# Mastercard International Inc. v. Fédération Internationale De Football Ass'n

> District Court, S.D. New York · December 7, 2006 · 464 F. Supp. 2d 246

URL: https://www.frixlaw.com/law-library/cases/2483961

## Case

- **Full name:** MASTERCARD INTERNATIONAL INCORPORATED, Plaintiff, v. FÉDÉRATION INTERNATIONALE DE FOOTBALL ASSOCIATION, Defendant
- **Court:** District Court, S.D. New York
- **Decided:** December 7, 2006
- **Citations:** 464 F. Supp. 2d 246; 2006 WL 3531196
- **Precedential status:** Published
- **Opinion:** Opinion by Preska
- **Judges:** Preska
- **Cited by:** 2 later opinions in the Frix Law Library

## Citator (automated)

- **Red flag:** Reversed in part, on other grounds by Mastercard International Inc. v. Federation Internationale de Football Ass'n, 239 F. App'x 625 (2007).
- Negative treatments: 1
- Distinguished by: 0
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/2483961

## Opinion text

AMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW
PRESKA, District Judge.
Introduction
Fédération Internationale de Football Association (“FIFA”) is the worldwide governing body of soccer and the organizer of the FIFA World Cup, a once-every-fourth-year tournament that its president calls “the world’s largest and most beloved sporting event.” As befits a sporting organization of this stature and renown, FIFA’s slogan is “fair play.”
MasterCard, the payment card services provider, has sponsored the World Cup in the financial services category for the last four cycles or sixteen years. Section 9.2 of MasterCard’s most recent sponsorship contract with FIFA gave MasterCard the first right to acquire the FIFA World Cup sponsorship for the next cycle. As is set out in detail below, FIFA breached its obligation under Swiss contract law to give MasterCard the first right to acquire the next round of sponsorship. In addition, FIFA’s conduct in performing its obligation and in negotiating for the next sponsorship cycle was anything but “fair play” and violated the heightened obligation of good faith imposed by the applicable Swiss law (as well as FIFA’s own notion of fair play as explained by its president). For example:
FIFA’s negotiators lied repeatedly to MasterCard, including when they assured MasterCard that, consistently with MasterCard’s first right to acquire, FIFA would not sign a deal for the post-2006 sponsorship rights with anyone else unless it could not reach agreement with MasterCard.
FIFA’s negotiators lied to VISA when they repeatedly responded to the direct question of whether MasterCard had any incumbency rights by assuring VISA that MasterCard did not.
FIFA’s negotiators provided VISA with blow-by-blow descriptions of the status of the FIFA-MasterCard negotiations while concealing from its longtime partner MasterCard both the fact of the FIFA-VISA negotiations as well as the status of those negotiations — an action FIFA’s president admitted would not be “fair play.”
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FIFA’s marketing director lied to both MasterCard, FIFA’s long-time partner, and to VISA, its negotiating counterparty, to both of which FIFA, under Swiss law, owed a duty of good faith. When, pursuant to his engineering, VISA raised its bid to the same level as MasterCard’s, he declined his subordinates’ suggestion to give MasterCard the opportunity to submit a higher bid based on his concern for his own reputation with the FIFA Board. He also declined his subordinates’ recommendation that he recommend to the FIFA Board that it continue with its prior approval of MasterCard as the posh-2006 sponsor. Instead, he told the board it was difficult for him to make a recommendation and never mentioned MasterCard’s first right to acquire the post-2006 sponsorship.
On the morning of the first of March 2006 FIFA board meetings and after all three FIFA boards had previously approved MasterCard as the post-2006 sponsor, FIFA’s marketing director called VISA to say that if VISA increased its cash bid by $30 million to the level of MasterCard’s bid, VISA “would be the partner.”
Even after MasterCard had signed the “FINAL version” of the post-2006 sponsorship agreement and returned it to FIFA, FIFA’s negotiators delayed telling MasterCard that the FIFA Board had chosen VISA; instead they waited for the VISA board to ratify the VISA agreement.
After the FIFA boards had approved MasterCard as post-2006 sponsor and after MasterCard had agreed to FIFA’s asking price and agreement had been reached on all other terms and after FIFA’s in-house counsel had solicited FIFA members for items that might be used to claim that MasterCard breached the Agreement, FIFA pointed to a trademark issue that had been present since 2000 or 2001 to justify granting the post-2006 sponsorship to VISA and sent a letter to MasterCard — after the commencement of this lawsuit — purporting to terminate the Agreement and thus MasterCard’s first right to acquire.
After MasterCard and FIFA waived, under Swiss law, both the 90-day time periods set out in section 9.2 by their “conclusive conduct,” FIFA now seeks retroactively to revive one of the 90-day periods, but not the other, to justify its choice of VISA for the post-2006 sponsorship.
While the FIFA witnesses at trial boldly characterized their breaches as “white lies,” “commercial lies,” “bluffs,” and, ironically, “the game,” their internal emails discuss the “different excuses to give to MasterCard as to why the deal wasn’t done with them,” “how we (as FIFA) can still be seen as having at least some business ethics” and how to “make the whole f* * *~up look better for FIFA.” They ultimately confessed, however, that “[I]t’s clear somebody has it in for MC.”
Thus, as set out in detail below, FIFA has breached its obligation under section 9.2 to give MasterCard the first right to acquire the posb-2006 sponsorship, both under the applicable Swiss contract law and the applicable Swiss law requiring good faith. Because section 22 of the parties’ Agreement permits the Court to grant equitable relief upon a finding of breach, the only equitable result is that FIFA be prohibited from proceeding with the subsequent FIFA-VISA agreement and be required to proceed with the 2007-2014 MasterCard Agreement that the parties agreed to and MasterCard signed and returned to FIFA.
The Parties
1. MasterCard is a corporation organized under the laws of the State of Delaware and having its principal place of busi
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ness in Purchase, New York. (Complaint ¶ 5; Answer ¶ 5). MasterCard provides an inter-face for credit, deposit, electronic cash, business-to-business and other payment transactions between the over 25,000 financial institutions in its network and those institutions’ customers. (Declaration of John Stuart, executed on June 6, 2006 (“Stuart Deck”), ¶ 5).
2. Defendant FIFA is an association organized under the laws of Switzerland and having its principal place of business in Zurich. (Complaint ¶ 6; Answer ¶ 6; Pl.Ex. 421). FIFA is the worldwide governing body of soccer, known outside the United States as “football.” It also is the organizer of, and owner of the rights with respect to, the FIFA World Cup, the famous worldwide soccer tournament. (Complaint ¶ 6; Answer ¶ 6; Pl.Ex. 422).
3. The predominate language in which business is transacted at FIFA is English, (Trial Tr. p. 48, 1. 1-3), and each of the FIFA witnesses who testified at trial was completely fluent and sophisticated in English.
4. As determined by the history of negotiations and series of sponsorship contracts, FIFA and MasterCard have roughly equal bargaining power.
MasterCard’s Use of and Reliance on Sports Sponsorships
5. Sports sponsorships are an important part of MasterCard’s global marketing effort. MasterCard utilizes sports sponsorships around the world to increase public awareness of, preference for and usage of its brand. (Stuart Deck ¶ 8).
6. Through advertising rights associated with a given sponsorship, MasterCard is able to promote its brand to target audiences. Furthermore, through the development and execution of marketing programs tied to the sponsorship, MasterCard and its member institutions are further able to leverage the sponsorship directly into increased card issuances and usage. Sponsorships also provide MasterCard with content for many of its advertising campaigns. For example, MasterCard’s sponsorships of Major League Baseball, golf, football, hockey and soccer have all been featured in “Priceless” commercials broadcast throughout the world. (Stuart Deck ¶¶ 8-10).
The Uniqueness of the FIFA World Cup and of FIFA World Cup Sponsorship
7. The FIFA World Cup, the once-every-fourth year worldwide soccer tournament held most recently in Germany this past summer, is the most widely watched, fanatically followed sporting event in the world. (Complaint ¶ 10; Answer ¶ 10; Blatter Tr.
1
134/17-135/1, 135/9-135/15; Houseman Tr. 44/14-44/22; Lampman Tr. 58/23-59/4).
8. FIFA concedes, and indeed capitalizes on, this fact. FIFA touts on its official website, www.fifa.com, and its representatives admitted under oath that:
a. “The FIFA World Cup is the world’s largest and most beloved sporting event.” (Blatter Tr. 133/2-133/6; Lamp-man Tr. 54/9-54/12; Schuster Tr. 53/9-53/12; Pl.Ex. 5;
See also
Blatter Tr. 135/9-135/15);
b. “The FIFA World Cup enjoys the undisputed status as the greatest single sporting event of the modern world.” (Lampman Tr. 55/19-55/22; Schuster Tr. 53/19-53/22; Pl.Ex. 5);
c. “No other sporting event captures the world’s imagination like the FIFA World Cup.” (Lampman Tr. 54/13-54/16; Schuster Tr. 53/13-53/15; Pl.Ex. 5);
d. “Every four years, the FIFA World Cup holds the entire global public under
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its spell.” (Schuster Tr. 53/23-54/1; PI. Ex. 5); and
e. “Every four years, the spotlight of world attention focuses on the month-long FIFA World Cup when billions of people in more than 200 countries around the world tune in to watch arguably the biggest show on earth.” (Schuster Tr. 55/11— 55/16; Pl.Ex. 5).
9. Statistics confirm the immense world-wide popularity of the FIFA World Cup (Complaint ¶ 10; Answer ¶ 10):
a. An accumulated television audience of more than 30 billion people around the globe watched the 1998 (France) FIFA World Cup tournament. (Schuster Tr. 54/25-55/1; Pl.Ex. 5);
b. More than 28 billion viewers in 213 countries collectively watched on television the 2002 (Korea/Japan) FIFA World Cup tournament. (Complaint ¶ 10; Answer ¶ 10; Schuster Tr. 55/24-56/4; Pl.Ex. 5); and
c. FIFA estimates that more than 30 billion people in the world collectively watched this year’s 2006 (Germany) FIFA World Cup tournament on television, with more than one billion people watching the final match alone. (Schuster Tr. 56/13— 56/17, 56/25-57/4).
