Both plaintiffs and defendants in the ongoing legal dispute between the International Swimming League and FINA have scored victories in court this week in the battle toward establishing a class certification, which would dramatically increase the stakes of the case, because plaintiffs would essentially be suing on behalf of a much larger number of athltes.
The case revolves around whether or not FINA behaved in violation of anti-trust law with regard to athlete participation in a 2018 Energy for Swim meet that was a precursor event to the International Swimming League.
It claims violations of the Sherman Antitrust Act of 1890, which forbids organizations from engaging in anti-competitive behavior. Attorneys for the plaintiffs also claim tortious interference with contractual relations or prospective economic relations, for collusion to unreasonably restrict competition, and for monopoly.
While the International Swimming League is not a party to the case, it is using the three named plaintiffs, Tom Shields, Katinka Hosszu, and Michael Andrew, as a surrogate in court. ISL has also filed a related case, and as such is named as an interested party in court filings.
The ISL’s founder Konstantin Grigorishin is also funding the plaintiffs’ case.
FINA Eviscerated by Judge, Ordered to Pay Costs
The side of the athletes and the pro league won a significant financial victory when US Magistrate Judge Jacqueline Scott Corley admonished FINA for a filing made to the court. The filing, which was in response to what FINA characterized as a “change in the Plaintiffs’ expert’s damages theory,” included revelation of confidential information from settlement negotiations between the two sides.
FINA said that they felt it was okay to disclose that information because the communications occurred between the parties and after settlement conference proceedings had ended, which the judge rejected.
FINA further argued that “confidentiality rules should not be used to conceal unethical conduct,” which the judge also rejected.
FINA’s goal with the filing was to argue that the Plaintiffs are not adequate class representations, according to the order to strike submitted by the judge.
The judge wrote a scathing conclusion that accused FINA of that called it the most “egregious” violation of a rule regarding disclosure of settlement conversation that it has seen in at least a decade.
This Court has conducted more than 1000 settlement conferences over the past 10 years. During that time it has never witnessed a violation of ADR Local Rule 7-4 as egregious as FINA’s here. Not only did that violation damage Plaintiffs by requiring them to file a motion to strike and reply, it led to the loss of a settlement magistrate judge who had been working with the parties for over 22 months. FINA’s insistence that it can unilaterally decide what settlement communications can be disclosed has thus wasted precious public resources in addition to the settlement judge’s heroic efforts at facilitating settlement. Further, FINA’s conduct has damaged the entire ADR program of the Northern District of California and thus the administration of justice. The success of settlement negotiations “depends largely on the willingness of the parties to freely disclose their intentions, desires, and the strengths and weaknesses of their case; and upon the ability of the [third party] to maintain a neutral position while carefully preserving the confidences that have been revealed.” In re County of Los Angeles, 223 F.3d 990, 993 (9th Cir. 2000) (citation omitted). Sadly, as a result of FINA’s breach, parties will have reason to question whether the promise of confidentiality will actually be honored.
Paperwork submitted by the athletes’ lawyers included costs of $136,799.
Class Agreement Rejected
The court ruled that the Plaintiffs had not adequately provided support for acting as a class when seeking damages from FINA. They did, however, find that in seeking injunctive relief, they had met that adequacy, because in the case of injunction, the interest of all athletes moved together.
Among the cases cited were White v. NCAA, where student-athletes argued that the NCAA’s grant-in-aid rule put a limit on student-athletes’ earnings.
In that case, the courts agreed with the logic of the argument by the NCAA against certification of a class, but ultimately said that the specifics of the Plaintiffs’ damages claim supported a class.
In this case, though, the court said that the Plaintiffs’ claim was different – the argument was made that there was a “fixed pot” of money, and that swimmers lost the opportunity to compete with others for a share of a “fixed pot” of money.”
Whereas in the NCAAs case, there was “unfettered discretion” to limit money (in other words, prevent athletes from seeking compensation from outside parties and brands), in this case, it was a zero-sum: that some athletes gain and others lose, according to the Plaintiffs’ argument.
That means that all athletes do not stand to gain in the same direction as they did in the NCAA’s case, so the court rejected that as a supporting ruling for class action.
The court also pointed to the ownership by Andrew and Hosszu of league teams, plus funding of the plaintiffs’ case by Konstantin Grigorishin, the founder of the ISL, creates a “risk of divided loyalties,” which also undercuts their request for class status.
The court did say, though, that these things were not a concern with regards to the injunctive relief sought, which allows Plaintiffs to file as a class to stop FINA from interfering with athletes participating in ISL via threats of suspension.
In this case, the courts have decided that the injunctive class is uniform enough to be granted, but the damages class, which seeks financial compensation from FINA, is not.
This does not rule on the merits of the claims by the Plaintiffs against FINA, it just limits their ability to act as a class that represents a much broader set of athletes. That will serve as a huge blow to the Plaintiffs and the ISL, because class status would have resulted in a substantially higher calculated damage if they won their case against FINA.
Ownership Stakes Revealed
Among the more interesting revelations in the judge’s orders are the first public disclosure of ownership stakes in the league’s teams.
Michael Andrew and his parents own 40% of the New York Breakers, a team that Michael Andrew no longer races for, his mom Tina is no longer the general manager of, and his dad Peter is no longer the head coach of. It also reveals that Hosszu is a 40% owner of Team Iron.
Through discussion of whether team ownership is a common characteristic among all class members, it is also revealed that two swimmers other than Andrew and Hosszu also have an ownership interest in an ISL team.
The court said that this gave those owners a $5,000 incentive to support a settlement with the class, even if it is not fair to all members of the class.
The documents also reveal that two other athletes have ownership stakes in teams, though the fillings that reveal those identities have been sealed by the court.
The ownership structure of the league is still not entirely clear, but as of last year, Grigroshin remained a majority owner in most of the league’s teams. Two recent as general managers have resigned include that Rob Woodhouse, former GM of the London Roar, is a “minority owner” of the team, while former DC Trident GM Kaitlin Sandeno says that she has no ownership stake in the team.