17‐3585‐cv
N. Am. Soccer League, LLC v. U.S. Soccer Fed’n, Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
______________
August Term 2017
(Argued: December 15, 2017 Decided: February 23, 2018)
Docket No. 17‐3585
NORTH AMERICAN SOCCER LEAGUE, LLC,
Plaintiff‐Appellant,
v.
UNITED STATES SOCCER FEDERATION, INC.,
Defendant‐Appellee.
______________
Before: PARKER, WESLEY, and CHIN, Circuit Judges.
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.
______________
2
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
3
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
Individuals with current ties to any professional league
1
cannot be on the Task Forces and must abstain from USSF Board
votes on matters relating to the professional leagues.
Amendments proposed in 2015 for Division I, to which
2
NASL objected, never were adopted.
4
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
3 Under the agreement, which was extended for an eight‐
year term in 2015, SUM guarantees an annual amount of
marketing revenue, plus additional revenue if SUM hits monetary
targets. The bundling financially benefits both USSF and MLS.
5
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.
6
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
4 We focus on the status quo rather than the “mandatory”
and “prohibitory” terminology because “in borderline cases
injunctive provisions containing essentially the same command
can be phrased either in mandatory or prohibitory terms.” Int’l
Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 835
(1994) (“‘Do not strike,’” would appear to be prohibitory . . . [but]
‘Continue working,’ would be mandatory.”); Abdul Wali v.
Coughlin, 754 F.2d 1015, 1025 (2d Cir. 1985), overruled on other
grounds by O’Lone v. Estate of Shabaze, 482 U.S. 342 (1987) (“In many
instances, this distinction is more semantic[] than substantive.”).
7
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,
5 The “status quo” in preliminary‐injunction parlance is
really a “status quo ante.” See Holt v. Cont’l Grp., Inc., 708 F.2d 87,
90 (2d Cir. 1983) (referring to reinstatement of benefits as
“restoration of the status quo ante”); accord O Centro Espirita
Beneficiente Uniao Do Vegetal v. Ashcroft, 389 F.3d 973, 1013 (10th
Cir. 2004) (en banc) (per curiam) (“requir[ing] a party who has
recently disturbed the status quo to reverse its
actions . . . restores, rather than disturbs, the status quo ante, and
is thus not an exception” to the ordinary standard for preliminary
injunctions). This special “ante” formulation of the status quo in
the realm of equities shuts out defendants seeking shelter under a
current “status quo” precipitated by their wrongdoing.
8
USSF would regularly evaluate NASL’s applications and
determine NASL’s divisional designation. The relationship
of annual application, assessment, and sanction
determination was the last uncontested status between the
parties preceding the present controversy. This is how the
parties operated, year after year.
NASL seeks to alter this near‐decade‐long relationship
of annual sanctioning between the parties. Although NASL
has never received a designation absent the annual process,
it now requests a Division II designation for the duration of
this litigation. NASL, looking to upend the federation–
league sanctioning framework, seeks a mandatory
injunction.
NASL argues that applying a heightened standard
here would require applying that standard any time a party
seeks an injunction to maintain “critical benefits” they have
long received. Appellant’s Br. 3. This case is different than
the benefits‐termination cases, however. In those cases, the
status quo is one in which the plaintiff continues receiving
previously granted benefits. See Holt v. Cont’l Grp., 708 F.2d
87, 90 (2d Cir. 1983) (reinstating benefits restores the status
quo ante); see also Garcia v. Yonkers Sch. Dist., 561 F.3d 97, 99–
101, 107 (2d Cir. 2009) (permitting suspended students to
continue attending school). Here, USSF decides anew each
year which divisional designation applies to NASL, if any.
NASL’s Division II sanctions never last beyond one season
of play. Unlike in the benefits‐termination cases, the status
quo here involves a periodic sanction of limited life.
9
“The purpose of a preliminary injunction is . . . to
preserve the relative positions of the parties.” Univ. of Tex. v.
Camenisch, 451 U.S. 390, 395 (1981). Conflating status with
status quo, the parties center their arguments on NASL’s
status as a Division II league. However, the status quo is not
that NASL regularly received a Division II designation, nor
is it NASL’s lack of a Division II designation for 2018. The
status quo is the parties’ pre‐controversy position vis‐à‐vis
the other.6 Directing USSF to grant NASL a divisional
designation for 2018 and beyond would alter that
relationship.7 NASL’s request for a preliminary injunction
6 Some of our sister circuits have explicitly incorporated
this principle into their formulations of the status quo. See, e.g.,
SCFC ILC, Inc. v. Visa USA, Inc., 936 F.2d 1096, 1100 (10th Cir.
