Entire Suit. Explosive Allegations: United World Sports vs USA Rugby, World Rugby

April 5, 2019 RWU Americas Rugby Championship, Europe, Featured, Matt McCarthy, RWU, Test Rugby, Tier 2/3, USA, USA Rugby Men's Eagles, USA Rugby Women's Eagles, Women's 7s, World Cup & Tests 0

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NEW YORK, NY – Following up our exclusive breaking of the United World Sports (USA Sevens LLC) lawsuit against USA Rugby and World Rugby, here is the entire suit, along with its explosive allegations:

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK

Index No. SUMMONS

The basis of venue designated above is CPLR § 501.

Trial is desired in New York County.

USA Sevens, United World Sports vs USA Rugby, World Rugby, Rugby_Wrap_Up 2

TO THE ABOVE-NAMED DEFENDANTS:

You are hereby summoned to answer the Complaint in this action and to serve a copy of your answer, or, if the Complaint is not served with this summons, to serve a notice of appearance, on the Plaintiff’s attorney within 20 days after the service of this summons, exclusive of the day of service (or within 30 days after the service is complete if this summons is not personally delivered to you within the State of New York); and in case of your failure to appear or answer, judgment will be taken against you by default for the relief demanded in the complaint.

Dated: New York, NY                                               s/ Steven M. Lucks                             

April 2, 2019                                                   Steven M. Lucks

S. Aaron Loterstein FISHKIN LUCKS LLP
277 Broadway, Suite 408
New York, NY 10007
646.755.9200
slucks@fishkinlucks.com
aloterstein@fishkinlucks.com
Attorneys for Plaintiffs

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK

Index No. COMPLAINT

Plaintiffs USA Sevens LLC (“USA Sevens”), American International Media LLC (“AIM”), and United World Sports LLC (“UWS”) (collectively, “Plaintiffs”), by and through their undersigned counsel, submit this Complaint against United States of America Rugby Football Union (“USA Rugby”), World Rugby Limited (“World Rugby”) and World Rugby Tournaments Limited (collectively, “Defendants”), and allege as follows:

NATURE OF ACTION

  1. World Rugby and USA Rugby are the international and domestic governing bodies for the sport of rugby. They are also the perpetrators of a calculated scheme to defraud and unlawfully seize from USA Sevens and the parent of its majority member, UWS, the perpetual hosting rights to a multi-million dollar annual rugby tournament that UWS had made profitable through a decade of work and an investment of more than $11 million.
  2. In 2005, USA Rugby was in dire financial straits after having lost millions of dollars in its failed efforts to host the local tournament at issue. UWS agreed to bail out USA Rugby and preserve the viability of the tournament in the United In exchange for a one-time fee of $150,000, annual payments totaling $200,000 (including a $50,000 fee for USA Rugby assigning to USA Sevens the ability to sell sponsorship rights to the tournament), and other consideration, USA Rugby sold to USA Sevens the perpetual right to host the annual tournament. World Rugby approved and indeed, actively encouraged and benefited from the sale. The deal eliminated World Rugby’s own need to bail out USA Rugby and furthered World Rugby’s stated mission of popularizing rugby in the United States. In total, USA Sevens has paid USA Rugby $2.95 million despite years of losses.
  1. Over the past thirteen years, USA Sevens, through its majority member, AIM, and AIM’s parent, UWS, spent more than $11 million building up the tournament into a commercial success. Without this investment and UWS’s expertise in promoting the event, the annual tournament would have failed, and its loss would have severely stalled the growth of rugby within the United States. As UWS has now learned, however, World Rugby has for years conspired with USA Rugby—aided by the misconduct of current and former USA Rugby and World Rugby officials—to induce UWS to invest in the tournament based on a series of misrepresentations and fraudulent promises.
  2. Now that the tournament has become profitable through UWS’s significant efforts and investment, World Rugby has decided to seize the tournament for itself, unlawfully interfering with USA Sevens’ contractual hosting rights assigned to USA Sevens by USA Rugby in As confirmed by a former Vice Chairman of USA Rugby and current member of World Rugby’s own Executive Committee, World Rugby’s current CEO, Brett Gosper, has “his hands deep in the pie on this one.”
  3. For its part, USA Rugby, which is now an alter ego of World Rugby, has breached its agreement with USA Sevens and has done everything in its power to support World Rugby’s efforts. This is (to borrow an idiom from another sport) par for the course for World Rugby and USA Rugby, which were recently sued in Colorado state court for nearly identical misconduct involving a United States-based rugby league.
  1. Defendants have not only induced UWS to invest more than $11 million in the tournament intending to steal it for themselves, they have, among other things, deprived Plaintiffs of an asset valued at more than $40 million.

PARTIES

  1. USA Sevens is a limited liability company organized under the laws of Delaware, with its principal place of business in Tarrytown, New York.
  2. AIM is a limited liability company organized under the laws of Delaware, with its principal place of business in Tarrytown, New York. AIM maintains a 90% membership interest in USA Sevens.
  3. UWS is a limited liability company organized under the laws of Delaware, with its principal place of business in Tarrytown, New York. UWS maintains a 90% membership interest in AIM, its indirectly owned subsidiary.
  4. USA Rugby is a non-profit corporation organized under the laws of Delaware, with its principal place of business in Lafayette, Colorado. USA Rugby maintains a 10% membership interest in USA Sevens.
  5. World Rugby is a private company based in Dublin, Ireland. It is the self- proclaimed world governing body for the sport of rugby.
  6. World Rugby Tournaments Limited, f/k/a IB Tournaments Limited, is a private company based in Dublin, Ireland. It is a wholly owned subsidiary of World Rugby and the entity through which World Rugby sanctions the tournament at issue in this litigation.

JURISDICTION AND VENUE

  1. Personal jurisdiction over Defendants is proper pursuant to CPLR § 302 because they committed tortious acts within the State of New York and tortious acts without the State of New York causing injury to persons within the state of New York. Personal jurisdiction over World Rugby and USA Rugby is additionally proper because they transacted business with UWS and USA Sevens within the State of New York.
  2. This Court also has jurisdiction over USA Rugby pursuant to an August 17, 2005 Purchase Agreement (the “Purchase Agreement”), in which USA Rugby “irrevocably submit[ted]” to “the non-exclusive jurisdiction of the United States District Court for the Southern District of New York and the jurisdiction of any court of the State of New York located in the Borough of Manhattan” and agreed to “waive any and all objections to jurisdiction that they may have under the laws of the State of New York or the United States and any claim or objection that any such court is an inconvenient forum.” Because USA Rugby is an alter ego of World Rugby as alleged herein, the Court has jurisdiction over World Rugby as well by virtue of this provision.
  3. Venue is proper in New York County pursuant to CPLR § 501. USA Sevens and USA Rugby each consented in the Purchase Agreement to fix the venue for any action in the Borough of Manhattan, and USA Sevens therefore designates New York County as the proper venue for this matter.

FACTUAL ALLEGATIONS 

  1. Background
  1. Rugby union, or rugby, is a team sport with two primary variations: traditional rugby, with 15 players per side, and rugby sevens (“Sevens”), a version of the game with seven players per side and certain other rule variations designed for faster-paced play. Sevens became an Olympic sport for the first time in
  2. Rugby is played across the globe at amateur and professional levels. In the United States, rugby (including Sevens) has increased in popularity in the past several decades, with the most substantial spike in growth beginning in 2010 when UWS invested in broadcasting USA Sevens events on national
  3. The self-proclaimed global governing body for rugby is World Rugby, based in Dublin, Ireland and known until 2014 as the International Rugby Board (“IRB”).
  4. The mission of World Rugby is to “deliver[] a truly global mass-participation sport.” To that end, World Rugby promulgates rules and regulations governing gameplay and organizes various competitions and tournaments.
  5. World Rugby operates pursuant to internal regulations and bylaws and is led by a twelve-member executive committee.
  6. Countries that are members of World Rugby are referred to as “member unions” and are grouped into six regional associations. There are currently more than 100 member unions worldwide.
  7. As the sole member union for the United States, USA Rugby is the “national governing body for the sport of rugby in America” and a member of the Unites States Olympic Committee. USA Rugby fields the United States men’s national rugby team, the Eagles.

