Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Settlement reached in cheerleading class action, (May 15, 2024)

By Martin A. Steinberg, J.D.

Defendants agreed to pay $82.5 million to class members who indirectly paid to participate in Varsity Cheer Competitions.

Cheerleading promoter and the U.S. All Star Federation have reached an agreement to settle claims originally brought by cheer moms, according to a filing of an unopposed motion for settlement in the federal district court in Memphis, Tennessee. The named Plaintiffs sued as indirect purchasers, on behalf of themselves and their respective daughters who competed in cheerleading events alleging that Defendants engaged in an unlawful exclusionary scheme to eliminate competition in the competitive cheer market and artificially raised prices for cheer products and services, in violation of Sections 1, 2 and 3 of the Sherman Act, and the antitrust and consumer protection laws of various states. Two settlement classes are proposed by the agreement: a State Law Damages Class and an Injunctive Relief Class. The settlement covered each of these Defendants, along with their respective related entities. Defendants noted their denial of the claims in the Settlement Agreement. This settlement follows on the heels of a $43.5 million settlement in another class action approved by the same court on October 4, 2023 (Jones v. Bain Capital Private Equity, No. 2:20-cv-02892-SHL-tmp (W.D. Tenn. May 13, 2024)).

Varsity, along with its subsidiary entities, is a vertically integrated group that (1) produces athletic apparel for the cheerleading sport; (2) promotes and sponsors cheerleading events and competitions; and (3) conducts training and summer camps focusing on cheerleading. In 2018, Bain acquired Varsity from Charlesbank, which had purchased Varsity in 2014. The U.S. All Star Federation (USASF) is a not-for-profit organization that sponsors, promulgates, and enforces the rules for cheerleading competitions.

The relevant markets alleged are (1) the apparel market; (2) the Cheer Camp market; and (3) the Competition event market. The putative classes are (1) an Injunctive and Declaratory Relief Class consisting of those who paid for apparel, entry fees, or camp fees or accommodations during the period of the alleged anticompetitive practice; and (2) a Nationwide Damages Class consisting of the same members as the Injunctive Relief Class but seeking damages for violations of the Tennessee Trade Practices Act (TTPA) and the Tennessee Consumer Protection Act (TCPA).

Settlement classes. The parties stipulated that the requirements of FRCP Rules 23(a) and 23(b)(3) are satisfied, and the Settlement Classes should be certified for settlement purposes only. The two proposed settlement classes are:

1. Injunctive Relief Class: All persons and entities in the U.S. that indirectly paid Varsity or any Varsity subsidiary or affiliate, from December 10, 2016, through March 31, 2024, for: (a) registration, entrance, or other fees and expenses associated with participation in one or more Varsity Cheer Competitions, including registration fees to USASF; (b) Varsity Cheer Apparel; (c) Varsity Cheer Camp Fees; or (d) accommodations at one or more Varsity Cheer Competitions, including registration fees to USASF.

2. State Law Damages Class: All persons and entities in Arizona, Arkansas, California, Connecticut, the District of Columbia, Florida, Hawaii, Idaho, Iowa, Kansas, Maine, Massachusetts, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, and Wisconsin, that indirectly paid Varsity or any Varsity subsidiary or affiliate, from December 10, 2016, through March 31, 2024, for: (a) registration, entrance, or other fees and expenses associated with participation in one or more Varsity Cheer Competitions; (b) Varsity Cheer Apparel; (c) Varsity Cheer Camp Fees; or (d) accommodations at one or more Varsity Cheer Competitions.

Released claims. The settlement will release all claims that have been or could have been brought based on the matters alleged or referred to in the Second Amended Complaint. The settlement, however, will not release any claims arising in the ordinary course between any of the Defendants and Plaintiffs or Settlement Class Members, for any product defect, breach of warranty, breach of contract, under the UCC, personal or bodily injury (including claims for sexual or emotional abuse, whether direct, indirect, or vicariously), violation of ERISA, discrimination, classification or misclassification, workplace safety, employee leave or benefits or claims under the WARN Act, or overtime pay under the Fair Labor Standards Act or similar state labor codes.

Settlement amount. The Settlement Fund Amount will total $82.5 million. Of that amount, Defendants will pay up to $2.5 million as a non-reversionary payment to cover the notice and settlement administration fees. The balance of the Settlement Fund Amount will be deposited into an Escrow Account within thirty days from the date the court’s final approval of the Settlement Agreement is no longer subject to appeal.

