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North American Soccer League, LLC v. United States Soccer Federation, Inc.

United States Court of Appeals, Second Circuit

February 23, 2018

NORTH AMERICAN SOCCER LEAGUE, LLC, Plaintiff-Appellant,
v.
UNITED STATES SOCCER FEDERATION, INC., Defendant-Appellee.

          Argued: December 15, 2017

         Appeal from a November 4, 2017 order of the United States District Court for the Eastern District of New York (Brodie, J.).

         North American Soccer League, LLC ("NASL") appeals from the denial of its motion for a preliminary injunction seeking a Division II designation pending the resolution of its antitrust case against the United States Soccer Foundation, Inc. ("USSF"). We evaluate NASL's motion under the heightened standard applicable to mandatory preliminary injunctions. NASL has not demonstrated a clear likelihood of success on the merits of its antitrust claim against USSF under 15 U.S.C. § 1. Accordingly, we AFFIRM the order of the District Court denying NASL's motion for a preliminary injunction, and we REMAND the matter for further proceedings on the merits of NASL's claims.

          JEFFREY L. KESSLER, Winston & Strawn LLP, New York, NY (David G. Feher, New York, NY; Steffen N. Johnson, Heather L. Kafele, Christopher E. Mills, Washington, D.C., on the brief), for Plaintiff- Appellant.

          GREGORY G. GARRE, Latham & Watkins LLP, Washington, D.C. (Lawrence E. Buterman, New York, NY; Christopher S. Yates, San Francisco, CA, on the brief), for Defendant-Appellee.

          Before: Parker, Wesley, and Chin, Circuit Judges.

          WESLEY, CIRCUIT JUDGE.

         After the denial of its requested Division II designation for the 2018 season of men's professional soccer, the North American Soccer League, LLC ("NASL") filed an antitrust suit against the United States Soccer Federation, Inc. ("USSF"). NASL also moved for a preliminary injunction, seeking designation as a Division II league pending resolution of the suit. This opinion addresses that motion. We conclude NASL has not demonstrated a clear likelihood of success on the merits of its antitrust claim under the heightened standard applicable to mandatory preliminary injunctions. Accordingly, we affirm the judgment of the United States District Court for the Eastern District of New York, N. Am. Soccer League, LLC v. U.S. Soccer Fed'n, Inc. ("NASL"), No. 17-CV-05495, 2017 WL 5125771 (E.D.N.Y. Nov. 4, 2017) (Brodie, J.), denying NASL's motion for a preliminary injunction.

         I

         As the regional governing body for soccer in the United States and Canada, USSF designates leagues as Division I, II, or III according to USSF's Professional League Standards (the "Standards"). The Standards establish requirements that a league must meet to gain a divisional designation-also called a sanction-for a season of play. The more competitive the division, the higher the bar. For example, the 2008 Standards required that a Division I league have a minimum of ten teams distributed in at least three time zones; a Division II league have a minimum of eight teams in at least two time zones; and a Division III league have a minimum of eight teams, with no time-zone requirement.

         Soccer leagues apply to USSF to receive annual designations for the upcoming season of play by submitting reports demonstrating their compliance, or plans for compliance, with the Standards. Leagues may submit requests for waivers from compliance with the Standards' requirements. The USSF Board votes on divisional designations after reviewing the recommendations of USSF's Professional League Task Force ("Task Force"). The Board is composed of fifteen directors, two of whom are chosen by the professional leagues.

         The same process applies for revising the Standards; the USSF Board works in conjunction with a Professional League Standards Task Force ("Standards Task Force").[1]Unchanged from 1996 to 2008, the Standards for all divisions were revised in 2008 and 2014, and for only Division II in 2010.[2]

         The three most prominent men's professional soccer leagues have historically occupied their respective divisions in isolation. Major League Soccer, LLC ("MLS") has been the only Division I men's soccer league since MLS's start in 1995. NASL has existed since 2009 and has operated as a Division II league since 2011. The United Soccer Leagues, LLC ("USL") ordinarily has filled the Division III slot. According to NASL, it long has harbored aspirations to compete against MLS in Division I; in contrast, USL has been content as an MLS feeder league.