10. Because, as FIFA acknowledges, the event “reaches an audience of a size and diversity that is unrivaled by any other single sports body,” the FIFA World Cup is “a sporting, social and marketing phenomenon” that FIFA itself describes as
“the
most effective international marketing platform” in the world, “more valuable than the Olympics.” (Blatter Tr. 134/17-135/1; Schuster Tr. 55/3-55/6, 55/17-55/23; Pl.Ex. 5; Pl.Ex. 340) (emphasis added).
11. For all of these reasons, sponsorship of the FIFA World Cup is — to quote FIFA’s co-Head of Business Development & Sales — a “unique property.” (Schuster Tr. 279/11-280/8;
See also
van der Noll Tr. 20/1-20/3). In the words of FIFA and its representatives, “the FIFA World Cup is a five-star sponsorship that gives its sponsors
unrivaled
exposure.” (Blatter Tr. 134/7-134/9; Schuster Tr. 55/5-55/10; PI. Ex. 5) (emphasis added).
MasterCard’s Long-Running Sponsorship of FIFA World Cup Soccer
12. Because of the unique benefits it provides, MasterCard has paid nearly $100 million in the aggregate to be an official sponsor of the FIFA World Cup for the past 16 years. (Complaint ¶ 12; Answer ¶ 12; Stuart Decl. ¶¶14, 17; Pl.Ex. 94). Throughout that time and up through the filing of this action, FIFA and MasterCard have enjoyed a “strong partnership” and an “extremely successful” and “long-term” relationship. (Pl.Ex. 86; Pl.Ex. 27; Pl.Ex. 4; Valcke Tr. 59/15-59/20).
13. MasterCard began its affiliation with the FIFA World Cup in 1990 as the Official Card of World Cup Italia. Since then, MasterCard has been an Official Sponsor of the 1994 FIFA World Cup (USA), 1998 FIFA World Cup (France), 2002 FIFA World Cup (Korea/Japan) and 2006 FIFA World Cup (Germany) tournaments. MasterCard also has sponsored the 1999 and 2003 FIFA Women’s World Cup tournaments. (Stuart Decl. ¶ 14).
14. MasterCard derives numerous benefits from its long-running sponsorship of the FIFA World Cup. The sponsorship provides a platform for MasterCard to promote its brand to a worldwide audience through in-stadium and broadcast advertising. (Stuart Decl. ¶ 15). Through various marketing programs that it develops and implements, both alone and in conjunction with various financial institutions in its network, MasterCard is able to increase the circulation and usage of its branded cards, thereby generating revenues both for itself and the financial insti
*253
tutions in its network. (Declaration of Rogerio Bonfiglioli, executed on June 7, 2006 (“Bonfiglioli Decl.”), ¶¶ 9-12; Stuart Decl. ¶ 16). Additionally, MasterCard’s association with the world’s most popular sporting event has been critical to its ability to compete globally with its larger competitor, VISA International (“VISA”), which has long been a sponsor of the Olympic Games. (Bonfiglioli Decl. ¶ 17; Stuart Decl. ¶ 16).
MasterCard’s Ongoing Insistence on a Right of First Refusal or Right of Renewal in Its World Cup Sponsorship Agreements
15. MasterCard’s 16-year sponsorship of the FIFA World Cup has been effectuated pursuant to a series of written agreements. Prior to 2002, those agreements were between MasterCard and ISL Marketing AG (“ISL”), a sports licensing and marketing company in Europe that served as the exclusive sponsorship sales agent for FIFA. After ISL declared bankruptcy in mid-2001, FIFA decided to handle the negotiation and sale of World Cup sponsorship rights in-house, through its subsidiary FIFA Marketing AG and, later, FIFA Marketing & TV AG.
2
(Declaration of Carl Munson, Jr., executed on June 8, 2006 (“Munson Decl.”), ¶ 5;
see also
¶¶ 7-11 & PI. Exs. 238-40). Thereafter, any World Cup sponsorship agreement into which MasterCard entered was with FIFA. (Munson Decl. ¶ 5).
16. As set out in detail in the unim-peached testimony of Carl Munson, Jr., Associate General Counsel of MasterCard, whose testimony I credit, until 2005, Mr. Munson “negotiated every one of MasterCard’s FIFA World Cup sponsorship agreements, dating back to 1988.” (Mun-son Decl. ¶ 4).
17.Mr. Munson traces the genesis of Section 9.2 at issue in this action “back to the very first FIFA World Cup sponsorship agreement into which MasterCard entered in 1988”. In negotiating that agreement (relating to the 1990 FIFA World Cup in Italy), MasterCard insisted — as a condition of acquiring sponsorship rights (in other words, as a ‘deal breaker’) — that it receive a right of first refusal with respect to sponsorship of the 1994 FIFA World Cup. A telex from Alan Shulteis, then Head of Marketing at MasterCard, dated May 25, 1988 ... demonstrates this. In this telex, Schulteis wrote:
“Notwithstanding the verbal statements made by ISL supporting our desire and requirement for a ‘right of first refusal’ for 1994 they are unwilling to provide such protection of our investment in Ita-lia 1990. After reviewing this with Russ Hogg and others
we cannot go forward without this protection or assurance. To proceed without a ‘right of first refusal’ for 199k [the year of the next FIFA World Cup] would violate our responsibility to our worldwide membership. Simply put, we and the members would build and invest in Italia 90, potentially to the benefit of a competitor ... All I can do is apologize to you and your company but ive cannot go forward
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without this protection,
(emphasis added).”
(Munson Decl. ¶ 6).
18. As Mr. Munson explained in detail, in each of the five World Cup sponsorship agreements into which it has entered (either with ISL or FIFA), MasterCard has bargained for rights with respect to the next World Cup cycle, either in the form of a right of renewal or a right of first refusal. (Munson Decl. ¶¶ 6-11; Houseman Tr. 31/14-31/19).
The 2006 World Cup Sponsorship Agreement and Section 9.2 Thereof
19. The contract at issue in this proceeding and pursuant to which MasterCard recently sponsored the 2006 FIFA World Cup is entitled the Official FIFA Partner Agreement between FIFA and MasterCard, made as of November 26, 2002 (the “2006 World Cup Sponsorship Agreement” or the “Agreement”). (Pl.Ex. 61; Stuart Decl. ¶ 21).
20. Under the Agreement, FIFA granted to MasterCard exclusive sponsorship rights, in the category of “real and/or virtual payment and/or account access systems”
(e.g.,
credit cards, debit cards and ATMs), with respect to the 2006 FIFA World Cup and other enumerated FIFA competitions, including the FIFA Women’s World Cup, held during the term of the Agreement, commencing on January 1, 2003 and concluding three months after the conclusion of the 2006 FIFA World Cup. (PLEx. 61; Stuart Decl. ¶ 21). In return for such rights, MasterCard agreed to pay a total of $50 million over the course of four years. (PLEx. 61).
21. The exclusive sponsorship rights that MasterCard acquired under the Agreement include the right to (i) use the designation of the official sponsor, partner, supplier or product of FIFA World Cup soccer, (ii) use FIFA’s official World Cup marks, (in) display advertising boards, and advertise on giant video screens, within the stadiums hosting World Cup events, (iv) advertise, free of charge, in official FIFA World Cup programs sold during events, (v) receive hospitality facilities in or near World Cup sites, in addition to tickets, parking passes and accreditations to attend World Cup games and events, (vi) receive exposure and advertising on FIFA’s official website and (vii) receive preferential advertising arrangements with respect to Woiid Cup broadcasts. (PLEx. 61; Stuart Decl. ¶ 21).
22. In addition, MasterCard received the “first right to acquire” any package of advertising and sponsorship rights that FIFA offers, in MasterCard’s product category, during the next World Cup cycle. Section 9.2 of the Agreement states:
In the event that MASTERCARD has not materially breached this AGREEMENT, MASTERCARD will have the first right to acquire, with respect to PRODUCTS, the package of advertising and sponsorship rights offered by FIFA, if any, in connection with the football competitions that are the subject of this AGREEMENT and which will be held during the period 2007-2010. Such right is to be exercised by MASTERCARD within ninety (90) days of receipt of the written offer from FIFA setting out the terms and consideration payable for such package of rights. Thereafter, FIFA will be free to grant to any entity such rights on comparable terms for such football competitions with respect to PRODUCTS. Ninety (90) days prior to FIFA sending MASTERCARD the written offer detailed above, FIFA shall notify MASTERCARD, in writing, that it intends to send out such an offer.
(PLEx. 61).
23. As the Court previously has found, “the right of first refusal [in section 9.2] was bargained for, was hard bargained for, and MasterCard paid more for the bundle
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of rights including the right of first refusal than it would have paid without such a right.” (7/27/06 Tr. of Decision Denying Defendant’s Motion to Compel Arbitration, at p. 8). Likewise, FIFA’s co-Head of Business Development & Sales admitted that MasterCard’s “first right to acquire” is a “significant” and “important” right in the Agreement. (Schuster Tr. 8/14-8/17, 178/18-178/24).
The Parties’ Mutual Understanding of the Operation of Section 9.2 and The Negotiation and Drafting Historg of the Section
24. There is no dispute between the parties as to the operation of section 9.2, although they differ as to its nomenclature. MasterCard refers to its right under section 9.2 as a “right of first refusal”; FIFA calls it a “first right to acquire.”
(Compare
Munson Decl. ¶ 2,
with
Houseman Tr. 163/10-164/3;
see also
Answer ¶¶ 22-23).
25. The parties agree that section 9.2 does not require FIFA to offer to MasterCard a package of advertising and sponsorship rights, in MasterCard’s product category, with respect to the next World Cup cycle, unless FIFA, of its own volition, has determined to grant rights in that category. The parties further agree that, in the event that FIFA has determined to grant such rights, FIFA is obligated, under section 9.2, to afford MasterCard the first right to acquire such rights. FIFA must send to MasterCard a “written offer” of the package of rights, setting out the terms and consideration for such package. (Munson Decl. 1f 32; Houseman Tr. 60/7-60/9). The written offer must be in a form that, if accepted by MasterCard, would constitute a binding agreement between the parties. (Munson Decl. ¶¶ 34-40; Houseman Tr. 55/20-56/12, 83/17-83/20, 84/4-84/8).
26. At least 90 days prior to making such an offer, FIFA must notify MasterCard in writing of FIFA’s intent to make the offer. (Munson Decl. ¶ 32; Pl.Ex. 97; Houseman Tr. 63/5-63/24; Schuster Tr. 194/13-194/190). The notice requirement is intended, in part, to make it transparent to both parties that FIFA has “startfed] the clock ticking” under section 9.2. (PI. Ex. 97; Munson Deck ¶ 32; Houseman Tr. 84/4-84/8, 342/25-343/7).
