Fraser v. Major League Soccer, L.L.C.

284 F.3d 47 (1st Cir. 2002)

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Nature of the Case

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Facts

In 1988, the USSF, the national governing body of soccer in the United States, was awarded the right to host the 1994 World Cup soccer tournament in the U.S. In consideration for the sponsorship rights, the USSF promised to establish a viable Division I professional soccer league in the U.S. as soon as possible. The USSF decided to sanction only one Division I professional league. No other country has sanctioned more than one Division I league within its borders. Three organizations presented competing plans to develop a Division I professional soccer league. The USSF board tentatively selected D as the exclusive Division I professional soccer league in the U.S. The USSF then decided it would consider sanctioning additional leagues which could meet rigorous new financial and operating standards beginning with the 1998 season. D was officially formed in February 1995 as a limited liability company under Delaware law. D retains significant centralized control over both league and individual team operations. MLS owns all of the teams that play in the league (a total of 12 prior to the start of 2002), as well as all intellectual property rights, tickets, supplied equipment, and broadcast rights. D sets the teams' schedules; negotiates all stadium leases and assumes all related liabilities; pays the salaries of referees and other league personnel; and supplies certain equipment. D has the 'sole responsibility for negotiating and entering into agreements with, and for compensating, Players.' D contracts with these investors to operate nine of the league's teams (the league runs the other three). The investors have 'exclusive right and obligation to provide Management Services for a Team within its Home Territory' and is given leeway in running the team and reaping the potential benefits. Investors hire local staff (including the general managers and coaches of their respective teams), and are responsible for local office expenses, local promotional costs for home games, and one-half the stadium rent. they control a majority of the seats on D's board. They may trade players with other MLS teams and select players in the league's draft. Such transactions, however, must follow strict rules established by the league. Most importantly, no team may exceed the maximum player budget established by the management committee. Each gets a 'management fee' that corresponds (in large part) to the performance of their respective team. The management fee equals the sum of one-half of local ticket receipts and concessions; the first $ 1,125,000 of local broadcast revenues, increasing annually by a percentage rate, plus a 30% share (declining to 10% by 2006) of any amount above the base amount; all revenues from overseas tours; a share of one-half the net revenues from the MLS Championship Game and a share of revenues from other exhibition games. The remaining revenues are distributed in equal portions to all investors. Investors may transfer their operating rights, within certain limits, and retain much of the value created by their individual efforts and investments. Ps sued D, the USSF, and the operator/investors for violation of the Sherman Act section 1 by agreeing not to compete for player services. This is as far as the Bauman 9^th edition casebook goes.