BOULDER, CO – He said on our show that he “…would scorch the Earth with lawsuits.” Many thought he was bluffing. Many thought he had no cause to sue. Many thought he should just go away. Some of us knew better; that when you spend in the neighborhood of 6 million bucks on something, you simply do not go off quietly into the night, especially if you feel you failed because others didn’t live up to their end of the bargain. And now, one could argue, we have a A Day of Reckoning for American rugby in the form of a lawsuit by Doug Shoninger and his Professional Rugby Organization (N.A. Rugby Union LLC). It may appear to be too long to attempt, but it’s easy reading and surprisingly not bogged down in legal jargon. Here are some of the particulars from 40 pages – you can scroll for individual headings. Apologies in advance for something left out that you may deem important, like the 18 Claims For Relief. First though, are pertinent interviews with Mr. Shoninger and Mr. Chang prior to this filing:
DISTRICT COURT, BOULDER COUNTY, COLORADO
1777 6th Street, Boulder, CO 80302
Plaintiffs: N.A. RUGBY UNION LLC, d/b/a Professional
Rugby Organization, a Delaware limited liability company;
DOUGLAS SCHONINGER, an individual,
Defendants: UNITED STATES OF AMERICA RUGBY
FOOTBALL UNION, a Delaware non-profit corporation;
RUGBY INTERNATIONAL MARKETING, a Delaware
limited liability company; WILL CHANG, an individual;
CHAD KECK, an individual; NIGEL MELVILLE, an
individual; and DANIEL PAYNE, an individual.
Attorneys for Plaintiffs
ROLLIN BRASWELL FISHER LLC
Caleb Durling, #39253; firstname.lastname@example.org
Kasey Johnson, #44996; email@example.com
Edgar Barraza, #49369; firstname.lastname@example.org
8350 E. Crescent Pkwy., Suite 100
Greenwood Village, CO 80111
Telephone: (303) 945-7415
Plaintiffs, N.A. Rugby Union LLC, d/b/a Professional Rugby Organization (“PRO Rugby”) and Douglas Schoninger, submit this Complaint against Defendants United States of America Rugby Football Union (“USAR”), Rugby International Marketing (“RIM”), Will Chang, Chad Keck, NigelMelville, and Daniel Payne:
1. This case involves a contract and numerous associated promises and guarantees made by Defendants to Plaintiffs concerning an exclusive, sanctioned American professional rugby league. Relying on oral and written representations and contractual promises, Schoninger, an entrepreneur with no prior rugby affiliation, invested $6,000,000 of his own money and years of his time in a tremendous—and successful—effort to start and develop the first professional
rugby league in U.S. history.
2. Defendants lied to Plaintiffs during contract negotiation about their loyalty and commitment to the agreement’s exclusivity and the league’s development to induce Plaintiffs to spend millions to start the league.
3. Later, in the face of Plaintiffs’ undeniable success and widespread media praise, rugby’s old guard envied the newcomers and saw an opportunity. Defendants schemed to capitalize on Plaintiffs’ blueprint for success and force Plaintiffs out. Intent on destroying Plaintiffs’ exclusive rugby league to take it over for themselves, Defendants engaged in extensive
tortious misconduct and contractual breaches. The misconduct was designed to frustrate the very purpose of Plaintiffs’ league and the contract, and to destroy Plaintiffs’ business opportunities with private investors and rugby unions worldwide.
4. PRO Rugby is a limited liability company organized under the laws of Delaware, with its principal place of business located in New York, New York.
5. Schoninger is an individual who resides in New York. Schoninger is the CEO of PRO Rugby. Schoninger incorporated PRO Rugby for the purposes of creating the first professional, domestic U.S. rugby league and raising capital from investors to grow and develop the league and the sport of rugby.
6. USAR is a non-profit corporation organized under the laws of Delaware, with its principal place of business located in Lafayette, Colorado. It is authorized to do business in the state of Colorado.
7. RIM is a limited liability company organized under the laws of Delaware, with its principal place of business located in Lafayette, Colorado. It is authorized to do business in the state of Colorado.
8. Upon information and belief, Chang is an individual who resides in California. At all material times, Chang was a member of the board of directors for USAR, and beginning in August 2016, was the board chair.
9. Upon information and belief, Keck is an individual who resides in Washington. At all material times, Keck was a member of the board of directors for both USAR and RIM and was RIM’s board chair. Chang and Keck have been close friends since their twenties.
