Championsworld L.L.C. v. United States Soccer Federation, Inc. et al

Filing 316

MEMORANDUM Opinion and Order Signed by the Honorable Harry D. Leinenweber on 8/17/2011:Mailed notice(wp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

CHAMPIONSWORLD, LLC,
Plaintiff,

Case No. 06 C 5724

v.
Hon. Harry D. Leinenweber
UNITED STATES SOCCER
FEDERATION, et al.,
Defendant.

MEMORANDUM OPINION AND ORDER
The

parties

have

filed

a

number

of

pretrial

motions,

primarily seeking sanctions against one another for various
alleged misdeeds.
of this order.

The Court will resolve all the motions by way

For the reasons that follow:

(1) Defendants’

Joint Motion for Sanctions for Plaintiff’s Wholesale Destruction
of Evidence [246] is granted in part; (2) ChampionsWorld’s Motion
for Sanctions Against Defendant United States Soccer Federation,
Inc. [277] is denied; (3) Non-Party John Collins’ Motion to Quash
Discovery Subpoena [265] and Defendant USSF’s Motion to Quash
Discovery Subpoena Issued to Non-Party John P. Collins [268] are
granted; (4) ChampionsWorld’s Motion for Sanctions Against: (A)
the Law Firms of Proskauer Rose LLP and Latham & Watkins LLP and
(B) Defendants MLS and USSF [278] is denied; and ChampionsWorld’s
Motion to Compel the Production of Documents [306] is denied.

Defendants, in various pending motions, seek to recover their
fees and costs in responding to these motions.
the

motions

brought

by

Plaintiff

are

Because none of

frivolous,

the

Court

declines to impose fees or costs.
I.
Plaintiff
defunct

OVERVIEW OF LITIGATION

ChampionsWorld,

sports

marketing

LLC

company

(“ChampionsWorld”)
that,

from

2001

to

is

a

2005,

sponsored professional soccer exhibitions in the United States
involving international club teams.

ChampionsWorld filed for

bankruptcy and ceased operations in 2005.
Defendant United States Soccer Federation, Inc. (the “USSF”)
is the governing body for amateur soccer in the United States.
Defendant Major League Soccer, LLC (“MLS”) is a professional
first-division

soccer

league

in

the

United

States.

ChampionsWorld claims that USSF improperly assumed the power to
oversee professional, as well as amateur, soccer in the United
States. USSF then used this power to unreasonably restrain trade
and to extract millions of dollars in sanctioning fees from
ChampionsWorld, which caused the company to fail. ChampionsWorld
alleges that USSF’s actions were part of an anticompetitive
scheme to protect MLS by preventing other soccer entities from
applying

for

first-division

status

in

the

United

States.

Defendants deny any wrongdoing and argue that ChampionsWorld is
trying to make them scapegoats for the company’s poor business
- 2 -

strategy and eventual demise.

Given the contentious nature of

the litigation, it is perhaps not surprising that the parties
have become embroiled in various discovery disputes and seek
sanctions against one another on several grounds.
II.

ALLEGED DESTRUCTION OF EVIDENCE

First, Defendants seek sanctions against ChampionsWorld on
the ground that Plaintiff lost or destroyed evidence, including:
(1) virtually every email on its servers dated after September 1,
2004; (2) all of its accounting files dated after April 2004; and
(3)

virtually

ChampionsWorld.

all

of

its

accountant’s

records

relating

to

Defendants seek a number of possible sanctions,

including precluding Plaintiff from arguing that it is entitled
to recover future lost profits or the lost value of its business
and precluding Plaintiff from relying on testimony regarding
events that occurred post-September 2004. It also seeks fees and
costs in bringing this motion.
ChampionsWorld responds that it took reasonable steps to
preserve its data. It acknowledges that it cannot find data from
the end of 2004 and 2005, but points the finger at Lino DiCuollo
(“DiCuollo”), who had been a Senior Vice President for Legal and
Finance at ChampionsWorld.
been

hired

by

that

DiCuollo now works for MLS, having

company

shortly

ChampionsWorld.

- 3 -

after

the

demise

of

A.

Background

Deposition testimony paints a muddy picture as to who was
minding

the

existence.

store

in

the

last

months

of

ChampionsWorld’s

DiCuollo, asked if he recalled being in charge of

document retention for ChampionsWorld, replied, “I don’t recall
that,”

but

acknowledged

providing

documents

to

Plaintiff’s

counsel, Pryor Cashman LLP, in connection with this case.
DiCuollo testified that he did not destroy any ChampionsWorld
documents and was not aware of anyone else doing so.
job

duties

while

serving

as

Senior

Vice

DiCuollo’s

President

for

Legal/Business Affairs for ChampionsWorld included “filing and
maintenance of corporate documents.”
Charlie Stillitano (“Stillitano”), ChampionsWorld’s CEO,
testified at his deposition that from 2002 on, the company had a
verbal policy of retaining all documents.

It was Stillitano’s

understanding that all of the company’s data would be saved on
the company’s on-site computer server. Stillitano testified that
he did not know why so few documents were produced from the
period after September 2004.

Employees of the company were

instructed to give documents to DiCuollo toward the end of the
company’s existence because such documents might be needed in the
company’s bankruptcy proceeding, he said.

DiCuollo’s brother,

Mario De Paola, who was the company’s information technology
director, has since died.

