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LIV on the Losing End of Two Major Decisions: Is a Settlement on the Horizon?

Updated: Mar 5, 2023

Two significant developments took place in the PGA Tour-LIV legal battle over the last week. First, US District Court Magistrate Judge Susan van Keulen denied LIV’s motions to quash the PGA Tour’s subpoena requests for Saudi Arabia’s Public Investment Fund (PIF) and its governor, Yasir Othman Al-Rumayyan. The PGA Tour had sought to subpoena the two parties since August 2022. Second, the PGA Tour’s motion for leave to amend its counterclaim to add the PIF and Al-Rumayyan, as defendants was granted.

LIV relied heavily on the Foreign Sovereign Immunities Act (FSIA), which generally makes foreign governments and officials immune from lawsuits in US courts under certain circumstances, to fight against the subpoena requests. One major limitation of the protections of FSIA is the “commercial activity” exception, which can subject foreign governments and leaders to lawsuits if they actively engage in certain commercial activity in the US. For those lucky enough to have sat through a 1L Civil Procedure class in law school, it is akin to an International Shoe “minimum contacts” test. To that end, LIV argued that PIF and Al-Rumayyan are merely investors in LIV Golf and are not engaged in the type of commercial activity necessary to circumvent FSIA protection. Conversely, the PGA Tour argued that the PIF and Al-Rumayyan were essentially in complete control of LIV such that they approve all contracts, manage the day-to-day operations, and wield significant power.

Judge van Keulen sided with the PGA Tour, writing that “it is plain that PIF is not a mere investor in LIV; it is the moving force behind the founding, funding, oversight, and operation of LIV.” She added that PIF’s action are “indisputably the type of actions by which a party engages in trade and traffic or commerce.”

In addition to arguing FSIA immunity, LIV resisted the subpoena requests on the grounds that subjecting PIF to discovery in this case could have far-reaching implications, since PIF is an investor in many other companies in the US and they could be subject to discovery every time one of those companies is embroiled in litigation. Although it is true that PIF is an investor in many other US companies, they are a 93% investor in LIV and have funded the league to the tune of approximately $2 billion to date. In addition to being a 93% owner, the PGA Tour argued that PIF officials are actively involved in all decisions of LIV Golf from top to bottom. Such active involvement and ownership move the FSIA needle beyond mere passive investment into clear commercial activity.

Under the order, which was originally filed under seal on February 9, PIF must submit to 25 separate categories of document discovery. Additionally, Al-Rumayyan and other PIF officials will be deposed either in New York City or Saudi Arabia. The discovery categories are largely related to the creation of the new league and the recruitment of players. The PGA Tour has long argued that LIV not only actively induced PGA Tour members to break their contracts, but also weaponized those members by incentivizing them to recruit others to do the same. The production of documents and information under those circumstances, Judge van Keulen wrote, “do not involve matters of national security or other information the disclosure of which would adversely affect Saudi Arabia.”

PIF and Al-Rumayyan have long resisted efforts to be subject to the discovery process in US courts. As Jodi Balsam, a Sports Law Professor at Brooklyn Law School, pointed out on the Golf Channel, Saudi Arabia is a “far more secretive and closed society that does not litigate with the permissiveness and open discovery” that the United States has. In addition to cultural objections, discovery may further implicate PIF and Al-Rumayyan in the PGA Tour’s claims of tortious interference if there are communications showing LIV incentivized its players to recruit PGA members to break their contracts.

PIF and Al-Rumayyan will petition district court judge Beth Freeman, who is overseeing the case, to review the order. However, Judge Freeman is unlikely to overturn van Keulen’s detailed and well-reasoned 58-page decision. Assuming that Judge Freeman keeps the ruling intact, LIV may also file an interlocutory appeal to the 9th Circuit Court of Appeals, which is also unlikely to provide PIF with the relief it seeks. Once their appeals are exhausted, PIF and Al-Rumayyan will have to either comply with the subpoena requests or ignore them.

The denial of LIV’s motion to quash the subpoena requests was not the only bad news for LIV this week. Late Tuesday night, the court granted the PGA Tour’s motion for leave to amend its counterclaim to add the PIF and Al-Rumayyan as defendants in the case. In doing so, Judge Freeman also decided to unseal and make public certain LIV documents and materials she used to justify her decision, further forcing transparency on a historically opaque regime.

Notably, PIF and Al-Rumayyan have already refused to comply with a subpoena to testify in a fraud trial against Tesla in the same court in California. If they further refuse to submit to the jurisdiction of the US courts – whose protections they are simultaneously seeking with their antitrust case – the consequences can range from negative inferences being drawn by the court to outright dismissal of their claims with prejudice. Notwithstanding those consequences, these recent decisions bring the possibility of a settlement into play, since PIF would likely rather drop the case than subject its executives to depositions and open up their books. The terms of a potential settlement are unclear, but would spare the parties, their employees, and their business partners from a long, drawn-out, and costly discovery process and trial.

John Nucci is the Chief Golf Correspondent for Conduct Detrimental and a Corporate Associate Attorney at Woods Oviatt Gilman LLP in Rochester, NY. He can be reached via Twitter at @JNucci23 or by email at [email protected].

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