10. Upon information and belief, Melville is an individual who resides in England and maintains a residence in Boulder, Colorado. Melville was the CEO of USAR until June 2016.
11. Upon information and belief, Payne is an individual
Sanction Agreement Background and Negotiations:
36. USAR initially agreed that Schoninger’s league would be sanctioned, but declined his demand that the league be exclusive. Because a lack of exclusivity was a deal breaker for him, Schoninger walked away from the negotiations.
38. After this point, USAR disclosed to Plaintiffs that it had an existing sanction agreement. The agreement was with current board members Chang (who was also negotiating on behalf of USAR with PRO Rugby as to the new sanctioning agreement) and Keck, and Michael Dunafon, the mayor of Glendale, Colorado. Chang, Keck, and Dunafon never started an American professional rugby league. This was despite Chang being a seasoned professional sports team owner and Dunafon being the mayor of the city dubbed “Rugbytown, USA” with the first purpose built, publicly-owned rugby stadium in the country.
39. Schoninger learned later that Chang, Keck, and Dunafon agreed to terminate their agreement early when Schoninger insisted on exclusivity for the new league. This was not done to support the advancement of the sport, but because they wanted Schoninger to spend the time and money to build a league and then retake the opportunity if Schoninger succeeded.
40. This concealed information about Chang and Keck’s plan to retake any successful league was highly relevant to Plaintiffs. Chang and Keck were among the small group of people who would decide whether to honor USAR’s promise of exclusivity to Plaintiffs, and they also had a personal financial stake in pursuing their own sanctioning agreement and professional rugby
investment if Plaintiffs demonstrated that professional rugby could succeed in America.
41. Under USAR’s code of conduct, Chang and Keck had a disqualifying conflict of interest as to the sanction agreement because they current possessed it. It is unclear under the code of conduct how directors could ever be permitted to own the exclusive sanction agreement and continue to serve on the board. Worse, they were not removed from negotiations with Plaintiffs as to the new sanction agreement and instead Chang was USAR’s lead negotiator on the transaction.
The First Season:
69. Opening day was April 17, 2016, and was a resounding success. Almost 3,400 fans, including Schoninger, watched the hometown Sacramento Express defeat the San Francisco Rush 37-25.6 In Glendale, 2,300 fans braved an April Colorado snow storm to watch the Denver Stampede defeat the Ohio Aviators 16-13.
70. Schoninger self-funded the entire 2016 season, spending approximately $6,000,000. Schoninger, on behalf of PRO Rugby and with assistance from USAR, also spearheaded the logistics of setting up and running a new sports league. He secured players, coaches, and staff from the United States and around the world. He determined where teams should be based across the country, working with local rugby communities to gauge interest and capacity. He negotiated stadium leases and the day-of-game logistics, like concessions. Running PRO Rugby consumed all of Schoninger’s professional life for several years to the exclusion of other potential business opportunities.
Apologies, but we must include this:
71. The rugby community was ecstatic that a domestic American professional rugby league had finally come to fruition. A prominent rugby journalist named Matt McCarthy was interviewing Schoninger and reached across the table to touch Schoninger’s arm, stating, “Doug, I just want to make sure you’re real . . . because you’re like Sasquatch to most American rugby fans.”
75. Plaintiffs’ first problem was the public success itself. Schoninger was not a member of the small insular circle that had run rugby in America and the world. Powerful forces within rugby, including Defendants, resented the success and public accolades that Plaintiffs were receiving. Those in this community did not like that an outsider had come in and received
recognition and achieved so much success so quickly.
76. Schoninger’s second problem was greed by those in rugby’s old guard, like Chang and Keck. They had not been willing to invest their money when they had previously held the exclusive license. Now that Schoninger had shown them a blueprint for success, they wanted to seize back the financial opportunity. USAR, Chang, Keck, RIM, and other members of USAR
and RIM’s boards of directors set out on a path to capitalize on the increased financial opportunity by sidelining PRO Rugby.
77. Another problem was the Denver franchise. Schoninger had originally avoided having a Colorado-based team because that meant having to deal with Dunafon, who was notoriously difficult to work with. He finally relented and approached Dunafon. Dunafon first demanded to see all of PRO Rugby’s financials—the only stadium owner that demanded this
disclosure—and appeared in retrospect to want to gain inside information about the party that had succeeded him, Chang, and Keck in having the exclusive agreement.