Stillitano further testified that he
- 4 -

did

not

instruct

the

company’s

Traphagen, to retain documents.

accountants,

Traphagen

&

Defendants did receive hard

copies of at least some of the 2004 QuickBooks data kept by
Traphagen, but they contend this is mostly financial projection
data

which

is

not

helpful

in

determining

the

cause

of

ChampionsWorld’s failure.
Stillitano provided an affidavit explaining that in the
early fall of 2004, after ChampionsWorld retained Pryor Cashman,
he, DiCuollo, and the company’s outside general counsel had lunch
with attorneys from the firm and were instructed to preserve all
documents related to the lawsuit.

Stillitano told outside

counsel that the company had a 100 percent document retention
policy in place and nothing would be destroyed.
ChampionsWorld contends that at the time outside counsel was
retained to bring the instant lawsuit, there was no reason to
doubt

that

DiCuollo

was

adequately

performing

his

job

of

maintaining the company’s records, with the assistance of his
brother.

Defendants argue that it was actually Senior Vice

President of Operations Tim Kassel (“Kassel”) who was in charge
of document retention.

Kassel testified that he preserved data

up until the company’s bankruptcy filing in January 2005, but did
not know if anyone did so following the bankruptcy.

- 5 -

B.

Legal Standard

Courts have the inherent power to sanction a party for
failure to preserve evidence that it controls when it could have
reasonably foreseen that evidence to be material in a potential
lawsuit.

Jones v. Bremen High School, 08 C 3548, 2010 WL

2106640, at *5 (N.D. Ill. May 25, 2010).

Sanctions “must be

proportionate to the circumstance surrounding the failure to
comply with discovery.”

Crown Life Ins. Co. v. Craig, 995 F.2d

1376, 1382 (7th Cir. 1993).
To find sanctions appropriate, the Court must determine:

(1)

that there was a duty to preserve the evidence; (2) that the duty
was breached; (3) that the other party was harmed by the breach;
and (4) that the breach was caused by the breaching party’s
willfulness, bad faith, or fault. Jones, 2010 WL 2106640, at *5.
If the court finds sanctions appropriate, it must impose the
least severe sanction necessary to ameliorate the prejudice that
arose from the breach.

Id.
C.

1.
There

is

no

Analysis

Duty to Preserve the Evidence
real

dispute

between

the

parties

that

ChampionsWorld had a duty to preserve evidence by early to mid2004.

Even prior to that date, the company had investigated

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possible claims against USSF.

In August 2004, ChampionsWorld

retained Pryor Cashman, its counsel of record in this proceeding.
2.

Breach of Duty to Preserve

The next question, then, is whether ChampionsWorld breached
its duty to preserve the evidence.
Court

cannot

find

that

On the record presented, the

ChampionsWorld

intentionally destroyed any documents.

(or

anyone

else)

However, it does not

appear that Stillitano took any affirmative steps to carry out
Pryor Cashman’s directive that all documents be preserved.
Stillitano apparently assumed either that DiCuollo handled this
process or that the company’s verbal document retention policy
would

suffice.

It

did

not.

Plainly

put,

Stillitano

and

ChampionsWorld’s outside counsel should have done more to ensure
that relevant evidence was preserved, particularly given the
importance of ChampionsWorld’s financial condition to its case
and the fact that ChampionsWorld had been contemplating some sort
of legal action against USSF well prior to its demise.

See

Jones, 2010 WL 2106640, at *6 (noting that an intention to
preserve evidence must be “followed up with concrete actions
reasonably calculated to ensure that relevant materials will be
preserved.”). So Plaintiff breached its duty to preserve certain
emails and accounting records.
Nonetheless, in discussing spoliation sanctions, the Seventh
Circuit has held that “the crucial element is not that evidence
- 7 -

was destroyed but rather the reasons for the destruction.”

Faas

v. Sears, Roebuck & Co., 532 F.3d 633, 644 (7th Cir. 2008)
(internal citations omitted).

Here, neither DiCuollo nor anyone

else seems to be able to explain why certain data was not
preserved. DiCuollo’s brother, who might have been able to offer
an explanation, has died.

As such, the circumstances make it

difficult for the Court both to understand what happened to the
information and to assign responsibility.
3.

Prejudice to Defendants

Nonetheless, the Court finds that Defendants have been
prejudiced

by

ChampionsWorld’s

failure

to

preserve

certain

documents from 2004 and early 2005. In arguing against a finding
of

prejudice,

ChampionsWorld

notes

that

in

October

2004,

Defendant MLS approached ChampionsWorld about buying the company,
and ChampionsWorld turned over some financial information to MLS.
The parties dispute how much information was disclosed, but
Defendants note that because the information was submitted in
October,

it did

not include

ChampionsWorld’s

fourth-quarter

results, which would have been important in understanding why the
company subsequently filed bankruptcy.

Defendants also argue

that almost all of the information regarding ChampionsWorld’s
efforts to find potential investors in late 2004 and early 2005
is missing, as are documents concerning the company’s decision to
file bankruptcy.

This information is clearly important to
- 8 -

defending against ChampionsWorld’s claims that USSF’s sanctioning
fees forced it into bankruptcy.

However, the Court notes that

that prejudice is ameliorated somewhat by the data provided by
ChampionsWorld to MLS during the sale discussions, as well as
information provided to Defendants through third-party subpoenas.
4.