1991), overruled on other grounds by O Centro Espirita, 389 F.3d at
975 (“The status quo . . . is defined by the reality of the existing
status and relationships between the parties.”) (emphasis
omitted); Stemple v. Bd. of Ed. of Prince George’s Cty., 623 F.2d 893,
898 (4th Cir. 1980) (“[C]ourts . . . will frame any equitable relief to
preserve the last uncontested status between the parties.”); Wash.
Capitols Basketball Club, Inc. v. Barry, 419 F.2d 472, 475 (9th Cir.
1969) (“maintain[ing] the status quo between the litigants”) (citing
Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738 (2d Cir.
1953)).
The case might be different if USSF designated NASL a
7
Division II league and revoked that designation mid‐season.
There, the status quo between the parties arguably would be
NASL’s Division II designation for that season, in which case we
would evaluate NASL’s challenge to USSF’s revocation under the
ordinary standard for a preliminary injunction.
10
was correctly analyzed by the District Court under the
heightened standard for a mandatory injunction.8
B. Clear Likelihood of Success on the Merits
NASL’s claim is anchored in § 1 of the Sherman Act.9
Section 1 prohibits “[e]very contract, combination . . . or
conspiracy[] in restraint of trade or commerce.” 15 U.S.C.
§ 1; Am. Needle, Inc. v. Nat’l Football League, 560 U.S. 183, 189
(2010). Thus, to establish a clear likelihood of success under
8 NASL contends that, as an alternative to a showing of a
clear or substantial likelihood of success, it can satisfy the higher
standard by showing that failure to issue the injunction would
result in extreme or very serious damage. It relies on our earlier
statement “that a mandatory injunction should issue ‘only upon a
clear showing that the moving party is entitled to the relief
requested, or where extreme or very serious damage will result
from a denial of preliminary relief.’” Tom Doherty, 60 F.3d at 34
(quoting Abdul Wali, 754 F.2d at 1025). Irreparable harm,
however, is “indistinguishable” from extreme damage. Jacobson
& Co., Inc. v. Armstrong Cork Co., 548 F.2d 438, 441 n.3 (2d Cir.
1977). Therefore, as we have previously noted, the extreme‐
damage language in our jurisprudence remains “merely a
reaffirmation of the traditional reluctance to issue mandatory
injunctions . . . .” Id.
9 The District Court found that NASL had established
irreparable harm and that the injunction would not harm the
public interest. NASL, No. 17‐CV‐05495, 2017 WL 5125771, at *8–
9, *21. USSF does not focus on a failure by NASL in either area.
Thus, we start and finish with the lower court’s determination
that NASL had not demonstrated its clear likelihood of success on
the merits.
11
its § 1 claim, NASL must show “there is a contract,
combination . . . or conspiracy amongst separate economic
actors pursuing separate economic interests such that the
agreement deprives the marketplace . . . of actual or
potential competition.” Am. Needle, 560 U.S. at 195 (internal
citations and quotation marks omitted).
NASL alleges that “USSF and co‐conspirators MLS,
USL and SUM have entered into a continuing agreement,
combination, or conspiracy in restraint of trade with the
purpose, intent and effect of restraining horizontal
competition among top‐tier [and second‐tier] men’s
professional soccer leagues . . . .” Compl. ¶ 200. NASL
asserts that the arrangement “enables MLS to be the only
men’s top‐tier professional soccer league . . . by
promulgating, revising, manipulating, and selectively
granting and denying waivers from anticompetitive
Professional League Standards so that MLS, and only MLS,
will satisfy the USSF’s requirements . . . to qualify for men’s
top‐tier Division I sanctioning.” Compl. ¶ 201.
12
1. Contract, Combination, or Conspiracy10
For an arrangement to be a conspiracy under § 1, it
“must embody concerted action.” Am. Needle, 560 U.S. at
191. Concerted action exists where there is an agreement
between “separate economic actors pursuing separate
economic interests.” Id. at 195 (internal quotation marks
omitted). The fact that the co‐conspirators are capable, due
to their separateness, of acting in concert is not sufficient.