78. Schoninger refused. Dunafon eventually backed down and let PRO Rugby place a team at Glendale’s rugby stadium. However, Dunafon and the city proved so disruptive to the operation of the Denver team that the playing staff begged Schoninger to move the team. PRO Rugby then moved the Denver team to play at the nearby University of Denver the only franchise forced to move in the first season.
79. USAR and RIM also failed to perform multiple services which they had promised to deliver. RIM failed to act as PRO Rugby’s player agents. USAR failed to set up the Game Board to coordinate PRO Rugby and USAR’s venture.
80. USAR did not fully promote on its website or on social media PRO Rugby’s season and games—a situation which became glaringly obvious based on USAR’s later heavy promotion in 2018 of an unsanctioned league and 2017 support of another unsanctioned competition.
81. USAR and Melville’s promised $4 million in sponsorship never materialized. Schoninger received no more than $100,000 in sponsorship from those sources. Schoninger spent his own money to fill in the difference, resulting in the league costing him personally $6 million in the first year instead of the budgeted $2 million plus the expected sponsorships.
Melville Hides His Long-Planned Departure from Schoninger:
82. A significant step leading to PRO Rugby’s demise and reflecting the fraud of rugby’s inner circle, including Defendants, happened within two weeks of the league’s successful opening games.
83. In May 2015, Melville told Schoninger in confidence that he would be stepping down from USAR but becoming the CEO of RIM. Melville reassured Schoninger that in his continued role at RIM, he would “have [an] increased capacity to drive us all forward commercially and more time to support you and the development of your league.” Melville told Schoninger a figurehead would be installed as USAR’s CEO, but he would retain power within the organization. Melville stated that his replacement “will be supportive don’t worry about” it. Schoninger considered the news of the future change of Melville’s role from USAR to RIM as potentially beneficial because it came with the promise of a greater time investment for the development of PRO Rugby. Melville would be moving to New York to lead RIM and Schoninger
looked forward to being even closer to his business partner and key supporter.
84. Instead, on April 29, 2016, just 12 days after the first match, and without any prior warning, Melville announced he was stepping down as CEO of USAR to take a leadership role with the English national rugby union (“RFU”).
85. Because Schoninger relied heavily on Melville both in structuring and securing the Sanction Agreement, as well as in ongoing business discussions with USAR about extending the term, Melville and USAR hid Melville’s intended departure from Schoninger. Schoninger later learned that Melville had previously accepted the job in late 2015, but held off on announcing his departure until PRO Rugby’s season began because USAR and Melville feared Schoninger would cancel the season if he knew Melville was leaving.
86. Because Schoninger considered Melville his advocate and confidant who would honor USAR’s promise to extend the agreement, Schoninger would never have played the first season if Melville had told him beforehand that he was leaving. Schoninger told Melville this repeatedly during the prior year in the context of Melville’s planned move to RIM. Melville similarly expressed his belief to others that he knew Schoninger would cancel the league if he had revealed his move to England to Schoninger before the season began, and thus he did not tell Schoninger of his move until after the PRO Rugby season was underway. Melville’s nondisclosure of his move to RFU appears even more deliberate because he had previously disclosed to Schoninger his planned move from USAR to RIM and discussed how it would affect PRO Rugby.
87. That same day, because of Schoninger’s concerns about representations Melville has made to him on behalf of USAR, including the extension of the initial contract term, Schoninger contacted Melville to discuss the departure and his strong desire for an extension. During their discussion, Melville promised—again—that the extension would get done. Melville confirmed in a series of emails that he, on behalf of USAR, would “make sure [Schoninger was] in a good place before I leave” and that the extension “will all be buttoned up.”
88. Melville’s promise of the extension was false, and may have been all along, in part because USAR wanted to force PRO Rugby to use RIM as its marketing and broadcasting partner, an entity that was barely conceived, unknown, largely non-functioning, and unfit for the scope of the job. USAR hid this precondition from Schoninger.
89. RIM “is the for-profit commercial arm of USA Rugby, tasked with monetizing the federation’s commercial rights and developing new revenue streams to fund the growth of the game in America. RIM is majority owned by USA Rugby, but structured to attract inward investment from strategic partners. The mission of Rugby International Marketing is to provide attractive financial returns to USA Rugby and its minority shareholders by utilizing third party capital in an entrepreneurially driven, for-profit company that leverages the commercial opportunities available to USA Rugby.”
