In the News Law360

NY Court Tosses NASL's Suit Against Soccer Fed. Top Brass

A New York state judge on Wednesday threw out the North American Soccer League's lawsuit against board members of the U.S. Soccer Federation that challenges the federation's tiered professional league structure, ruling that the case overlaps with the antitrust suit ongoing in Brooklyn federal court.

Justice Andrea Masley ruled that the overlapping cases deal with "substantially similar" defendants and the same allegations and issues, making them too similar to both continue, and found that the federal case — which was filed first in 2017 — should take precedence over the state case.

NASL argues that the U.S. Soccer board of directors revises and manipulates the division standards for professional soccer to reportedly ensure that only Major League Soccer meets the criteria for Division I status — associated with more financial and sponsorship opportunities — while repeatedly relegating NASL to Division III. In its federal antitrust suit, Judge Masley said NASL made similar allegations against U.S. Soccer as an organization.

"[W]ithout dismissal of this action, there exists a possibility for conflicting rulings," Judge Masley wrote. "The federal court has been asked to determine whether the current Division standards are enforceable. This court has also been asked to analyze the USSF's board's denial of Division II status to NASL, whose denial was based on NASL's failure to fulfill the same Division standards as in the federal action."

Judge Masley found that even though the defendants named in the state case are members of U.S. Soccer's board of directors and not the organization itself, the parties are not substantially different because the board members govern U.S. Soccer and the decisions it makes.

"The directors/defendants were the parties allegedly responsible for causing the harm to the NASL," Judge Masley wrote. "For instance, 'count one' alleges that the 'actions of the [USSF's voting membership]' consisted of a conspiracy to restrain competition. [T]he board members retain complete governance over USSF."

While the U.S. doesn't have promotion and relegation, a system where teams can move up and down between tiers of leagues depending on how well they perform in the standings, in its federal suit NASL says being forced to operate as a third-tier league makes it impossible to attract fans and investors.

NASL alleges that U.S. Soccer and MLS are pushing it down to promote their favored league, United Soccer League, which is not seeking to compete with MLS. The league has positioned itself as a feeder league for MLS, similar to the minor league system in baseball and hockey.

After losing a bid for a preliminary injunction asking to be granted Division II status, NASL canceled its 2018 and 2019 seasons. NASL was denied a bid for a June 2019 trial date, which puts its 2020 season in danger of cancelation.

Counsel for the parties did not immediately respond to requests for comment Wednesday.

NASL is represented by Jean-Marie L. Atamian and Jordan Sagalowsky of Mayer Brown LLP.

The board members are represented by Andrew A. Kassof, Atif Khawaja and Shireen A. Barday of Kirkland & Ellis LLP.

The case is North American Soccer League LLC v. Sunil K. Gulati et al., case number 650579/2018, in the Supreme Court of the State of New York, County of New York.