Proof of a conspiracy is required. Capital Imaging Assocs.,
P.C. v. Mohawk Valley Med. Assocs., Inc., 996 F.2d 537, 545 (2d
Cir. 1993).
A plaintiff must offer “direct or circumstantial
evidence that reasonably tends to prove . . . a conscious
commitment to a common scheme designed to achieve an
unlawful objective.” Monsanto Co. v. Spray‐Rite Serv. Corp.,
465 U.S. 752, 768 (1984). Rarely do co‐conspirators plainly
state their purpose. As a result, courts often must evaluate
circumstantial evidence of a conspiracy by weighing “plus
factors, which, when viewed in conjunction with the parallel
acts, can serve to allow a fact‐finder to infer a conspiracy.”
Because “[t]he question whether an arrangement is a
10
contract, combination, or conspiracy is different from and
antecedent to the question whether it unreasonably restrains
trade,” Am. Needle, 560 U.S. at 186, we first examine, pursuant to
NASL’s allegations, whether USSF, MLS, USL, and SUM
conspired within the meaning of § 1 of the Sherman Act.
Although we ultimately assume the existence of a conspiracy, we
address this antecedent question to clarify the framework the
lower court must use on remand.
13
United States v. Apple, Inc., 791 F.3d 290, 315 (2d Cir. 2015)
(citation and internal quotation marks omitted). In
Monsanto, the Supreme Court noted that courts should look
for evidence that “tends to exclude the possibility that the
[defendant was] acting independently.” Monsanto, 465 U.S.
at 764. In Matsushita, the Supreme Court elaborated on what
this meant: “[C]onduct as consistent with permissible
competition as with illegal conspiracy does not, standing
alone, support an inference of antitrust conspiracy.”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
588 (1986).
The District Court concluded that the USSF Board’s
promulgation of the Standards was not direct evidence of
concerted action among USSF, the leagues, and SUM.
According to the court, NASL needed to show there was “an
agreement to agree to vote a particular way” before the
Standards could satisfy the concerted‐action requirement.
NASL, No. 17‐CV‐05495, 2017 WL 5125771, at *10 (emphasis
omitted). The court then evaluated circumstantial evidence
of a conspiracy. Regarding the USSF Board’s votes to adopt
and amend the Standards as parallel conduct, the court
examined whether there were plus factors demonstrating an
antitrust conspiracy. Id. at *11. Although acknowledging
that the SUM agreement poses “a conflict of interest,” and
describing as “troubling” USSF’s admitted past intent to give
MLS a head start in the industry, the District Court
concluded that there was insufficient evidence of concerted
action because the evidence did not tend to exclude the
possibility of independent action. Id. at *11, *13, *15.
14
NASL argues that the District Court erred in applying
the Monsanto standard for inferring a conspiracy because the
Standards are direct evidence of a conspiracy. We disagree.
The Monsanto‐Matsushita framework works here. See
Monsanto, 465 U.S. at 764, 768; Matsushita, 475 U.S. at 588.
Courts use this framework for assessing conspiracies,
including those conspiracies provable by direct evidence.
See, e.g., Monsanto, 465 U.S. at 765 (finding substantial direct
evidence of vertical price‐fixing agreement). A plaintiff who
can proffer direct evidence of a conspiracy should have no
qualms with the Monsanto‐Matsushita framework because
direct evidence by definition shows the requisite concerted
action. See Cosmetic Gallery, Inc. v. Shoeneman Corp., 495 F.3d
46, 52 (3d Cir. 2015) (“‘Direct’ evidence must evince with
clarity a concert of illegal action.”).
Moreover, organizational decisions do not inherently
constitute § 1 concerted action. NASL’s argument
misinterprets the meaning of concerted action in antitrust
law. “[Not] every action by a trade association is . . .
concerted action by the association’s members.” AD/SAT,
Div. of Skylight, Inc. v. Associated Press, 181 F.3d 216, 234 (2d
Cir. 1999) (per curiam). Indeed, even though a “trade
association by its nature involves collective action by
competitors[,] . . . a trade association is not by its nature a
‘walking conspiracy.’” Consol. Metal Prods., Inc. v. Am.