27. If, within 90 days after receiving the “written offer,” MasterCard exercises its rights under section 9.2, then MasterCard has acquired the package of rights offered by FIFA, and FIFA is prohibited from granting the rights to a third party. (Stuart Deck ¶2; Houseman Tr. 139/15— 140/20). On the other hand, if, after 90 days of receiving the written offer, MasterCard does not exercise its rights, then FIFA is free to grant such package of rights to a third party, but only on terms “comparable” to those offered to, and declined by, MasterCard. (Munson Deck ¶ 24; PkEx. 97; Houseman Tr. 80/5-80/18; Lampman Tr. 202/9-202/14, 203/21-204/8, 204/19-205/2; Schuster Tr. 23/1-23/7; Valcke Tr. 97/5-97/20).
28. If no third party accepts the package, and thereafter FIFA determines to revise the package of rights and grant a different set of rights or terms from those previously offered to MasterCard, then the requirements of section 9.2 apply anew, and, as the Head of FIFA’s Commercial Legal Department described it in his testimony, “the whole process effectively starts again”: FIFA would be obligated to offer the revised package of rights to MasterCard in a written document setting forth the terms and consideration for such package; FIFA would be required to precede the offer with no less than 90 days written notice of its intent to offer a revised package of rights; and, if after 90 days of MasterCard’s receipt of the revised offer, MasterCard does not exercise its rights, FIFA would then be free to grant such
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package of revised rights to a third party, but only on comparable terms. (Munson Decl. ¶ 24; Houseman Tr. 82/2-82/24, 116/22-117/3; Lampman Tr. 216/13-217/2; Schuster Tr. 22/16-24/8,144/20-145/3).
29. The parties’ positions with respect to the operation of section 9.2 are consistent with the negotiation and drafting history of the provision, which, under Swiss law (which governs the Agreement), may be considered by the Court.
30. The initial draft of the section, prepared by FIFA and circulated to MasterCard on September 6, 2002, provided:
9.2 In the event that FIFA continues to hold the necessary advertising and sponsorship rights and MASTERCARD has not materially breached this AGREEMENT, MASTERCARD will have the first right to acquire, with respect to PRODUCTS, the package of the same or similar advertising and sponsorship rights offered by FIFA, if any, in connection with the football competitions that the subject of this AGREEMENT which will be held during the period 2007-2010. Such right is to be exercised by MASTERCARD within 60 days of receipt of the written offer from FIFA setting out the terms and consideration payable for such package of rights. Thereafter, FIFA will be free to grant to any entity any rights for such football competitions with respect to PRODUCTS.
(Munson Deck ¶ 16; Pl.Ex. 242).
31. At an all-day negotiating session on September 11, 2002, at MasterCard’s offices in Purchase, New York, Mr. Munson negotiated significant changes to this language. Mr. Munson negotiated that, after the time expired for MasterCard to exercise its right to acquire the package of sponsorship rights offered to it, FIFA would be free to grant “such” rights to a third party only “on comparable terms.” (Munson Deck ¶¶ 22-24). He further negotiated that the 60-day exercise period proposed by FIFA be expanded to 90 days and that FIFA be required, at least 90 days before offering rights to MasterCard, to notify MasterCard, in writing, of FIFA’s intent to make an offer. (Munson Deck ¶¶ 25-27).
32. These negotiated changes were reflected in the next draft contract circulated by FIFA on October 8, 2002, which provided:
9.2 In the event that FIFA continues to hold the necessary advertising and sponsorship rights and MASTERCARD has not materially breached this AGREEMENT, MASTERCARD will have the first right to acquire, with respect to PRODUCTS, the package of the same or similar advertising and sponsorship rights offered by FIFA, if any, in connection with the football competitions that are the subject of this AGREEMENT which will be held during the period 2007-2010. Such right is to be exercised by MASTERCARD within
90
days of receipt of the written offer from FIFA setting out the terms and consideration payable for such package of rights. Thereafter, FIFA will be free to grant to any entity
such
rights
on comparable terms
for such football competitions with respect to PRODUCTS.
90 Days prior to FIFA sending out the written offer detailed above, FIFA shall notify MASTERCARD in writing, that it intends to send out such an offer.
(Munson Deck ¶ 28; PkEx. 244) (emphasis added).
33. After receipt of the October 8 draft, Mr. Munson negotiated additional changes to the language of section 9.2. Most notably, Mr. Munson negotiated that MasterCard shall have the first right to acquire
“the
package of advertising and sponsorship rights offered by FIFA,” and
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not merely a package that is “similar” to that offered by FIFA. The first sentence of section 9.2 was thus changed from “MASTERCARD will have the first right to acquire ... the package of the same or similar advertising and sponsorship rights offered by FIFA” to “MASTERCARD will have the first right to acquire ... the package of advertising and sponsorship rights offered by FIFA.” (Munson Decl. ¶¶ 29-30).
34. The drafting changes set out above support the common understanding of the parties that the obligations of section 9.2 were ongoing and that the procedures of section 9.2 applied anew each time FIFA offered a package of rights to MasterCard.
FIFA Determines to Revise Its Sponsorship Structure
35. Within several months after the parties’ execution of the 2006 World Cup Sponsorship Agreement, FIFA began to explore possible changes to its sponsorship structure to be implemented in connection with the sponsorship cycle following the 2006 World Cup. (Lampman Tr. 27/9-27/20, 28/3-28/9, 29/6-29/13, 64/8-65/24; Valcke Tr. 12/5-12/18, 24/24-25/22). It hired JérOme Valcke as Director of FIFA Marketing & TV in September 2003 to, among other things, review and, if appropriate, restructure FIFA’s sponsorship program in time for the sponsorship cycle following the 2006 World Cup. (Blatter Tr. 31/25-32/11; Valcke Tr. 12/1-12/18).
36. Mr. Valcke determined that, given the changed business environment where numerous of FIFA’s then 15 sponsors had expanded their lines of business so as to overlap with each other, it was no longer possible for FIFA to grant “exclusive” sponsorship rights to that many sponsors. He concluded that FIFA had to reduce the number of top level sponsors from 15 down to six. (Blatter Tr. 31/25-32/23; Valcke Tr. 24/24-25/22; Pl.Ex. 77). Because, at the same time, revenue from sponsors is critical to FIFA’s ability to meet its budgetary needs, Mr. Valcke understood that the reduction in the number of top level sponsors would require FIFA significantly to increase the price of sponsorship. (Valcke Tr. 24/24-25/22). Mr. Valcke figured that the price of a top level or “Tier 1” sponsorship would have to be increased to at least $100 million per four-year FIFA World Cup cycle and that sponsorships should be sold for two four-year terms instead of one four-year term. (Valcke Tr. 24/24-25/22, 38/24-39/8). In Mr. Valcke’s view, there were only a small handful of product categories in the world that could afford that price. “Financial services,” a combination of two then existing product categories (payment services and banking services), was one of those categories. (Lampman Tr. 70/25-71/17, 75/9-75/15; Valcke Tr. 29/3-29/11; PbEx. 77).
37. After determining that one of the product categories FIFA would seek to exploit in its revised sponsorship structure would be “financial services,” Mr. Valcke and a team working under him (referred to as the “Beyond 2006” team) set out to identify companies in the financial services industry that would be interested in the sponsorship. In addition to the incumbent sponsor, ie., MasterCard, Mr. Valcke identified a number of other credit card companies and banks that could be interested in the sponsorship. (Valcke Tr. 29/3-29/19). At the top of the list was VISA. As Mr. Valcke testified, “if ... you have to think about various companies potentially who could have an interest or are already in the world of sport[,][y]ou’re thinking about MasterCard and VISA, that’s it.” (Valcke Tr. 34/5-34/14;
see also
Valcke Tr. 49/8-50/2).
FIFA Reviews Its Obligations to Incumbent Sponsors
38. In connection with its internal review of FIFA’s sponsorship program and
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how to restructure the program, Mr. Valcke and his team analyzed the renewal rights, if any, that FIFA’s then 15 existing sponsors had under their contracts. (Houseman Tr. 29/3-29/15, 30/7-30/9; Valcke Tr. 39/20-40/18). In considering any new sponsorship platform, Mr. Valcke wanted to know if FIFA was operating with a clean slate or whether there were obligations to existing sponsors that would constrain FIFA’s restructuring efforts. (Valcke Tr. 40/5-40/18). In late 2003, Mr. Valcke thus asked the Head of FIFA’s Commercial Legal Department, Tom Houseman, to prepare a written analysis of the renewal rights, if any, in FIFA’s sponsorship contracts. (Pl.Ex. 97; Houseman Tr. 45/4-45/20; Valcke Tr. 41/2-41/22, 42/2-42/5, 42/9-42/11, 43/2-43/3).
39. Mr. Houseman, who holds himself out as “legal counsel” but is not authorized to practice law in any jurisdiction, prepared a six-page document entitled “Official Partner Renewal Rights,” analyzing the renewal rights, if any, of FIFA’s 15 then-sponsors. (Houseman Tr. 33/11— 33/18, 34/15-34/19, 219/15-219/19, 220/2-220/4). Among the “renewal clauses” that Mr. Houseman addressed was section 9.2 of the Agreement, which, in Mr. Houseman’s opinion, required FIFA, “before it grants any rights with respect to the products within MC’s product category, [to] keep open for 90 days the opportunity to acquire any package of sponsorship rights in relation to
ANY
MC products” and to “give MC 90 days notice that it will make MC an offer, which means that 180 days must elapse between the original notice and the expiry of the offer period.” (PI. Ex. 97; Pl.Ex. 56).