B. The World Rugby Sevens Series 

  1. The most prominent annual international Sevens competition is the World Rugby Sevens Series, currently known as the HSBC World Rugby Sevens Series (the “Series”). World Rugby first organized the Series in 1999 by leveraging its “sanctioning” authority (e., its ability to officially authorize a tournament) to assemble a group of pre-existing local Sevens tournaments in individual countries, including Hong Kong, Dubai, South Africa, and New Zealand. The Series is now a set of ten international Sevens tournaments held in ten countries or “stops” around the world, in which sixteen national Sevens teams compete to become the overall series champion.
  2. Member unions must apply to host a stop on the Series. World Rugby selects from those member unions the “host unions,” which are the unions that are designated to host a stop on the Series.
  3. Each host union enters into an agreement, the Host Union Agreement (“HUA”), with World Rugby (through its wholly owned subsidiary, defendant World Rugby Tournaments Limited). The HUA sets forth the commercial and other arrangements governing the relationship and respective rights and obligations between World Rugby and the host union. Under this agreement, World Rugby essentially grants each host union a license to host a Series stop under agreed-upon terms.

C. The IRB Designates USA Rugby as a Host Union

  1. In 2003, seeking to grow the sport of rugby in America, the IRB designated USA Rugby as a host union beginning with the 2004 USA Rugby touts this as a significant event in United States rugby history, as it was the first major IRB-sanctioned Sevens event in the United States.
  1. USA Rugby formed a single-member Delaware limited liability company, USA Sevens LLC, through which it operated the 2004 and 2005 Series stops.
  2. Despite its enthusiasm for hosting the event, USA Rugby’s efforts failed miserably.
  1. USA Rugby incurred a loss of more than $750,000 while operating the event in 2004 and 2005 and was on the verge of financial To avoid USA Rugby’s impending collapse (and to keep a Series stop in the United States, a critical cornerstone to growing the popularity of rugby in the United States), World Rugby found itself on the verge of having to financially bail out USA Rugby to the tune of several millions dollars.

D. United World Sports Bails Out USA Rugby

  1. Given its failure in hosting the Series stop, USA Rugby could not afford more losses and desperately sought to sell the rights to host the Series stop. In 2005, Neil Brendel, USA Rugby’s then-Chairman, and Douglas Arnot, USA Rugby’s then-CEO, reached out to Jon Prusmack for help. Prusmack was known to them as a successful entrepreneur and a decorated former rugby player and 1
  2. Until his death in December 2018, Prusmack was the principal and CEO of UWS, a sports and entertainment company that owns and operates major sporting events in the United States. Brendel and Arnot hoped that Prusmack could leverage his considerable financial resources and connections within the sport to salvage the Series stop in the United States.
  3. Prusmack negotiated with USA Rugby and Arnot to reach a deal that would preserve the United States Series stop and decrease the likelihood that World Rugby would need to bail out USA Rugby.

1 For his many contributions to the sport, Prusmack has been inducted into the New York Athletic Club Hall of Fame and the U.S. Rugby Hall of Fame.

  1. On August 17, 2005, the parties executed a Purchase Agreement along with a series of supporting documents effectuating the transaction.
  2. Through the Purchase Agreement, USA Rugby sold to AIM, an indirectly owned subsidiary of UWS, 90% of USA Rugby’s interests in USA Sevens. As a result, AIM became a 90% member of USA Sevens, with USA Rugby retaining the remaining 10% In exchange, USA Sevens would compensate USA Rugby an upfront fee of $150,000, $150,000 annually, and an additional $50,000 annually for the tournament naming rights and the rights to sell logo placement on the United States national team jerseys.
  3. In addition to assigning its interests in USA Sevens, the Purchase Agreement required that USA Rugby execute—and USA Rugby did in fact execute—an assignment of rights through which USA Rugby assigned to USA Sevens all of USA Rugby’s rights under its then- current agreement with the IRB to host a Series stop.
  4. USA Rugby would later execute a subsequent assignment of rights, dated February 2, 2009, making clear that its assignment to USA Sevens of the United States Series stop extended in perpetuity to any future agreements in which the IRB granted USA Rugby the right to host a Series stop (the “Assignment Agreement”).
  5. World Rugby was not only aware of the purchase and assignment, but it actively encouraged and ultimately approved the deal, which was in World Rugby’s best interest as it minimized the risk that World Rugby would need to bail out USA Rugby. Since its approval of the deal, World Rugby has, for the last thirteen years, actively worked closely with UWS regarding the Series.

E. World Rugby Represents that it Only Operates Through Member Unions

  1. World Rugby has long represented to UWS in both written and oral communications that it would only operate through its member unions, including USA Rugby, as opposed to operating through commercial parties. As a result, World Rugby claimed that it could not enter into any agreement to host a Series stop with an entity other than a member union.
  2. For years, UWS requested that World Rugby make USA Sevens or UWS a signatory to the HUA for the United States Series stop. World Rugby rebuffed these efforts, claiming that it only transacts directly with unions (e., USA Rugby as opposed to commercial entities such as UWS).
  3. For example, in response to a document addressing comments to the 2012 HUA negotiation, a World Rugby representative wrote to USA Sevens, “The IRB [World Rugby] allocates tournaments to Host Unions so, as such, any tournament held within the USA would ordinarily be organized by USA Rugby pursuant to a separate HUA. We are not able to qualify approval of any such tournament by reference to USA Sevens nor refer to USA Sevens in the HUA. USA Sevens would need to make separate arrangements with USA Rugby as  ”appropriate.”
  4. Based on these and similar representations, UWS understood, and World Rugby reaffirmed on multiple occasions, that World Rugby could not grant a Series stop in the United States to any entity other than USA Rugby. And because USA Rugby had assigned its rights in perpetuity to USA Sevens, USA Sevens was guaranteed the right to host any Series stop that takes place in the United States.
  5. Unbeknownst to Plaintiffs, and as described more fully below, World Rugby’s assurance that it would only operate through its member unions—thus guaranteeing the security of the USA Sevens assignment and UWS’s and AIM’s investment—was knowingly false when made.
  1. In fact, and confirming World Rugby’s deception, World Rugby has only applied this purported policy to UWS. The HUA for the United Arab Emirates, for example, has three signatories: World Rugby, the UAE Rugby Union, and Emirates Airlines (the commercial operator of the event, similar to UWS).
  2. In addition to World Rugby misrepresenting its claimed inability to grant the Series stop to an entity other than USA Rugby, World Rugby and USA Rugby further defrauded Plaintiffs regarding the nature of their relationship. World Rugby and USA Rugby have always held themselves out as independent entities, and UWS understood that USA Rugby would negotiate on USA Sevens’ behalf with World Rugby in an arms’ length fashion regarding the commercial terms of the Series stop. Certain USA Rugby and World Rugby officials were instrumental in misrepresenting the relationship between the two entities and concealing World Rugby’s true intentions. As late as October 2017, for example, Dan Payne, USA Rugby’s then-CEO, reassured UWS that World Rugby would not seek to infringe on USA Sevens’ right to the Series World Rugby and USA Rugby would perpetuate this longstanding myth to their advantage, only to later work together to deprive USA Sevens of its contracted-for hosting rights and significant investment.