         It often pays to be at the top, of course, and MLS has enjoyed competitive benefits as the top-tier league since its inception. Indeed, USSF, when establishing men's soccer in the United States, decided "to not sanction any other league as a [Division I] men's professional outdoor league until MLS had finished its second full season in 1997-to give it a 'runway' of sorts." Gulati Decl. ¶ 64. MLS's top-tier status has economic benefit as well. MLS and USSF have a "business relationship" through which Soccer United Market ("SUM"), a marketing company, has the rights to "bundle[d]" MLS and USSF sponsorship and broadcasting rights. Compl. ¶ 107; Gulati Decl. ¶ 230.[3]

         Like the other leagues, NASL annually applies to USSF for a divisional designation. It operated as a Division II league for the 2011-2017 seasons, receiving compliance waivers for all but one season. Although NASL made a play for a Division I designation for 2016, its application was denied, and NASL operated as a Division II league (with waivers) for that season. For the 2018 season, NASL applied for a Division II designation, requesting waivers for the minimum-team and time-zone requirements. The USSF Board rejected NASL's Division II application but gave NASL additional time to file for Division III status. NASL filed suit instead.

         NASL contends that USSF conspired with its membership and related entities in adopting, amending, and applying its Standards in an anticompetitive manner to preclude NASL and other leagues from competing with MLS in the Division I market. See 15 U.S.C. §§ 1-2. NASL requests preliminary injunctive relief in the form of a Division II league designation and permanent relief enjoining USSF from promulgating the Standards to separate leagues into divisions.

         NASL's motion for a preliminary injunction is tied to its allegations in the first count of its Complaint-that USSF violated 15 U.S.C. § 1 through a conspiracy to restrain competition. NASL asked the District Court for a preliminary injunction allowing it to operate as a Division II league. In a 49-page decision, the district court made detailed findings of fact and conclusions of law before concluding that NASL had not made a clear showing of entitlement to relief and denying the preliminary injunction. NASL, No. 17-CV-05495, 2017 WL 5125771, at *1, *21. NASL appeals, arguing the District Court abused its discretion in applying the preliminary injunction standard and in finding that NASL had not sufficiently showed its clear likelihood of success on the merits of its § 1 antitrust claim.

         II

         This Court reviews a district court's legal rulings de novo and its ultimate denial of a preliminary injunction for abuse of discretion. McCreary Cty. v. Am. Civil Liberties Union of Ky., 545 U.S. 844, 867 (2005); Almontaser v. N.Y.C. Dep't of Educ., 519 F.3d 505, 508 (2d Cir. 2008). "A district court abuses its discretion when it rests its decision on a clearly erroneous finding of fact or makes an error of law." Almontaser, 519 F.3d at 508.

         A. Applicable Standard for the Preliminary Injunction

         Courts refer to preliminary injunctions as prohibitory or mandatory. Prohibitory injunctions maintain the status quo pending resolution of the case; mandatory injunctions alter it.[4] Tom Doherty Assocs., Inc. v. Saban Entm't, Inc., 60 F.3d 27, 34 (2d Cir. 1995) (internal citation omitted). A party seeking a preliminary injunction must show (1) irreparable harm; (2) either a likelihood of success on the merits or both serious questions on the merits and a balance of hardships decidedly favoring the moving party; and (3) that a preliminary injunction is in the public interest. New York ex rel. Schneiderman v. Actavis PLC, 787 F.3d 638, 650 (2d Cir. 2015). Because mandatory injunctions disrupt the status quo, a party seeking one must meet a heightened legal standard by showing "a clear or substantial likelihood of success on the merits." N.Y. Civil Liberties Union v. N.Y.C. Transit Auth., 684 F.3d 286, 294 (2d Cir. 2012) (internal quotation marks omitted). The District Court concluded that NASL was seeking a mandatory injunction and imposed the heightened standard. NASL, No. 17-CV-05495, 2017 WL 5125771, at *7. NASL argues that using the heightened standard was error.

         Because the proposed injunction's effect on the status quo drives the standard, we must ascertain the status quo- that is, "the last actual, peaceable uncontested status which preceded the pending controversy." Mastrio v. Sebelius, 768 F.3d 116, 120 (2d Cir. 2014) (per curiam) (quoting LaRouche v. Kezer, 20 F.3d 68, 74 n.7 (2d Cir. 1994)).[5] Before this litigation, USSF would regularly evaluate NASL's applications and determine NASL's divisional designation. The relationship of annual application, assessment, and sanction determination ...


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