40. In his written analysis, Mr. Houseman concluded that, notwithstanding these constraints, FIFA is “not restricted from approaching or making presentations to third parties prior to a MC decision.” (PI. Ex. 97; Pl.Ex. 56). As he explained in testimony, section 9.2, in his view, meant that FIFA was “free to offer, but not free to sell” a sponsorship in MasterCard’s product category at any time prior to or during the 180 day period set out in the clause. (Houseman Tr. 64/10-64/12, 85/17-85/24). When asked what would happen if a third party that had been offered the sponsorship by FIFA proceeded to accept the offer prior to MasterCard exercising its rights under section 9.2, Mr. Houseman responded: “We might have had a problem;” namely, “MasterCard would be entitled to claim that we’d breached their first right to acquire.” (Houseman Tr. 66/4-66/13). In that scenario, according to Mr. Houseman, it would be a “passive breach” on the part of FIFA, because “[i]t ended up that FIFA was, by virtue of the actions of a third party, unable to give the benefit of the first right to acquire.” (Houseman Tr. 69/3-69/11). Mr. Houseman acknowledged that under his interpretation, MasterCard’s rights under section 9.2 were therefore “contingent on the fortuitousness of a third party not accepting the offer from FIFA” or, in other words, “MasterCard’s rights under section 9.2 were a matter of luck.” (Houseman Tr. 69/16-70/4, 114/24-115/1). In that regard, Mr. Houseman’s conclusions were accepted by Mr. Valcke and his sponsorship team and became the basis for FIFA’s conduct described below. (Schuster Tr. 24/3-24/8, 132/24-133/4; Valcke Tr. 55/7-56/2).
41.With respect to section 9.2’s “restriction relating to ‘comparable terms,’” Mr. Houseman wrote in his analysis that:
“if FIFA wants to appoint VISA in relation to any of MC’s products,
it can only do so if the terms are comparable to the terms offered to MC.” (Pl.Ex. 97; Pl.Ex. 56) (emphasis added). VISA is the only company other than FIFA’s then-existing sponsors mentioned by name in Mr. Houseman’s analysis. Neither Mr. Houseman nor Mr. Valcke could recall whether
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Mr. Valcke specifically asked Mr. Houseman to opine on whether FIFA could enter into a sponsorship contract with VISA. (Houseman Tr. 75/15-75/24, 76/5-76/7, 76/23-76/25, 77/13-77/21; Valcke Tr. 47/6-48/2). Mr. Valcke testified: “Either it’s: yes, I have clearly asked him to put VISA in or he put VISA because it was the only one competitor of MasterCard able to reach an agreement with FIFA.” (Valcke Tr. 47/6^48/2).
FIFA Solicits VISA’S Interest in a World Cup Sponsorship
— March
2004
42. While Mr. Valcke and his “Beyond 2006” team were in the later stages of restructuring FIFA’s sponsorship program, they decided to pursue VISA’S interest as a potential sponsor of the FIFA World Cup. (Lampman Tr. 130/8-130/14).
43. In or around March 2004, Robert Lampman, then a Sales Director of FIFA Marketing & TV (and now co-Head of Business Development & Sales at FIFA) and a member of Mr. Valcke’s “Beyond 2006” team, without solicitation, called Michael Lynch, a VISA representative involved in sports marketing, to arrange a meeting with him at an upcoming sports marketing conference in California that both men were scheduled to attend. (Lampman Tr. 78/9-78/15, 81/14-82/10, 82/21-83/13, 85/2-85/18).
44. Messrs. Lampman and Lynch met during the first week of March at the conference in California. (Pl.Ex. 55). During the meeting, Mr. Lampman informed Mr. Lynch that FIFA was restructuring its sponsorship structure and inquired about VISA’S interest in pursuing a World Cup sponsorship. Mr. Lynch said that he was not certain but that the opportunity to sponsor the FIFA World Cup would be one that would certainly elicit discussion internally within VISA. (Lamp-man Tr. 87/20-88/7, 88/11-88/18). Mr. Lampman told Mr. Lynch that once FIFA had completed the restructuring of its sponsorship program, he would be back in touch to discuss sponsorship in more detail. (Lampman Tr. 91/14-91/23).
45. Mr. Lampman followed up the meeting with an e-mail to Mr. Lynch on March 12, 2004 in which he thanked Mr. Lynch for meeting with him and confirmed FIFA’s “interest in developing a relationship with VISA on an informal basis.” (PI. Ex. 55).
FIFA Sends Notice of Its Intent to Make an Offer to MasterCard
— July
2004
46. In accordance with the provisions of section 9.2 of the Agreement, FIFA notified MasterCard, by letter dated July 14, 2004, of its intent to send out an offer concerning “marketing rights in relation to FIFA properties for the term 2007-2014” in not less than 90 days. (Pl.Ex. 86).
47. The letter, co-signed by Mr. Valcke and Eelco van der Noll, a former MasterCard employee who left to become Head of Marketing & Sponsorships at FIFA, acknowledged that “[i]n accordance with Section 9.2 of our agreement dated 26 November 2002, FIFA is required to give MasterCard 90 days’ notice of its intention to present an offer to MasterCard for sponsorship rights to the competitions outlined in the agreement.” (Stuart Decl. ¶ 26; Pl.Ex. 86). It then stated that “[t]herefore, this letter is intended to provide MasterCard with written notice that FIFA intends to make an offer to MasterCard outlining the package of marketing rights, the events covered, and the product category which FIFA proposes to offer” and “that this offer will not be made to MasterCard prior to 90 days from today.” (Stuart Decl. ¶ 26; Pl.Ex. 86).
48. During a meeting between Messrs. Valcke, Lampman and Van der Noll of FIFA, and Deborah Hughes of MasterCard, Ms. Hughes requested, and FIFA consented, to postpone the time FIFA would present its written offer to Master
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Card. The reason Ms. Hughes gave was that MasterCard needed preparation time so that it could respond to the expected written offer within the 90-day time frame prescribed by Section 9.2.
49. In a September 30, 2004 e-mail, Ms. Hughes requested that FIFA “extend you[r] visit date as far as you can” — meaning the date on which FIFA would arrive in New York to deliver the written offer to MasterCard. (Valcke Decl. ¶¶ 13-14).
FIFA and VISA Meet in Athens
— August
2004
50. About a month after FIFA gave notice of its intent to make an offer to MasterCard, on August 20, 2004, three senior members of FIFA’s sponsorship team, Messrs. Valcke, Lampman and van der Noll, met with Tom Shepard, Executive Vice President, Global Merchant Partnerships & Global Sponsorship, of VISA, in Athens in the midst of the Olympic Games. (Lampman Tr. 92/18-92/25, 93/19-94/19). The meeting was initiated by the FIFA representatives, who were “pursuing to find out whether VISA had an interest” in a FIFA World Cup sponsorship. (Lampman Tr. 130/8-130/18).
51. The FIFA team explained to Mr. Shepard the nature of FIFA’s new sponsorship structure (consisting of three “Tiers” of sponsorship), the expected length of sponsors’ commitments (eight years) and the expected cost of the sponsorship ($225 million over eight years). (Lampman Tr. 94/25-95/9, 95/22-96/15; PI. Ex. 142).
52. Mr. Shepard stated that VISA had been “burnt” in the past when pursuing sponsorship of the FIFA World Cup and asked the FIFA representatives, “[w]hy VISA, why now?” (PkEx. 142). He told the FIFA team that FIFA should not pursue a relationship with VISA unless there is a genuine opportunity for VISA to acquire the sponsorship. (PkEx. 142; Lampman Tr. 96/25-97/11, 124/5-124/11). Mr. Shepard specifically asked the FIFA representatives whether MasterCard had any incumbency rights of which VISA should be aware. (Lampman Tr. 190/23-191/7).
53. Mr. Valcke and his colleagues assured Mr. Shepard that “FIFA [is] free to engage in any commercial relationship it desires post 2006 for [television] and sponsorship” and that VISA would have a “genuine opportunity” to acquire the sponsorship. (PkEx. 142; Lampman Tr. 98/7-98/14). They made no mention, even generally, of MasterCard’s “first right to acquire,” although they well understood that section 9.2 of the 2006 World Cup Sponsorship Agreement posed a legal impediment to FIFA’s granting rights to VISA. (Lampman Tr. 98/11-98/14, 98/21-100/2, 100/15-100/25, 101/15-101/22). Mr. Lamp-man, who admitted that the FIFA team “misrepresented the truth” to Mr. Shepard, explained that he and his colleagues were “interested in ensuring that Mr. Shepard was interested in pursuing a partnership with FIFA” and thus “were not about to tell Mr. Shepard that MasterCard had any rights with respect to future sponsorship.” (Lampman Tr. 127/4-127/25, 190/23-191/8). According to Mr. Valcke, telling VISA that “FIFA was free to engage in any commercial relationship it desired” was a “commercial lie” that enabled FIFA to “keep the door open” with VISA. (Valcke Tr. 73/3-73/23).
54. Mr. Lampman followed up the Athens meeting with an e-mail three days later, thanking Mr. Shepard for meeting him and his colleagues in Athens and, on the assumption that VISA has “an appetite to further pursue a relationship with FIFA,” proposing that their two teams meet in San Francisco the last week of November or first week of December. (PI. Ex. 53).
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FIFA “Offers” Sponsorship in the “Financial Services” Category to
VISA—
December 2004
55.
On December 9, 2004, Mr. Valcke (Director of FIFA Marketing
&
TV), Mr. Lampman (then Sales Director of FIFA Marketing
&
TV) and Stefan Schuster (then also FIFA Marketing
&
TV Sales Director and now co-Head of Business Development
&
Sales for FIFA) met at VISA’S offices in San Francisco with Mr. Shepard, Mr. Lynch and several other VISA representatives. (Lampman Tr. 160/22-163/13; Schuster Tr. 92/23-94/3; Pl.Ex. 69).
56. During the meeting, the FIFA team made a slide and video presentation promoting the benefits of sponsoring the FIFA World Cup, in general, and the 2010 FIFA World Cup in South Africa, in particular. (Schuster Tr. 94/4-94/25; Pl.Ex. 67). The FIFA representatives also presented to VISA the package of World Cup sponsorship rights in the “financial services” category for the next eight years. (Lampman Tr. 172/19-173/6; Schuster Tr. 95/7-95/14; Pl.Ex. 68). The presentation, as FIFA co-Head of Business Development
&
Sales, Mr. Schuster, admitted in testimony, was an “offer” by FIFA to VISA to be the “Tier 1” World Cup sponsor in the “financial services” category for the period 2007 to 2014 at a price of $225 million. (Schuster Tr. 95/18— 95/23). In his direct written trial testimony, Mr. Schuster testified that “FIFA’s negotiation team traveled to San Francisco to present FIFA’s sponsorship strategy to VISA,” (Declaration of Stefan Schuster, executed on September 21, 2006 (“Schus-ter Decl.”), ¶ 39), not to make an offer. On cross-examination at trial, he was evasive but, after being confronted with his deposition testimony, finally admitted that an offer had been made to VISA on December 9, 2004. (Trial Tr. p. 110,1. 12-p. 115, 1.13).
