Major League Soccer

League gets dismissal of much of players’ suit, but September trial still set.

(Thursday, April 20, 2000) -- A federal judge has thrown out a key part of the Major League Soccer players’ class action lawsuit against the league.

Judge George A. O'Toole ruled yesterday that MLS's so-called single-entity ownership structure does not violate federal antitrust law. The judge ruled that it is not unlawful for MLS, rather than its individual teams, to own all players' contracts and to negotiate player contracts collectively.

But O’Toole is allowing several other issues to come to trial, scheduled for September 18. A jury will be asked to decide (1) whether the whole 1995 certification process whereby the United States Soccer Federation granted MLS sole Division I status created a monopoly in violation of U.S. law (2) whether a illegal conspiracy exists between MLS and the rest of the soccer world (through the USSF and world governing body FIFA) to illegally restrain player movement by requiring that transfer fees be paid after a player's MLS contract has expired; and (3) whether MLS's collective agreement with its players illegally limits the players' share of licensing agreements.

How important those issues varies depending on which side is doing the talking, though it is hard to dispute MLS scored a big win with the judge’s ruling.

"Yesterday, Judge O’Toole of the Federal District Court in Boston issued a ruling which essentially dismissed the heart of the plaintiff’s law suit, the players’ law suit," said MLS chief operating officer Mark Abbott. "The judge ruled that the single entity is both proper and lawful and does not violate the antitrust laws. This is what, of course, we’ve been saying . . . for he last three year’s of the law suit. There are a few minor issues on which, for technical reasons, we couldn’t seek summary judgment. They don’t relate to the single-entity. Those few issues remain in the case, but for all intents and purposes the case is over and MLS has won."

MLS Players Association attorney Jeffery Kessler, expressed disappointment in the ruling, but disagreed with Abbott’s assessment. Kessler contends the suit is far from over and the central issue -- whether MLS operates illegally as a monopoly -- remains intact.

"This ruling doesn't change anything, really," he said. "The key issue here is the monopolization issue. This issue in the one we will try starting September 18. If the jury finds in our favor, that MLS and U.S. Soccer conspired to prevent other soccer leagues from forming then, de facto, they will have struck down MLS' structure and we will have prevailed.

"Sure we're disappointed in the ruling. But we intend to appeal immediately and ask that it be heard on an expedited basis. We'll be in court as soon as possible asking for 1292 certification."

Under federal civil procedure rules, since O'Toole's ruling covers only some of the issues involved, he needs to give permission under Section 1292 for his ruling to be appealed now before the remaining issues are litigated. If he does give the 1292 certification, then it is likely the trial would be postponed until the First Circuit Court of Appeals hears and rules, and that could be a year or more.

"We’re going to press forward with the law suit because we think we have two issues that are extremely important which speaks to monopolization of the league and also he transfer fee issue. ," said MLSPA executive director John Kerr, Sr. "This is just a temporary setback."

The league, naturally downplays the importance of these remaining issues. "We have never, nor will we ever ask for or pay a transfer fee for a player whose contract has expired," Abbott said. As for the issue of the licensing fee, Abbott sought to downplay it by stating "their own expert says that at most the total amount of money involved is $330,000."

As for the certification by the USSF, he said, "It's a non-issue The certification received in 1995 was for only two years. No one else has ever come forward seeking sanction as a Division 1 entity."

In his 25-page ruling, which for the most part is a highly technical discussion of arcane points of antitrust law, O'Toole threw out counts one and four of the original suit. The first count alleged that MLS and its "operator-investors" "unlawfully combined to restrain trade or commerce in violation of the Sherman Antitrust Act."

The fourth count alleged that by definition the formation of the new league as a single entity limits competition in violation of the Clayton Antitrust Act.

The MLSPA alleged that MLS’s single-entity structure is a "sham" because the league's operator-investors are individual and different economic entities. O'Toole agreed, but he wrote: "As a factual matter, there is insufficient basis in the record for concluding that operators have divergent economic interests within MLS's structure. Even if one draws the most favorable inference on the plaintiffs' behalf, there is no reasonable basis for imposing liability."

In other words, the judge found that while MLS's investors may be different and divergent entities -- the Hunt family is different from Philip Anschutz who is different from the Kraft family, etc. -- they operate collectively within the framework of the league, and this is not in restraint of trade.

O’Toole also dismissed the MLSPA’s argument that the relationship between the league and its operators is like an illegal conspiracy to control prices between a corporation and its subsidiaries.

"In sum, the plaintiffs' deconstruction efforts are unavailing," he wrote. "MLS is what it is. As a single entity, it cannot conspire or combine with its investors in violation of Section 1 (of the Sherman Act) . . . MLS's policy of contracting centrally for player services is unilateral activity of a single firm. Since Section One does not apply to unilateral activity . . . the claim set forth in Count One cannot succeed as a matter of law."

Michael Cardozo, MLS's lead attorney in the suit, explained this part of the ruling thusly: "The judge said in effect MLS is one company with offices in a number of cities, each run by a different vice president. There is nothing illegal or in restraint of trade for a company to have multiple divisions or multiple branches . . . The judge found that MLS is one company, therefore, there is no conspiracy and no illegality."

The judge also threw out the players' claim that the very formation of MLS in the first place violates Section 7 of the Clayton Act. To try to simplify a complicated argument under somewhat arcane antitrust provisions, the players asserted the way the league was formed as a single-entity substantially lessened competition. Here O'Toole ruled that the law is not applicable because competition can only be lessened among existing entities joining together and, he wrote, "the formation of MLS did not involve the acquisition or merger of existing business enterprises, but rather the formation of a new entity which itself represented the creation of an entirely new market."

To win this argument, the players had to assert, even though a men’s Division I soccer league did not exist when MLS was formed, the market for such a league did exist because of the success of the 1994 World Cup in the U.S.

O’Toole rejected that argument: "The inevitability of a professional soccer league is not the same as the inevitability of multiple competitors. Granting that there would inevitably be a league, it was not inevitable that the league would be formed and would operate in the way of previous sports leagues."

Another interesting point in O'Toole's ruling is how he differentiates between MLS's structure and that of the National Football League. Previous court rulings have gone against the NFL in its attempts to be judged a single entity in some applications of its collective bargaining agreement, or in defending itself from an antitrust suit filed by the now-defunct United States Football League.

The MLSPA argued that if the NFL isn't a single entity, then MLS is not either. "The NFL, despite certain similarities, is fundamentally different from MLS," O’Toole wrote. "The NFL is a confederation fused from agreements among pre-existing, independently owned teams; unlike MLS, NFL football clubs do not exist as part of an overarching corporate structure . . . MLS cannot be subjected to the wide-ranging analysis of economic interests that have been applied to the NFL."

"We are enormously pleased by the judge's ruling," MLS commissioner Don Garber said. "We have been confident from the outset that the league's business structure was not only lawful, but the most efficient way for a professional soccer league in the country to be organized. For three years we have believed that our players' concerns should be resolved through negotiation, rather than litigation. We very much hope that in light of the Judge's ruling we can put this dispute behind us and work with our players -- our most important asset -- to grow our sport and expand its attractiveness."

Senior correspondent Robert Wagman can be e-mailed at bobwagman@soccertimes.com. Managing editor Gary Davidson can be e-mailed at editor@soccertimes.com.