A class-action lawsuit filed by three youth clubs against the MLS Players Union, as well as players Michael Bradley, Clint Dempsey, and DeAndre Yedlin has been dismissed by order of the U.S. District Court Eastern District of Texas, Sherman Division.
In dismissing the suit, the court ruled that it lacked personal jurisdiction over the MLSPU and specific jurisdiction over the players involved.
A third motion, asking for a change of venue to the U.S. District Court Massachusetts District, was rendered moot given that the original suit had been dismissed.
The original class-action lawsuit -- filed last July by Redmond, Wash.-based Crossfire Premier, the Chicago Sockers, and the Dallas Texans -- aimed to settle the question of whether FIFA's Regulations on the Status and Transfer of Players (RSTP) are legal in the U.S., and whether the youth clubs in question can then recoup training fees for the players it developed who later become professionals. At one point, Bradley played for the Chicago Sockers, Dempsey for the Dallas Texans, and Yedlin for Crossfire Premier.
RSTP stipulates that training compensation is charged when a player signs his or her first pro contract and there is a change of national association, while solidarity payments are collected when a player is transferred before the expiration of their contract, and there is a change of national association.
The U.S. Soccer Federation, citing U.S. law, has long forbidden U.S. youth clubs from collecting training compensation and solidarity fees, and MLS has followed their lead. Specifically, the concern is that implementing RSTP in the U.S. could result in a restraint of trade and thus violate U.S. anti-trust law.
In a bid to collect the fees they feel are owed them, the three clubs have taken their case to FIFA's Dispute Resolution Chamber (DRC), and are awaiting a decision. Meanwhile, they are also moving to establish the system's legality in the U.S.
"We have said consistently that training compensation and solidarity payments are bad for players, and would treat players differently than employees in any other industry, including sports," MLSPU executive director Bob Foose said in a statement. "For example, it's absurd to think that a business school could demand a fee from a company that hired one of its students. Yet, that's the kind of payments the youth clubs seek. No player should have the market for his services adversely affected by these payments.
"This is not to say that players and the Players Union don't believe in and support youth development. We do, but it should not be funded through a tax on randomly selected professional players' contracts. We have said all along that we do not understand why the youth clubs sued players and their union, and we certainly do not believe that the suit was filed in the appropriate court. We're very satisfied that the court has agreed and brought this case to a close by dismissing it in its entirety."
Lance Reich, the attorney representing the three youth clubs told ESPN FC in an interview last year that the lawsuit was a preemptive strike against the MLSPU. In a meeting back in May of 2016, it was alleged that Foose said that implementing a system of training compensation and solidarity payments would violate anti-trust law. It was also alleged by the clubs that a representative of MLS told them that the MLSPU had threatened to file an antitrust lawsuit against the clubs, the U.S. Soccer Federation and others if the DRC awarded the clubs training compensation or solidarity contributions.
The MLSPU countered with three motions. The first stated that the U.S. District Court Eastern District of Texas, lacked personal jurisdiction over the MLSPU in the matter, since the union had minimal contacts in the state of Texas had no offices there, and that its Collective Bargaining Agreement is with MLS and not any specific entity in Texas.
A second motion argued that the players "lack sufficient contact with the state of Texas" for them to be under specific jurisdiction by the U.S. District Court for the Eastern District of Texas. The third was for a change of venue, in the event that the suit wasn't dismissed.
The three clubs argued that the fact that the MLSPU contained members in the state of Texas, occasionally held meetings there, and was threatening litigation against one of the youth clubs was sufficient to give the Texas court jurisdiction.
Ultimately the court sided with the union and the three players. With regard to the MLSPU, the court said in its decision that having some members located in the state of Texas and holding meetings there wasn't sufficient to establish the court's jurisdiction. The court added, "A defendant's threat of litigation does not establish specific jurisdiction over the defendant in a declaratory judgment action."
The court used similar reasoning in dismissing the suit against the players.
"The Court does not need to determine whether an agency relationship existed between the Player Defendants and the Players Union. Even if the Players Union threat of litigation could be attributed to the Defendant Players, the threat of litigation does not establish specific jurisdiction over the defendant in a declaratory judgment action."
Reached by telephone, Reich said he was "still mulling over the full import of the opinion."
But Reich did state that the ruling contained a silver lining. The court found that, "The Players' Union is not a party to the trade contract between the professional soccer clubs that would give rise to Plaintiffs' claim for solidarity fees in Texas. The Players' Union's contacts with Texas do not give rise to the cause of action."
Reich said, "The key we're focused on is the specific ruling by the judge that the MLSPU is not a party to a player transfer, therefore they don't have a cause of action, so they can't sue us for antitrust."
Given that interpretation, Reich said the three clubs have no intent to refile the suit against the MLSPU "in any other jurisdiction right now."
In the meantime, the three clubs will await the ruling by FIFA's DRC.
"Once we get that, and hopefully they rule on our favor, we'll push forward from there on getting solidarity payments and training compensation enforced," he said.