I am sure that many readers followed with interest the recent litigation brought by college athletes against the NCAA and the top athletic conferences in which the athletes alleged that the defendants conspired to suppress athletes’ compensation. The lawsuit ended in a blockbuster settlement that may reshape the fundamental economics of college sports. Now, as discussed in the following guest post from Sarah Abrams, a group of professional tennis players, have filed a lawsuit in which they, too, allege their compensation has been suppressed, in this case by a “tennis cartel.” Sarah, who is Head of Claims Baleen Specialty, a division of Bowhead Specialty, takes a look at the new lawsuit and considers the D&O insurance implications. I would like to thank Sarah for allowing me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.

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A recent antitrust lawsuit filed by 14 professional tennis players and the Professional Tennis Players Association (PTPA) alleges, in part, that professional tennis players are not being fairly compensated for their Name, Image, and Likeness (NIL). Vasek Pospisil, et al. v. ATP Tour, Inc. and WTA Tour, Inc., filed in the Southern District of New York, claims that a “tennis cartel”, the ATP (Association of Tennis Professionals) and WTA (Women’s Tennis Association), have conspired to prevent opportunities for competition and have complete control over tennis players’ pay and working conditions.  Such allegations seem to echo those previously made by student-athletes against the NCAA and member institutions.

Thus, in the wake of the House Settlement and an increasing focus on compensating athletes for their NIL, will the Pospisil et. al plaintiffs have a greater chance of winning their recent antitrust litigation?  And, in turn, will D&O risk increase for other sport governing bodies and professional tour organizers?  The following discussion examines the procedural posture of the Pospisil et al. case, the differences and similarities between the ATP, WTA, and NCAA, as well as antitrust allegations made against the pro tennis tours, and the D&O exposure stemming therefrom.

In Pospisil et al., theplaintiff tennis players and PTPA allege that the ATP and WTA tour organizers have violated U.S. antitrust laws by suppressing player compensation, fixing prize money, limiting off-court “NIL” earnings, controlling player schedules and rankings, and blocking competition. The players argue that the ATP and WTA operate as a monopoly and a monopsony, depriving players of a fair market for their labor. In addition, as a condition of competing in ATP and WTA tournaments, the plaintiffs allege that they are required to grant the right to market the tournaments using their NIL without compensation.

It is interesting to note that, on June 24, the players and PTPA law firm wrote the presiding judge that they had agreed to engage in discussions with the Grand Slams, without the need for court intervention and would abstain from naming the Grand Slams as defendants for 90 days (Wimbledon, a Grand Slam, runs from June 23-July 13).  The players and PTPA previously advised the Court that they would amend their complaint to include the Grand Slams as defendants, supporting the plaintiffs’ complaint that professional tennis players must compete in the Grand Slams, as well as the ATP and WTA tours, to make their living.

Similarly to the In Re NIL Litigation, the professional tennis players’ loss of NIL income may be a consideration for the court in deciding whether the ATP and WTA violated antitrust law.  Given the number of previous similar complaints against the NCAA and recent resolution outlined in the House Settlement, will the defendant governing bodies of men’s and women’s tennis be forced to make a change?

First, although the ATP, WTA, and Grand Slam tournaments oversee global professional tennis circuits, much like the NCAA governs collegiate sports, they differ in their structure, purpose, and governance. The ATP (Association of Tennis Professionals) and WTA (Women’s Tennis Association) are the two main governing bodies for professional tennis. They organize and oversee the men’s and women’s tennis tours, respectively, and function like commercial sports leagues.

The professional tennis players who participate in the ATP and WTA tours are independent contractors whose income is based on performance and endorsements. There is no revenue sharing for professional tennis players; instead, players can earn prize money from performance (round-by-round) in tournaments, as well as from endorsement deals, appearance fees, and personal sponsorships. Neither ATP nor WTA offers pensions, healthcare, or collective bargaining, unlike many professional sports leagues.

The NCAA, on the other hand, is specifically designated as a 501(c)(3) educational organization with the directive of governing amateur college athletics in the U.S. and promoting student-athlete development. As D&O Diary readers may recall, the NCAA historically prohibited athletes from being paid; however, numerous antitrust lawsuits that focused on student athletes’ abilities to own and earn from their NIL eroded this proscription.  In June, the House Settlement provided a framework for compensating athletes. 

Now that professional tennis players are alleging that the tours are not compensating them for their NIL, will the Pospisil, et al. Court consider the House Settlement and find antitrust violations by the defendant tennis associations? 

A brief review of US antitrust laws follows.  The Sherman Act prohibits contracts, combinations, or conspiracies that unreasonably restrain trade or commerce.  Thus, if the ATP and WTA agree with each other or with tournament operators to fix prize money or block rival tournaments, that could be a per se violation of Section 1. In addition, if the ATP or WTA uses ranking point systems or non-compete rules to exclude new entrants or punish players who don’t comply with ATP or WTA regulations, that may be viewed as monopolistic behavior, which would violate Section 2 of the Sherman Act.

The Clayton Act allows a private party injured by antitrust violations, in this case, professional tennis players, to sue for triple the actual damages plus attorneys’ fees and costs.  The Clayton Act further allows a Court to issue injunctions to prevent or stop anticompetitive behavior.  As D&O underwriters may know, antitrust litigation can be lengthy and expensive, with plaintiffs having to “define the market, define harm to the market, define monopoly, and then determine pro- versus anti-competitive practices.” While some D&O policies exclude antitrust in their base form but provide coverage for defense costs until a final adjudication, an antitrust exclusion may also be removed or sublimited by endorsement. 

Thus, there may be exposure to D&O insurers stemming from allegations similar to those made in Pospisil, et al., as well as follow-on claims against defendant organizations.  

For example, an antitrust complaint may lead to inquiries of whether an organization failed to ensure compliance with antitrust laws, giving rise to mismanagement claims against directors, officers, and board members under state corporate law.  Such claims against organizational leadership may trigger coverage under Side A.  Both the ATP and WTA, like the NCAA, are structured as nonprofit corporations, subjecting their directors to potential liability under nonprofit fiduciary duty standards. Misuse of nonprofit status to benefit private tournament owners (as alleged) could be framed as self-dealing or actions beyond corporate authority.

The Pospisil, et al. complaint describes ATP and WTA as having a governance structure thatfavors tournament owners over players, despite the tours’ original mission to represent players.  Such allegations sound familiar to those made against the NCAA, an organization with a mission to support amateur athletes.  Finally, similarly to complaints against the NCAA, the ATP and WTA have purportedly punished players.  For the professional tennis players, adverse action was allegedly taken against those who became affiliated with the PTPA.  If true, this could expose the boards of both organizations to liability for retaliation and unlawful interference. 

In light of the above, whether professional tennis and similarly structured sport governing bodies are about to face a House-sized change to how athletes are compensated for their NIL remains to be seen.  The D&O risks stemming from the antitrust allegations, however, continue to be a risk familiar to underwriters.

The views expressed in this article are exclusively those of the author, and all of the content in this article has been created solely in the author’s individual capacity. This article is not affiliated with her company, colleagues, or clients. The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter.