Kraft Soccer, evidently the company through which the Kraft family became MLS investors and operators of the New England Revolution MLS team. Gulati frequently represented the Kraft family and/or Kraft Soccer at MLS and SUM proceedings.
Don Garber ("Garber") is the MLS Commissioner and CEO of SUM; he also sits on USSF's Board of Directors. Garber and Gulati communicated fairly often about soccer matters. Charles "Chuck" Blazer ("Blazer") is a FIFA Executive Committee member, and was at all relevant times CONCACAF General Secretary.
In 1975, Pres. Gerald Ford formed a Commission on Olympic Sports. The Commission's final report noted, among other things, that: (a) USSF became affiliated with FIFA in 1913; (b) unlike the other sport governing bodies, USSF's members included amateur and professional leagues; and (c) USSF derived income from fees relating to "Foreign Games/Tours." That report was delivered to Congress before the passage of the Amateur Sports Act of 1978. (The Act was amended in 1998 and renamed the Ted Stevens Olympic and Amateur Sports Act, and is now codified at 36 U.S.C. §§ 220501, et seq.)
As part of its successful bid to host the 1994 FIFA Men's World Cup, USSF agreed to facilitate the development of a Division I professional soccer league in the United States. USSF selected Major League Professional Soccer, Inc. ("MLPS") (later to become MLS) from among three applicants to become that league (and to become a USSF member). Alan Rothenberg ("Rothenberg"), then-President of USSF, was involved in developing and founding MLPS, although Mark Abbott ("Abbott") (MLS's 30(b)(6) witness and current President) testified that Rothenberg did not participate substantively in selecting MLPS. Plaintiff contends that process was not genuinely competitive. MLS was formed in 1995, and played its inaugural season the following year.
It appears that the World Cup Organizing Committee lent $5 million to MLPS to get the league running (that loan was later assumed by MLS). After the World Cup, surplus funds, as well as the right to collect on that loan, were transferred to the newly-formed United States Soccer Foundation ("Foundation"). (The parties dispute how independent the Foundation is from USSF.) Instead of repaying the loan in cash, MLS entered into an arrangement whereby the Foundation incrementally forgave the loan in exchange for marketing benefits such as sponsorship placement on an MLS team's jersey and the right to use MLS's marks. See Abbott Dep. 77:11-80:23. Plaintiff disputes that the loan was ever truly repaid.
USSF has repeatedly stated its support for MLS (and the women's professional leagues), and that the leagues' success is important to the good of soccer in the United States. USSF has helped fund stadium development for certain MLS teams (though, Defendants contend, only in exchange for fair consideration). USSF also helped fund Project 40, which has been described in different ways throughout the record, but appears to have been intended to support aspiring professional soccer players.
2. The Background of This Dispute
From 1996 to 2002, MLS promoted over 40 matches between FIFA-affiliated National or club teams, but the games were generally not as well attended as Plaintiff's, nor did they necessarily feature the same caliber teams. After its founding, SUM considered acquiring all or part of ChampionsWorld several times, but talks failed. SUM created SUM International to promote high-caliber international matches, noting in a memorandum that "leaving the field open to ChampionsWorld and other promoters will prove extremely damaging to SUM and MLS." Pl.'s Resp. to Defs.' Statement of RICO Facts, Ex. EE, at Bates No. MLS 044641-643.
For all or nearly all of ChampionsWorld's matches, Plaintiff entered into contracts or "match agreements" with USSF. The agreements set forth, among other things, Plaintiff's agreement to pay a fee and post a performance bond in return for USSF's agreement to sanction the match.
Although ChampionsWorld eventually went bankrupt, some of its games were successful in drawing large crowds and high gross gate receipts. In 2003, ChampionsWorld's average attendance at U.S. matches was 45,427, and it paid an average sanctioning fee of over $200,000 per match.
USSF claims that it has been sanctioning international games, and charging sanctioning fees, since the early 20th century; Plaintiff objects to USSF's historical evidence and argues that USSF's bylaws did not impose sanctioning fees on non-USSF members until 1999. In any event, USSF's general sanctioning fee is an amount calculated as follows:
* 5.25% of the gross gate receipts for matches involving one foreign club team;
* 9% of the gross gate receipts for matches involving two foreign club teams;
* 11.25% of the first $200,000, and then 15% of the remaining gross gate receipts for matches involving any country's national team ("a National Team").