F.  Plaintiffs Grow the Series Stop 

  1. World Rugby and UWS both knew that it would take years to turn the Series stop into a profitable venture. UWS was willing to take that substantial risk and absorb significant losses in the short term because it viewed the tournament as a long-term investment and because it knew that its investment was protected as it had the exclusive, perpetual right to host the tournament in the United States. In that regard, UWS relied on World Rugby’s false representations and invested millions of dollars into transforming the Series stop from a losing enterprise into a commercial success, which, as explained below, World Rugby (aided by USA Rugby) has now seized for itself.
  1. The 2004 inaugural tournament hosted by USA Rugby was held in Carson, California at Home Depot Stadium, which is owned and operated by the Anschutz Entertainment Group (AEG). The tournament drew attendance of just 15,700 for the multi-day event.
  2. After UWS acquired the rights to the Series stop through the Purchase Agreement, it moved the Series stop to Petco Park in San Diego, California, where attendance steadily grew from 2007 through 2009.
  3. Beginning with the 2010 tournament, UWS moved the Series stop to its current home, Las Vegas, Nevada. Since then, the Series has been held each year at Sam Boyd Stadium where attendance has consistently increased, peaking at more than 60,000 in attendance for the 2017 tournament. The domestic and international rugby communities praised the move to Las Vegas as an astute decision that increased attendance and the interest of rugby and non-rugby fans alike.
  4. Likewise, the rugby community in the United States and abroad attributes the growth of the Series stop in the United States to Prusmack and UWS. In 2016 Forbes wrote about Prusmack’s contribution to the growth of rugby:

Just a decade ago, rugby’s presence in America was essentially non-existent. Enter Jon Prusmack, a former player turned serial entrepreneur, whose passion for the game led him to found United World Sports (UWS). The sports marketing and events company now owns and operates both the USA Sevens International Tournament and Collegiate Rugby Championship in partnership with NBC Sports. The Sevens tournament in Las Vegas is the only North American stop for the Sevens World Series, and is the largest rugby event on the continent, generating more than $30 million in economic impact to the city. NBC’s USA Sevens Rugby coverage on last year averaged 1.23 million viewers, the networks most-watched rugby telecast. On the other side of the country, United World Sports has leveraged the popularity of college sports to introduce rugby to the hundreds of thousands of fans who will attend the championships or watch the matches on television. NBC and NBCSN will combine to present 11 hours of coverage, catering to fans of some of the country’s most well-known university brands, including: Michigan, UCLA, Virginia Tech, Notre Dame, Alabama, Arizona, and Clemson.2

  1. Along with the increase in attendance came a corresponding increase in television viewership, other media consumption, advertising opportunities, and general visibility of the tournament. These increases, in turn, helped to transform a historically unprofitable event into a financial success for USA Sevens, USA Rugby, and World Rugby.

G.  The Commercial Terms

  1. As required by the Purchase Agreement, USA Rugby has been paid $200,000 per year for assignment and sponsorship rights—more than $2.95 million since 2005, despite years of tournament losses that UWS absorbed.
  2. Separate and apart from that cost, the commercial expenses of hosting the Series stop—as well as the income generated from the event—were allocated between World Rugby and USA Sevens (by way of the Purchase Agreement and Assignment Agreement) pursuant to a series of consecutive HUAs.
  3. As described previously, these agreements between World Rugby and USA Rugby governed the logistical and commercial arrangements of the United States Series stop between 2005 and the present, with the most recently negotiated agreement covering the Series stop through 2019.
  4. World Rugby has negotiated and entered into similar agreements with other host unions around the world.

2 https://www.forbes.com/sites/jasonbelzer/2015/05/30/growth-of-collegiate-rugby-championship-evidence-of- sports-rising-popularity/#7d4022355ae9

  1. Although each agreement for the United States series stop has been between World Rugby and USA Rugby, all negotiations have been directly between World Rugby and UWS.
  2. Nevertheless, because the agreement requires only USA Rugby’s signature, and because USA Rugby is the local host union, World Rugby has mandated that only USA Rugby be the counterparty to the agreement

H.  World Rugby Begins to Execute on its Plan to Infringe on USA Sevens’ Rights

  1. In 2012, World Rugby instituted a regime change. Former rugby player Brett Gosper was named CEO of World Rugby.
  2. Under Gosper, World Rugby began to take a more imperialistic approach towards its global oversight of rugby, seeking to expand and centralize its power and influence.
  3. World Rugby outwardly represented to UWS that it was pleased with the way UWS had been running the Series stop in Las Vegas. In February 2013, for example, Gosper wrote to Prusmack thanking UWS for its “hospitality during the Vegas Sevens” and emphasizing that Gosper was “impressed with the running of the event as well as its scale, setting and ”and atmosphere.”
  4. At this time, World Rugby also continued to reaffirm to UWS that World Rugby would operate exclusively through its member unions.
  5. In truth, World Rugby had designs on cutting out UWS and seizing for itself the United States Series stop. But World Rugby planned to wait while it caused UWS to invest millions of dollars more to continue to build up the popularity of the sport within the United States and the value of the Series stop until it finally began turning a significant profit.
  6. In 2014, World Rugby took a critical step towards implementing its plan.

Beginning with the 2014 HUA, which was to govern the Series from 2015 through 2019, World Rugby instituted for the first time a “tender process” for the selection of potential host unions.

  1. Under the tender process, unions interested in hosting a Series stop were required to submit a formal application addressing their qualifications on several key issues, which World Rugby claimed it would use to evaluate the potential host unions.
  2. The commercial model for the 2014 HUA and the clear delineation between the sponsorship assets controlled by the Series (e., World Rugby) and each local Series stop also departed significantly from the model used for the previous four Series cycles. World Rugby claimed the new model would “tidy up” the Series.
  3. Although UWS reached an agreement with World Rugby in 2014 under the new commercial model, World Rugby quickly demonstrated that it did not respect USA Sevens’ rights and would not honor its commitments under the new HUA.
  4. One of World Rugby’s most blatant transgressions concerned the local sponsorship rights for the Each HUA—including the 2014 HUA—addressed the respective sponsorship rights of the parties.
  5. In 2010, World Rugby had sold the Series sponsorship rights to HSBC; rather than being known as the IRB Sevens World Series, the Series became the HSBC Sevens World Series.
  6. Although World Rugby was authorized to sell the Series sponsorship rights to HSBC, it did not have the right to sell the local sponsorship rights. That is, the Series as a whole could be referred to as the HSBC Sevens World Series, but, pursuant to the HUA, World Rugby did not have the right to name the United States Series stop.
  7. Yet after negotiating and finalizing the terms of the 2014 HUA, which again only authorized World Rugby to sell the Series sponsorship rights, World Rugby stole the local sponsorship rights by unilaterally selling them to HSBC.
  8. As soon as UWS learned what had happened, it wrote to Philippe Bourdarias at World Rugby expressing concern over World Rugby’s actions and demanding reasonable compensation for having to give up the local sponsorship rights. UWS explained that the local sponsorship rights were worth between $1.2 million and $1.5 million.
  9. In response, Bourdarias, and later, Gosper, admitted that World Rugby’s actions were not authorized by the HUA but that World Rugby would proceed however it wanted, regardless of the terms of the parties’ agreement.
  10. Despite these admissions and the signficant value of the local sponsorship rights, World Rugby has refused to pay UWS any compensation for the local title sponsorship rights, which it has stolen and continues to sell to HSBC.

