NASL Filing Alleges SUM Tried to Buy New York Cosmos to Eliminate Club
As part of its effort to establish a pattern of anti-competitive behavior by the U.S. Soccer Federation, MLS and Soccer United Marketing, their $2 billion marketing arm, the NASL late Monday night alleged that SUM tried to buy the New York Cosmos last December “with the intent to terminate the franchise and eliminate the organization as a competitor.”
That claim was made in a filing by current Cosmos owner Rocco Commisso, a cable TV magnate who’s now helping to fund the NASL’s antitrust lawsuit against U.S. Soccer. The NASL is seeking an injunction that would prohibit the federation from stripping the league’s second-division sanction, thereby allowing it to operate next year. The injunction hearing is scheduled for Oct 31. at the U.S. District Court in Brooklyn. Commisso’s declaration was part of the NASL’s filing in advance of that hearing.
Commisso testified that SUM, a partnership between MLS and the USSF, offered $5 million for the Cosmos to former club chairman Seamus O’Brien. A term sheet, sent in an email from New York City FC president Jon Patricof, outlined the transfer of the Cosmos intellectual property and assets and indicated that, “To avoid consumer confusion in the marketplace, for a period of ten (10) years following the closing, New York Cosmos LLC and its owners shall not own or operate a soccer team in the New York metropolitan area under any name.”
The email was dated December 15, 2016. That morning, O’Brien reportedly was ready to accept another offer for his club from GF Capital Management, a New York private equity firm. The Cosmos had lost some $30 million and already had furloughed players and staff. GFCM didn’t intend to field a team, but O'Brien still preferred its offer of approximately $3.5 million. SUM’s intentions are unclear, at least based on the Patricof email (it's also unclear why NYCFC's president was the point man). But O'Brien's reticence may be telling. Commisso contacted O'Brien through intermediaries on the night of the 14th and the next day, they met for more than 12 hours in order to close the deal and keep the Cosmos on the field.
Had the Cosmos gone under, the NASL almost certainly would’ve followed. Commisso’s arrival spurred remaining owners to keep the Jacksonville Armada afloat until Robert Palmer bought the club this summer, allowing the NASL to play the 2017 season with provisional D2 sanctioning.
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That sanctioning was stripped for 2018 in September, however, prompting the lawsuit. The eight-team NASL also claimed in Monday’s filing that it has commitments from six new clubs to join next year and an additional two for 2019—as long as D2 sanctioning is maintained. The cities and ownership groups were redacted from the filing, but Detroit, Atlanta and New Orleans are thought to be among the potential expansion markets. Commisso, Palmer and Miami FC owner Riccardo Silva likely will help buttress those new teams in order to keep the league in business.
There doesn’t appear to be anything illegal about the SUM offer. O'Brien wanted out, and it's possible MLS or SUM could've revived the brand. But the NASL hopes to establish at next week’s hearing that there’s a pattern of behavior resulting from the partnership between MLS and the USSF that unfairly limits and inhibits competition. If that's enough to secure the injunction, the NASL can move forward with its 2018 season while waiting for more evidence to come to light during the case's discovery phase.
Later Tuesday, SUM released the following statement explaining its position:
"Yesterday, in litigation that NASL and Rocco Commisso (the new owner of NASL club the NY Cosmos) are pursuing against the United States Soccer Federation, Mr. Commisso placed in the public record a bid that Soccer United Marketing (SUM) made for certain intellectual property and related assets of the NY Cosmos in 2016, before his purchase of the team.
"The facts behind that bid are that SUM, the marketing, licensing and commercial affiliate of Major League Soccer, 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."