Petroleum Inst., 846 F.2d 284, 293–94 (5th Cir. 1988). Rather,
it is when “a § 1 plaintiff establishes the existence of an illegal
contract or combination” that the plaintiff can “proceed to
demonstrate that the agreement constituted an unreasonable
restraint of trade.’” Capital Imaging, 996 F.2d at 542
15
(emphasis added). Evidence should “tend[] to show that
association members, in their individual capacities,
consciously committed themselves to a common scheme
designed to achieve an unlawful objective.” AD/SAT, 181 F.3d at
234 (emphasis added).
In fairness to NASL, organizational decisions
sometimes are § 1 concerted action. For example, when there
is direct evidence of an alleged conspiracy via an
association’s express regulation of its members’ market. In
Associated Press, the government challenged as illegal a
cooperative news association’s by‐laws that restricted
membership and prohibited members from distributing
news to nonmembers. Associated Press v. United States, 326
U.S. 1, 5 (1945). In ruling for the government, the Supreme
Court endorsed the district court’s conclusion that “[t]he by‐
laws of AP are in effect agreements between the
members . . . . [They are] contracts in restraint of commerce.”
Id. at 11 n.6. Similarly, in Indiana Federation of Dentists, the
Supreme Court found that a federation’s policy constituted
a collective refusal to deal with insurers and was an illegal
agreement. FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 457–58
(2009). These cases corroborate the obvious—that direct
evidence of an illegal “contract, combination, or conspiracy”
satisfies § 1’s concerted‐action requirement. See Allied Tube
& Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 500 (1988)
(finding agreement, in violation of § 1, to subvert standard‐
setting process by packing vote); see also United States v. Topco
Assocs., Inc., 405 U.S. 596, 601–02 (1972) (by‐laws allocating
market territory among chain members found
anticompetitive); Fashion Originatorsʹ Guild v. FTC, 312 U.S.
16
457, 462–64 (1941) (Guild’s rules and policies found
anticompetitive where purpose was to prevent sales and
create a monopoly).
If NASL were challenging the Standards themselves—
in totality—as violative of the antitrust laws, then the USSF
Board’s promulgation of them would constitute direct
evidence of § 1 concerted action in that undertaking.11 As for
How NASL is challenging the Standards is unclear. See
11
A‐135 (the District Court, with NASL’s later agreement,
summarized NASL’s position as: “You’re saying standards are
okay, Division I, Division II is okay; the manner in which [USSF]
set[s] the requirements for each is wrong”); see also A‐137 (NASL
stating “I’m challenging the requirements here . . . that a standard
setting body should set [the minimum‐team requirement] . . .
[challenging] [t]hat particular rule”). There is room for
disagreement as to whether NASL’s reference to the Standards, as
“effectuat[ing] the USSF’s anticompetitive conspiracy,” wages
war on the Standards or just fires shots at their role in the larger
alleged conspiracy. Compl. ¶ 122. See Summit Health, Ltd. v.
Pinhas, 500 U.S. 322, 339–40 (1991) (Scalia, J., dissenting)
(describing an alleged agreement to boycott as “not the totality of
the conspiracy, but merely the means used to enforce it”).
Compare Wilk v. Am. Med. Ass’n, 895 F.2d 352, 374 n.9 (7th Cir.
1990) (saying plaintiffs did not directly challenge standards
alleged to “perpetuate[] the boycott”), with Robertson v. Sea Pines
Real Estate Cos., Inc., 679 F.3d 278, 283, 288, 289 (4th Cir. 2012)
(finding direct evidence of conspiracy where defendants used
joint venture as an “instrumentality” and “conduit,” saying that
“board members conspired in the form of [their] rules, the very
passage of which establishes that the defendants convened and
came to an agreement”).
17
the clearly alleged overarching conspiracy to restrain
competition in markets for top‐ and second‐tier men’s
professional soccer leagues in North America, the
promulgation of the Standards is circumstantial evidence of
that conspiracy. The District Court properly evaluated the
Standards along with other circumstantial evidence of
NASL’s conspiracy allegations, concluding that NASL had
not sufficiently shown the presence of concerted action. See
NASL, 17‐CV‐05495, 2017 WL 5125771, at *11–15. But even
assuming NASL’s allegations show a conspiracy, NASL has
failed to show that the agreement was an unreasonable
restraint on competition under § 1.