See, e.g., Pl.'s Resp. To Def.' Statement of Antitrust Facts, Ex. OOO. (The actual percentages appear to have varied over time.) Promoters are responsible for these fees, regardless of whether they are members of USSF. Throughout its existence, Plaintiff questioned whether USSF had authority to sanction its games and charge these fees.
Although the parties hotly dispute when the policy originated, at all relevant times USSF gave a "discount" to promoters of international matches who put on matches as a part of a doubleheader with an MLS game; that is, the sanctioning fee due for the international match was calculated based on 50% of the gross gate receipts of the doubleheader event (rather than the ordinary 100% of gross gate receipts). (The parties dispute whether the discount applied only to MLS games.) Some of ChampionsWorld's games were doubleheaders.
Similarly, USSF claims that it has required promoters to put up "performance bonds" (to ensure payment of sanctioning fees) for decades. Again, Plaintiff contends that USSF rules did not require fees (and therefore, bonds) from non-members before 1999. USSF requires bonds in the greater of:
* $3,750 per foreign club team per game;
* $25,000 for any game involving a National Team; or
* an estimate of the anticipated percentage payments that will be due to USSF, CONCACAF and FIFA after the match. The estimate is in the sole discretion of the Federation.
See id. The bond amount could also vary depending on the number of games at issue.
Plaintiff disputes that all promoters have had to post such bonds. Plaintiff points out that MLS teams benefit from using a collective "blanket bond" of $50,000, and notes several other incidences of USSF issuing fee waivers (for example, to Nike as part of a Licensing Agent Agreement; the parties dispute whether that waiver was assigned later, with the rest of the Agreement, to SUM.) SUM undisputedly paid sanctioning fees to USSF.
USSF contends that its staff members made decisions regarding fee and bond amounts independent of anyone at MLS. Plaintiff disputes this, claiming that Defendants worked together to run it out of business, and pointing to communications from or relating to individuals like Gulati, who have overlapping connections to SUM, MLS, and USSF.
At all relevant times, FIFA charged a fee of 2% of the gross receipts for any match between two National Teams of FIFA members (less a deduction for certain taxes and fees). Similarly, for matches played in its territory, CONCACAF has charged a fee of: 2% of the gross receipts (again, less a deduction) for matches between two National Teams, and 2% of the gross receipts for international club team matches. Under the ChampionsWorld-USSF match agreements, USSF was responsible for the fees payable to FIFA, CONCACAF, and any state associations.
In 2001 and 2002, USSF set the bond amounts for ChampionsWorld's matches at the base bond level. Plaintiff was late in "closing out" its financial obligations for every game in 2002 and 2003; Plaintiff does not dispute this, but contends that it is essentially irrelevant, pointing to testimony from USSF employees that late fees are generally not collected. In 2003, USSF set performance bonds for all but one of Plaintiff's matches higher than the base bond amount - most often, at $100,000. At Plaintiff's request, USSF significantly reduced the bond requirements for some of Plaintiff's 2003 games.
In 2003, in support of Stillitano's application to become a FIFA-licensed match agent, USSF Secretary General Dan Flynn wrote a letter stating that ChampionsWorld had consistently submitted required paperwork and fees to USSF and to the participating teams, that USSF had never received any complaints regarding Stillitano, and calling his track record with USSF "impeccable." See Pl.'s Opp'n to Defs.' Mot for RICO Summ. J. Ex. N.
In 2004, USSF set ChampionsWorld's performance bonds above the base amount (evidently for every game) -- generally, $75,000, and did not agree to reduce them. Plaintiff paid the 2004 bonds in a single $675,000 payment, which, it contends, was at USSF's insistence. Plaintiff contends that Chuck Blazer objected to Plaintiff not being allowed to meet that bond amount with a letter of credit, as USSF rules allegedly permit. ChampionsWorld did not pay the balance of the fees owed for its 2004 matches.
ChampionsWorld suffered substantial losses during its existence, filed for bankruptcy in January 2005, and ceased doing business in May 2005.
