Varsity Brands LLC, a leading student apparel company and cheerleading event producer, has agreed to pay $43.5 million to settle a federal lawsuit that accused the company of abusing its industry dominance. The lawsuit alleged that Varsity Brands caused private gyms and spectators to pay artificially inflated prices by engaging in exclusionary contracts and anticompetitive loyalty programs.
The proposed deal, which is subject to court approval, resolves prospective class action claims against Varsity Brands and two affiliated entities, including Memphis-based Varsity Spirit LLC. The lawsuit was filed in 2020 by gyms participating in “All Star Cheer” events that Varsity produces. These events involve short performances featuring “pyramids,” tumbling, and other components.
The plaintiffs alleged that Varsity Brands used its dominant position in the industry to create a monopoly and engage in anticompetitive practices that resulted in higher prices for participants and spectators. The settlement provides a substantial monetary recovery for the plaintiffs and includes forward-looking relief that bars some of the conduct that the plaintiffs challenged as anticompetitive.
Varsity Brands did not admit wrongdoing or liability in settling the case, and the company stated that it remains confident that it has acted appropriately and in the best interest of the sport. Bain Capital Private Equity bought Varsity Brands in 2018 for $2.5 billion, according to CNBC, but it was not a defendant in the case. 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 said that the settlement represents a significant victory for the gyms and other participants in the cheerleading industry.
The settlement is the result of lengthy and hard-fought litigation over two-and-a-half years, and intense negotiations, according to the lawyers for the direct purchase plaintiffs, including gyms paying to register at Varsity events and spectators paying to see them. The plaintiffs’ lawyers will ask the court for $14.5 million in legal fees, or about 33% of the settlement fund.
In a court filing in 2020, Varsity’s attorneys argued that 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. However, 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.
In summary, the settlement in the case of 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, represents a significant development in the cheerleading industry. The plaintiffs’ successful challenge to Varsity Brands’ alleged anticompetitive practices has resulted in a significant monetary recovery for gyms and other participants, as well as forward-looking relief that aims to prevent future anticompetitive behavior.
