The Chicago Daily Law Bulletin Published Timothy Liam EPSTEIN'S Article Entitled, "Soccer league tired of getting kicked around."

In a decision that may mark the end of the North American Soccer League, on Nov. 4, a New York federal judge denied the NASL’s request for a mandatory injunction granting it Division II status in its antitrust suit against the United States Soccer Federation.

U.S. District Judge Margo K. Brodie ruled the league failed to prove it was entitled to a preliminary injunction — despite successfully proving that absent Division II status it may face irreparable harm, that the balance of hardships weighed in favor of the NASL and that the public interest would not be harmed by an injunction.

In other words, while Brodie did find the NASL is harmed by U.S. Soccer’s actions, she did not find U.S. Soccer is breaking the law by inflicting such harm.

Without further judicial intervention, the survivability of the NASL is at risk.

To delay going out of business, the NASL sought an injunction from a federal court to enjoin U.S. Soccer from reclassifying the NASL during litigation. The litigation could last for several months or even years, meaning that an injunction may give the NASL additional time to face such adverse consequences.

The NASL originally filed an antitrust suit against U.S. Soccer in September. The league alleged the federation and three co-conspirators — Major League Soccer, Soccer United Marketing and the United Soccer League — unlawfully prevented the NASL from competing with MLS as a Division I pro soccer league.

The NASL also asserted that U.S. Soccer sought to illegally revoke the NASL’s Division II status in favor of MLS’ minor league, the United Soccer League, so that it could become the sole Division II league. Thus, the NASL argued it required an injunction to prevent U.S. Soccer from classifying leagues by division.

In an opposition to the injunction bid, the federation argued it goes to great lengths to prevent conflicts of interest when making governing decisions. The NASL called those claims “laughable” in an Oct. 23 reply.

In order to obtain an injunction, a party must prove four elements: (1) the threat of irreparable harm, (2) the balance of hardships tips in its favor, (3) the likelihood of success on the merits and (4) that it would be in the public’s best interest to grant an injunction. Salinger v. Colting, 607 F.3d 68, 79-80 (2nd Cir. 2010).

Brodie found three of the four elements satisfied. In fact, the judge expressly agreed that without an injunction, the NASL faces a “likely total loss of its business,” including the loss of potential investors who are exploring the possibility of bidding for new NASL teams in 2018. Thus, the threat of irreparable harm and balance of hardships elements were satisfied.

The court also held that “the grant of an injunction would not have harmed the public interest.” However, Brodie did not find that the NASL made a clear showing of entitlement to relief or likelihood of success on the merits.

Brodie found that the NASL was unable to demonstrate that U.S. Soccer is not entitled to determine and regulate professional division designations. The judge stated that although there is ample evidence of a conflict of interest between the USSF and Major League Soccer, such conflicts are not uncommon in membership associations and despite the conflicts, the federation still owes fiduciary duties to its members and, thus, they are protected.

The NASL appealed Brodie’s decision, stating “we're hopeful that the Second Circuit will deliver a ruling that allows the NASL to play at the Division II level in 2018 and enables us to continue growing and developing the sport.”

The 2nd Circuit granted the NASL’s appeal and also agreed to an expedited process. In its underlying motion, the NASL argues Brodie made fundamental legal errors in making her decision.

The NASL argues, among other things, that Brodie applied a much too scrutinizing standard in determining whether the NASL had a likelihood of success on the merits. The NASL argues that instead of treating the motion for a preliminary injunction as “preliminary,” she treated it as one for a mandatory injunction. The latter requires a more conclusive showing than an ordinary preliminary injunction.

The league also stated that Brodie’s purportedly incorrect definition of the “status quo” in the case led her to overlook the fact that the injunction would only bar U.S. Soccer from changing the league’s Division II status for the upcoming season. As a result, the 2nd Circuit’s interpretation of “status quo” will play a key role in the NASL’s appeal.

The appellate judges will review the key legal issues “de novo.” Under de novo review, appellate courts award no deference to the judgment which has been appealed. This non-deferential standard of review will be beneficial to the NASL, although it does not insure that the NASL will be successful in its appeal. In order to prevail, the panel of judges on the 2nd Circuit must construe the law differently than Brodie.

The rest of the litigation process remains on hold pending the outcome of the NASL’s appeal, including U.S. Soccer’s pending motion to dismiss the NASL’s complaint. However, the dispute between the entities continues outside of court. The NASL recently sent a letter to U.S. Soccer requesting it remove North Carolina FC owner Steve Malik from U.S. Soccer’s board of directors and replace him “with an individual who can fairly represent the NASL.”

The stakes are high, as the NASL risks being forced to go out of business if it loses in court. Even if it prevails, the litigation may still influence potential investors and any clubs who have indicated they are ready to join the league.

Soccer fans should expect oral arguments to be heard by the 2nd Circuit mid-December due to the expedited schedule.

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