I. World Rugby Takes Control of USA Rugby

  1. By 2015, UWS had invested millions of dollars and had finally grown the Series stop into a profitable World Rugby was determined to cut out UWS and seize the profitable tournament for itself. But to do so it would need more active assistance from USA Rugby, which was a necessary party to the HUA.
  2. Although USA Rugby and World Rugby had long held themselves out as independent entities who operated at arms’ length, it is now clear that World Rugby and USA Rugby have for years worked together with the common aim of depriving UWS of its contractual assignment rights, and as described herein, USA Rugby ultimately became an alter ego of World Rugby.
  3. USA Rugby’s leadership ranks are and historically have been replete with former World Rugby officials who maintain allegiance and are entirely beholden to World Rugby and who consistently have acted in World Rugby’s interests at the expense of USA Sevens and UWS.
  4. From 2006 through 2016, USA Rugby’s CEO was Melville, who UWS understands was acting in concert with World Rugby during his decade-long tenure to defraud and undermine Plaintiffs.
  5. In 2016, Melville resigned as USA Rugby’s CEO to take a leadership role with the English national rugby union, the RFU. Not coincidentally, the RFU was a minority investor in USA Rugby’s for-profit commercial arm, Rugby International Marketing (“RIM”).
  6. Before his departure, Melville assured concerned business partners that the new CEO of USA Rugby would merely be a “figurehead,” one who would easily controlled by World Rugby.
  7. Enter Dan Payne, who from 2007 to 2009 worked at USA Rugby where he reported directly to Melville and was considered Melville’s protégé. Prior to his resignation, Melville hand- selected Payne as his successor to serve as the USA Rugby CEO, a role Payne would hold from July 2016 to July 2018. During his tenure, he followed in Melville’s footsteps, colluding with World Rugby to cut out UWS from the United States Series stop.
  8. As UWS recently learned from litigation filed in Colorado state court—with striking parallels to this action, as described below—Payne was at the same time collaborating with World Rugby to interfere with the exclusive contractual rights of Douglas Schoninger, the founder of a domestic rugby league in the United States, PRO Rugby.
  9. As alleged in the PRO Rugby complaint, Payne traveled frequently to Dublin to meet with World Rugby’s leadership. During those meetings, Payne and World Rugby conspired to renege on PRO Rugby’s sanction agreement. Upon information and belief, during Payne’s frequent visits to Dublin, he and World Rugby leaders similarly collaborated to develop a final strategy for eliminating UWS from the Series as well.
  10. During Payne’s tenure as CEO of USA Rugby, RIM would prove to be a commercial disaster that would further cement World Rugby’s control over USA Rugby and enable World Rugby to finally force out UWS.
  11. RIM had been created by USA Rugby and tasked with monetizing USA Rugby- controlled events and assets including the Rugby World Cup 7s, which World Rugby awarded to USA Rugby in May of 2015. Among other things, RIM created and operated a failing television channel, The Rugby Channel, which contributed to its demise.
  12. In 2018, after two years of poor financial decisions and mismanagement, RIM was on the verge of insolvency, threatening the existence of its majority owner, USA Rugby
  13. To avoid the failure of one if its key member unions, World Rugby loaned USA Rugby more than $10 million to cover the RIM losses. $2 million of RIM’s losses stemmed from USA Rugby’s hosting of the World Rugby-owned Rugby World Cup Sevens (which was held in the stadium owned in part by then-USA Rugby board member, Will Chang), of which $700,000 stemmed from travel and hospitality costs directly incurred by World Through this bailout, USA Rugby became financially beholden to World Rugby.
  14. As a condition of World Rugby’s bailout of USA Rugby, World Rugby hijacked USA Rugby’s leadership.
  15. First, World Rugby removed Payne as CEO of USA Rugby and appointed him CEO of Rugby Americas, the regional association of which USA Rugby is a member. Payne thus became the senior World Rugby official across two continents.
  16. Chang and fellow USA Rugby board members Dean Barrett and Chad Keck resigned or were forced to resign from the USA Rugby board, and with two other board members hitting their term limits, the six-member USA Rugby board was in shambles.
  1. World Rugby replaced Payne with Ross Young, who began as interim CEO but who is now the permanent CEO of USA Young is a former World Rugby official who has made no secret of his allegiance to World Rugby.
  2. Young has candidly described himself to UWS as “a double-agent” for World Rugby. Before his appointment as permanent CEO of USA Rugby, Young likewise informed a room full of Division 1 college rugby coaches that his remit as CEO of USA Rugby is “to protect World Rugby’s $10 million investment” in USA Rugby.
  3. World Rugby would later install its Vice Chairman, Augustin Pichot, to one of the vacancies on the USA Rugby board. 3
  4. As stated by USA Rugby’s Chair of the Board in a public interview, Pichot’s position on the board will persist until World Rugby has recouped its loan from USA Rugby. Between Young, Pichot, and World Rugby’s investment, World Rugby exerts complete domination over USA Rugby. Indeed, World Rugby now has the final say over who USA Rugby employs, abandoning any pretext of independence.

J.  World Rugby and USA Rugby Orchestrate a Sham Bidding Process 

  1. In late 2017, against the backdrop of RIM’s impending failure, World Rugby requested that all interested unions submit a bid for tender to participate in the 2020-2023 Series. In prior years, the commercial terms proposed by World Rugby generally had been equitable. In the new HUA, however, World Rugby imposed material, unreasonable changes to the proposed commercial arrangement seizing for itself virtually all of the economic benefits of the series stop.

3 Pichot has been deemed a controversial figure by the rugby community. While already the World Rugby Vice Chairman, he became president of a mining company (an industry in which he has no prior experience) owned by an Australian mining magnate, who at the same time was seeking World Rugby sanctioning for a new rugby competition he was launching in Asia. Pichot’s appointment as president of that company, while concurrently serving as World Rugby’s Vice  Chairman,          was perceived by many to be  a significant conflict  of   interest. https://www.smh.com.au/sport/rugby-union/twiggy-recruits-world-rugby-deputy-to-head-mining-push-in-argentina- 20180816-p4zxwd.html

  1. Among the proposed commercial terms, World Rugby kept for itself the first £10 million per year derived from sponsorships across the entire Series, including associated sponsorship assets. This would leave USA Sevens with minimal available sponsorship inventory and a significant revenue shortfall.
  2. Under the 2014 model, USA Sevens received approximately $1.3 million annually from World Rugby in exchange for 70% of USA Sevens’ local sponsorship inventory, which was worth far more than that sum. Under the new model, USA Sevens would lose an estimated $1.1 million and 80% of its sponsorship inventory, thus eliminating one of its two critical revenue streams.
  3. World Rugby also sought to replace the USA Sevens brand and event logo with a new logo created by World Rugby. This would have destroyed the brand equity of USA Sevens, which USA Sevens had successfully built over thirteen years.
  4. In addition, the new commercial terms would provide World Rugby with the broadcast rights to the Series. Those rights belonged to USA Sevens under previous HUAs, and for good reason.
  5. As part of the previous HUAs, World Rugby had required USA Sevens to produce and distribute global and domestic telecasts of the Series stop. Because Sevens was an unproven media property at the time, television networks did not pay rights and production As a result, UWS had to spend millions of dollars on broadcast and production costs and had assumed all the risk in building the Series into a viable and profitable media asset in the United States. UWS has also created significant value and presence within social media for the Series and for USA Sevens. According to a 2016 valuation from Nielsen Sports, the USA Sevens social media channels generated over $2.3 million in value for sponsors (a figure that has only increased with time). Now that those media assets had significant value, World Rugby intended to take the broadcast rights for itself without any compensation to USA Sevens or UWS.
  6. Upon information and belief, World Rugby’s attempt to claim the broadcast rights to the tournament was further motivated by its resentment toward UWS for having sold broadcast rights for 2017 and 2018 to ESPN, rather than NBC, which had been UWS’s broadcast partner going back to 2011.
  1. Earlier in 2017, NBC had cut a deal with World Rugby estimated to be worth over $10 million to broadcast in the United States all of the events and tournaments for which World Rugby owned the broadcast rights. NBC assumed that it would continue to serve as UWS’s broadcast partner for the Series, though the agreement between UWS and NBC was up for renewal.
  2. World Rugby had previously encouraged UWS to explore alternate broadcast partners, which UWS did. ESPN offered UWS a broadcast deal for the Series that would reach a broader audience, while saving UWS approximately $900,000 over two years. NBC would not match ESPN’s offer. Upset that it was not the exclusive rugby broadcast partner in the United States, NBC protested to World Rugby. World Rugby pressured and threatened UWS to remain with NBC despite ESPN’s broader reach and more favorable In seizing the broadcast rights in the new HUA, World Rugby planned to capitalize on the value of those rights established by UWS’s investment.
  3. The new commercial terms also would have required USA Sevens to fund all hospitality and sponsor-related costs for the Series Sponsors, a minimum expense of $250,000. World Rugby would thus have no expenses and nearly all the revenue from the Series.
  4. In short, the new commercial terms would have forced the United States Series stop to operate at a significant loss for USA Sevens but would result in a windfall for World Rugby.