Plaintiff relies heavily on a series of e-mails and communications, mostly between, among others, Gulati, Garber, Abbott, and Kraft Soccer's Brian O'Donovan, to demonstrate that, e.g., MLS and/or SUM improperly sought special breaks on sanctioning fees; MLS and/or SUM could use USSF's structure, contacts, and/or members to their benefit; MLS and/or SUM affiliates were improperly consulted regarding Plaintiff's sanctioning fee and bond amounts; or that they were gleefully plotting Plaintiff's demise. Needless to say, Defendants contest many of these documents' admissibility, as well as the conclusions that Plaintiff draws from them regarding who spoke on behalf of whom, and whether or not the discussions were appropriate. The Court will discuss the admissibility of these various documents as necessary, below.
For some undisclosed period of time, USSF provided MLS and/or SUM with an international games report -- that is, a report of upcoming international games promoted by other promoters. USSF's Tom King maintained, however, that the information was provided to any promoter that asked, and was given to other promoters verbally.
Plaintiff's Complaint originally brought claims sounding in antitrust (Counts I through III), civil RICO (Counts IV and V), and contract, along with related doctrines (Count VI through Count X).
a. Arbitration Proceedings
FIFA has a standing committee called the Players' Status Committee (the "PSC"), which acts as its dispute resolution body. See FIFA Statutes, § 34, 49 (2011). The PSC is the designated arbiter listed in the Match Agent Regulations ("MARs"), to which (as set out in this Court's May 2007, opinion) ChampionsWorld became bound when Stillitano applied to become a FIFA-licensed match agent. The Court of Arbitration for Sport ("CAS") is an arbitral court headquartered in Lausanne, Switzerland. When arbitrating FIFA-related disputes, the CAS applies FIFA's statutes and regulations and, secondarily, Swiss law. PSC decisions are appealable to the CAS.
On May 4, 2007, this Court granted the Defendants' Motion to Stay this action pending arbitration before the PSC. That November, Plaintiff filed a claim for arbitration against Defendants, which included its antitrust and RICO claims. FIFA rebuffed the arbitration request, in part because only individuals (not corporations) may participate in FIFA's dispute resolution process.
In September 2008, USSF instituted an arbitration action against Stillitano, limited to whether FIFA's rules authorized USSF to: (1) sanction games such as Plaintiff's, (2) charge sanctioning fees and a performance bond, and (3) notify FIFA if a match agent refused to pay the fees or bonds. The original petition also asked (4) whether USSF, FIFA and/or CONCACAF had to return any sanctioning fees to Stillitano. Plaintiff objected to that arbitration, and the matter was submitted to the PSC for its determination of its own jurisdiction. The PSC determined that it had jurisdiction over USSF's petition.
Plaintiff appealed that conclusion to the CAS, which affirmed the PSC's conclusion with regard to first three questions (but not the fourth), and noted that the PSC's jurisdiction was limited to interpreting FIFA's Statutes and regulations. The case was returned to the PSC for a ruling on the merits. The PSC
subsequently found that under FIFA's statutes and regulations:
* USSF has the authority to require matches between foreign national or club teams on U.S. soil to be sanctioned by it;
* USSF has the right to charge sanctioning fees for such matches and require the posting of a bond securing those fees; and
* USSF has the right to notify FIFA if a FIFA-licensed match agent refuses to pay its sanctioning fees or post performance bonds in connection with such games.
The PSC concluded that all of these principles have applied at least since 2001, even though FIFA's statutes only explicitly recognized members' sanctioning authority over club games played on their territory since 2004.
Plaintiff appealed the merits decision to the CAS, which subsequently affirmed the PSC's ruling as a reasonable interpretation of FIFA's statutes and regulations. It held that USSF had the authority to sanction and charge sanctioning fees for foreign national team or club matches played on U.S. soil, and to notify FIFA regarding delinquent match agents. In a procedure uncommon in U.S. courts, Plaintiff had to name FIFA (as the entity of which the PSC is a part) as a respondent in its appeal; FIFA submitted briefs and arguments to the CAS panel. Plaintiff evidently did not appeal the CAS decision to the Swiss Supreme Court. USSF has now moved to confirm the arbitral award.
b. Litigation Proceedings
On July 21, 2010, the Court denied Defendants' Motion for Judgment on the Pleadings regarding Counts I through IX, and dismissed Count X without prejudice. In that ruling, the Court found as a matter of law that the Ted Stevens Act does not grant USSF authority to govern professional soccer in United States, "except to the extent necessary for USSF to govern the participation of professional players in the Olympic Games and related events. . . . USSF is not entitled to an exemption from the antitrust laws regarding professional soccer, except to [that extent]." ChampionsWorld LLC v. U.S. Soccer Federation, 726 F.Supp.2d 961, 975 (N.D. Ill. 2010).