2. Unreasonable Restraint
Only unreasonable restraints on competition violate
§ 1 of the Sherman Act. Courts use one of two tests here.
“[A] restraint may be adjudged unreasonable either because
it fits within a class of restraints that has been held to be ‘per
se’ unreasonable, or because it violates what has come to be
known as the ‘Rule of Reason.’” Ind. Fed’n of Dentists, 476
U.S. at 457–58. Regulation of league sports is a textbook
example of when the rule of reason applies. See Nat’l
Collegiate Athletic Ass’n v. Bd. of Regents of Univ. of Okla., 468
U.S. 85, 101 (1984).
NASL argues for an abbreviated, “quick look” version
of the rule of reason,12 which applies when “no elaborate
industry analysis is required to demonstrate the
The parties did not, and do not, dispute the rule of
12
reason’s applicability.
18
anticompetitive character of [the challenged] agreement.”
Ind. Fed’n of Dentists, 476 U.S. at 459 (internal quotation mark
omitted). Here, however, far from being obviously
anticompetitive, the Standards could be found to have a net
procompetitive effect, or no competitive effect at all. See Cal.
Dental Ass’n v. FTC, 526 U.S. 756, 771 (1999). Indeed, the
Standards are seemingly designed to avoid a flaw in the
relevant market: implosion of leagues due to minimal
consumer demand and teams’ financial instability. Because
the alleged restraints might avoid a flaw in the market, the
full rule‐of‐reason analysis applies. See id. (using three‐step
rule of reason when reviewing restrictions designed to
address deceptive advertising in market prone to
information gaps).
The District Court properly applied the three‐step
rule‐of‐reason framework. First, a plaintiff bears the initial
burden of demonstrating that a defendant’s challenged
behavior can have an adverse effect on competition in the
relevant market. United States v. Am. Express Co., 838 F.3d
179, 194 (2d Cir. 2016), cert. granted, Ohio v. Am. Express Co.,
138 S. Ct. 355 (Oct. 16, 2017) (mem.). Second, if the plaintiff
satisfies this initial burden, the burden shifts to the
defendant, who must demonstrate the procompetitive
effects of the challenged restraint. Id. at 195. Third, if the
defendant provides that proof, the burden shifts back to the
plaintiff to show that these “legitimate competitive
benefits . . . could have been achieved through less restrictive
means.” Id. (internal quotation marks omitted). Ultimately,
“[t]he true test of legality is whether the restraint imposed is
such as merely regulates and perhaps thereby promotes
19
competition or whether it is such as may suppress or even
destroy competition.” Nat’l Soc’y of Prof’l Eng’rs v. United
States, 435 U.S. 679, 691 (1978) (quoting Chi. Bd. of Trade v.
United States, 246 U.S. 231, 238 (1918)).
Under the first step of the rule of reason, a plaintiff
must demonstrate that the alleged restraint has an adverse
effect on competition. Am. Express, 838 F.3d at 194. The
plaintiff can do this directly, by showing an “actual adverse
effect on competition as a whole in the relevant market.” Id.
(emphasis omitted) (internal quotation mark omitted)
(giving examples of higher prices or reduced output).13 Or
the plaintiff can make her case indirectly, “by showing that
the defendant has sufficient market power to cause an
adverse effect on competition.” Id. (internal quotation marks
omitted). Plaintiffs seeking to show adverse effect indirectly
must demonstrate both the defendant’s market power and
“other grounds” for believing the challenged restraint harms
competition. MacDermid Printing Sols. LLC v. Cortron Corp.,
833 F.3d 172, 183–84 (2d Cir. 2016). These other grounds
might include price increases, reduced output or market
quality, significantly heightened barriers to entry, or reduced
consumer choice. Id. at 183 & n.42, 184, 186 n.56.
The District Court did not err in finding that NASL
indirectly established an adverse effect on competition in
The District Court found that NASL had not directly
13
shown an actual adverse effect on competition in the market.
NASL, 17‐CV‐05495, 2017 WL 5125771, at *18 & n.41 (no customer
confusion and no reduced output beyond NASL’s own exclusion
from Division II).