Had USA Rugby been an independent entity concerned with preserving its own interests, as opposed to the interests of World Rugby, it would have pushed back on these onerous terms, which were (at least on paper) just as oppressive for USA Rugby as they were for UWS. But USA Rugby was hardly independent from World Rugby—especially after the RIM bailout and the Young and Pichot appointments—and World Rugby caused USA Rugby, its alter ego, to take no action in opposition to the new one-sided agreement. In exchange for not challenging the terms of the new HUA, World Rugby allocated to USA Rugby “grant money”—essentially a payoff—that would go towards ventures other than the Series. In addition to grant money, World Rugby provided USA Rugby with a generous line of credit. In total, World Rugby would compensate USA Rugby far in excess of what USA Rugby would have earned under the Assignment Agreement.

K. USA Sevens (Via USA Rugby) Submits its Bid for the Sham Tender Process

  1. Despite its disagreement with the commercial terms as they were then proposed, in February 2018, USA Sevens (through USA Rugby) submitted its bid to continue to host the United States Series stop. As in previous cycles, USA Sevens proposed Las Vegas as the venue for the Series stop, a decision that made sense for several reasons.
  2. First, as World Rugby itself had historically expressed, Las Vegas had proven over the course of the previous ten years to be a successful tournament venue. In the world of rugby Sevens, the most successful Series stops—Hong Kong and Dubai—have built established legacies dating back decades. The USA Sevens event had become synonymous with Las Vegas (many refer to the event simply as the “Las Vegas Sevens”), and USA Sevens was thus following a proven model for success.
  3. In addition, Las Vegas had become a major sports destination, particularly since the addition of a National Football League franchise (the Raiders) and a National Hockey League franchise (the Golden Knights).
  4. The Raiders were also developing a state-of-the-art stadium that would meet all of World Rugby’s technical requirements to host future international rugby competitions.
  5. During the 2014 tender process, World Rugby had required USA Sevens (through USA Rugby) to submit a comprehensive tender submission that included options to host the Series stop in four different cities—San Jose, San Francisco, Houston, and Las Vegas. But for the 2018 tender process, World Rugby issued no such instruction. In fact, World Rugby actively encouraged UWS to submit a bid specifically for Las Vegas. During a February 2018 walk- through of the new Las Vegas Stadium, for example, World Rugby’s long-time Head of Competitions, Mark Egan, stated, “this stadium is a game changer . . . it will be the best stadium in the Series.”
  6. Despite encouraging USA Sevens to submit a bid for Las Vegas, World Rugby would soon point to the selection of Las Vegas as a pretextual excuse for denying USA Sevens’ bid.

L. UWS Expresses Concern Regarding the New Commercial Terms

  1. In March 2018, after receiving further detail regarding how World Rugby intended to divide the sponsorship rights, UWS expressed concern to both USA Rugby and World Rugby regarding the new commercial
  2. In April 2018, UWS instructed USA Rugby to send on behalf of USA Sevens confirming that USA Sevens intended to submit a bid that would be compliant with all of World Rugby’s requested specifications. The email made clear that USA Sevens could not sign an HUA with the new terms, at least at that juncture.
  1. Young subsequently informed UWS that he had spoken with Bourdarias, the World Rugby General Manager for Competition. Young had been Bourdarias’ supervisor during Young’s tenure at World According to Young, World Rugby intended to challenge UWS’s relationship with USA Rugby. Young stated that “World Rugby does not like that UWS has so much control regarding the direction of the Series stop in the USA.” World Rugby also was taking the position that certain of the Series sponsors were not in favor of Las Vegas, a concern that Gosper stated he had resolved during the previous HUA cycle.
  2. One day later, Bourdarias followed up with an email stating that World Rugby was “not in a position to amend the sponsorship terms provided to USA ” The email also stated that World Rugby sought “confirmation from the Host Union that it has no existing contractual arrangements with a third party that impacts the rights for the 2020-2023 Series.” World Rugby asked that if USA Rugby could not provide such confirmation—which World Rugby knew to be the case, as it was well aware of the USA Sevens agreement—USA Rugby provide “full details including copies of all contracts in respect of any contractual arrangements in place with a third party that may have any impact of the rights for the 2020-2023 Series.”
  3. Of course, World Rugby knew of (and in fact approved) the agreement between USA Rugby and USA Sevens and had previously seen the contractual documents governing that relationship. By feigning ignorance, World Rugby was preparing to challenge the Assignment Agreement once it “learned” of the agreement through this transparent inquiry.
  4. Bourdarias’ email also stated that “a number of World Rugby’s commercial partners have indicated their strong preference” that any United States Series stop be held at a venue other than Las Vegas. World Rugby would repeat this assertion several times over the following months, ultimately blaming HSBC as the commercial sponsor that allegedly did not want to sponsor an event that would be held in Las Vegas.
  1. World Rugby imposed a May 1, 2018 deadline for USA Rugby (on behalf of USA Sevens) to sign the HUA. On April 26, 2018, UWS informed USA Rugby and World Rugby that although UWS did not find the commercial terms of the new HUA financially viable or reasonable, “given the choices available to us, we would like USA Rugby to sign the HUA before May 1 to ensure we have a binding agreement with World Rugby. Even so, we fully expect that all parties will continue to negotiate the commercial terms in good faith going forward. ”
  2. The same day, UWS spoke by phone to Young, who was at the time USA Rugby’s interim CEO, to confirm that he would be submitting the signed HUA. Young refused, claiming that he did not have the authority to sign as interim CEO and that the USA Rugby board was mostly vacant and could not authorize the decision.
  3. With respect to the contractual documents governing the USA Rugby and USA Sevens relationship, UWS asked Young to provide the requested documents to World Rugby, as Bourdarias’ request had been directed to USA Rugby. Young stridently insisted that USA Rugby would not send the documents and that the USA Rugby board—the mostly vacant board that Young had just minutes earlier said had no authority to take action—had demanded that UWS send the documents directly to World Rugby.
  4. Still, on May 1, 2018, Young wrote to World Rugby providing the “legal documents regarding the partnership/purchase agreement and assignment of rights.” Young sought to distance USA Rugby from the agreement, emphasizing “that for the avoidance of [doubt, the documents] have been provided by our event partners UWS.” Young also provided an executed stadium deed for the use of the Las Vegas Raiders’ landmark new stadium, which UWS had previously negotiated to be the venue for the new Series cycle. Finally, Young asked for an extension of the May 1 deadline due to “corporate governance issues around signing authority at USA Rugby” but, at UWS’s insistence, noted USA Sevens’ continued request to continue negotiations over the commercial terms.
  5. World Rugby then issued a letter to all potential host unions rescinding the May 1 deadline, as several other unions had not yet signed HUAs. In what would become a pattern over the next several months, World Rugby repeatedly told UWS there was no room for negotiation on the commercial terms. Nevertheless, World Rugby was willing to negotiate, and did in fact reach different commercial terms, with all of the other stops on the Series.
  6. World Rugby was generally silent over the next month despite UWS’s efforts to discuss its concerns regarding the HUA.
  7. In early July 2018, World Rugby finally agreed to speak with UWS about its bid for the Series stop. On a call between World Rugby, USA Rugby, and UWS, World Rugby admitted that it had been negotiating commercial terms with other unions but insisted that this was irrelevant to its interactions with USA Rugby and UWS.
  8. World Rugby invited UWS and USA Rugby to submit a proposal for changes to the HUA. World Rugby also stated that its Executive Committee would only consider HUAs signed by July 19, 2018. Shortly thereafter, UWS drafted, and USA Rugby revised and sent, a letter to World Rugby outlining USA Sevens’ position with respect to the commercial terms. The letter also requested an extension of the July 19 date as World Rugby had only spoken with USA Rugby and UWS for the first time that week. World Rugby never responded to the letter.

