Varsity Brands to pay $43 mln in cheer industry antitrust settlement

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Private gyms, spectators alleged anticompetitive practices

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Varsity had fought claims it said "misconstrue" U.S. law

By Mike Scarcella

(Reuters) - Varsity Brands LLC has agreed to pay $43.5 million to resolve a federal lawsuit that the student apparel company and producer of cheerleading events abused its industry dominance, causing private gyms and spectators to pay artificially inflated prices.

Plaintiffs' lawyers in a filing on Friday in U.S. District Court for the Western District of Tennessee revealed the proposed deal resolving prospective class action claims against Varsity Brands and two affiliated business entities, including Memphis-based Varsity Spirit LLC.

Bain Capital Private Equity bought Varsity Brands in 2018 for $2.5 billion, according to CNBC. Bain was not a defendant in the case.

The lawsuit was filed in 2020 by gyms that register teams participating in "All Star Cheer" events that Varsity produces. The events involve short performances featuring "pyramids," tumbling and other components. Plaintiffs alleged Varsity used "exclusionary contracts and anticompetitive loyalty programs."

In the settlement papers, lawyers for direct purchase plaintiffs — gyms paying to register at Varsity events and spectators paying to see them — said the proposed deal, which is subject to a court's approval, was the "result of lengthy and hard-fought litigation over two-and-a-half years, and intense negotiations."

Varsity did not admit wrongdoing or liability in settling the case, and it said "the company remains confident it has acted appropriately and in the best interest of our sport."

Representatives from Bain deferred comment to Varsity.

The plaintiffs were represented by lawyers from firms including Berger Montague, DiCello Levitt and Cuneo Gilbert & LaDuca.

In a statement, the plaintiffs' lawyers on Monday said the settlement provides "substantial monetary recovery," and other forward-looking relief that bars some of the conduct that the plaintiffs challenged as anticompetitive.

In a court filing in 2020, Varsity's attorneys said the "plaintiffs are three disgruntled gyms that do not like the rules and structure Varsity has created" and that the claims "fundamentally misconstrue" U.S. antitrust laws.

U.S. District Judge Sheryl Lipman in Memphis, Tennessee, federal court in 2021 declined to dismiss the lawsuit. Class certification was still pending before the settlement was reached.

The plaintiffs' lawyers said they would ask the court for $14.5 million in legal fees, or about 33% of the settlement fund.

The case is Fusion Elite All Stars et al v. Varsity Brands LLC et al, U.S. District Court, Western District of Tennessee, No. 2:20-cv-02600-SHL.

For plaintiffs: Eric Cramer of Berger Montague; Gregory Asciolla of DiCello Levitt; and Jonathan Cuneo of Cuneo Gilbert & LaDuca

For Varsity Brands: George Cary of Cleary Gottlieb Steen & Hamilton; and Matthew Mulqueen of Baker, Donelson, Bearman, Caldwell & Berkowitz