90. Under the Sanction Agreement, PRO Rugby agreed only to appoint RIM as a “nonexclusive agency to present the commercial rights of [PRO Rugby] . . . .” See Sanction Agreement § II(1)(h) (emphasis added). PRO Rugby never promised or contracted to give RIM an exclusive marketing/broadcasting deal. To the contrary, USAR asked for RIM to be the exclusive marketing provider during negotiations but PRO Rugby declined and USAR then relented.
91. Moreover, RIM did not even exist at the time of the contract formation in April 2015—it was not established until June 2015. RIM did not hire its CEO David Sternberg until after PRO Rugby’s season had kicked off in 2016. However, USAR increasingly desired that PRO Rugby use RIM as its exclusive broadcast partner because of the perceived financial benefits which would flow to USAR. Schoninger demurred. RIM had a minimal media presence, having created a struggling TV channel (the Rugby Channel) with limited viewership and carriage. Schoninger had embraced new media concepts and channels and arranged for PRO Rugby’s matches to be live streamed on Facebook Live and AOL. It was the first and the first game received 1.2 million views on Facebook Live.
92. In April 2016, Melville told Schoninger that he had two tasks to finish before stepping down in June 2016. The first was to extend PRO Rugby’s exclusive sanction as he had long promised. The second was to extend the exclusive sanction for the professional 7-a-side league (though that licensee had never set up a league and, to this date, still has not).
93. Before leaving in June 2016, Melville completed his second task and extended the (inactive) 7-a-side exclusive sanction for seven additional years, but failed to deliver as promised as to PRO Rugby’s 15-a-side exclusive sanction extension. The difference between these two licensees was the 7-a-side licensee agreed to give exclusive marketing rights to RIM and PRO Rugby did not.
94. The emphasis on using RIM was concealed from Plaintiffs until after they entered the Sanction Agreement and began using other marketing/broadcasting agencies.
95. When Defendants started applying pressure on Plaintiffs to give RIM an exclusive deal, Schoninger explained to Melville, Keck, Chang, and Sternberg numerous times that RIM was not fit for the job. Defendants’ post-contractual efforts to lock Plaintiffs in to an exclusive deal with RIM persisted. Schoninger agreed to meet with Sternberg to discuss an agreement, but Sternberg cancelled the meeting.
96. Schoninger did not know that powerful forces had interests in RIM and were driving USAR to prevent PRO Rugby from extending the exclusive sanction as promised. Keck, Chang’s partner in the previous sanction agreement and longtime best friend, was RIM’s board chair. Similarly, Board Member 1 sat on both USAR and RIM’s boards. Keck and Board Member 1 thus made decisions in their roles as USAR directors as to extending or not extending the exclusive sanctioning agreements when the condition for that extension hinged on using RIM, on whose board they also sat. This cross-membership and resulting self-interested decision making violated USAR’s code of conduct as to handling conflicts of interest.
97. RIM’s minority investors included RFU—whose executive director position Melville assumed upon leaving USAR. Melville had a direct interest in forcing PRO Rugby to accept RIM to enrich his future employer. Another of RIM’s minority investors was the Harlequins, an English rugby club and member of RFU.
98. On June 30, 2016, Melville left USAR for RFU without fulfilling the promise he made to Plaintiffs on behalf of USAR to extend the initial term of the sanctioned league.
99. On August 1, 2016, Daniel Payne became the new CEO of USAR.
102. Schoninger would soon learn that PRO 12’s existence and desire to expand to the United States and Canada was driving decisions by many, including Defendants, about enforcing and extending PRO Rugby’s exclusive sanction.
103. In mid-July 2016, during PRO Rugby’s successful first season, Board Member 2, then-Chairman of the Board of USAR, gave an interview stating that USAR would welcome PRO 12 to the United States.
104. Upon hearing this, and knowing that PRO 12’s entry in America violated the Sanction Agreement, Schoninger complained to USAR, citing the Sanction Agreement’s exclusivity provision.
105. In response, Board Member 2 told Schoninger that PRO 12 coming to America would not happen anyway and assigned Payne to make sure the Sanction Agreement was extended right away. USAR was fully aware that bringing PRO 12 to America would violate the Sanction Agreement and even encouraging PRO 12’s expansion plans in America breached the agreement and harmed PRO Rugby.