M. Young Concedes that World Rugby Is Trying to “Tear Up” the USA Sevens Agreement

  1. In a further attempt to engage World Rugby in discussions, UWS’s leadership traveled to San Francisco on July 20, 2018 for the Rugby World Cup Sevens, which all of World Rugby’s key decision-makers were Earlier that week, Prusmack had requested via email to Gosper and World Rugby’s Chairman, Bill Beaumont, a meeting to discuss the HUA terms. Neither Gosper nor Beaumont responded. UWS’s president, Jonathan First, similarly reached out to Bourdarias for a meeting in San Francisco. Bourdarias responded copying Young that he would be happy to meet, but despite First’s repeated request to Young and Bourdarias, neither would confirm or schedule a meeting. Even so, UWS executives traveled to San Francisco hoping to obtain a meeting.
  2. First quickly bumped into Bob Latham, former Vice Chairman of USA Rugby and a current member of World Rugby’s Executive Committee. First questioned Latham regarding the previous day’s Executive Committee meeting, and Latham was surprised to learn that no one had spoken with UWS regarding the meeting’s Latham informed First that World Rugby would provide a very short extension of the time to make a decision on the United States Series stop. He also confirmed that Gosper of World Rugby was leading the campaign against UWS and that “Brett has his hands deep in the pie on this one.”
  3. UWS later learned that Mark Lambourne, a RIM board member, had been spreading the news at the Rugby World Cup Sevens (and before anyone had notified UWS of the World Rugby’s Executive Committee decision) that, “UWS was out.”
  4. On the afternoon of July 22, 2018, Prusmack encountered Young and Mark Egan, Head of Competitions for World Rugby, and managed to obtain a meeting to discuss the HUA later that day.
  5. During the meeting, Egan questioned the validity of the USA Sevens agreement with USA Rugby and made the bizarre claim that World Rugby never saw, approved, or recognized the sale of the USA Sevens LLC to Prusmack and his company.
  6. In so doing, Egan ignored the fact that World Rugby had worked directly with UWS for the past dozen years and had benefitted significantly from the tens of millions of dollars that Prusmack and his company had invested to build the USA Sevens stop on the Series and the sport of rugby Sevens in general. Prusmack corrected Egan’s blatant falsehood, explaining that from the very beginning, World Rugby’s then-CEO, Mike Miller, was well aware of and had blessed the deal. Egan also denied that UWS had the right to operate the United States Series stop, a characterization UWS obviously disputed.
  7. After the meeting concluded (with no discussion of the HUA’s terms), First and Young continued speaking. First pressed Young to disclose World Rugby’s true intentions regarding the Series stop. Young stated that World Rugby “wants to tear up the agreements between UWS and USA Rugby. ”

N. World Rugby Rejects the USA Sevens Bid and Creates a New Tender Process

  1. Perhaps recognizing that it should make some effort to conceal its attempt to interfere with the Assignment Agreement, World Rugby took a different approach.
  2. On August 2, 2018, World Rugby wrote a letter to USA Rugby regarding the tender.

The letter stated, “After completing [the tender] evaluation process, the World Rugby Executive Committee has decided not to award USA Rugby the opportunity to host a tournament in the New Series at this time.” Rather than simply not granting a Series stop in the United States, “[t]he World Rugby Executive Committee decided that it was necessary to open a new tender process for the USA to decide whether it would be feasible to stage a leg of the New Series in this territory.” World Rugby stated that it was “considering the structure of this tender process and will keep USA Rugby updated in this regard.”

  1. World Rugby offered to make itself available for a call to discuss the reasons that it denied the tender bid. Before that call was scheduled, UWS spoke with Gosper regarding the denial and the new tender process.
  2. Gosper claimed that HSBC did not want the event to take place in Las Vegas, which HSBC felt was not good for its Conveniently, he claimed that “HSBC won’t go into writing on this” because it has large clients in Las Vegas that it wouldn’t want to offend. Rather than simply asking USA Sevens to submit a bid with alternate proposed venues (as had been the process during the previous tender cycle) Gosper insisted that a new tender—open to other commercial entities as well—would be necessary.
  3. And contrary to World Rugby’s and USA Rugby’s repeated historical representations that World Rugby would only operate through its member unions—which ensured that USA Sevens would be guaranteed the rights to any tournament held in the United States through the Assignment Agreement—Gosper claimed that World Rugby had “no obligation to award” the Series to USA Rugby and was free to grant the Series stop to any entity it Gosper emphasized that USA Rugby was “welcome to tender with you,” but was not required to do so.
  4. As an additional purported justification for denying the bid, Gosper pointed to UWS’s decision to grant broadcast rights to ESPN as opposed to NBC. Gosper claimed that the broadcast deal with ESPN was too narrow and was undertaken without World Rugby’s consent.
  5. Neither justification was truthful. HSBC had been the Series sponsor for nearly a decade of tournaments in Las Moreover, at the time USA Sevens submitted its 2018 tender, HSBC had not renewed its sponsorship agreement going forward, and in fact, only renewed its deal on July 22, 2018, three days after World Rugby denied the tender.
  6. Prusmack would later discuss this issue with two high-ranking individuals within HSBC. They described World Rugby’s claim as unfounded, noting that HSBC “loves” the Las Vegas event and wishes to do more with its sponsorship there. In fact, HSBC is a sponsor of several major financial conventions hosted in the city of Las Vegas, including a finance conference hosted the week of the USA Sevens.
  7. With respect to the ESPN decision, before signing a deal with NBC, World Rugby had actually encouraged UWS to explore other broadcasting partners. ESPN’s offer was not only commercially better than NBC’s, ESPN also tripled the linear air time for the United States Series stop and added eight hours of coverage for the Hong Kong stop on the Series. The total amount of air time, together with digital coverage that ESPN would provide, was unprecedented in the United States and would ensure as broad an audience as In good faith, UWS offered NBC a deal that would match ESPN’s commercial terms and coverage. NBC was willing to match ESPN’s coverage but offered commercial terms that would have resulted in an increased cost to UWS of $900,000 over two years. USA Sevens, acting in the financial interests of its members, including USA Rugby, selected ESPN.
  8. Later that month, World Rugby provided by phone the official bases for its decision. In addition to the excuses offered by Gosper, much of World Rugby’s explanation concerned the not-yet-built stadium of the Las Vegas Raiders, which is to be the home of the Series stop beginning in 2020 under USA Sevens’ proposal.
  9. As noted, in early 2018, UWS and World Rugby had attended a detailed presentation on the new stadium, which World Rugby’s Egan described as a “game changer” that would “be the best stadium in the Series.”
  10. But in September 2018, when discussing its purported rationale for denying the bid, World Rugby claimed that it could not properly assess the venue because the stadium had not yet been built. World Rugby expressed concern that the stadium might never be built or that it might not be built as designed. This despite the fact that the stadium is being built at a cost of $1.8 billion—of which $750 million is public funding—and is one of the highest profile and most anticipated stadium construction projects in modern professional sports.
  11. Invoking these reasons, World Rugby had rejected the tender bid and eliminated USA Rugby from the By cutting out USA Rugby from the Series stop, World Rugby was cutting out UWS as well. And of course, USA Rugby would not push back on World Rugby’s actions—historically USA Rugby had been aligned with World Rugby regarding this plan, and because USA Rugby had become financially beholden to World Rugby and led by World Rugby personnel, USA Rugby was certain to toe the party line.
  12. Moreover, although USA Rugby has purportedly been cut out of the process, World Rugby intends to keep USA Rugby involved in the Each year, World Rugby hosts an annual meeting in London for the various host unions, which UWS and USA Rugby attend each year on behalf of USA Sevens. The most recent year’s meeting was held in October 2018. Young (acting on behalf of World Rugby) informed Jeff McDowell, the UWS representative who attended the conference, that UWS would be excluded from certain meeting sessions, which Young explained were “for confirmed future hosts as part of the cycle.” Of course, Young himself attended some of those very sessions despite World Rugby’s stated intention of hosting the United States Series stop without USA Rugby’s involvement.
  1. During the meeting, World Rugby would not discuss the Series stop with UWS. Most notably, over the course of the conference, World Rugby’s lead negotiator, Phillipe Bourdarias, refused to engage McDowell in any discussion around the future Series.

