NASL thinks American soccer is corrupt, and it’s battling U.S. Soccer for survival in court

This Sunday’s North American Soccer League championship is a study in contrasts. On one side of the midline is the New York Cosmos, the venerable American soccer brand whose history spans from its 20th century forerunner, to winning three league titles since its 2013 entry into the neo-NASL. On the other is the host San Francisco Deltas, an expansion project that strode into the league oozing the moxie of a Silicon Valley startup and a professed kinship with social and cultural platitudes.

But beyond their joint championship aspirations, the teams share one big commonality: They might be playing the final competitive professional soccer match for their club and league.

The NASL held playoff games last weekend, but the most intense league drama came Saturday morning at a courthouse in Brooklyn, where Judge Margo Brodie of the U.S. Eastern District Court of New York issued an order denying the NASL’s request for a preliminary injunction preserving its status as a Division II United States men’s professional soccer league for 2018. The NASL’s lawsuit was brought against the U.S. Soccer Federation, whose Board of Directors voted on Sept. 3 to deny the NASL second-division sanctioning for next year.

The league’s championship game will go on, but the NASL’s future is now decidedly the stuff of legal maneuverings and corporate machinations. Time is running out for its clubs to assess their diminishing options for next year and decide on their futures. Otherwise, they and their league increasingly risk suffering the same fate as the original NASL.

NASL goes to court to prove a conspiracy

At the Oct. 31 court hearing on the preliminary injunction, the NASL challenged the provisions and implementation of the USSF’s Professional League Standards. The PLS, last amended in 2014, are the requirements professional soccer leagues must meet in order to be sanctioned as Division I, II, or III leagues by the USSF. They cover such things as market and stadium sizes, the number of teams in a league, and the net worth of club owners, among other factors.

In its August 2017 application for Division II sanctioning in 2018, the NASL fell short of two standards:

1) A minimum of 12 teams

2) Teams located in the Eastern, Central, and Pacific time zones

Specifically, the NASL’s application forecast eight possible teams in the league for 2018, none of them located in the Central time zone.

The NASL argues that the USSF’s joint financial ties to Major League Soccer represent a fundamental conflict of interest, and resulting antitrust violation, that interferes with U.S. Soccer’s independence in setting and applying their standards to NASL sanctioning. MLS and USSF are partners in Soccer United Marketing, a company with an estimated value of $2 billion.

The USSF has long claimed that its authority to regulate professional soccer in the United States is subject to an antitrust exemption under the Ted Stevens Olympic and Amateur Sports Act. It’s an argument the federation unsuccessfully made in the Championsworld lawsuit, and one it didn’t repeat here. It’s approaching settled law that, while the USSF can regulate professional soccer under its member association with FIFA, the USSF’s actions cannot run afoul of U.S. antitrust law. But the NASL also did not make a “clear showing” that the USSF has committed an antitrust violation.

During the preliminary injunction hearing, the NASL did not challenge the authority of the USSF to establish divisional tiers or even promulgate standards for professional leagues, both issues potentially subject to antitrust examination. Instead — as Judge Brodie almost cheekily noted — the NASL merely sought to eliminate the PLS it didn’t meet, all under the guise of trying to prove an overarching conspiracy between the USSF, MLS, and even the United Soccer League to crowd the NASL out of the soccer market.

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The parties didn’t require live testimony at the hearing, so both sides had almost free reign to submit expert declarations and supporting documentation. Tracking the elements necessary to issue a preliminary injunction, Judge Brodie found that the NASL would suffer “irreparable harm” as a result of losing its second-division status, and that the league’s hardship “tips slightly” over the harm USSF would sustain by disrupting its regulatory authority. The judge also found “ample evidence” of a conflict of interest between the USSF and MLS, but she didn’t find that it improperly impacted the USSF’s procedures for adopting and applying the PLS.

While the judge wrote that the court pleadings and declarations demonstrated a “plausible claim for relief” by the NASL, that fell short of the “clear showing” of entitlement to relief required to issue a preliminary injunction guaranteeing Division II status for 2018, potentially putting the league’s future in jeopardy.

Not surprisingly, the NASL appealed Judge Brodie’s ruling to the U.S. Second Circuit Court of Appeals, although the appellate court’s “abuse of discretion” review standard is a high hurdle to overcome at this stage of litigation. The rest of the litigation process remains on hold pending the outcome of the NASL’s appeal, including the USSF’s pending motion to dismiss the NASL’s complaint. While the NASL’s case in chief hasn’t been litigated, the league’s ability and appetite to proceed may be impacted by upcoming rulings by the Court of Appeals and Judge Brodie.

Division II or bust?

Jeffrey Kessler, the NASL’s legal counsel, has repeatedly stated that a favorable ruling on the preliminary injunction is essential to the league’s immediate survival.

“In order for the NASL to continue in 2018, and to grow and to survive, it needs to obtain a preliminary injunction from the court to retain its Division II status,” Kessler said during a Sept. 28 media conference call held after the league filed its lawsuit. “It hopes, and it expects, that it will win that motion. If it does not, it does not have any other plan, option, or pathway to be able to continue in its current format as the NASL.”

Indeed, Jacksonville Armada owner Robert Palmer’s cryptic tweet Sunday afternoon seemed to signal the NASL’s impending demise following its championship final.