Fault

As noted above, apportioning fault in this case is difficult
given the messy relationship between DiCuollo and the parties.
Nonetheless, the Court cannot find that ChampionsWorld acted
willfully or in bad faith because there is nothing to indicate
the company destroyed records to hide adverse information.
Trask-Morton v. Motel 6 Operating L.P., 534 F.3d 672, 681 (7th
Cir. 2008).
But bad faith is not a prerequisite to the imposition of
sanctions. Marrocco v. Gen. Motors Corp., 966 F.2d 220, 224 (7th
Cir. 1992). Fault is enough, and Stillitano and ChampionsWorld’s
outside counsel should have done more to ensure the documents
were preserved, rather than relying on what was apparently a
verbal “100 percent document retention policy.”

See, Danis v.

USN Communs., Inc., No. 98 C 7482, 2000 WL 1694325, at *32 (N.D.
Ill. Oct. 20, 2000) (“The duty to preserve documents in the face
of pending litigation is not a passive obligation.”).

So a

sanction of some sort is appropriate, although not so harsh as

- 9 -

limiting ChampionsWorld’s damages to recovery of the sanctioning
fees alone or precluding Plaintiff from presenting testimony
about events after September 2004.

Nor should Defendants be

allowed to draw an adverse inference from the absence of the
emails and accounting records without any evidence that they were
destroyed in bad faith.

See Wiginton v. CB Richard Ellis, 02 C

6832, 2003 WL 22439865, at *7 n.6 (N.D. Ill. Oct. 24, 2003).
That

leaves

the

remedy

of

instructing

the

jury

that

ChampionsWorld failed to take appropriate steps to preserve
information relevant to the litigation, and that as a result,
most its emails dated after September 1, 2004, its Quickbooks
files dated after April 2004, and most of its outside accounting
firm’s records were destroyed.

The Court agrees to so instruct

the jury, but declines to impose any further sanctions, monetary
or otherwise, on ChampionsWorld.
III.

ALLEGED MISCONDUCT OF USSF BEFORE FIFA

ChampionsWorld seeks sanctions against USSF, arguing that
USSF tampered with arbitration proceedings before the Federation
Internationale de Football Association (“FIFA”) by engaging in
inappropriate ex parte communications with FIFA officials.
ChampionsWorld argues that USSF needed a favorable ruling from
FIFA after this court rejected its argument that the Ted Stevens
Olympic and Amateur Sports Act, 36 U.S.C. § 220501, gave it
authority to charge sanctioning fees for professional soccer
- 10 -

matches in the United States.

ChampionsWorld LLC v. U.S. Soccer

Fed’n, Inc., 726 F.Supp.2d 961, 970 (N.D. Ill. 2010).
ChampionsWorld requests either a default judgment against
USSF or a finding that USSF is barred from asserting that FIFA’s
regulations

gave

it

professional

soccer

authority

sanction

USSF

matches.

to

contends

international
any

ex

parte

communications with FIFA officials concerned only scheduling
matters, and the motion is frivolous.

Because the Motion to

Quash filed by Collins (and joined by USSF) is intertwined with
this motion, the court will address them jointly.
A.

Background

Some background on the FIFA arbitration is necessary for the
Court to resolve this motion.

In 2007, this Court ordered this

case stayed pending arbitration before FIFA pursuant to an
arbitration clause in Stillitano’s application for a FIFA match
agent license.

ChampionsWorld subsequently filed a request

before FIFA’s Players’ Status Committee (the “PSC”) seeking a
resolution

of

its

dispute

with

USSF,

but

FIFA

declined

to

intervene in the matter because only individuals may proceed
before FIFA’s decision-making bodies.
company, was barred.

ChampionsWorld, as a

FIFA also stated that it could not hear

RICO or antitrust claims, two of the issues ChampionsWorld had
asked it to decide.

After receiving letters from FIFA to that

- 11 -

effect, ChampionsWorld requested that this Court lift the stay.
USSF objected on the ground that they had not been informed of
ChampionsWorld’s efforts before FIFA and wanted the opportunity
to present its own case for arbitration.

This Court continued

the stay to give the parties a chance to get the PSC to accept
the case.
On September 4, 2008, USSF submitted a petition to the PSC
asserting that Stillitano, and not ChampionsWorld, was the real
party in interest because he held the match agent license.

USSF

did not request an adjudication of ChampionsWorld’s racketeering
or antitrust claims, but rather requested that the PSC answer
four questions related to USSF’s authority to charge sanctioning
fees for matches between foreign national teams or foreign clubs.
Specifically, USSF asked FIFA to decide whether:

(1) USSF has

the authority to require matches between foreign national teams
first to be sanctioned by USSF; (2) USSF has the authority to
impose sanctioning fees; (3) USSF was required to return the
sanctioning fees previously paid to it; and (4) USSF has the
right to notify FIFA if a match agent refuses to pay sanctioning
fees.

(The phrasing of these questions in the present tense,

rather than as of the time the sanctioning fee dispute arose,
would become a problem, as we shall see.)
Stillitano

objected

to

that

petition.

One

day

after

Stillitano filed his objection, on October 31, 2008, USSF’s
- 12 -

General Counsel, Timothy Pinto (“Pinto”), sent an email to FIFA’s
Director of Legal Affairs, Marco Villiger (“Villiger”).

Pinto,

writing on behalf of himself and USSF’s President, Sunil Gulati
(“Gulati”), requested a meeting with FIFA Secretary General
Jerome Valcke (“Valcke”) about the ChampionsWorld lawsuit and
indicated that Pinto and Gulati were willing to travel to Zurich
for the meeting.