All Settlement Class Members will receive payment from the Settlement Fund Amount and shall only be excluded from receiving payment if they timely and validly opt out in accordance with the procedures set forth in the notice served on the Settlement Classes, subject to court approval. Allocating the Settlement Fund Amount among the Settlement Classes will be based on a plan of allocation approved by the court and implemented by the Settlement Administrator.

If monies remain from the Settlement Fund Amount following all distribution efforts, that cannot be economically or efficiently distributed to certain Settlement Class Members because of the costs of distribution as compared to the amount remaining, Class Counsel will, with Defendants’ approval, apply to the Court for such sums to be used to make cy pres payments for the benefit of the members of the Settlement Classes.

Prospective relief. Defendants agreed to maintain, for a period of five years from the date of the agreement, the following conduct:

1. Varsity will not condition a Competitive Cheer athlete or team’s eligibility to compete at an end-of-season championship competition on prior participation at a Varsity-owned Cheer Camp.

2. Varsity will not offer or require exclusive purchasing arrangements as a condition for participation in the Varsity Family Plan, Network Program, or any rebate or discount program relating to Cheer Competitions.

3. Varsity will not require participants in 35% or more of its Cheer Competitions to stay at Varsity-approved accommodations as a prerequisite to their participation in Varsity-owned Cheer Competitions.

4. USASF will not disclose to any of its event producer members confidential information regarding cheer competition schedules or attendance records shared with USASF by another event producer member.

5. Within sixty days after final approval of this Settlement Agreement, Varsity and USASF will confirm in writing to Class Counsel that they have implemented these provisions.

Attorney and service fees. Class Counsel may seek an award of attorney fees and costs at the time of filing the Preliminary Approval Motion or at any later time as Class Counsel deems appropriate. Attorney fees and expenses awarded by the court will be payable from the Settlement Fund. Class Counsel may also seek court approval for service awards to the Class Representatives to compensate them for their participation in this Action.

Related case. Varsity and USASF had previously reached a $43.5 million settlement of another class action filed by competitive cheerleading gyms and spectators alleging that Varsity Spirit gained and maintained significant control of every aspect of “All-Star Cheer” through a conspiracy to monopolize. The settlement agreement was granted final approval by the federal court in Memphis and provided relief to the Gym Class and the Spectator Class. One-third of the award, or approximately $14.5 million, went to attorney fees. The final settlement also provided prospective relief, including various restrictions on challenged conduct (Fusion Elite All Stars v. Varsity Brands, LLC, No. 2:20-cv-02600-SHL-tmp (W.D. Tenn. October 4, 2023)).

The Case is No. 24-CV-01587.

Judge: Lipman, S.

Attorneys: Joseph R. Saveri (Joseph Saveri Law Firm, Inc.) and Ashlea Schwarz (Paul LLP) for Jessica Jones and Christina Lorenzen. Adam S. Baldridge (Baker, Donelson, Bearman, Caldwell & Berkowitz P.C.) and Christopher Tayback (Quinn Emanuel Urquhart & Sullivan, LLP) for U.S. All Star Federation, Inc., Bain Capital Private Equity, Bain Capital Fund XII, L.P., Bain Capital Fund [DE] XII, L.P. and Bain Capital Fund [Lux] XII, SCSp. Scott Alexander Edelman (Milbank LLP) and George Cary (Cleary Gottlieb Steen & Hamilton LLP) for Charlesbank Equity Fund VII, Limited Partnership, Charlesbank Equity Fund VIII, Limited Partnership, Charlesbank Equity Fund IX, Limited Partnership, Charlesbank Capital Partners, LLC, Varsity Spirit Fashions & Supplies, Inc. and Varsity Brands, LLC. Paul Coggins (Locke Lord LLP) and Edward L. Stanton, III (Butler Snow LLP) for Jeff Webb.

Companies: Bain Capital Private Equity; Charlesbank Capital Partners, LLC; Varsity Spirit Fashions & Supplies, Inc.; Varsity Brands, LLC; Charlesbank Equity Fund VII, Limited Partnership; Charlesbank Equity Fund VIII, Limited Partnership; Charlesbank Equity Fund IX, Limited Partnership; Bain Capital Fund XII, L.P.; Bain Capital Fund (DE) XII, L.P.; Bain Capital Fund (Lux) XII, SCSp

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