On September 14, 2011, Plaintiff voluntarily dismissed
Counts II, III, and IV (its Sherman Act Section 2 and USSF RICO Enterprise claims). Accordingly, the only remaining counts are Counts I, V, and VI-IX.
The bulk of this opinion is devoted to summary judgment; other applicable legal standards will be set out in the relevant sections. The Court applies the ordinary summary judgment standard. See, e.g., FED. R. CIV. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). The Court discusses the extent of the parties' compliance with Local Rule 56.1 below.
Plaintiff consistently objects that Defendants use the term "FIFA Affiliate Exhibition Matches" to distort the issues, insisting that USSF's policies purported to govern a match involving any foreign soccer-playing entity, not merely those affiliated with FIFA members. See, e.g., Pl.'s Mem. in Opp'n to USSF's Pet. to Enforce CAS Ruling 7; Pl.'s Mem. in Opp'n to Defs.' Mot. For RICO Summ. J. 2. Defendants note that all of Plaintiff's games did involve FIFA affiliates, and objects that Plaintiff lacks standing to challenge its policy as applied to other matches. See, e.g., USSF's Opp'n to Pl.'s Mot. For Partial Summ. J. 6-7 & n.5. (USSF raised the issue in a footnote, and Plaintiff does not appear to have directly responded. Standing, however, is jurisdictional, and not waivable.)
The Court agrees that, at least with regard to the contract claims, Plaintiff's claims are predicated on its relationship with USSF, and USSF's authority over Plaintiff's matches. Plaintiff may well agree. See Pl.'s Reply in Supp. of its Mot. For Partial Summ.
J. 1 ("To prevail . . . USSF must show that it had authority to charge its own sanctioning fees upon professional soccer matches promoted by ChampionsWorld between 2001 and 2004.")
Under RICO, a plaintiff has standing if it has suffered: "(1) an 'injure[y] in [its] business or property' (2) 'by reason of' (3) the defendants' 'violation of section 1962.'" RWB Services, LLC v. Hartford Computer Group, Inc., 539 F.3d 681, 685, 687 (7th Cir. 2008) (noting also that plaintiffs must be injured by at least one predicate act, but that courts should examine the injury in the context of the entire RICO violation to assess the requisite causation.). See also 18 U.S.C. § 1964(c).
Plaintiff's RICO liability theory is premised on the claim that USSF falsely claimed exclusive sanctioning authority over foreign professional soccer matches played in the United States, and then demanded fees and bonds in unjustifiable and discriminatory amounts calculated in part to drive Plaintiff out of business. To the extent that Plaintiff's business was injured by reason of this alleged racketeering activity, it is only in relation to games that Plaintiff promoted or tried to promote. See Pl.'s Opp'n to Defs.'s Mot. for RICO Summ. J. 26 (noting that Plaintiff suffered RICO harm: (1) in paying the sanctioning fees and bonds, and (2) because the alleged misconduct was intended to (and did) drive its investors away.) Plaintiff has conceded that all of its matches involved FIFA affiliates, and not argued that it has broader standing. Furthermore, Plaintiff has made little, if any, genuine effort to establish a violation of § 1962 beyond the context of FIFA-affiliate matches - including whether such matches occur, of USSF actually sanctions them. Although this is a closer question, absent such an explanation, the Court concludes that Plaintiff can only establish standing to challenge USSF's conduct as it pertains to FIFA-affiliated matches.
Antitrust standing is not jurisdictional, and need not be addressed at this juncture. Hammes v. AAMCO Transmissions, Inc., 33 F.3d 774, 778 (7th Cir. 1994).