O. World Rugby Attempts to Bypass the USA Sevens Agreement

  1. In truth, these excuses were designed to mask World Rugby’s and USA’s Rugby’s actions over the prior year and a half—materially changing the commercial terms of the HUA and working together to “tear up” the USA Sevens agreement with no legitimate basis for doing In fact, World Rugby and USA Rugby never even contemplated awarding the new tender to USA Sevens.
  2. Upon learning of the new tender, UWS attempted multiple times to address World Rugby’s “concerns.” UWS proposed alternate venues and commercial models, provided detailed viewership data showing the success of the partnership with ESPN, and cooperated with any and all of World Rugby’s Still, World Rugby insisted on pursuing the new and unprecedented tender.
  3. UWS also spoke with USA Rugby Chair Barbara O’Brien, which proved unsuccessful. O’Brien maintained the startling position that she was unaware of USA Rugby’s agreement with UWS.
  4. While those discussions were ongoing, a USA Rugby board member was posting damaging information about the situation on social media, further harming UWS’s chances at resolving the issue. USA Rugby board member Paul Santinelli wrote in a Facebook comment directed to rugby journalist Pat Clifton, who is employed by a sister company of UWS:

“[W]ouldn’t it be appropriate to disclose that UWS and World Rugby have a public issue regarding the HSBC 7s stop and you are employed by UWS?” Clifton responded, “There’s a public issue? Not that I’m aware of.” In response, Santonelli wrote, “you may want to check that, as many folks in the rugby community are discussing it. [S]ort of like public domain software in the world of rugby…”

  1. When Prusmack brought this issue to O’Brien’s attention she admitted to the misconduct and wrote, “I considered breaking the fingers of a few board members who are addicted to sharing half-baked opinions on social media . . . and then I remembered that they could still dictate. So I’m going back to  persuasion.”
  2. Despite having promised details regarding the new tender process by the end of September, World Rugby waited until December to provide any further detail regarding its plan.
  3. The new tender process introduced by World Rugby opened up the bidding to cities and commercial entities alike. And although World Rugby claims that it is handling the tender process on its own and USA Rugby asserts that it has been cut out of the picture, World Rugby personnel have been meeting with potential venues alongside former USA Rugby CEO and current Rugby Americas CEO, Dan Payne.
  4. World Rugby and USA Rugby continue to portray the tender process as ongoing, with no decision having been made for the next Series cycle, and have encouraged UWS to submit a bid in the new tender process. For example, as late as March 2019, Egan wrote, “[a]s we’ve continually said USA Rugby, UWS or USA Sevens LLC could all bid for the event and we have sent tender information to [USA Rugby] and UWS.”
  5. This tender process is a sham, designed to convey the illusion that UWS had a legitimate chance at hosting the next Series cycle. All the while, World Rugby and USA Rugby have continued to urge UWS to proceed with the current tender process.

P. World Rugby’s and USA Rugby’s Pattern of Misconduct

  1. World Rugby’s and USA Rugby’s misconduct is part of a pattern of similar malfeasance over the past several years.
  2. For example, in 2012, UWS began negotiating with World Rugby and USA Rugby (through Melville and Payne) regarding the creation of a local Sevens tournament, the Silicon Valley Sevens (initially referred to as the Americas 7s Cup and Pacific 7s Cup). After extensive negotiations spanning more than two years, USA Rugby (through Melville) and World Rugby informed UWS that the parties had a deal in Then in 2015, Melville and USA Rugby, at the direction of World Rugby, declined to sanction the proposed competition. From 2015 through 2017, UWS continued to seek sanctioning for its Silicon Valley 7s tournament.
  3. After five years of USA Rugby and World Rugby delaying and denying sanctioning for the tournament, they finally agreed to sanction it, but only after UWS agreed to organize and produce the U.S. stop for the women’s Sevens tournament in Las Vegas. USA Rugby could not afford to organize and produce the women’s tournament as it was sure to lose UWS knew the event would lose money but deemed it worthwhile because World Rugby and USA Rugby agreed to sanction the Silicon Valley Sevens for a minimum of three years with built-in renewals.
  4. As with the Series, because it takes time to develop and market a major sports tournament, UWS only invested these sums based on the parties’ agreement that UWS would have at least three years to grow the tournament and make it profitable. The first year of the new tournament was almost certain to lose money. World Rugby and USA Rugby were aware of this fact and understood the significance of the three-year authorization. Relying on the three-year agreement, UWS invested more than $1 million in 2017 to advertise, develop, and host the first annual Silicon Valley Sevens tournament.
  1. On November 1, 2017, just three days before the inaugural Silicon Valley Sevens tournament was to begin—after UWS had spent substantial nonrefundable sums on venues that had been booked, travel and accommodations for players and staff, and agreements that had been finalized with sponsors and other commercial participants—World Rugby wrote to USA Rugby stating that World Rugby would only sanction the first year of the tournament.
  2. This despite the fact that World Rugby had previously agreed to sanction the tournament for three years (in fact, World Rugby had reviewed and commented on the parties’ sanction agreement) and “acknowledge[d] that [USA Rugby had] signed a three-year hosting agreement with a third party (United World Sports).” World Rugby did not have, nor did it offer, any justification for its actions. And despite its longstanding business relationship with UWS, neither USA Rugby nor Payne objected to or attempted to push back on World Rugby’s revocation of its sanction.
  3. Plaintiffs have not been the only targets of World Rugby’s and USA Rugby’s malfeasance. Just last year, USA Rugby, World Rugby, and a number of individuals referenced herein (Chang, Melville, Payne, and Latham) were named as defendants in a 350-paragraph complaint in Colorado state court (which has since moved to arbitration) alleging eighteen causes of action relating to USA Rugby’s and World Rugby’s misconduct in connection with an exclusive, sanctioned American professional rugby league, PRO Rugby.
  4. As alleged by PRO Rugby and its founder, PRO Rugby had relied on oral and written representations and contractual promises in investing millions of dollars into building a successful rugby league. But “Defendants lied to Plaintiffs during contract negotiation about their loyalty and commitment to the agreement’s exclusivity and the leagues development to induce Plaintiffs to spend millions to start the league.”
    1. Moreover, as alleged in the Colorado action: “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.”
        1. The Colorado action is replete with striking parallels to World Rugby’s and USA Rugby’s misconduct concerning the Series. As alleged:
          a.USA Rugby entered into an exclusive agreement with PRO Rugby to operate a rugby league in the United States;
          b. USA Rugby and World Rugby made representations to PRO Rugby that induced PRO Rugby to invest millions of dollars in growing the event
          c. USA Rugby and World Rugby would later conspire to deprive PRO Rugby of its exclusive rights and would instead sanction a different league in the United States;
          d. USA Rugby and World Rugby personnel engaged in side deals and self-dealing,
          e. USA Rugby and World Rugby collaborated to block PRO Rugby from purchasing a rugby team (much like they rescinded the sanction for the Silicon Valley Sevens);
          f. World Rugby was able to direct USA Rugby through its financial control and board oversight;
          g. The RIM fiasco played a substantial role in the fraud at issue (in the case of the PRO Rugby suit, RIM is a named defendant).

Count I: Common Law Fraud

(All Plaintiffs Against USA Rugby and World Rugby)

      1. Plaintiffs repeat every allegation of this complaint as if fully set forth at lengthherein.
      1. World Rugby repeatedly and falsely represented to Plaintiffs that it would only operate through its member unions, which statements were made in an effort to induce Plaintiffs to rely on them so that they would invest millions of dollars to grow the Series stop.
      2. After the tournament became profitable, World Rugby stated that it was not obligated to operate exclusively through its member unions, thereby revealing that its prior representations and assurances were false when made.
      3. USA Rugby represented to Plaintiffs that it was independent from World Rugby and would work together with Plaintiffs to host the Series In truth, USA Rugby was beholden to World Rugby and planned to assist World Rugby in cutting out Plaintiffs as soon as the tournament became profitable, thus “tear[ing] up” the Assignment Agreement and seizing for themselves the valuable Series stop.
      4. In reliance on World Rugby’s and USA Rugby’s misrepresentations, Plaintiffs invested millions of dollars to grow the Series stop.
      5. World Rugby and USA Rugby likewise misrepresented to UWS the sanctioning duration of the Silicon Valley Sevens tournament.
      6. In reliance on this representation, UWS invested substantial sums into the Silicon Valley Sevens, only for World Rugby and USA Rugby to withdraw the three-year sanction on the eve of the inaugural tournament.
      7. As a result of World Rugby’s and USA Rugby’s fraud, Plaintiffs were damaged in an amount to be determined at trial.