106. Worse, despite being board members of USAR, knowing of the Sanction Agreement because they participated in its negotiations, and ratifying the Sanction Agreement through their board approval, Chang and Keck were involved with negotiations on the side with PRO 12 to bring teams to the United States.
107. Chang and Keck had business partners interested in bringing PRO 12 to the United States. Chang’s business partners in MLS’s D.C. United were negotiating to place a PRO 12 team in their stadium in Washington, D.C.
108. Chang and Keck engaged in a scheme to bring PRO 12 to America for their own personal and professional benefit, notwithstanding the obvious and intended consequence for Plaintiffs. Through Chang and Keck’s side-dealing with PRO 12, their conduct served to frustrate the purpose of the Sanction Agreement and deteriorate the business relationship between Plaintiffs and USAR. This conduct violated USAR’s code of conduct and both Chang and Keck should not have been permitted to have any role in USAR dealings regarding PRO 12. Instead, Chang was the USAR board chair and Keck the RIM board chair and spearheaded decision making on these issues.
110. No Defendant disclosed to Plaintiffs their plans and active negotiations to bring
PRO 12 to the United States. Instead, Defendants made material misrepresentations and omissions
to create a false impression in Plaintiffs’ mind that USAR was agreeing to and enforcing
PRO Rugby’s exclusive sanctioning.
111. Shortly after Board Member 2’s public comments on PRO 12’s American
expansion, Martin Anayi, the managing director of PRO 12, hosted a press conference during
which he too discussed PRO 12’s plans to expand into the United States, specifically noting
PRO 12’s ongoing discussions with USAR, broadcasters (i.e., RIM), and sponsors, all of which
violated the Sanction Agreement.
112. Schoninger again emailed the decision-makers at PRO Rugby and RIM with his concerns about the harm these statements were doing to his league and efforts to lock in sponsors and investors for future seasons. Rather than acknowledging their role and being truthful, RIM’s Sternberg responded: “We (USA Rugby and RIM) are aware of Pro12’s interests in the US market, including what they have stated in the media, and are in touch with their management to ascertain more details of their plans . . . . We are of course mindful of the (evidently unsigned)7 sanctioning agreement between USA Rugby and PRO Rugby.” Schoninger wrote back reminding USAR and RIM of their contractual obligations.
113. The statements by Board Member 2 and PRO 12 had an immediate damaging effect on PRO Rugby. Schoninger was at the time negotiating with investors and sponsors for the second season in 2017. Investors and sponsors expressed concerns that PRO Rugby would not be the exclusive American rugby league in 2017 and instead would be usurped by the better-known PRO 12 league’s new teams. Investors and sponsors backed out based on the news that PRO Rugby’s exclusivity would not be honored and the signals from USAR’s top management that it instead preferred PRO 12 teams coming to America.
116. Board Member 2’s statements were not the only harmful statements made by current USAR members. A consultant hired by Chang and acting at his direction interfered with Schoninger’s negotiations with potential investors in a New York expansion franchise. The consultant stated that PRO Rugby was a bad investment and that a 15-a-side professional rugby league had no viable future. The potential investor backed out after hearing Chang’s consultant’s negative statements.
Ongoing Term Extension Negotiations:
118. In the wake of his concerns about PRO 12, Schoninger continued to exchange emails and correspondence with Payne about the status of the term extension.
119. Not satisfied with the written communications and the extensive delay, Schoninger requested a meeting between himself and representatives of USAR, including Payne, Chang, Board Member 2, Keck, and another USAR board member. The August 27, 2016 meeting, like many meetings with or among the Board, occurred in the Denver metro area.
120. During the Denver meeting, Chang and Payne acknowledged that PRO Rugby was operating successfully. However, rather than agreeing to extend the league term, Chang chastised Schoninger, calling him “uncooperative,” for refusing to allow PRO 12 to come to the United States.
121. The meeting also revealed the jealousy among rugby’s inner circle about Schoninger’s public success. Board Member 2 complimented Schoninger on being named one of rugby’s 50 most influential people in the world in the September 2016 issue of Rugby World magazine when he had been involved for less than two years. Upon hearing this, Chang (who was not named to the list) became angry and his tone and the tenor of the conversation changed for the remainder of the evening.
