NASL contends MLS's SUM tried to buy and 'terminate' New York Cosmos
The marketing arm of Major League Soccer made a bid to buy the North American Soccer League's New York Cosmos for $5 million with an aim to "terminate the franchise," new club owner Rocco Commisso has disclosed in legal documents.
The NASL's latest response in its ongoing antitrust lawsuit against the U.S. Soccer Federation included a declaration from Commisso in which he disclosed that as he pursued ownership of the Cosmos -- an organization that had laid off staff and stopped paying players, and whose sale was critical to the NASL's survival -- he became aware of a competing offer from Soccer United Marketing (SUM), the marketing arm of MLS and an entity that has a substantial business dealings with the USSF.
In an email from New York City FC president Jon Patricof dated Dec. 15, 2016, with MLS deputy commissioner Mark Abbott included, SUM offered to buy the Cosmos' remaining assets for $5 million.
Among the terms of the offer was that the new owners of the Cosmos wouldn't operate a soccer team in the New York Metropolitan area for a period of 10 years. Commisso stated that offer was made with "the intent to terminate the franchise and eliminate the organization as a competitor."
Commisso's rival offer was eventually accepted, and he completed his purchase of the team in early January. But the existence of the offer from SUM, and any intention to shut the Cosmos down, will likely be used by the NASL to buttress its claim that that MLS, SUM, and the USSF were engaged in a conspiracy to put it out of business.
On Tuesday, SUM released a statement disputing Commisso's characterization of SUM's approach: "[SUM] was informed that the Cosmos were going out of business and were trying to sell its commercial assets for as much money as possible to pay its creditors. Those assets included the Cosmos name, a film library, the use of Pele's likeness in connection with Cosmos-related merchandise, etc.
"As one of the leading soccer commercial companies in the United States representing a wide variety of soccer properties, SUM placed a bid for these soccer-related commercial opportunities with the view that it could develop merchandise and other products for the public.
"As a part of its bid, SUM included common provisions that the seller -- the prior owner of the Cosmos -- would not devalue those assets and create consumer confusion by operating a new team in the New York metropolitan area for 10 years. SUM's bid was not successful, and it made no further efforts to buy the assets. Any suggestion by Mr. Commisso that SUM's conduct was in any way improper is without any merit."
The NASL's original complaint alleges that the USSF has violated federal antitrust laws through its anti-competitive "Division" structure that divides men's professional soccer for U.S.-based leagues based on what an NASL press release described as "arbitrary criteria that the USSF has manipulated to favor Major League Soccer (MLS), which is the commercial business partner of the USSF."
The division structure is intended to provide a set of minimum requirements for a league, including number of teams, geographic distribution of teams, market size of a team's city and stadium capacity, as well as the minimum financial requirements for team owners.
The complaint alleges that the USSF has selectively applied and waived its divisional criteria to suppress competition from the NASL and benefit MLS and the United Soccer League (USL).
The USSF granted the NASL provisional Division 2 status earlier this year. But in September, the USSF announced it had denied the NASL's application to be sanctioned as a Division 2 league, due to the fact that it could not guarantee it would field at least eight teams in 2018.
Commisso's declaration also details the NASL's expansion plans, which are intended to meet the USSF's Division 2 standards of having at least 12 teams. The plans entail adding six teams for 2018. This is in addition to the teams in San Diego and Orange County that already have been announced. It then plans to add two more squads for 2019, as well as an undisclosed number of additional teams by 2020.
The names of the cities involved were redacted, but previous court documents, including a 78-page declaration by USSF president Sunil Gulati, indicate that two of the cities in question are Detroit and Atlanta. Commisso indicated that all of the interest from the proposed expansion teams is contingent on the NASL retaining its Division 2 sanction.
On Oct. 16, the USSF filed a response of its own, including the aforementioned statement from Gulati, in which he disputed that the standards were intended to suppress competition, since they were formulated years before the NASL even existed.
Gulati expressed concern in August when he was told by NASL interim commissioner Rishi Sehgal that two teams -- Edmonton FC and the San Francisco Deltas -- had not committed to return, but that California teams in Orange County and San Diego would join the league. Gulati also expressed concern that North Carolina FC had not specified what league it would play in for 2018.
Gulati also contended that the numerous waivers the USSF had granted the NASL over the years undercut the league's argument that the USSF was trying to put it out of business.
"Given the large amount of turnover in the NASL since its founding and the lack of specific information provided, it was difficult to conclude that the NASL would have even 8 teams for 2018 -- the same number of teams as in 2017, still 4 teams short of the Division II minimum of 12 teams, and still with no team proposed for the Central time zone," said Gulati in his statement.
"In other words, at best the NASL had made no progress towards compliance with the Division II standards and, at worst, it had taken a significant step backwards by losing 2 or 3 teams while proposing 2 replacement teams with relatively little information."
At a Sept. 1 meeting between the USSF and the NASL board of directors, the NASL asked for three years to meet the Division II standards, but that offer was turned down.
In a declaration made by NASL interim commissioner Rishi Sehgal, he maintained that the USSF's decision not to grant Division I sanctioning in March 2016 thwarted the NASL's momentum, and that Gulati never informed the NASL that it had to be fully compliant with the Division II standards in order to receive that status for 2018.
Sehgal also contested Gulati's assertion that the USSF gave the NASL 30 days to appeal the decision to not grant Division II status.
Sehgal's statement read, "On September 1, 2017, in a suite at Red Bull Arena in Harrison, New Jersey, shortly before kickoff of the FIFA World Cup Qualifier between the United States and Costa Rica, Lydia Wahlke, General Counsel of USSF, informed me of USSF's decision to deny the NASL a Division II sanction for the 2018 season.
"I asked Ms. Wahlke if there was an opportunity to have further dialogue about that decision, and she informed me that there was no such opportunity but that the NASL would have the opportunity to have further dialogue regarding the ability to apply for a Division III sanction."
Sehgal concluded his statement by reiterating the NASL's argument that "irreparable harm" would be done to the league by virtue of losing its Division II sanction.
Arguments are scheduled to be heard before U.S. District Court Judge Margo K. Brodie on Oct. 31.
Jeff Carlisle covers MLS and the U.S. national team for ESPN FC. Follow him on Twitter @JeffreyCarlisle.