B. USSF's Petition to Enforce the Arbitral Award
USSF has petitioned under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention" or "Convention") for recognition and enforcement of the arbitral decision in CAS 2010/A/2241 (Charles Stillitano v. United States Soccer Federation (USSF) & Federation Internationale de Football Association (FIFA)). Thomson Dec. Ex. A (hereinafter, "2011 CAS Ruling"). Plaintiff objects that: (a) the decision falls outside of the Convention; (b) venue in this Court is improper; and (c) several defenses to enforcement under the Convention apply.
The Convention is enacted into U.S. law as Chapter 2 of the Federal Arbitration Act ("FAA"). 9 U.S.C. § 201, et seq. Article 1
(1) of the Convention provides that it applies: to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where recognition and enforcement of such awards are sought. . . .[and to] arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.
Convention Art. I, opened for signature June 10, 1958, 21 U.S.T. 2517, 330. Its implementing legislation, however, limits the Convention's applicability. Lloyd's London v. Argonaut Ins. Co., 500 F.3d 571, 577 (7th Cir. 2007)(citing 9 U.S.C. § 202). Section 202 defines a Convention award as:
An . . . arbitral award arising out of a legal relationship, whether contractual or not, which is considered as commercial. . . . An . . . award arising out of such a relationship which is entirely between citizens of the United States shall be deemed not to fall under the Convention unless that relationship involves property located abroad, envisages performance or enforcement abroad, or has some other reasonable relation with one or more foreign states.
Id. Because the various entities' relationships are integral to this discussion, the Court pauses summarize them (as relevant here, and very generally) as follows:
Stillitano, USSF, and ChampionsWorld are or were U.S. citizens; FIFA is Swiss. As relevant here, only ChampionsWorld and USSF are parties to this litigation. The agreement under which this Court compelled arbitration (under Chapter 1 of the FAA) is Stillitano's match agent application to FIFA. (This Court ruled previously that ChampionsWorld was bound by that agreement due to its relationship to Stillitano, and found that USSF could enforce the agreement essentially because it was an intended beneficiary thereof.) Because arbitration before the PSC can only involve individuals (not corporations), this Court ruled in 2008 that Stillitano, though not a party, could arbitrate on Plaintiff's behalf.
In its petition here, USSF argued that the relevant relationship arises out of the commercial contracts between Plaintiff and USSF (that Stillitano executed as CEO and, in some cases, a FIFA-licensed match agent), and that the award is foreign and/or has a reasonable relation to a foreign country because: (a) FIFA was a named respondent in the CAS proceeding; (b) the seat of arbitration was Switzerland; and (c) the CAS panel said that it would apply FIFA statutes and, complementarily, Swiss law. See Pet. 4.
Plaintiff appears to agree that this dispute and award arise out of a commercial contractual relationship between it and USSF, but strenuously objects that neither the parties' relationship nor the arbitral award is foreign enough to bring the award within the Convention. Plaintiff argues, in part, that FIFA's participation in the CAS proceeding - defending its ruling as the arbiter below - does not make the award arise "out of such a relationship." Pl.'s Mem. in Opp'n to Pet. 12. In essence, Plaintiff claims that FIFA's appearance before the CAS is not a sufficient (or at least, not the correct) "relationship" to bring the CAS ruling within the Convention.
In its reply, USSF raised several alternative arguments for the first time, including that the award also arose from a relationship (as opposed to an award) not entirely between U.S. citizens, because FIFA had issued the match agent license. Further, USSF argued, the Court can enforce the award pursuant to Chapter 1 of the FAA, or under the doctrine of issue preclusion (regardless of whether the award is confirmed). See id. at 6-7 n. 7 & 8. The Court sought briefing from Plaintiff in response to these new arguments, see DKT 430, which is now complete.
1. Applicability of New York Convention
Although the parties do not express it as such, they seem to construe the second sentence of § 202 differently, giving the phrase "which is entirely between citizens of the United States" different modifiers. If it modifies "an agreement or award," Defendant's construction is plausible -- the CAS "award" is arguably "between" the parties and FIFA. If it modifies "such a relationship," however, the commercial relationship identified in the first sentence of § 202 must have included FIFA or another foreign ...