The NASL has long couched its desire to remain a second-division league as a matter of principle in line with the ambitions of its club owners. The league eschewed the option to apply for Division III sanctioning following its D2 denial, even though the lower D3 standards would afford the league greater latitude to remain active and reconstitute its ranks.

Currently, NASL is recruiting teams from the semi-pro fourth-division National Premier Soccer League to attempt to ensure it has 12 or more teams for next season. It reportedly has letters of intent from six NPSL clubs indicating that they’re ready to go pro and join the league for the 2018 season. NASL likely needs to have its Division II status guaranteed by the court to convince all of these teams to make the leap.

But there may be a more fundamental reason the NASL needs to retain its Division II status. The NASL LLC’s membership agreement, last seen publicly in pleadings filed with the league’s 2015 lawsuit against would-be Oklahoma City investor Tim McLaughlin (now owner of the USL’s OKC Energy), lists fees for withdrawing as a member of the LLC as high as $2 million, depending on various factors. However, according to McLaughlin’s 2013 LLC membership agreement, that withdrawal fee plummets to $25,000 if the NASL ever loses its Division II status.

In recent years, NASL’s owners have seen their monetary outlays to the league increase due to heightened dues, broadcast expenditures, and perennially propping up teams such as the Atlanta Silverbacks, Fort Lauderdale Strikers, and Jacksonville Armada. By its own admission, the league teeters on the edge of extinction and saw a lawsuit against its federation as its only means for survival. The only thing conceivably keeping some owners in the league is the high cost of leaving it. Once that barrier is significantly diminished, even NASL owners sympathetic to the league’s mission and plight would be derelict to decline the ability to jettison its entanglements.

Absent Division II sanctioning, the individual NASL clubs are close to an encroaching state of purgatory, with only a few possessing any clarity about their ultimate fates. Representations made in court last week by attorneys for both sides confirmed rumors that North Carolina FC, through its owner Steve Malik, has given notice of its intent to move to the USL (no official announcement has yet been made by the club or leagues). Malik, who is also a member of the USSF Board of Directors and owns the NWSL’s North Carolina Courage, recently became a target of ire for NASL insiders — chiefly Cosmos owner Rocco Commisso — who regaled reporters gathered for the Oct. 31 court hearing with his purported grievances against the NCFC owner.

That leaves a lot of clubs in the lurch, including the Cosmos, Armada, Riccardo Silva’s Miami FC, Indy Eleven, and the NASL’s two announced 2018 expansion clubs, California United FC and 1904 FC in San Diego. Those teams face limited recourse if the league’s appeal is unsuccessful. The remaining NASL teams and some of the proposed newcomers from NPSL could apply for Division III status, although that possibility appears increasingly remote for the aforementioned reasons. Some teams will undoubtedly explore joining the USL, although it takes two to tango: The USL may resist admitting unsteady or tempestuous NASL owners, while the NASL owners will have to accept the USL’s franchise league model along with ponying up an entry fee reported to be as high as $5 million.

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One popular alternative among the NASL hoi polloi is teaming with the nascent National Independent Soccer Association, the brainchild of longtime American soccer executive Peter Wilt and his company Club 9 Sports. NISA might then apply for Division II or III sanctioning, depending on the size and nature of the league’s composition. However, NISA is not yet a sanctioned league, and it’s not known how many non-NASL teams are ready to join NISA and begin play in 2018. Moreover, little is known about NISA’s governing structure and whether it would satisfy NASL owners used to a league model where they have direct control over league operations, as well as a piece of the league’s expansion and withdrawal fees.

FC Edmonton could presumably join the proposed Canadian Premier League, but that venture isn’t yet officially slated to kick off next year. For Carmelo Anthony’s Puerto Rico FC, league woes are secondary to the massive human and infrastructure toll suffered by the island in the wake of Hurricane Maria, a recovery process that likely will be ongoing into the next soccer season.

The final option for NASL members that find themselves with no place to play next year is shuttering operations. It’s the apocalyptic scenario for clubs and their fan bases, yet one that appears already in the cards for one team: the Deltas. Months-old rumors that the club will fold after its inaugural season, due to severe financial losses, were also confirmed by attorneys during the Oct. 31 hearing.

Switch, fold, or fight

Turmoil has always been part of the DNA for this iteration of the NASL, the product of dissident USL owners that included the now-defrocked Traffic Sports USA. Yet none of those original breakaway owners are still around, and only one founding member —Dave and Tom Fath of FC Edmonton — remains in the NASL. Indeed, of the eight NASL owners this year, only two have been with the league longer than two seasons.

From 2011 until 2015, only one NASL team — the Puerto Rico Islanders — ceased operations or left to join another non-MLS league. Six clubs have done so over the last two offseasons.

The four teams in this year’s NASL playoffs embody the apparent options left to all its clubs: switch leagues, fold, or fight. It’s a testament to the Deltas’ players and their manager, Marc Dos Santos, that they finished second in the NASL regular season table and are one win away from a league title in a debut season that is probably its last.

“People don’t understand, with the rumors of us not being a club next year, you need to have a lot of personalities and strong locker room,” Dos Santos says. “We have that. Seriously, it’s been very tough on our guys mentally. They had to battle through a lot of doubts, including the technical staff. But we’re finding a way.”

That’s where the entire NASL is now: trying to find a way.