Villiger’s response was copied to Omar Ongaro

(“Ongaro”), the head of player status and governance for FIFA.
Villiger wrote that the Players’ Status Department was awaiting
Stillitano’s position, so “there is not much we can say.”

He

added, “once we have the position, things are surely getting
interesting.

If you agree, I propose that we will inform you

once we got [sic] the position in order to discuss the next
steps.”

There is no evidence showing that any in-person meeting

took place as a result of this exchange.

Villiger and Ongaro are

part of the administrative staff of the PSC.
ChampionsWorld views these communications as an attempt to
manipulate the proceedings before FIFA, but USSF offers a less
nefarious explanation. USSF contends that ChampionsWorld kept it
in the dark about its initial communications with FIFA.

When it

learned of those discussions, USSF contends, it contacted FIFA to
determine what the procedure would be after USSF submitted its
own petition.

After receiving no response to these inquires,

Pinto sent the October 21, 2008, email to Villiger.
- 13 -

USSF

contends there were no further communications between Pinto and
Villiger prior to FIFA’s decision to accept jurisdiction over the
USSF petition.

In deposition testimony, Pinto said he did not

expect a meeting in Zurich to occur, but was merely trying to
“step up the pressure” to get a response from FIFA.
On November 5, 2008, FIFA provided each side with copies of
correspondence from the other side, but did not provide copies of
the email exchange between Villiger and Pinto.
later,

on

December

2,

2008,

the

jurisdiction over USSF’s petition.

PSC

decided

About a month
that

it

had

It did not initially provide

an explanation for its ruling.
ChampionsWorld contends that USSF again had improper contact
with FIFA on the eve of a March 10, 2009, status hearing before
this Court in which the Court to was decide whether to continue
the stay.

Gulati emailed Villiger and told him an update on the

ChampionsWorld matter was needed because of an “important court
filing date.”

Villiger replied that the decision would be

released the day before the status hearing.

On March 9, 2009,

the PSC did issue the grounds for its decision that it had
jurisdiction over the USSF petition.

Gulati, in deposition

testimony, said the email was no different from a call to a clerk
to see when an order would be issued.
Stillitano

appealed

the

PSC’s

decision

that

it

had

jurisdiction to the Court of Arbitration for Sport (the “CAS”).
- 14 -

On July 15, 2009, the CAS found the PSC was competent to answer
questions as to whether FIFA’s statutes and regulations give USSF
the right to sanction foreign matches, charge sanctioning fees,
and report non–paying match agents to FIFA.

But the CAS found

that the PSC could not rule on the issue of whether USSF was
required to return sanctioning fees previously paid by Stillitano
for international matches played in the United States.

Again,

the questions as framed by the CAS were in the present tense and
did not specifically refer to the period when the sanctioning fee
dispute arose.
With

the

case

again

set

to

be

heard

by

the

PSC,

ChampionsWorld alleges that USSF had improper contact with FIFA.
On August 26, 2009, Gulati wrote to Villiger to propose a meeting
to introduce USSF’s new general counsel, Lisa Levine (“Levine”),
and to address various issues “that we have been discussing over
the last several months with you.” The ChampionsWorld litigation
was on the agenda for the meeting, which was held via conference
call on September 24, 2009.
Levine’s notes from that meeting indicate that during the
conference call, FIFA officials said they would soon be inviting
Stillitano to file a brief, to which USSF could file a reply.
hearing would then be set.

A

USSF contends that Levine’s notes

show that the discussion of the ChampionsWorld matter was limited
to questions of timing and procedure.
- 15 -

Testimony from Levine,

Gulati, and John P. Collins (“Collins”), counsel for FIFA, during
the most recent CAS hearing supports this interpretation. Levine
testified that during the conference call there was no discussion
about the substance of the dispute, and that no one from USSF
tried to influence the PSC. Collins agreed that the conversation
solely concerned the status and timing of the dispute.
Nonetheless, ChampionsWorld notes that shortly after this
meeting, FIFA again sided with USSF in a dispute. Stillitano had
attempted to moot the need for arbitration by stipulating that
FIFA’s current statutes and regulations may be read to authorize
USSF to sanction professional international soccer matches played
in the United States.

ChampionsWorld argued that although the

current regulations do give USSF that power, the regulations in
existence during the genesis of this dispute did not.

USSF, on

the other hand, argued that the PSC should decide not only
whether

it

currently

has

sanctioning

authority

under

FIFA

statutes and regulations, but whether it had that authority
during Stillitano’s tenure at ChampionsWorld.

The PSC agreed,

rejecting ChampionsWorld’s arguments that the CAS’s questions
were framed in the present tense and did not speak to that issue.
On February 10, 2010, the PSC decided the questions in favor
of USSF, finding that under FIFA regulations USSF has sanctioning
authority over soccer matches played by foreign national teams or
foreign clubs in the United States, has the right to charge
- 16 -

sanctioning fees, and has the right to notify FIFA if a licensed
match agent refuses to pay those fees.
that

USSF

has

had

those

rights

since

Further, the PSC found
at

least

2001,

when

Stillitano and ChampionsWorld began promoting international,
first-division

professional

men’s

soccer

exhibitions

in

the

United States. ChampionsWorld appealed that decision to the CAS.
A ruling by the CAS was issued on July 12, 2011.
affirmed the PSC’s ruling.