122. One day after the Denver meeting, Schoninger was shocked to read Brett Gosper, CEO of World Rugby, publicly supporting PRO 12 coming to the United States in a storypublished by the BBC.
123. After the Denver meeting, Payne promised to send a draft sanction agreement extension. Payne outlined the terms of a multi-year extension in an August 30, 2016 email, including: (1) allowing for lower-level semi-pro leagues; (2) giving Schoninger right of refusal on foreign leagues like PRO 12; and (3) partnering with RIM. Schoninger was disappointed with the offer but recognized the need to make progress and accepted the offer, citing his “extreme time pressure for next season” and asking for the agreement to be immediately papered. Payne said he had spoken with Chang, Keck, and Sternberg and had authority to make this offer. Days later, Payne rescinded the offer, claiming the board of directors had not approved of the proposed terms, contrary to his prior representations.
124. In early September, Payne again sent Schoninger proposed terms, and Schoninger responded with revisions. Payne represented to Schoninger that he had authority to negotiate on behalf of USAR, but it became clear that the board final authority and had not approved of terms as the weeks dragged on and Payne sent nothing to Schoninger.
125. On September 15, 2016, Schoninger emailed Payne asking for an update from USAR on the extension. Payne responded by stating that USAR’s attorney was “integrating items you sent along in most recent email with other key points we’ve discussed.”
126. In response, Schoninger reiterated the dire need for the extension, the multiple promises by USAR to give PRO Rugby the extension, and the damage caused to Plaintiffs given the extensive delay, including the loss of funding opportunities, challenges in marketing and advertising, and difficulty in attracting and paying players, coaches, and referees: “I have been talking about these issues since at least April and the lack of progress (even since I first talked about them with [Board Member 2] in mid[-]July) has done incredible damage to our business. I am being asked by all our potential partners when I will have this resolved and I have no answer for them.”
127. Despite numerous written and verbal promises of an extension by Melville and Payne for years prior to and after contracting, Payne responded by stating he would forward Schoninger’s email along to USAR’s lawyer and remarking, for the first time, that there was no promise to extend the term.
128. Thereafter, on September 19, 2016, Schoninger informed USAR that, given the lack of resolution and clarity on USAR’s part, he “d[id] not feel it is financially prudent for any additional capital to be put into PRO Rugby until our agreement discussions are resolved. The lack of resolution and clarity has limited our abilities to engage with media, sponsors and other commercial groups that would allow us to increase our revenue for our second season.”
USAR Blocks PRO Rugby’s Expansion into Canada:
132. Plaintiffs began working with Rugby Canada on 2017 expansion teams in Canada. With Rugby Canada’s support, PRO Rugby secured a lease on a Vancouver stadium for one team and was close to an agreement with a Toronto-area stadium for another
133. In the summer of 2016, Schoninger reached a deal for a sanction agreement with Rugby Canada. The agreement was essentially identical to PRO Rugby’s deal with USAR. Schoninger took his existing USAR Sanction Agreement, changed the language to cover Rugby Canada, and sent it to the Canadian union for its review. Schoninger offered the same, limited
exclusivity carveouts in section V.1 because he feared Canada was not a large enough market to support multiple leagues. Rugby Canada’s head sent it back accepting all material terms, including as to exclusivity, and identified only minor issues related to releasing Canadian national team players for national team commitments.
134. Shortly thereafter, and with no explanation, Rugby Canada backed out of the deal and insisted on an exclusivity carve-out for PRO 12. Upon information and belief, USAR, RIM, and World Rugby directed Rugby Canada to insist on this condition to force Schoninger to accept PRO 12 teams moving to North America despite his Sanction Agreement with USAR.
USAR Blocks Schoninger’s Purchase of a South African Rugby Team:
135. Thereafter, Schoninger attempted to buy a South African rugby team, Southern Kings, which was in liquidation. Schoninger needed approval from the South African Rugby Union (“SARU”). Schoninger wanted the team to provide a feeder of South African players to PRO Rugby. This would help ensure PRO Rugby in future years had sufficient high-quality players as South Africa has a surplus of such players, and Schoninger identified the need for PRO Rugby to recruit more top-quality players as it expanded and raised the level of play.
136. In another direct effort to frustrate Schoninger’s business dealings in the rugby world, Payne, on behalf of USAR, informed SARU that USAR did not support Schoninger purchasing the Southern Kings franchise and that it had not been cleared by USAR.