3
57. In view of MasterCard’s “first right to acquire,” the Head of FIFA’s Commercial Legal Department, Tom Houseman, conceded under oath that it was a “mistake” for FIFA to have offered the financial services category to VISA before FIFA offered it to MasterCard. (Houseman Tr. 108/13-108/16, 109/4-109/8, 109/22-110/2).
58. Nevertheless, at no point during the meeting did anyone from FIFA alert the VISA team to MasterCard’s “first right to acquire” and the impediment such right imposed on FIFA’s ability to deliver the package of rights being offered to VISA. (Lampman Tr. 174/13-175/11; Schuster Tr. 96/3-96/6; Pl.Ex. 67).
FIFA Misrepresents to VISA the Nature of MasterCard’s Rights
— Early
January 2005
59. Following the meeting on December 9, 2004, the parties arranged to meet again in mid-January at VISA’S offices in San Francisco.
60. In advance of that meeting, on January 6, 2005, Christopher McCleary, an in-house attorney at VISA and one of the attendees at the December 9, 2004 meeting, called Robert Lampman, then Sales Director of FIFA, to assure himself that FIFA had no contractual obligations to MasterCard that might impede FIFA’s
*262
ability to do a deal with VISA. (Lampman Tr. 178/10-178/17; PLEx. 26).
61. As reflected in an e-mail that Mr. Lampman wrote the same day in which he recounted the conversation, Mr. MeCleary directly asked Mr. Lampman what incumbency rights MasterCard had in its contract with FIFA and whether there were any rights of which VISA should be aware. (Pl.Ex. 26). Mr. Lampman responded: “Our partner agreements do not provide for incumbency rights. We have an obligation to present to MasterCard and we will, but there is nothing in our agreement with MasterCard that would prohibit us from doing a deal with VISA should we choose to do so.” (Pl.Ex. 26; Lampman Tr. 181/10-183/7,192/4-192/21).
62. As FIFA’s representatives readily admitted under questioning, Mr. Lamp-man’s statements to Mr. MeCleary were simply false. (Houseman Tr. 103/13-104/3; Lampman Tr. 181/10-183/7). At trial, Mr. Schuster characterized the statements as a “white lie,” (Trial Tr. p. 130, 1. 3-11) adding that, in his opinion, “VISA does not even want ... to know the exact truth” because “if we tell him that there are incumbent rights and what it is, then he will never get approval from any of his boss[es] to talk to us.” (Trial Tr. p. 130,1. 17 — p. 131,1. 5). In any event, Mr. Schus-ter testified that “we wouldn’t have told him anyways.” (Trial Tr. p. 131, 1. 11).
63. Yet at no time did any of FIFA’s representatives — Mr. Valcke, Mr. Houseman or Mr. Schuster, who were recipients of Mr. Lampman’s e-mail recounting the conversation and who all were in frequent contact with VISA in the following days and months — ever disabuse VISA of the false impression that nothing in FIFA’s agreement with MasterCard constrained FIFA’s ability to grant sponsorship rights to VISA. (Houseman Tr. 96/21-98/23). When asked why he “misrepresent[ed] the truth to Mr. MeCleary,” Mr. Lampman testified: “it was because it was beneficial to my commercial cause at that point in time.” (Lampman Tr. 183/17-183/21). At trial, Mr. Valcke conceded that he never instructed Mr. Lampman to correct the falsehood because “it was the game.” (Trial Tr. p. 385,1. 13-24).
FIFA Foresees No “Roadblocks” to Signing a Binding Letter of Intent with VISA
— Mid-January
2005
64. On January 14, 2005, the FIFA and VISA negotiating teams met again to discuss FIFA World Cup sponsorship in the financial services category. (Houseman Tr. 187/12-187/25; Schuster Tr. 96/19-97/14). Messrs. Valcke, Schuster and Houseman, for FIFA, and Messrs. Shepard, MeCleary and Christopher Katsu-leres, for VISA, attended the meeting. (Houseman Tr. 187/12-187/25; Schuster Tr. 96/19-97/14).
65. According to “minutes” of the meeting taken by Mr. Schuster, the “meeting was held in a very good atmosphere and with a positive and productive spirit” and “[discussions about key matters ... showed a very good common understanding on both sides.” (Pl.Ex. 70; Schuster Tr. 98/18-99/8). Based on the “positive and productive” discussions, Mr. Schuster concluded that he foresaw no “major roadblocks to possibly concluding a deal with VISA” — notwithstanding that FIFA had yet to even offer the “financial services” package of rights to MasterCard, as required under section 9.2. (Schuster Tr. 100/2-100/16, 101/7-101/12). When asked whether “by the end of your meeting with VISA on January 14th 2005, you saw no obstacles to doing a deal with VISA before you ever even presented the Financial Services category to MasterCard,” Mr. Schus-ter testified: ‘Yeah. Absolutely correct.” (Schuster Tr. 101/7-101/12).
66. In fact, the FIFA representatives told the VISA representatives that their
*263
objective was to have a “binding letter of intent signed” with VISA by June 2005. (Houseman Tr. 189/1-189/4; Schuster Tr. 99/9-99/18; Pl.Ex. 70).
67. As was the case in each of the prior meetings with VISA, no one from FIFA disclosed the fact that MasterCard had a “first right to acquire” the sponsorship rights that FIFA was seemingly committing to VISA. (Schuster Tr. 101/24-102/2, 102/20-102/28).
68. At the request of Mr. Shepard of VISA, the two teams agreed to arrange a meeting between FIFA’s President, Joseph S. Blatter, and VISA’S President, Christopher Rodrigues, in the near future. (Schuster Tr. 102/20-104/5; PLEx. 70).
FIFA’s and VISA’S Top Executives Meet
— Late
January 2005
69. Mr. Blatter and Mr. Rodrigues met in late January 2005 in Zurich around the time of the World Economic Forum in Davos, Switzerland. (Blatter Tr. 26/7-28/23; Schuster Tr. 104/6-104/16, 105/3— 105/6; PL Exs. 145 & 400). The two executives had long known each other through activities with the Olympic Games. Mr. Blatter is a member of the International Olympic Committee, and VISA has been a long-standing Olympics sponsor. (Blatter Tr. 23/17-24/12).
70. The two executives, joined by their respective senior sponsorship executives, Messrs. Valcke and Shepard, met over dinner. (Blatter Tr. 26/7-28/23, 35/2-35/6, 36/5-36/21; Valcke Tr. 114/22-115/3, 115/23-116/6;
See also
Shepard Tr. 61/24— 63; PLEx. 400). They met for about two hours to discuss their mutual interest in a partnership. (PLEx. 145). Toward the end of the dinner, Mr. Blatter “expressed support” for the parties’ discussions and “said that the potential of VISA being a partner would be welcomed.” (Shepard Tr. 63/22-63/7).
71. Following the meeting, Mr. Valcke wrote to Mr. Shepard that he believed the meeting “went well” and expressed his “hope” that “we share the same wish, to be partners soon!” (PLEx. 145; Valcke Tr. 122/12-122/23, 123-5-123/8). It was clear, as Mr. Valcke admitted, that “things were falling into place between VISA and FIFA.” (Valcke Tr. 126/2-126/4).
FIFA “Offers” Sponsorship in the “Financial Services” Category to MasterCard
— February
2005
72. After FIFA gave notice to MasterCard in July 2004 of its intent to make an offer, representatives of FIFA, from time to time, provided MasterCard with a “few details” about the new FIFA sponsorship structure, but did not present, as it had done to VISA, the package of rights. (Valcke Tr. 87/10-87/20).
73. In early February, 2005, more than 210 days after FIFA gave notice of its intent to make an offer to MasterCard and after FIFA had had at least five meetings with VISA, FIFA sent its sponsorship team to MasterCard’s offices in Purchase, New York to present the “financial services” package of rights.
74. On February 8, 2005, Messrs. Valcke, Schuster, Lampman and van der Noll met with John Stuart, Senior Vice President, Global Sponsorships of MasterCard, and his colleagues in the Global Sponsorship group, Deborah Hughes and Geraldine Cooper, to unveil officially FIFA’s revised sponsorship structure and to “offer” sponsorship of the next two World Cups in the “financial services” category to MasterCard. (Stuart Decl. ¶¶ 1, 28; Schuster Tr. 86/12-86/16).
75. The meeting was similar in substance to FIFA’s meeting with VISA in December 2004. The FIFA representatives presented largely the same multimedia presentation highlighting the benefits of sponsoring the FIFA World Cup, in general, and the 2010 FIFA World Cup in South Africa, in particular, that FIFA had
*264
presented to VISA. (Schuster Tr. 88/22-89/5, 89/14-89/15, 89/17-89/21, 90/3-90/10, 90/22-90/24, 94/4-94/10;
compare
PLEx. 65,
with
PLEx. 67; Stuart Decl. ¶¶ 29-30). They then presented to the MasterCard team the same package of sponsorship rights in the “financial services” category that they earlier had presented to VISA. (Schuster Tr. 91/12-92/5, 95/7-95/14;
compare
PLEx. 66,
with
PLEx. 68; Stuart Decl. ¶ 31).
76. The rights package was presented in the form of a document entitled “The FIFA Sponsorship Program 2007-2014,” which, following a lengthy introduction, broadly outlined the “tangible benefits delivered by the FIFA Partnership, intended for inclusion in the FIFA Partnership Agreement.” (PLEx. 66, § 5.2). A copy of the FIFA Partnership Agreement was not attached. Nor was any such agreement provided to the MasterCard representatives at or following the meeting. (Schuster Tr. 92/6-92/10). The document that the FIFA representatives did provide, “The FIFA Sponsorship Program 2007-2014,” was not denominated an “offer,” was not signed by anyone at FIFA and contained no signature line for acceptance by anyone at MasterCard. Nor did it even outline such basic items as the definition of the “financial services” category for which the sponsorship opportunity was being presented.
77. Nevertheless, the combination of the FIFA representatives’ oral presentation, coupled with their written materials, made clear that the package of sponsorship rights that was being presented at the meeting differed significantly from the sponsorship rights that had been granted to MasterCard in the 2006 World Cup Sponsorship Agreement. (Stuart Deck ¶¶ 31-32).