The CAS

Relevant to the instant motion, it

found insufficient evidence in the record to establish that USSF
and FIFA had engaged in improper communications or conspired to
rephrase the questions at issue to suit their own purposes.
B.
The

Court

notes,

Analysis

as

it

has

before,

that

FIFA’s

interpretation of its own statutes is of limited use in this
proceeding because FIFA does not have the authority to interpret
U.S. law or to grant USSF an exemption from this country’s
antitrust

laws.

ChampionsWorld,

726

F.Supp.2d

at

969.

Nonetheless, ChampionsWorld argues that USSF manipulated the
outcome of the FIFA proceedings and should not be permitted to
offer

the

misconduct.”

CAS’s

ruling

“as

insulation

against

its

prior

A district court may dismiss a case for egregious

litigation misconduct under either FED . R. CIV . P. 37 or its
inherent authority.

JFB Hart Coatings, Inc. v. AM Gen. LLC, 764

F.Supp.2d 974, 981 (N.D. Ill. 2011).
- 17 -

However, while ChampionsWorld can show some communications
between USSF and FIFA’s administrative staff of which it perhaps
should have been informed, nothing in ChampionsWorld’s motion
rises to the level of “tampering” with the tribunal.

There is no

evidence to show that USSF communicated with the PSC tribunal
that decided the arbitration, and USSF’s explanation that its
communications with FIFA officials involved scheduling matters
appears well-taken.

While ChampionsWorld ascribes a great deal

of meaning to FIFA’s unwillingness to accept his stipulation that
FIFA’s current regulations allow USSF to charge sanctioning fees,
the Court cannot do the same.

The questions in USSF’s petition

inartfully

of

framed

the

issue

USSF’s

authority

to

charge

sanctioning fees as implicating only FIFA’s current regulations.
But it has always been clear that the dispute in this case stems
from the USSF’s authority to charge sanctioning fees during the
time of ChampionsWorld’s existence.
In an attempt to show wrongdoing by USSF, ChampionsWorld
supplemented its motion with emails between counsel for USSF and
Collins. Collins, who now serves as outside counsel to FIFA, was
formerly general counsel to USSF.

Collins turned over these

emails in response to a subpoena from ChampionsWorld that seeks
information

related

to

his

communications

with

Defendants’

counsel regarding ChampionsWorld or Stillitano. Although Collins
turned over these emails, he and USSF seek to quash the subpoena.
- 18 -

In one of the emails to Collins, one of the attorneys

for

USSF, Russell Sauer (“Sauer”), attached a letter that USSF had
faxed to FIFA (which also had been submitted to ChampionsWorld’s
counsel), with the comment “I understand you may be advising the
FIFA Player’s Status Committee in connection with the [the
ChampionsWorld matter].”

Sauer added, “If you wish to discuss

this matter further, please do not hesitate to call.”
replied, “Your understanding is correct.”
exchange,

Sauer

requested

that

Collins

In a later email

Collins

provide

contact

information for an individual at FIFA, unconnected with the PSC,
who could help locate historical information.
The Court cannot ascribe to these emails the nefarious
motives urged by ChampionsWorld.

ChampionsWorld complains that

it did not have an opportunity to submit copies of anticipated
submissions to the PSC for Collins’ “consideration and ex parte
‘discussion.’”

However,

there

is

no

evidence

of

further

discussions of that letter, or that Collins took any actions that
compromised the integrity of the FIFA arbitration proceedings.
Collins has submitted an affidavit in which he states that he was
not present at the PSC hearing, did not know who was on the
bureau of the PSC that decided the matter, and did not learn of
the PSC’s decision until after the fact.

In light of these

representations, and the lack of evidence of any discussions
between USSF officials and FIFA officials that went to the
- 19 -

substance of the dispute, ChampionsWorld cannot establish any
tampering with the FIFA proceedings on the part of USSF.
There remains the question of whether Collins should have to
turn over additional documents in response to ChampionsWorld’s
subpoena regarding his communications with Defendants’ law firms
about Stillitano or ChampionsWorld.

USSF and Collins note that

fact discovery in this case closed on January 31, 2011.

Because

there is nothing to show improper conduct on Collins’ part, the
Court

finds

that

good

cause

does

not

exist

to

extend

discovery deadline and allow the subpoena of Collins.

the

As such,

it is quashed, and ChampionsWorld’s Motion for Sanctions against
USSF for FIFA Tribunal Tampering is denied.

Collins’ request

that he be awarded fees and costs incurred in filing the motion
to quash is likewise denied.
IV.

Motion to Disqualify Defense Counsel

ChampionsWorld asks this Court to disqualify counsel for
both Defendants, and to strike their affirmative defenses, on the
basis of

a

June 2006

interview

with

DiCuollo

conducted by

attorneys for MLS from the law firm of Proskauer Rose LLP.
DiCuollo,

as

ChampionsWorld

noted
who

above,
went

ChampionsWorld’s employ.

to

is

the

work

former
for

MLS

executive
after

for

leaving

DiCuollo, a lawyer, served as in-house

counsel at ChampionsWorld, although he and Defendants contend his
role at the company was primarily a business one.
- 20 -

In March, this Court directed Proskauer to turn over its
notes from the meeting over its objection.