137. As a result, SARU backtracked and refused to let Schoninger buy the team and made a public announcement to that effect. The CEO of SARU wrote to Schoninger: “We have a golden rule in rugby as Unions we only deal through our member Unions. I did engage with Dan [Payne] at the Confex (copied in) who told me in very clear terms that they do not support this as this had not been cleared by USA Rugby.” Payne responded that USAR could not “endorse” Plaintiffs because it did not have final deal terms—terms which Schoninger could only receive from South Africa once USAR had endorsed him.
138. Faced with the Kafkaesque machinations of the two national unions, Schoninger was blocked from purchasing the Southern Kings. Instead, SARU approved that the Southern Kings and another bankrupt South African team would join the PRO 12 (now renamed PRO 14). USAR and its leadership had again maneuvered to block Schoninger from investing in rugby teams which it knew would be given the chance to be successful. World Rugby Undermines and Blocks Plaintiffs
139. Since PRO Rugby entered the Sanction Agreement, World Rugby has been a consistent presence in Plaintiffs’ relationship and dispute with USAR and other Defendants. World Rugby has tremendous power over national unions, particularly for smaller rugby-playing
countries like America. World Rugby provides a large portion of the funds on which USAR depends to fund its national team and development outreach. World Rugby also holds the power over national unions and professional teams to remove sanctioning, an effective death knell to the union or teams.
140. Gosper told Schoninger that he could play a role in resolving Plaintiffs’ dispute with USAR. In reality, World Rugby was participating in, if not directing, the very tortious actions at issue.
141. World Rugby’s role in this dispute cannot be overstated. World Rugby’s representation system on its governing council gives disproportionate weight to the Celtic countries who have a near-majority of votes. PRO 12 plays in those Celtic countries. When PRO 12 struggled financially, World Rugby took steps, both overt and in private, to encourage PRO 12 to come to North America and made public statements (like Gosper’s August 2016 statements to the BBC) supporting that move.
142. World Rugby collaborated with Payne and USAR to block Plaintiffs’ acquisition of the Southern Kings and instead place that team in the PRO 12 to provide additional support for that league and ensure it regained its financial footing with the new South African clubs.
143. In the months leading up to USAR blocking Plaintiffs’ purchase of the Southern Kings, Payne traveled to Dublin to meet with World Rugby’s leadership three or four times. This was uncommon for Payne to travel that frequently from Denver to Dublin. Upon information and belief, USAR’s leadership and World Rugby’s leadership agreed during those meetings to push PRO Rugby out of sanctioned rugby.
144. Upon information and belief, World Rugby collaborated with Payne and USAR to pressure Rugby Canada to renege on the terms of the Sanction Agreement with which it had entered with Plaintiffs to benefit a future PRO 12 expansion to Canada.
145. World Rugby continually stressed its ultimate power over PRO Rugby. For example, when PRO Rugby played some matches within the “windows” (time frames) reserved for national team play, World Rugby’s Gosper told Schoninger that if PRO Rugby did that again, World Rugby would strip PRO Rugby of its sanction.
146. On November 15, 2016, Schoninger met with World Rugby’s Gosper in London to express his concerns about the potential incursion of PRO 12 in the United States. Schoninger in this meeting outlined his plan to purchase the Southern Kings to create a player pipeline for PRO Rugby. Upon information and belief, World Rugby found PRO Rugby’s plan threatening to its own desires to bail out PRO 12 to benefit the influential Celtic nations and was another reason rugby authorities blocked PRO Rugby’s purchase of the South African club.
147. On that same trip, Schoninger and Gosper appeared on a panel together in London about rugby. Gosper and Schoninger engaged in a heated conversation at the public panel when Gosper publicly backed PRO 12 coming to America while Schoninger stressed that this violated PRO Rugby’s exclusive Sanction Agreement and materially harmed his fledgling league.
148. Schoninger followed up by email with Gosper about his concerns about PRO 12’s incursion and USAR and World Rugby’s open support of the effort. Gosper did not respond to the email for ten months and neither expressed disapproval for USAR’s public endorsement of PRO 12’s potential incursion nor criticized USAR’s failure to abide by the terms of the Sanction Agreement. On the contrary, Gosper later became hostile and threatened to rescind Plaintiffs’ sanction with USAR and World Rugby and remarked that PRO Rugby would never again play rugby in America.