Count II: Aiding and Abetting Fraud (All Plaintiffs Against USA Rugby)

      1. Plaintiffs repeat every allegation of this complaint as if fully set forth herin.
      1. As stated herein, World Rugby repeatedly and falsely represented to Plaintiffs that it would only operate through its member unions, only to later reveal that this was not the case.
      2. World Rugby’s aim was to cause Plaintiffs to invest millions of dollars in growing the Series stop, which World Rugby would then seize for itself.
      3. USA Rugby provided substantial assistance towards this fruad.
      1. In order for World Rugby’s plan to succeed, USA Rugby needed to maintain the illusion that it was independent from World Rugby and would negotiate at arms’ length, only to watch passively as World Rugby cut out USA Rugby from hosting the Series stop.
      2. USA Rugby did so in exchange for “grants” and other remuneration that World Rugby promised to provide.
      3. USA Rugby worked with World Rugby and World Rugby Tournaments Limited to arrange a deal with parties other than USA Sevens well before World Rugby had evaluated USA Rugby’s initial bid proposal. World Rugby was thus assured of a viable alternate commercial partner.
      4. As a result, Plaintiffs were damaged in an amount to be determined at trial.

Count III: Conspiracy to Commit Fraud (All Plaintiffs Against All Defendants)

      1. Plaintiffs repeat every allegation of this complaint as if fully set forth herein.
      1. As set forth herein, Defendants have engaged in a large-scale fraud to induce Plaintiffs to invest in and grow the Series Stop.
      2. USA Rugby and World Rugby jointly misrepresented the nature of their relationship to induce UWS to invest millions of dollars in growing the Series stop.
      3. While representing to Plaintiffs that USA Sevens would continue to receive the benefit of the Assignment Agreement, USA Rugby and World Rugby collaborated to deprive USA Sevens of that right. As set forth herein, and as conceded by USA Rugby’s CEO, World Rugby and USA Rugby were in fact working to “tear up” the Assignment Agreement.
      1. USA Rugby likewise worked with World Rugby and World Rugby Tournaments Limited to arrange a deal with parties other than USA Sevens well before World Rugby had evaluated USA Rugby’s initial bid proposal. World Rugby was thus assured of a viable alternate commercial partner.
      2. Having already decided that they would not grant the Series stop to USA Sevens, World Rugby and USA Rugby collaborated to orchestrate a sham tender process designed to hide their ultimate goal of seizing for themselves the valuable tournament hosting As confirmed by a former Vice Chairman of USA Rugby and current member of World Rugby’s own Executive Committee, World Rugby’s current CEO has “his hands deep in the pie on this one.”
      3. As a result of this conspiracy, Plaintiffs have been damaged in an amount to be determined at trial.

Count IV: Breach of Contract

(USA Sevens Against World Rugby and USA Rugby)

      1. Plaintiffs repeat every allegation of this complaint as if fully set forth at length herein.
      1. The Assignment Agreement is a valid contract between USA Sevens and USA Rugby.
      1. Pursuant to that contract, USA Rugby is required to assign to USA Sevens its right to host any World Rugby Sevens tournament.
      2. Instead, USA Rugby has actively worked with World Rugby to ensure that the Series would be held in the United States but delivered to a party other than USA Sevens, including by (a) appointing a USA Rugby CEO who is a self-described “double-agent” for World Rugby whose goal is to ensure that World Rugby can be repaid on its $10 million loan to USA Rugby; (b) actively working with World Rugby to ensure that another bidder would be available, which was arranged before USA Rugby’s bid was rejected; (c) failing to deal with World Rugby in an arms’ length fashion throughout the tender process; and (d) failing to insist that World Rugby follow its stated policy of operating solely through its member unions. It has therefore breached the Assignment Agreement.
      1. As described herein, World Rugby totally dominated the affairs of USA Rugby with respect to USA Rugby’s actions in failing to perform under the Assignment Agreement. World Rugby used that dominion to cause USA Rugby to breach the Assignment Areement.
      2. By virtue of its total domination of USA Rugby in connection with USA Rugby’s failure to perform under the Assignment Agreement, World Rugby is liable for USA Rugby’s breach of the Assignment Agreement because it was USA Rugby’s alter ego.
      3. USA Sevens has been damaged by this breach of contract in an amount to be determined at trial, but not less than $40 million, plus interest.

Count V: Tortious Interference with Contractual Relations

(USA Sevens Against World Rugby and World Rugby Tournaments Limited)

      1. Plaintiffs repeat every allegation of this complaint as if fully set forth at length herein.
      1. The Assignment Agreement is a valid contract between USA Sevens and USA Rugby. World Rugby and World Rugby Tournaments Limited were aware of and actively encouraged the formation and execution of that contract.
      2. USA Rugby breached the Assignment Agreement in as described herein.
      1. World Rugby and World Rugby Tournaments Limited intentionally procured that breach without justification in line with World Rugby’s stated goal of “tearing up” the Assignment Agreement.”
      2. The purported justifications offered by World Rugby for its conduct are mere pretext and are belied by incontrovertible facts. USA Sevens has been damaged by this breach of contract in an amount to be determined at trial, but not less than $40 million, plus interest.

Count VI: Breach of Contract

(All Plaintiffs Against World Rugby and World Rugby Tournaments Limited)

      1. Plaintiffs repeat every allegation of this complaint as if fully set forth herein.
      1. As set forth herein, World Rugby, through its wholly owned subsidiary, World Rugby Tournaments Limited, breached the terms of the HUA between World Rugby Tournaments Limited and USA Rugby by seizing valuable local sponsorship rights and delivering those rights to HSBC, which was not authorized by the HUA.
      2. World Rugby has admitted that its actions were not authorized by the HUA.
      1. USA Sevens, AIM, and UWS were intended, known third-party beneficiaries of the HUA. World Rugby understood that USA Rugby had assigned its interest in the tournament to USA Sevens, that AIM had a 90% stake in USA Sevens, and that AIM and its parent, UWS, would be harmed by World Rugby’s breach of the HUA.
      2. As a result of World Rugby’s breach of the HUA, USA Sevens, AIM, and UWS have been damaged in an amount to be determined at trial.

Count VII: Breach of the Covenant of Good Faith and Fair Dealing (USA Sevens Against USA Rugby and World Rugby)

      1. Plaintiffs repeat every allegation of this complaint as if fully set forth at lengthherein.
      1. The Assignment Agreement is a valid contract between USA Sevens and USA Rugby. Like every contract, the Assignment Agreement imposed the implied duty of good faith and fair dealing.
      2. USA Rugby participated in a scheme to realize gains by depriving USA Sevens of the benefit of the bargain provided to USA Sevens by the Assignment Agreement. In so doing, USA Rugby acted dishonestly and outside of accepted commercial practices.
      3. As described herein, World Rugby totally dominated the affairs of USA Rugby with respect to USA Rugby’s actions in its failure to perform under the Assignment Agreement.
      4. World Rugby used that dominion to cause USA Rugby to fail to perform its obligations under the Assignment Agreement in accordance with the implied covenant of good faith and fair dealing.
      5. USA Sevens has been damaged by this breach of the covenant of good faith and fair dealing in an amount to be determined at trial, but not less than $40 million, plus interest.

WHEREFORE, Plaintiffs demand judgment in their favor and against Defendants

(i) in an amount to be determined at trial; and (ii) for such other relief in Plaintiffs’ favor as this Court deems just and proper.

Dated:  New York, NY                                               s/ Steven M. Lucks                             

April 2, 2019                                                               Steven M. Lucks

S. Aaron Loterstein FISHKIN LUCKS LLP

277 Broadway, Suite 408

New York, NY 10007

646.755.9200

slucks@fishkinlucks.com

aloterstein@fishkinlucks.com

Attorneys for Plaintiffs

 

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