The interview of

DiCuollo by Proskauer attorneys is documented in an 11-page
internal

memorandum

Memorandum”).
Proskauer

dated

June

29,

2006

(the

“Proskauer

ChampionsWorld contends the memorandum shows that

deliberately

elicited

privileged

information

from

DiCuollo, and that both Proskauer and counsel for USSF, Latham &
Watkins LLP, must be disqualified because this information has
tainted the proceedings.

Specifically, ChampionsWorld contends

that DiCuollo was the source of Defendants’ theory that misguided
business strategies, and not the USSF sanctioning fees, drove
ChampionsWorld into bankruptcy.
Defendants contend that it was legally permissible for
attorneys for MLS to interview a former employee of its adversary
and

that

DiCuollo

information.

was

warned

not

to

reveal

privileged

Further, they argue that DiCullo’s role within

ChampionsWorld was largely business, not legal, circumscribing
the scope of Plaintiff’s privilege claim.
A.
As

noted

ChampionsWorld
Affairs.”

above,
was

Background
DiCuollo’s

“Senior

Vice

job

President

description
—

with

Legal/Business

DiCuollo told the Proskauer attorneys that he was not

really “practicing law” at ChampionsWorld, but was Stillitano’s
right-hand man and the day-to-day “financing guy.” DiCuollo said
- 21 -

he worked for ChampionsWorld until May 2005, then did some work
on a per diem basis as the company’s bankruptcy administrator
until October or November 2005.

By late November 2005, he was

offered a position with MLS as director of player personnel.
DiCuollo outlined for the Proskauer attorneys the staffing
of ChampionsWorld, its financial position, the attempted sale of
the

company

prior

to

its

bankruptcy,

and

its

bankruptcy.

Proskauer attorneys also questioned DiCuollo about the background
of the instant lawsuit.

On this point, DiCuollo disclosed:

•

He was asked to do research on the suit by the
ChampionsWorld Board.

•

In his opinion, MLS was not a potential target of
the suit until the lawyers got involved.

•

The names of certain ChampionsWorld investors
that DiCuollo said were “leading the charge” on
the lawsuit.

Relevant to the issue of USSF sanctioning fees, DiCuollo told the
Proskauer attorneys that:
•

Certain international teams required that the
promoter be sanctioned by the home federation.
For example, Manchester United, an English team,
told ChampionsWorld that it would not play in
matches sponsored by it if ChampionsWorld did not
either pay the USSF sanctioning fees or sue over
them.

•

In 2002 or 2003, ChampionsWorld had an expert
look at the Ted Stevens Act to determine if USSF
had authority to charge sanctioning fees, and the
expert concluded that it did not.

•

DiCuollo himself looked into the issue in 2004,
reviewing FIFA rules, USSF bylaws, and other
- 22 -

documents.
He also researched whether other
federations were charging similar fees. DiCuollo
concluded that USSF did not have authority to
charge sanctioning fees.
•

DiCuollo spoke with Sheila Kronert Moore at FIFA,
who told him that club team games were outside of
FIFA’s purview, so ChampionsWorld would have to
look to the governing law in the United States.

•

DiCuollo
also recounted
conversations
with
officials at USSF seeking clarification for its
authority for charging the sanctioning fees.
DiCuollo told the Proskauer attorneys that his
research on the sanctioning fee issue was not
done from a “legal perspective,” but rather as a
negotiating tool to get lower fees.

DiCuollo also discussed with Proskauer attorneys details of
ChampionsWorld’s perception of the interrelationship between MLS
and USSF, including the fact that there was a perception by some
at ChampionsWorld that because MLS and USSF had overlapping board
members, MLS received benefits from USSF.

Finally, DiCuollo

provided the names of two of ChampionsWorld’s main competitors.
B.

Legal Standard

Here, the Court is called upon to determine whether DiCuollo
revealed any privileged information.

ChampionsWorld’s principal

claims (RICO and antitrust violations) are brought under federal
law, so this Court will apply attorney-client privilege law as
determined by the federal courts. Mem’l Hosp. for McHenry Co. v.
Shadur, 664 F.2d 1058, 1061 (7th Cir. 1981).

As a preliminary

point, Defendants argue that Proskauer’s conduct in interviewing
DiCuollo should be judged by the standards applied in New York
- 23 -

federal courts because this action was transferred pursuant to
28 U.S.C. § 1404(a), and in such a case the transferee court
applies the law of the forum in which the case was originally
filed.
law

ChampionsWorld contends that this Court should apply the

of

this

circuit

as

to

the

appropriate

boundaries

of

interviews of a former employee of an adversary. Given that this
interview occurred in New York while the case was pending there,
this Court will look to the interpretation of New York federal
courts on this issue. Regardless, it appears that federal courts
sitting both here and in New York (and indeed throughout the
country) have applied similar reasoning to disputes such as this.
Federal

courts

have

inherent

authority

to

discipline

attorneys who appear before them for conduct inconsistent with
ethical standards.

MMR/Wallace Power & Indus., Inc. v. Thames

Assoc., et al., 764 F.Supp. 712, 717 (D. Conn. 1991).

Generally

speaking, counsel may conduct ex parte interviews of former
employees

of

a

corporate

adversary.

Chambers

v.

Cities/ABC, 159 F.R.D. 441, 443 (S.D.N.Y. 1995).
counsel

may

not

inquire

about

privileged

or

Capital
However,

confidential

communications, and must conform to all ethical standards.
Siebert & Co., Inc. v. Intuit, 868 N.E.2d 208, 210 (N.Y. 2007).
Where

privileged

information

was

revealed,

the

Court

must

determine whether the attorney’s conduct is so questionable as to

- 24 -

taint

the

litigation

before

disqualification of counsel.

the

Court,

thus

requiring

MMR/Wallace, 764 F.Supp. at 718.