78. The product category of “financial services” was far broader than the product category of “real and/or virtual payment and/or account access systems” in which MasterCard was sponsoring the 2006 FIFA World Cup. The “financial services” category included not only payment cards but also core banking services, such as current accounts and commercial and mortgage lending, which were outside MasterCard’s line of business. (Stuart Deck ¶ 31). The length of the sponsorship commitment (eight years) was twice the length of the commitment for the 2006 FIFA World Cup. (Stuart Decl. ¶¶ 31-32). And, as a result of the broadening of the product category and lengthening of the term, the fee being sought, $225 million, was more than four times the amount that MasterCard agreed to pay in the 2006 World Cup Sponsorship Agreement. (Stuart Decl. ¶¶ 31-32). The rights being offered were also somewhat expanded in that, for example, they included certain rights to use FIFA’s logo.
4
79. At some point during the course of the meeting, the FIFA representatives suggested that MasterCard would have 90
*265
days to make its decision regarding the sponsorship package. (Stuart Decl. ¶ 33). The MasterCard representatives resisted that suggestion, telling the FIFA team that, because of the expanded scope, length and price of the proposed sponsorship, the MasterCard team would have to undergo a substantial amount of work to analyze the proposal and could not be expected to receive a signed contract within 90 days. In response, the FIFA representatives assured them that FIFA did not expect a signed contract within 90 days, but needed only an indication of MasterCard’s assent to the proposal and its willingness to enter into good faith contract negotiations within the 90-day timeframe. (Stuart Decl. ¶ 33).
80. At no time during the meeting did anyone on the FIFA team disclose that they earlier had met with, let alone presented the “financial services” package to, VISA. (Schuster Tr. 44/12-44/14, 199/11-199/15; Valcke Tr. 145/9-145/18).
FIFA Specifically Invokes MasterCard’s 90-Day Exercise Period Under Section 9.2
81. Prior to the February 8 meeting with MasterCard, FIFA’s team gave careful consideration to section 9.2 and what FIFA was obliged to do under the clause in order trigger MasterCard’s 90-day exercise period in connection with the “financial services” package.
82. On the one hand, Mr. Valcke and his team wanted to “make it clear” to MasterCard, so that there would be “no confusion in MasterCard’s mind,” that the “clock would start to run on the 90 days” for MasterCard to exercise its right to acquire the “financial services” package. (Valcke Tr. 146/2-147/2, 147/13-147/24). Mr. Houseman thus advised Mr. Valcke that, at the meeting, the FIFA representatives should provide a “leave behind” that specifically “use[s] the word ‘offer.’ ” (PI. Ex. 146). Mr. Houseman explained that this step was “important because we needed MasterCard ... to understand that the process we were pursuing was as defined in the contract.” (Houseman Tr. 342/25-343/11).
83. On the other hand, there was concern within Mr. Valcke’s group that if FIFA “explicitly reference[s] the word ‘offer’ on the leave behind, and MC [MasterCard] accept[s] the ‘offer,’ what MC will be accepting is what is set out in the leave behind, and, accordingly, the leave behind as a whole will become a binding contract between FIFA and MC.” (Pl.Ex. 147). As Mr. Valcke admitted, he and his team did not want the “leave behind” to be “legally binding on FIFA.” (Valcke Tr. 448/8-448/16;
See also
Pl.Ex. 147). One of Mr. Valcke’s team members thus advised that the “way forward in this instance ... [should be] to write a letter to MC making them an offer in accordance with clause 9.2 of the current Agreement which would ... set out the ‘terms’ and ‘consideration’ of the package of rights” to thus start the clock ticking. (Pl.Ex. 147).
84. As a result of these internal deliberations, and in an effort to make it clear to MasterCard that its rights were being triggered, about a week after the February 8 meeting, FIFA delivered a letter to MasterCard notifying it that the presentation of the rights package at the meeting constituted an “offer” and that, under section 9.2 of the Agreement, MasterCard would have 90 days from the date of the meeting to acquire the package of rights.
85. The letter, from Jérdme Valcke to John Stuart dated February 14, 2005, acknowledged that “[i]n accordance with Section 9.2 of our existing agreement, FIFA must give MasterCard notice of its offer, setting out the terms and consideration payable in relation to the package of rights to be offered to MasterCard, for its product category, for the Partnership Agree
*266
ment beyond the 2006 FIFA World Cup” and that “MasterCard shall have 90 days, from the date of the offer, to exercise its right to acquire the rights offered by FIFA.” (Pl.Ex. 27). It then stated: “This letter is therefore intended to provide MasterCard with written confirmation of FIFA’s offer, as presented to MasterCard on the 8th February 2005 in Purchase. MasterCard’s right to acquire the relevant rights expires on 8th May 2005.” (PLEx. 27).
86. Consistent with what the FIFA representatives told the MasterCard representatives during the February 8 meeting, Mr. Yalcke’s letter made clear that acceptance of the “offer” did not require the execution of a long-form contract. Rather, the letter indicated that the rights being offered would be more specifically set out in a long-form agreement “should MasterCard accept FIFA’s offer set out herein.” The letter did not specify, however, by what means MasterCard could “accept” FIFA’s offer. (PLEx. 27).
87. Mr. Houseman testified with respect to the February 14, 2005 letter that “it was important for MasterCard to understand that FIFA was pursuing the process under Section 9.2”, that he “wanted to be clear that MasterCard would have 90 days from receipt of an offer to exercise its rights,” that it was “important that both sides understood that [they] were operating under Section 9.2” and that he “wanted there to be no mistakes about it.” (Trial Tr. p. 313,1.13-23).
88. Internally, FIFA’s team kept careful track of the 90-day period. Messrs. Schuster and Lampman, then the two Sales Directors handling the negotiations, recorded the 90-day period in a “progress chart” they maintained concerning their dealings with MasterCard. (PLEx. 96; Lampman Tr. 231/19-232/23; Schuster Tr. 291/16-291/18, 293/15-293/22). Next to the date, “8 February 2005,” they noted: “The 90 days notice of FIFA’s offer in relation to the Tier 1 FIFA Partner rights package for the period 2007-2014 was given to MC orally on the date of the presentation.” (PLEx. 96). Across from the date, “14 February 2005,” they wrote: “Offer open for 90 days.” (PLEx. 96).
89. In fact, so closely did they follow the 90-day period that Messrs. Schuster and Lampman were able to recall at their depositions, without any refreshment of their recollections, the precise date (May 8, 2005) and day of the week (Sunday) on which the 90-day period was set to expire. (Lampman Tr. 232/11-232/18; Schuster Tr. 31/17-31/24).
FIFA Negotiates Along Two Tracks with VISA and MasterCard, Yet Misleads MasterCard Into Believing that MasterCard Had an “Exclusive Negotiation” Period
— February
to Mag 2005
90. During the weeks following the February 8 meeting in Purchase, the FIFA sponsorship team of Messrs. Valcke, Schuster, Lampman and Houseman proceeded on two fronts. (Valcke Tr. 144/3-144/20).
91. Negotiations progressed rapidly with VISA, such that, on February 17, 2005, less than ten days after MasterCard was first presented with the “financial services” package, Mr. Valcke wrote to Mr. Shepard of VISA that “[s]hould negotiations continue along the lines as they have until now I could expect, and strongly recommend, that VISA and FIFA enter into an agreement.” (PLEx. 415). On February 25, Mr. Valcke followed up with Mr. Shepard: “Waiting to receive your confirmation we have a deal!!!!” (PL Ex. 149). To his colleagues at FIFA, Mr. Valcke trumpeted: “Soon we will receive a call asking for a signature date!!!!” (PLEx. 150;
See also
Schuster Tr. 123/19— 123/25). At the same time, Mr. Valcke cautioned: “But a deal is not done or can
*267
collapse before, so yes we have to play careful with MC [MasterCard].” (Pl.Ex. 150). Mr. Valcke explained that what he meant was, “we have to be careful in the way we are dealing with VISA to make sure that if MasterCard finally say: no, we have no interest, VISA will not use that fact we are pushing away the date of the signature to say: oh guys, sorry but the deal is over.” (Valcke Tr. 144/3-144/15).
92. Meanwhile, consistent with Mr. Valcke’s direction to “play careful with” MasterCard until “a deal is ... done” with VISA, FIFA’s representatives responded to the ongoing inquiries of MasterCard concerning the specifics of the sponsorship proposal, while MasterCard — completely unaware of FIFA’s negotiations with VISA — engaged in the process of internally analyzing and reviewing with the financial institutions in its network, the new “financial services” package. (Stuart Decl. ¶ 36).
93. Not once during this time did any of the FIFA representatives disclose to them counterparts at MasterCard that FIFA had offered and was negotiating with VISA over the same rights package that FIFA had presented to MasterCard. (Schuster Tr. 199/11-199/15).
94. Instead, FIFA’s negotiating team misled Mr. Stuart and his team into believing that MasterCard was in a 90-day “exclusive negotiation period” with FIFA. Mindful of the 90-day exercise period that FIFA had invoked in Mr. Valcke’s February 14, 2005 letter and that the deadline FIFA imposed was a Sunday, May 8, 2005, Mr. Stuart requested that the 90-day “exclusive negotiation” period be extended by three days, until May 11, 2005, so that MasterCard could respond to the “financial services” package during a business day. (Stuart Decl. ¶ 37; Houseman Tr. 154/19-155/2, 156/13-157/3; Schuster Tr. 31/17-31/22, 253/25-253/254/8). FIFA’s response to this request was to send a letter — prepared by Mr. Houseman, signed by Mr. Valcke and transmitted by Mr. Schuster — under the subject heading “Exclusive Negotiation Period,” stating that “FIFA agrees to your request to extend MasterCard’s exclusive negotiation period under our current agreement.” (Pl.Ex. 28; Pl.Ex. 76; Houseman Tr. 155/3-155/13; Schuster Tr. 131/15-132/12;
see also
PI. Ex. 79 (referring to “an exclusive negotiation period over the last three months”)).
95. In fact, as FIFA’s representatives admitted, MasterCard was not in any “exclusive negotiation period” because FIFA was simultaneously and aggressively negotiating with VISA. (Schuster Tr. 132/13-132/15,148/1-148/13; Houseman Tr. 155/7-155/9; Valcke Tr. 466/8-467/5). Nevertheless, the FIFA negotiators referred to the period as such because they did not want to disabuse Mr. Stuart of the “error of his ways” in believing that MasterCard was enjoying “exclusive” negotiations with FIFA. (Houseman Tr. 155/18-155/22).