PRO Rugby Has No Choice but to Cancel the 2017 Season:
151. On December 19, 2016, Schoninger and Payne met in New York to discuss the state of affairs. During the meeting, it became clear to Schoninger that, despite repeated promises, USAR did not intend to extend the Sanction Agreement and never had.
152. USAR’s material breaches of the Sanction Agreement and Defendants’ continuing actions designed to harm Plaintiffs left Schoninger with no choice. On December 20, 2016, to avoid losing even more of his money and business opportunities, Schoninger cancelled the 2017 PRO Rugby season. Hundreds of players, coaches, and staff lost their jobs.
USAR Attempts to Terminate the Sanction Agreement and Supports the Unsanctioned
Major League Rugby:
164. USAR declared that PRO Rugby’s Sanction Agreement ended on April 21, 2018.
165. Prior to the alleged termination of the Agreement, USAR was already advertising another unsanctioned league on its website, Major League Rugby. Major League Rugby’s preseason began in January 2018 and the league’s first game was April 20, 2018, the day before USAR claims PRO Rugby’s Sanction Agreement terminated. USAR again did not block referees or players from participating. Instead, its website offers full coverage of the games, and both USAR and World Rugby have been collaborating with Major League Rugby on social media.
166. Major League Rugby has foreign-sanctioned players on its teams. As an unsanctioned league, the foreign unions and USAR should have blocked those players from playing. Instead, they have allowed these players to play without interference or penalty.
168. USAR’s strong support of Major League Rugby, to the detriment of PRO Rugby, has long been planned. Upon information and belief, USAR officials told the then-head of Major League Rugby in early 2017 that Major League Rugby would be sanctioned.
169. Major League Rugby was the name of the allegedly hypothetical league that Melville shared with Schoninger in 2015 when Schoninger first mulled investing in rugby.
170. Major League Rugby was not a hypothetical English feeder league. It was then current
exclusive owners’ (Chang, Keck, and Dunafon) plan for a future league. Once Schoninger showed through PRO Rugby that professional rugby was viable in America, Chang, Keck, and Dunafon wanted to implement their original plan.
171. Chang told people in 2015 that Schoninger’s idea was a good one but “three years too early.” Three years later, with PRO Rugby forced out of business and USAR reneging on its promise to extend the Sanction Agreement, Chang, Keck, Dunafon, and other rugby insiders are poised to capitalize on PRO Rugby’s investment and capacity-building.
172. One of Major League Rugby’s initial clubs is the Glendale Raptors. The Raptors play in Glendale’s municipal stadium. Dunafon remains the mayor of Glendale.
173. Two of the other franchises (based in Utah and Houston) are owned by rugby backers with whom Chang, Keck, and Dunafon were negotiating when they owned the exclusive sanction agreement from 2012 to 2015 and were planning Major League Rugby.
174. There has been considerable turnover and change at USAR and RIM in 2018.
175. Payne resigned as USAR’s CEO to accept a job with World Rugby as Chief Executive Officer of Rugby Americas. Rugby Americas is a World Rugby venture in North and South America and he will be the senior World Rugby employee across the two continents having responsibility on growing the game through strengthening professional and domestic competitions. Payne will continue to be based in Colorado for his employment with World Rugby.
176. Keck was forced off the RIM board and then resigned from the USAR board.
177. Chang announced in April 2018 that he would resign from the USAR board in the summer of 2018—after USAR and World Rugby will host the World Cup for 7-a-side rugby in AT&T Park in San Francisco, the park owned by Chang’s San Francisco Giants. RIM is the financial guarantor of the event. Chang, in his departure announcement, stated his reason for resigning was to actively pursue investment opportunities in rugby. Upon information and belief, Chang is already involved in investing in a Major League Rugby franchise to be launched in the future.
178. Chang valued RIM as worth approximately $20-$30 million in January 2018. Instead, RIM is nearing insolvency. It failed to monetize the valuable broadcasting rights to broadcast that national team that USAR gave it for free.
179. In a surprise announcement, Chang on May 31, 2018, announced his resignation from the board effective immediately. Reports indicate that World Rugby has loaned USAR and RIM over $10 million so the Rugby World Cup can proceed in Chang’s San Francisco stadium his summer. Chang’s resignation appears to be one of the conditions for this bailout. USAR’s board is down to only two of the six required outside directors. It has no permanent CEO and a former World Rugby executive is acting as USAR’s interim CEO.
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