C.

Analysis

DiCuollo’s role in this case is thorny for many reasons, not
the least of which is that he worked in both a business and legal
capacity

for ChampionsWorld.

The

attorney-client

privilege

protects confidential communications by a client to an attorney,
acting in his or her role as an attorney, for the purpose of
obtaining legal advice. Sandra T.E. v. South Berwyn School Dist.
100, 600 F.3d 612, 618 (7th Cir. 2010).

Because the privilege

only applies when a lawyer acts as a lawyer, communications
regarding business strategy are not governed by the attorneyclient privilege.

Weeks v. Samsung Heavy Ind. Co., Ltd., 93 C

4899, 1996 WL 341537, *3 (N.D. Ill. June 20, 1996). Further, the
“attorney-client privilege protects communications between a
client

and

its

lawyer,

not

communicates to the attorney.”

the

facts

which

the

client

Standard Chartered Bank PLC v.

Ayala Int’l Holdings, Inc., 111 F.R.D. 76, 80 (S.D.N.Y. 1986).
And the privilege does not protect facts that an attorney obtains
from independent sources and conveys to his client.

Id.

Much of the information revealed by DiCuollo during the
Proskauer

Rose

interview

was

factual

information

about

the

circumstances of the sanctioning-fee dispute. Further, a portion

- 25 -

of ChampionsWorld’s Complaint centers on communications between
DiCuollo

and

USSF

over

the

sanctioning

fees,

communications cannot be considered privileged.

so

those

The Court also

notes ChampionsWorld itself inquired of DiCuollo during his
deposition in January 2011 (before disclosure of the Proskauer
Memorandum) about many of the same subjects touched upon during
the Proskauer Rose interview.

Specifically, ChampionsWorld’s

counsel asked DiCuollo about his position with the company, who
its

investors

were,

his

communications

with

USSF

over

the

sanctioning fees, and his own investigation into the validity of
the fees.

ChampionsWorld’s counsel apparently was not concerned

that DiCuollo would reveal privileged information in response to
these inquiries. But counsel did instruct DiCuollo not to reveal
privileged information in regard to his conversations with Martin
O’Connor, who served as outside counsel for the company. This is
a strong indicator that, despite its arguments to the contrary,
ChampionsWorld
privileged.”

did

not

view

DiCuollo’s

work

as

“innately

Further, while it is undisputed that DiCuollo

identified documents for ChampionsWorld to use in preparing its
RICO and fraud claims, there is no evidence that Proskauer
attorneys broached this subject with him.
The instant case is similar to Siebert, 868 N.E.2d at
210–11,

where

the

disqualification

Court

was

not

of

Appeals

warranted
- 26 -

of

New

merely

York

held

because

that

defense

attorneys interviewed a former executive for the plaintiff who
had

been

privy

information.

to

plaintiff’s

privileged

and

confidential

In Siebert, the executive, Nicholas Dermingy, was

involved in negotiating a contract between the parties to create
an Internet brokerage service.

Id. at 209.

After the agreement

fell apart, Dermingy also was a member of the litigation team for
the plaintiff and was privy to its litigation strategy.

Id.

After he was fired from the plaintiff company, attorneys for the
defendant interviewed Dermingy, but warned him not to reveal
confidential or privileged information.

Id.

Because the record

showed that no such information had been disclosed, the court
found the interview was proper.

Id. at 212.

There are numerous parallels between the instant case and
Siebert. Like the executive in that case, DiCuollo played a role
in the underlying transaction by negotiating with USSF over the
sanctioning fees, and he later played a role in developing
ChampionsWorld’s litigation strategy.

And as in Siebert, the

interview in this case focused on the facts underlying the
dispute, not ChampionsWorld’s litigation strategy.

As such, the

Court cannot find that the Proskauer interview was improper.
Even

if

the

Court

were

to

find

some

impropriety,

ChampionsWorld has not shown that the interview tainted these
proceedings or provided Defendants with an unfair advantage so as

- 27 -

to require the extreme sanction of disqualification.

The vast

majority of the information obtained from DiCuollo was publicly
available elsewhere, primarily through information disclosed
during

the

bankruptcy

proceeding

and

ChampionsWorld itself made to third parties.

by

disclosures

It is clear that

DiCuollo was not the only possible source of Defendants’ theory
that a flawed business model, and not the USSF sanctioning fees,
was the cause of the company’s demise.

There was abundant

information that pointed in this direction, including testimony
by

both

Stillitano

and

DiCuollo

during

ChampionsWorld’s

bankruptcy proceedings, as well as a valuation of ChampionsWorld
prepared

by

Bederson

&

Company,

LLP,

a

firm

retained

by

Plaintiff’s bankruptcy counsel, which showed the financial losses
suffered by ChampionsWorld throughout its history.

The fact

that DiCuollo did not disclose secret information and was not the
only source of the defense theory in this case distinguishes this
case from the principal case relied upon by ChampionsWorld,
Ackerman v. Nat’l Prop. Analysts, Inc., 887 F.Supp. 510 (S.D.N.Y.
1993). In Ackerman, a former in-house counsel for the defendants
provided

“inside

and

obviously

secret

information”

to

the

plaintiffs’ counsel and helped them develop their theory of
fraud.