20
“the market for (1) top‐tier and (2) second‐tier menʹs
professional soccer leagues located in the United States and
Canada.” NASL, 17‐CV‐05495, 2017 WL 5125771, at *17 &
n.40.14 USSF’s market power is evident in its “power to . . .
exclude competition” through the Standards. United States
v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391 (1956). And
the ratcheting up of the Standards over the last two decades
imposes increasingly “significant barriers to entry” in the
relevant soccer market. CDC Techs., Inc. v. IDEXX Labs., Inc.,
186 F.3d 74, 80 (2d Cir. 1999); see also MacDermid, 833 F.3d at
183–84, 186 n.56.
The burden then shifts to USSF to offer evidence of the
Standards’ procompetitive effects. See Am. Express, 838 F.3d
at 195. Although fraught with anticompetitive potential,
standards promulgated by standard‐setting organizations
can be flush with “significant procompetitive advantages.”
See Allied Tube, 486 U.S. at 501. “The history of the restraint,
the evil believed to exist, the reason for adopting the
particular remedy, the purpose or end sought to be attained,
are all relevant facts.” Capital Imaging, 996 F.2d at 543
(quoting Chi. Bd. of Trade, 246 U.S. at 238).
The District Court also did not err in finding that USSF
offered sufficient evidence of the Standards’ procompetitive
virtues. See NASL 17‐CV‐05495, 2017 WL 5125771, at *18–19
(considering minimum‐team count, time zones, market size,
stadium capacity, and financial viability). The court found
The District Court defined the market as proposed by
14
NASL, and the parties do not contest this definition. In light of
that consensus, we regard the relevant market to be the same.
21
that the minimum‐team requirement increases output
through sustained fan interest and provides stability because
larger leagues are less likely to collapse. Id. at *19. The court
further found that the time‐zone and market‐size
requirements generate fan and media interest, and, along
with the stadium‐capacity requirement, promote league
quality. Id. The court lastly determined that the financial‐
viability requirements keep fans interested, stabilize the
leagues financially, and prevent free riding. Id. These
findings by the District Court are not clearly erroneous. See
Almontaser, 519 F.3d at 508.
The Standards further benefit the market by
coordinating necessary competition. As the Supreme Court
recognized when addressing the National Collegiate
Athletic Association’s (“NCAA”) role in regulating
intercollegiate athletics, “this case involves an industry in
which horizontal restraints on competition are essential if the
product is to be available at all.” Bd. of Regents, 468 U.S. at
101; see also id. at 102 (“[The NCAA’s] actions widen
consumer choice—not only the choices available to sports
fans but also those available to athletes—and hence can be
viewed as procompetitive.”).
NASL argues that the District Court erred in finding
some of the Standards’ requirements justified in part by their
procompetitive effects of eliminating free riding and
stabilizing the market. However, it is permissible for courts
to consider free riding and stability as two potential
procompetitive justifications in the standard‐setting context.
22
Eliminating free riders can be a procompetitive
advantage of alleged restraints on competition like vertical
price agreements. See Leegin Creative Leather Prods., Inc. v.
PSKS, Inc., 551 U.S. 877, 889–92 (2007) (discussing free riding
and other procompetitive justifications). The same holds
true in the standard‐setting context. Here, the District Court
did not err in finding that the Standards reduce leagues’
incentive to free ride on USSF’s efforts and expenditures
without making similar investments to generate fan interest
in the sport. NASL, 2017 WL 5125771, at *19.
Courts can also consider whether evidence of a
defendant’s stabilizing behavior constitutes a
procompetitive benefit of standard‐setting. NASL argues
that anticompetitive behavior cannot be justified as
preventing “[r]uinous competition, financial disaster, [or
the] evils of price cutting.” United States v. Socony‐Vacuum
Oil Co., 310 U.S. 150, 221 (1940). However, that logic is tied
to cases where courts were confronted with per se illegal
practices. Per se illegal practices, like horizontal price‐fixing,
are those that “because of their pernicious effect on
competition and lack of any redeeming virtue are
conclusively presumed to be unreasonable and therefore
illegal without elaborate inquiry as to the precise harm they
have caused or the business excuse for their use.” N. Pac. Ry.
Co. v. United States, 356 U.S. 1, 5 (1958). Though courts might
reject the stability rationale where conduct is so
anticompetitive as to be beyond redemption, see Socony‐
Vacuum, 310 U.S. at 228, that and other procompetitive
justifications still can be relevant elsewhere—as in the sports
standards context.