96. In contrast to what Mr. Stuart was led to believe, the reality was that during the 90-day period from February 8 to May 8, 2005 when MasterCard was contractually entitled to a
“first
right to acquire” the “financial services” package, Mr. Valcke “had two negotiations to run.” (Valcke Tr. 144/3-144/20). His goal, he admitted, was “to go to the [FIFA Marketing & TV] Board with two signed agreements” from VISA and MasterCard and enable the Board to choose which agreement to accept. (Valcke Tr. 135/18-137/14). Mr. Valcke conceded, however, that he would be unable to achieve that goal during MasterCard’s 90-day exercise period. (Valcke Tr. 136/20-137/14). So he and his team, as he admitted, “wanted to stall everything until the 90 days had run.” (Valcke Tr. 136/13-136/15;
see also
Pl.Ex. 291). In the case of VISA, with which negotiations were proceeding rapidly, Mr.
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Valcke admitted that he wanted to “keep them hot, keep them interested, keep them enthusiastic, be encouraging, but slow them down until the 90 days expired.” (Valcke Tr. 145/3-145/8;
see also
Pl.Ex. 148 (“Let’s hope VISA ... will not speed up their internal process”)).
Both VISA and MasterCard Reject the “Financial Services” Package; So FIFA Revises the Package
— May
2005
97. On May 11, 2005, the date to which MasterCard’s response period had been extended, Mr. Stuart and Ms. Hughes of MasterCard met in Zurich with Messrs. Valcke, Schuster, Houseman and Lamp-man to discuss MasterCard’s response to the “financial services” proposal. (Stuart Deck ¶ 37; Lampman Tr. 207/10-208/10; Schuster Tr. 124/4-124/20).
98. Mr. Stuart explained that the combination of doubling the term of the sponsorship from four to eight years and expanding the scope of the product category to “financial services,” which included products and services not offered by MasterCard, had made MasterCard’s task in evaluating the sponsorship proposal more difficult and time-consuming than in years past. (Stuart Deck ¶ 31; Lampman Tr. 208/11-208/19). He related that the new structure effectively required MasterCard to syndicate the banking services component of the sponsorship to its associated banks and that, therefore, MasterCard had devoted almost the entire 90-day period to discussions with banks. (Stuart Deck ¶ 31; Lampman Tr. 208/11-208/19). The problem with syndication, he explained, is that MasterCard could “pass through” rights to some, but not all, of its member banks. (PbEx. 79).
99. Mr. Stuart told the FIFA representatives that, after undertaking an extensive evaluation, MasterCard determined that it could not adequately exploit the “financial services” category to justify the price of the sponsorship. (Stuart Deck ¶31; Lampman Tr. 208/11-208/19). Accordingly, Mr. Stuart informed the FIFA team that MasterCard was rejecting the “financial services” proposal. (Lampman Tr. 208/20-208/24, 209/14-209/18; Schuster Tr. 124/21-124/24, 125/3-125/11). Thus, MasterCard requested the extension in the response period in order to
reject
the offer in a timely manner.
(See
Trial Tr. p. 138, 1. 8 (Mr. Schuster so acknowledging)).
100. Nevertheless, Mr. Stuart made it clear to Messrs. Valcke, Schuster, Houseman and Lampman that MasterCard was still interested in continuing its relationship with FIFA. (Stuart Deck ¶ 37). He suggested that the parties arrange to meet again to discuss an alternative proposal that would exclude banking services from MasterCard’s category and thus would allow MasterCard to buy only that which it could use, while, at the same time, enabling FIFA to exploit separately, on a region by region basis, the banking services sub-category. (Stuart Deck ¶ 37).
101. Both sides agree in this proceeding, and understood at the time, that once MasterCard rejected the “financial services” package of rights, FIFA was free, at that point, to grant the rights on comparable terms to another party. (Stuart Deck ¶ 40; Houseman Tr. 145/10-145/14; Schus-ter Tr. 125/25-126/3). By that time, however, the only other party to which the “financial services” package had been presented, VISA, also had rejected the proposal, for the same reasons as MasterCard. (Pl.Ex. 77; Lampman Tr. 210/6-210/24; Schuster Tr. 129/5-129/13, 130/4-130/8).
102. In light of the rejections from both VISA and MasterCard, FIFA’s sponsorship team determined to “refine [its] approach to the Financial Services category.” (Pl.Ex. 77; Schuster Tr. 135/10-135/20). They explored a number of options. (Pl.Ex. 77). Within a matter of
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days, Mr. Valcke’s team decided that the best approach would be to restructure the rights package, such that FIFA would retain the right to exploit banking services in the country hosting the FIFA World Cup. By restructuring the package, which they denominated “financial services light,” FIFA was able to reduce significantly the rights fee being sought from the category sponsor to $180 million from $225 million, eliminate the sponsor’s responsibility to syndicate host country banking rights and give FIFA the ability to exploit the host country banking rights separately. (Schuster Tr. 145/12-146/4; Pl.Ex. 77). Mr. Valcke’s team decided to present the revised package, which drew largely upon Mr. Stuart’s comments, to both VISA and MasterCard.
Section 9.2’s Applicability to the “Financial Services Light” Package
103. Both parties agree in this proceeding that the “financial services light” package was a “new offer” or “second offer.” (Stuart Decl. ¶ 41; Houseman Tr. 145/22-145/24; Schuster Tr. 22/6-24/8, 145/1-145/3). They also agree that because it was a new offer, MasterCard’s rights, and FIFA’s obligations, under section 9.2 were re-triggered, including FIFA’s obligation to give MasterCard 90 days written notice of its intent to make a new offer. (Stuart Decl. ¶ 41; Houseman Tr. 116/22-117/3; Lampman Tr. 216/13— 217/6; Schuster Tr. 23/8-23/15, 145/4-145/9,194/13-194/19).
FIFA Meets with VISA and “Offers” It the “Financial Services Light” Package
— May
2005
104. On May 23, 2005, Messrs. Valcke and Schuster met with Messrs. Shepard and McCleary at VISA’S offices in San Francisco to present or “offer” the “financial services light” package to VISA. (Schuster Tr. 155/2-155/16, 155/20-156/5; Pl.Ex. 81).
105. As he did with respect to the “financial services” offer, in his written direct testimony Mr. Schuster did not say that FIFA “offered” the “financial services light” package to VISA at the May 23, 2005 meeting in San Francisco. Instead, he stated that the FIFA team met with the VISA team “to put the revised Financial Services Light concept under the microscope.” (Schuster Decl. ¶ 61). Upon cross examination, he was confronted with his deposition testimony wherein he testified that FIFA did “offer” the “financial services light” package to VISA on May 23 and that offering it to VISA before offering it to MasterCard was somehow for MasterCard’s benefit. In response, although conceding that an “offer” was made to VISA (Trial Tr. p. 117, 1. 1-5), he testified evasively, saying, for example, that FIFA “verbally guided VISA through these revised changes,” (Trial Tr. p. 119,1. 1-2), and that “I said ultimately I think it was to MasterCard’s benefit that we did that. It is also — as I said, it’s also to FIFA’s benefit to understand what is in the market, and with what kind of position we can talk to our partners at MasterCard.” (Trial Tr. p. 120, 1. 8-12.) Mr. Schuster’s credibility was damaged by this testimony resisting the concession that FIFA in fact made an “offer” to VISA on May 23 and by his incredible testimony to the effect that it was for. MasterCard’s benefit that FIFA “offered” the “financial services light” package to VISA first.
(See
Trial Tr. p. 117, l. 1-p. 120, l. 12).
106. The meeting, from the FIFA team’s perspective, “went quite well.” (PI. Ex. 85). After discussing the scope and price of the new package and VISA’S initial reaction to it, the FIFA team told Messrs. Shepard and McCleary that if they could get approval from VISA management of the package before the next meeting of the Board of Directors of the FIFA Marketing & TV (the “FIFA Board”) on June 27,
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2005, the FIFA Board “could approve the deal.” (Pl.Ex. 85; Schuster Tr. 169/8-169/12,169/16-169/21,169/24-170/18).
107. Under questioning, Mr. Schuster admitted that, in light of MasterCard’s rights under section 9.2 of the Agreement, the FIFA Board, in fact, could
not
approve a deal with VISA at the Board meeting on June 27, 2005 and that his and Mr. Valcke’s assurances to the contrary were “not correct.” (Schuster Tr. 168/22-169/6, 171/4-171/19). When asked if he was aware, when he told Mr. Shepard that the FIFA Board could approve a deal with VISA on June 27, that section 9.2 prohibited such approval, Mr. Schuster responded: “I didn’t think about it.” (Schuster Tr. 174/2-174/8).
108. Mr. Houseman, Head of FIFA’s Commercial Legal Department, added that, in light of MasterCard’s rights under section 9.2, it was a second “mistake” for FIFA to offer the “financial services light” package (as it had offered the “financial services” package) to VISA before offering the package to MasterCard. (Houseman Tr. 113/18-114/3).
FIFA Meets with MasterCard and Offers It the “Financial Services Light” Package
— May
2005
109. On May 25, 2005, two days after presenting the package to VISA, Messrs. Schuster and Lampman met with John Stuart and Deborah Hughes in Istanbul, Turkey, to “verbally convey” the $180 million “financial services light” package to MasterCard. (Schuster Tr. 144/7-144/25, 162/22-162/25; Stuart Decl. ¶ 43).
110. The FIFA representatives made no mention of their earlier meeting with VISA. (Schuster Tr. 163/5-163/8, 199/11-199/15). In fact, they led Mr. Stuart and Ms. Hughes to believe that they were presenting the “financial services light” package exclusively to MasterCard. For example, in a follow-up memo to Mr. Stuart several days later, Mr. Schuster explained that FIFA had developed the “financial services light” proposal with the specific assumptions in mind that “MasterCard is seriously interested in a Tier 1 FIFA Partnership,” that “FIFA highly values the long-standing partnership with MasterCard” and that FIFA, thus, “is interested in finding the best possible solution for both parties.” (Pl.Ex. 79).