Id. at 517–18.

That information was used as the primary

source of information for plaintiff’s complaint.
is not true here.
- 28 -

Id.

The same

Further, counsel for USSF argues that it did not know the
substance of the DiCuollo interview until after this Court
ordered co–defendant MLS to produce it, so it could not have used
information from DiCuollo to shape its litigation strategy.
ChampionsWorld has given this Court no reason to doubt this
assertion.

For

these

reasons,

ChampionsWorld’s

Motion

for

Sanctions Against: (A) the Law Firms of Proskauer Rose LLP and
Latham & Watkins LLP and (B) Defendants MLS and USSF is denied.
V.

ChampionsWorld’s Motion to Compel Production
of Documents from MLS

Finally, ChampionsWorld seeks to compel MLS to produce
documents relating to its decision to partner with Creative
Artists Agency (“CAA”) to promote international, professional
soccer matches in 2010 and 2011.

For the reasons that follow,

the motion is denied.
A.

Background

CAA is a talent and entertainment agency that, among other
things, promotes exhibition soccer matches and is the current
employer

of

both

Stillitano

ChampionsWorld executive.

and

Jon

Sheiman,

a

former

In 2010 and 2011, MLS, through its

marketing arm, Soccer United Marketing (“SUM”), partnered with
CAA

to

promote

these

international teams.

exhibitions,

some

of

which

involved

ChampionsWorld’s document requests, issued

in 2010, sought documents that showed MLS’ revenues and expenses
- 29 -

in connection with the promotion of international games.

MLS

objected to the unlimited date range of the requests. After some
back and forth, MLS agreed in a June 11, 2011, letter to produce
such documents through the end of 2009.

The CAA–promoted games

did not fall within this category, and, until recently, there was
no further discussion of the matter.
However, Championsworld argues that the CAA documents are
important
reports.

in

light

of

recently

exchanged

expert

valuation

ChampionsWorld’s expert contends that but for USSF’s

unlawful sanctioning fees, it would have stayed in business and
become profitable. Defendants’ expert, on the other hand, opines
that ChampionsWorld could not have reasonably expected to turn a
profit.
ChampionsWorld

contends

that

during

recent

deposition

testimony, Stillitano shed new light on the issue when, under
questioning from USSF’s counsel, he testified that lessons he
learned from running ChampionsWorld allowed the CAA-MLS promoted
matches to be profitable. Although Stillitano is its former CEO,
ChampionsWorld characterizes this revelation as surprising.

In

fact, during Stillitano’s initial deposition in this matter,
counsel for ChampionsWorld instructed Stillitano not to answer
questions about whether certain CAA-promoted games made a profit
because that would result in the disclosure of CAA’s confidential
information.

Further, when counsel for Defendants sought to
- 30 -

question Sheiman about the CAA games, counsel for ChampionsWorld
objected because CAA is not represented in this matter and “it’s
irrelevant to this action anyway.”

MLS argues, in essence, that

ChampionsWorld has waived any right to the CAA documents.
B.
Generally,

parties

Analysis

may

obtain

discovery

regarding

any

non–privileged matter that is relevant to any party’s claim or
defense.

FED. R. CIV. P. 26(b)(1).

ChampionsWorld brings this

motion to compel under FED . R. CIV . P. 37(a)(1).
broad discretion in ruling on motions to compel.

Courts have
Gile v. United

Airlines, Inc., 95 F.3d 492, 495–96 (7th Cir. 1996).

In ruling

on a motion to compel, the Court must “independently determine
the proper course of discovery based upon the arguments of the
parties.”

Id. at 496.

While FED. R. CIV . P. 37 does not set a

time limit for motions to compel, they must be brought within a
reasonable period of time.

Singletary v. Cont’l Ill. Nat’l Bank

and Trust Co. of Chi., No. 89 C 2821, 1992 WL 199827, at *2 (N.D.
Ill. Aug. 10, 1992).
Here, ChampionsWorld has known since June 11, 2010, that MLS
planned to produce documents to show its revenue and expenses in
connection with the promotion of international games only through
the end of 2009, but has not objected until now.

The fact

discovery cutoff in this case was January 31, 2011.

It is too

- 31 -

late in the game, so to speak, for ChampionsWorld to object,
particularly given that the “new” information that sparked this
motion came from its own former CEO.

This is particularly true

where attorneys for ChampionsWorld had previously objected during
depositions when Defendants tried to pursue this line of inquiry.
As such, Plaintiff’s motion to compel is denied.
VI.

CONCLUSION

For the reasons stated herein, the Court rules as follows:
(1)

Defendants’ Joint Motion for Sanctions for Plaintiff’s

Wholesale Destruction of Evidence [246] is granted in part;
(2)

ChampionsWorld’s Motion for Sanctions Against Defendant

United States Soccer Federation, Inc. [277] is denied;
(3)

Non-Party

John

Collins’

Motion

to

Quash

Discovery

Subpoena [265] and Defendant USSF’s Motion to Quash Discovery
Subpoena Issued to Non-Party John P. Collins [268] are granted;
(4)

ChampionsWorld’s Motion for Sanctions Against: (A) the

Law Firms of Proskauer Rose LLP and Latham & Watkins LLP and (B)
Defendants MLS and USSF [278] is denied; and

- 32 -

(5)

ChampionsWorld’s Motion to Compel the Production of

Documents [306] is denied.
IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
DATE: 8/17/2011

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