23
A defendant cannot, of course, justify anticompetitive
arrangements by saying an industry’s “special
characteristics” warrant them. Nat’l Soc’y of Prof’l Eng’rs, 435
U.S. at 689. But in the context of a soccer industry historically
prone to collapse, the free‐rider and stability justifications do
not rationalize anticompetitive effects—they evince
procompetitive ones. Specifically, as USSF urges, the
Standards avoid free riders on, and lock in consumer interest
for, the relevant competitive market. See Bd. of Regents, 468
U.S. at 117 (“[M]ost of the regulatory controls of the NCAA
are justifiable means of fostering competition among
amateur athletic teams and therefore procompetitive because
they enhance public interest in intercollegiate athletics.”)
(emphasis added).
NASL separately argues that the District Court should
have concluded NASL was clearly likely to succeed on the
merits once the court found problems with the SUM
agreement and USSF’s early use of the Standards to favor
MLS. NASL, No. 17‐CV‐05495, 2017 WL 5125771, at *11, *13.
As the District Court noted, however, USSF’s voting
procedures and early history are a far cry from the collusive
activity that would warrant per se antitrust analysis. See
Allied Tube, 486 U.S. at 501 (excluding product by packing the
annual meeting vote); Gelboim v. Bank of Am. Corp., 823 F.3d
759, 775 (2d Cir. 2016) (acting collusively by circumventing
LIBOR‐setting rules). NASL has not shown a meaningful
financial conflict of interest stemming from the SUM
agreement; Board members with ties to professional leagues
do not participate in the Task Forces and must abstain from
votes regarding the Standards. As for USSF sheltering MLS
24
from competition in the mid‐1990s, USSF’s alleged co‐
conspirator leagues did not yet exist. Any anticompetitive
promulgation or misuse of the Standards would be
attributable to USSF alone. And unilateral action does not
violate § 1 of the Sherman Act. Am. Needle, 560 U.S. at 190–
91; see also United States Football League v. Nat’l Football League,
842 F.2d 1335, 1372 (2d Cir. 1988) (saying prior judgments
against defendant, “admitted as evidence of a longstanding
conspiracy,” were “at best marginally probative of an
ongoing intent to exclude competitors”).
Because USSF has demonstrated procompetitive
effects of the Standards, the burden shifts to NASL to prove
that “any legitimate competitive benefits offered by [USSF]
could have been achieved through less restrictive means.”
Am. Express, 838 F.3d at 195 (internal quotation mark
omitted). Less restrictive alternatives are “those that would
be less prejudicial to competition as a whole.” Capital
Imaging, 996 F.2d at 543. The District Court did not err in
concluding that NASL failed to demonstrate viable less
restrictive alternatives to the current Standards.
NASL points to the earlier renditions of the Standards
as less restrictive alternatives to the current version of the
Standards.15 NASL notes, for example, that the Standards’
eight‐team requirement for Division II is less restrictive than
its current twelve‐team requirement. Having fewer
requirements generally is less restrictive than having more.
But NASL fails to show how reverting to earlier versions of
15 By making this argument, NASL apparently concedes
that the earlier Standards had procompetitive justifications.
25
the Standards would achieve the same legitimate
procompetitive objectives as the Standards’ current form.
The Standards’ evolution could show simply that its earlier
renditions were no longer viable. Growing industries have
developing standards; antitrust plaintiffs cannot just point to
earlier standards as less restrictive alternatives without
additionally showing the equivalent viability of the
alternatives proffered.
NASL also urges that eliminating the Standards—
using league rules instead of federation rules—is a less
restrictive alternative. Again, we fail to see that leagues‐
based rules would accomplish the same ends as those issued
by a federation. As the Supreme Court said of the NCAA’s
regulating function in intercollegiate sports, “[w]hat the
NCAA and its member institutions market in this case is
competition itself—contests between competing institutions.
Of course, this would be completely ineffective if there were
no rules on which the competitors agreed to create and
define the competition to be marketed.” Bd. of Regents, 468
U.S. at 102. The same holds true here.
III
NASL has a case left to make. But we cannot say at
this point that NASL has shown a clear likelihood of its
success on the merits under 15 U.S.C. § 1. Accordingly, the
order of the District Court denying NASL’s motion for a
preliminary injunction is AFFIRMED, and the matter is
REMANDED for further adjudication of this case on the
merits.
26