Varsity Strikes $43 Million Settlement With Antitrust Accusers
Varsity Brands has agreed to pay $43.5 million to settle an antitrust lawsuit brought on behalf of a class of all-star cheerleading gyms, according to a copy of the agreement filed in the case.
The settlement deal, which still requires court approval, would bring to a final resolution one of three federal antitrust suits Varsity has been forced to defend over the last three years. The particular class of plaintiffs in the case, Fusion Elite All Stars, et al. v. Varsity Brands LLC, et al., are so-called “direct purchasers”—gyms and cheerleading spectators that paid registration and associated fees to participate in Varsity all-star events—over the last seven years.
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The other defendant in the case was the U.S. All Star Federation (USASF), the Varsity-backed cheerleading governing authority, which the plaintiffs had accused of being central to Varsity achieving “monopoly power” over the cheer market.
In addition to the settlement’s financial terms, Varsity and the USASF agreed to a list of conditions meant to curb what critics have said is Varsity’s improper influence over the cheer organization it founded in 2003. According to the deal the parties struck, current Varsity board members will no longer be able to simultaneously serve on the board for USASF, and Varsity cannot pay for the salaries or benefits of USASF employees and executives.
Moreover, no single cheerleading event producer will be able to occupy more than a third of the voting seats on USASF’s board nor comprise more than 40% of USASF’s sanctioning committee.
However, only Varsity, which is owned by Bain Capital, will be on the hook for any monetary compensation related to the settlement.
The agreement also does not address USA Cheer, the Varsity-backed American national governing body, which in January gained recognition from the United States Olympic and Paralympic Committee as one of its new affiliate sports organizations. USA Cheer, which was not named a defendant in the case, had yet to ascend to its current state of supremacy when the suit was filed in August 2020.
As part of the settlement with the Fusion plaintiffs, Varsity and the USASF admit no wrongdoing; Varsity reiterated that point in a statement given to Sportico.
“Reaching this mutual agreement is a positive outcome for everyone involved,” Varsity Spirit said via spokesperson Nicole Lauchaire. “It will allow [Varsity], gym owners, and families to focus on what matters most—creating incredible experiences for young people.”
The lead plaintiff in the lawsuit, Fusion Elite All Stars—a club gym located in Hollister, Calif.—initially sued Varsity in May 2020 in the U.S. District Court for the Northern District of California. After the case was transferred to the Western District of Tennessee, where Varsity is based, it eventually merged with a similar lawsuit from other direct purchasers accusing Varsity of violating Section 2 of the Sherman Antitrust Act.
In their consolidated action, the plaintiffs accused Varsity of controlling 80% of the all-star cheerleading competition market and 90% of the all-star apparel market through a series of “exclusionary schemes.”
Varsity and the USASF unsuccessfully filed a motion to dismiss the case in August 2021; at the time, the court decided there was a plausible claim that Varsity had achieved monopoly power over the relevant cheer market and that it had done so through willful anticompetitive conduct. The ensuing two-and-a-half years of litigation yielded over 1.6 million documents from Varsity, its corporate affiliates and the USASF.
The plaintiffs retained as their expert witness the economist and consumer protection advocate Hal Singer. He has also served as the Tennis Channel’s expert in its program carriage dispute with Comcast before the Federal Communications Commission and the UFC fighter’s expert in the antitrust lawsuit Cung Le et al v. Zuffa, LLC.
The Fusion settlement arose out of a mediation that took place on Jan. 20, just days before the initial deadline for the plaintiffs to file their motion to certify the class. Though the parties didn’t ultimately reach an agreement then, less than two weeks later, on Jan. 31, they jointly notified the court of their intention to settle and requested a stay of all deadlines in the case.
In a joint declaration filed with the court last week, the plaintiffs’ lawyers called the settlement terms “fair, reasonable and adequate,” contending that its stipulations regarding the USASF governance have “the potential to facilitate vigorous competition in the All-Star Cheer Events Market.”
The attorneys’ legal fees will eventually be paid out of the settlement fund, pending court approval.
Last week, Varsity received a major break when another of the antitrust cases, American Spirit and Cheer Essentials et al v. Varsity Brands, LLC et al, was dismissed by Chief U.S. District Judge Sheryl Lipman because of repeated procedural violations by the plaintiffs. Judge Lipman has also presided over Fusion and a third lawsuit, Jones et al. v. Varsity et al., which is still ongoing.
Additionally, Varsity and the USASF, along with USA Cheer, have each been named as co-defendants in a series of federal cheerleading sex abuse lawsuits filed over the last year in seven states on behalf of at least 21 accusers.