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: P ARKER

, W ESLEY

, and C HIN

, Circuit Judges

.2 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

.

______________3 W ESLEY

, 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 III4 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

1 Individuals with current ties to any professional league

cannot be on the Task Forces and must abstain from USSF Board

votes on matters relating to the professional leagues.

2 Amendments proposed in 2015 for Division I, to which

NASL objected, never were adopted.5 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.6 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.7 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.”).8 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.9 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.10 “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)).

7 The case might be different if USSF designated NASL a

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.11 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.12 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. ¶ 201.13 1. Contract, Combination, or Conspiracy 10

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.”

10 Because “[t]he question whether an arrangement is a

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.14 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, *15.15 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 54216 (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 Originators ʹ Guild v. FTC

, 312 U.S.17 457, 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

11 How NASL is challenging the Standards is unclear. See

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”).18 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

12 The parties did not, and do not, dispute the rule of

reason’s applicability.19 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 promotes20 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

13 The District Court found that NASL had not directly

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).21 “the market for (1) top

‐ tier and (2) second

‐ tier men ʹ s

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

14 The District Court defined the market as proposed by

NASL, and the parties do not contest this definition. In light of

that consensus, we regard the relevant market to be the same.22 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.23 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.24 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 MLS25 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.26 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.