On the heels of Barcelona’s announcement that Lionel Messi will not remain with the club, Spanish-league rival Real Madrid is considering legal action to stop a pending multi-billion dollar deal between LaLiga and private equity giant CVC Capital Partners. Under the arrangement, which LaLiga’s executive committee unanimously approved on Thursday but still must be approved by the clubs, LaLiga would distribute proceeds from the sale of TV and sponsorship rights over the next 40 years.
LaLiga’s general assembly is set to vote on the measure on Aug. 12, and will require approval of two-thirds of the 42 clubs that make up the league’s first and second division in order to pass. The potential legal action, first reported by El Independiente and ESPN, is based on unnamed sources and may serve to influence the vote regardless of any formal court filing.
Real Madrid’s potential claims, however, reveal the importance of media broadcast and voting rights to LaLiga’s member clubs.
The reports suggest that misappropriation of assets is a main point of contention for Madrid. Asset misappropriation refers to executives and other personnel fraudulently abusing their power to steal financial resources from an organization. The theft is designed to personally enrich the fraudsters at the expense of the organization and its members. Here, Madrid reportedly objects to CVC becoming able to monetize TV rights that would otherwise benefit Madrid. It’s not clear at this time whether such actions would benefit LaLiga personnel at the expense of the league or clubs.
Madrid’s official statement on the pending agreement hints at other potential legal claims.
One is for breach of contract. The statement complains that the agreement was reached “without the involvement or knowledge of Real Madrid.” It also charges the agreement impermissibly “expropriates 10.95% of the clubs’ audiovisual rights for the next 50 years.” If Madrid’s membership contract with LaLiga supplies notice and access rights to member clubs, or if it precludes or restricts the transfer of clubs’ audiovisual rights, Madrid could argue the contract was breached.
Madrid might also view the transaction as illegally interfering with its contractual relationship to LaLiga. An interference claim would entail an assertion that CVC and LaLiga’s dealings obstruct LaLiga’s obligations to member clubs, including Madrid.
The statement also hints at potential claims under competition law, which in the U.S. would be called antitrust law. “The negotiation,” the statement asserts, “was carried out without competitive proceedings . . .” If there was an absence of competition in negotiating, it could have led to an inferior result for member clubs.
Madrid’s membership contract with LaLiga would shed light on the range of permissible claims, including defining jurisdiction and whether any grievances would need to go through private arbitration before they could be litigated in a court of law.
Madrid is not alone in expressing opposition and intimating potential litigation. On Friday, Barcelona’s president, Joan Laporta, warned that his club “will find ways to defend” itself if the deal is approved.
It’s worth stressing that (1) LaLiga and CVC would likely repudiate any claims and (2) no lawsuit, arbitration filing or other legal action has occurred.
It’s also unclear if Madrid is seriously exploring a legal remedy or merely saber-rattling through the press.
If the clubs believe that one or more members might initiate a lawsuit against the league and possibly other clubs, they could become less inclined to vote yea. They might worry litigation would bring about legal expenses and the sharing of sensitive materials and trade secrets. If support for the deal wanes in the face of Madrid’s maneuvers, the vote could also be postponed. Meanwhile, CVC and LaLiga could return to the bargaining table and tweak the deal to appease Madrid and other dissenting clubs. Another possibility: The vote happens, the deal is approved, and no club takes legal action.