111. The MasterCard team informed Messrs. Schuster and Lampman that they were encouraged by FIFA’s changes to the rights package but they would need to evaluate the concept further before giving FIFA a response. (Stuart Decl. ¶ 43). Mr. Schuster and Mr. Lampman requested that “within a week or 10 days we should have their feedback.” (Schuster Tr. 160/22-161/4). They imposed no other deadline on a response from MasterCard to the revised package. (Schuster Tr. 160/22-161/4). Unlike what they had told the VISA team two days earlier, the FIFA representatives did not tell the MasterCard team that their goal was to present an agreement to the FIFA Board by the June 2005 meeting.
(Compare
PLEx. 81,
with
Pl.Ex. 79).
FIFA Does Not Give Notice of Its Intent to Make a Revised Offer or of Any Intent to Invoke MasterCard’s 90-Day Exercise Period under Section 9.2
112. In contrast to FIFA’s conduct in connection with the “financial services” package, FIFA did not invoke, and took no visible steps to comply with, section 9.2 in connection with the “financial services light” package.
113. As set out above, prior to presenting the “financial services” package to MasterCard at the February 8, 2005 meeting, FIFA, specifically citing section 9.2, provided to MasterCard written notice of its intent to make an offer. In connection with the “financial services light” package, in contrast, while FIFA’s representatives
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conceded that section 9.2 required FIFA to give MasterCard 90 days’ written notice of its intent to make an offer, no such notice was given. (Houseman Tr. 116/22-117/3; Schuster Tr. 192/6-192/20, 194/13-194/19; Stuart Decl. ¶ 45).
114. Likewise, as set out above, in connection with the “financial services” package, FIFA deliberated over how to “make it clear” to MasterCard when the “clock would start to run on the 90 days” for MasterCard to exercise its right (under section 9.2) to acquire the package because it “was important for MasterCard to understand that FIFA was pursuing the process under Section 9.2” and FIFA “wanted it to be clear that MasterCard would have 90 days from receipt of an offer to exercise its rights” and decided to deliver to MasterCard a letter specifically confirming that the presentation at the February 8 meeting was an “offer” under section 9.2 and that MasterCard would have 90 days within which to exercise its rights to acquire the package. No such letter was delivered to MasterCard following presentation of the “financial services light” package at the May 25, 2005 meeting. (Houseman Tr. 145/25-146/6, 148/5-148/10, 150/17-150/23; Stuart Decl. ¶ 45).
115. FIFA did follow up the May 25 meeting, as it did its meeting with VISA on May 23, with a letter. (Pl.Ex. 79). But the letter makes no reference to section 9.2. Nor does it indicate that MasterCard would have any deadline, let alone 90 days, for accepting the package of rights. It merely echoes the statements made by Messrs. Schuster and Lampman at the meeting that they were “looking forward to receiving [MasterCard’s] initial feedback” within a matter of days. (Pl.Ex. 79). When asked why neither that letter nor any other letter notified MasterCard that it would have 90 days to acquire the “financial services light” package, the Head of FIFA’s Commercial Legal Department, Tom Houseman, could provide no explanation. (Houseman Tr. 145/25-145/6, 149/4-149/8,149/23-150/5,150/12-150/16).
116. Section 9.2’s “90 + 90” day period simply was not discussed between the parties in connection with the “financial services light” package. (Lampman Tr. 224/3-224/12, 229/14-229/20, 231/9-231/19, 240/6-240/11; Schuster Tr. 26/19-27/13, 160/22-161/4; Stuart Decl. ¶¶ 45-47). As the witnesses on both sides explained, the parties’ silence regarding the “90+90” day period was a function of changed circumstances.
117. From FIFA’s perspective, as Mr. Lampman testified, FIFA was “less bullish ... as to what was in the marketplace.” (Lampman Tr. 233/24-234/16). Despite their earlier optimism that VISA would agree to become the “financial services” sponsor for $225 million, Mr. Valcke and his team learned that VISA was not as committed to the sponsorship, at least not at FIFA’s asking price, as they initially believed. Thus, in contrast to the situation in February 2005, when Mr. Valcke and his team expected, at the time they presented the “financial services” package to MasterCard, “that VISA and FIFA [would] enter into an agreement” after MasterCard’s 90-day exercise period expired, the situation in late May 2005, when the FIFA team presented the “financial services light” package to MasterCard, was that the FIFA negotiators “didn’t at that point in time have a view that there was another party we were interested in contracting with” when MasterCard’s 90-day “clock expired.” (Lampman Tr. 232/24-233/12).
118. Accordingly, as Mr. Lampman explained, FIFA was “in a position where we felt that it was not of great benefit to hamper discussions or cloud, discussions by pointing out to a partner [MasterCard], by the way, we’re working against this clock.”
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(Lampman Tr. 232/24-233/12). Or, as Mr. Schuster put it in his testimony: “It would be rather counterproductive, from a sales and relationship perspective to again rub it and say: there’s a certain deadline, hurry up.” (Schuster Tr. 27/25-28/20). The bottom line, as Mr. Lampman admitted, was that “it was not in FIFA’s commercial interests to notify MasterCard that MasterCard had 90 days within which to accept the ... financial services light offer.” (Lampman Tr. 235/17-235/22). Moreover, as Mr. Schuster admitted, “given the circumstances after the second offer, ... FIFA had no intention of holding MasterCard to the 90-day deadline.” (Schuster Tr. 181/6-181/16;
see also
180/3-180/5).
119. Mr. Schuster was entirely impeached with respect to his testimony that the 90-day acceptance period for MasterCard was applicable to the “financial services light” package, and his attitude and demeanor while testifying was unconvincing. For example, in May, at the time that package was offered to MasterCard, Mr. Schuster did not understand Section 9.2 to be applicable at all, did not think about Section 9.2 when the offer was made to MasterCard on May 25, and it was only upon receiving Mr. Stuart’s June 19, 2005 e-mail that he even considered that possibility.
(See
Trial Tr. p. 140-144).
120. Mr. Stuart’s testimony that when he wrote in his June 19, 2005 e-mail that “our evaluation process this time around will be entirely different than that of round 1 when the entire 90-day period was taken up with the bank solicitation process,” he was referring to the 90-day period from February 8 to May 8, 2005, (Tr. 18-19) that is, the acceptance period applicable to the “financial services” offer, is entirely credible.
121. In light of Mr. Schuster’s unconvincing testimony on this topic and the other undisputed facts, Mr. Schuster’s testimony to the effect that MasterCard acknowledged the applicability of the 90-day acceptance period in Mr. Stuart’s June 16, 2005 e-mail is rejected. (Schuster Decl. ¶ 54, Trial Tr. p. 134-144).
122. Mr. Schuster’s testimony that “when we made the ‘Financial Services Light’ offer, the situation was different than towards the end” (Trial Tr. p. 137, 1. 21-22), that the first meeting to discuss the “financial services light” package was scheduled for a month
after
Mr. Schuster now says the 90-day deadline had passed (Trial Tr. p. 139, 1. 1-6), and that “[f]or [FIFA] it was better to have it this way,” that is, without a 90-day period in which MasterCard had to accept the offer, because [w]e felt by that time, end of August, mid of August, end of August, that we’re on track ... “does lend itself to belief.” (Trial Tr. p. 139,1.11-17).
123. Similarly, because he was impeached on this issue, Mr. Houseman’s trial testimony to the effect that FIFA did not send a letter to MasterCard invoking Section 9.2 with respect to the “financial services light” offer because MasterCard had requested an offer is not credible. (Trial Tr. p. 314-316).
124. From MasterCard’s perspective, there also was no reason for it to raise section 9.2’s 90 + 90-day period. Mr. Stuart reasonably believed that FIFA was presenting the “financial services light” package exclusively to MasterCard. (Stuart Decl. ¶ 46). And because, in contrast to February 2005, FIFA did not invoke section 9.2’s 90-day exercise period or impose any other deadline on MasterCard when FIFA presented the revised package, Mr. Stuart did not even consider whether section 9.2’s 90-day exercise period applied. (Stuart Decl. ¶ 45).
125. Mr. Stuart’s testimony that he was not aware of any 90-day limit on the time for MasterCard to accept the “financial services light” offer because the nego
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tiations were in an “entirely different” context is entirely credible (Trial Tr. pp. 20-24) as is his testimony that the “context was entirely different” because FIFA had gone to the open market, and the financial services offer had not been accepted, because FIFA “came back and said to me clearly, we listened to you, we want to do business with you, you’ve been our partner for all these years, we want to go ahead” and because of “the body language [and] the conversations.” (Trial Tr. pp. 21-23). Also credible was his testimony that “[i]f [FIFA] had taken any steps to invoke a 90-day process, we certainly would have reacted to it.” (Trial Tr. p. 21, 1. 17-19).
126. Mr. Schuster’s testimony that at no time did anyone from FIFA tell him that MasterCard had 90 days to accept the “financial services light” offer or otherwise mention section 9.2 with respect to the “financial services light” offer is entirely credible. (Trial Tr. p. 67-68).
127. Mr. Schuster’s testimony to the effect that there was no reason for Mr. Stuart and his team to think about section 9.2’s 90-day acceptance period is credible. Mr. Schuster testified: “Because we had an ongoing business relationship. We know there is an interest from MasterCard. We knew we had put forward a package that was interesting for them. We had all the positive feedback. We had no intention to sell to anybody else.” (Schuster Tr. 32/22-33/6). “Because there was no — at the time, there was no intention ... to do anything else but do a deal with MasterCard, ... the 90 days were not so relevant for us.” (Schuster Tr. 23/16-24/2,
see also
180/6-180/20).
128. In contrast to their actions in connection with the “financial services” package, the parties simply did not contemplate, and FIFA did not invoke, any 90-day deadline for acceptance of the “financial services light” package.
5
FIFA Delivers Draft Long-Farm Agreements, first to VISA then to MasterCard
— August
2005
129. Following a period of several months during which both VISA and MasterCard internally reviewed FIFA’s revised sponsorship package, FIFA circulated, for the first time, draft long-form agreements to both companies. Consistent with its prior pattern of conduct, FIFA provided the draft long-form agreement to VISA before it provided it to MasterCard. (Schuster Tr. 167/1-167/5).
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130. FIFA delivered the first draft of a long-form agreement to VISA on August 22, 2005. (Schuster Tr. 165/21-166/14; PI. Ex. 84). Several days later, on August 26, 2005, FIFA transmitted the first draft long-form agreement to MasterCard. (Schuster Tr. 164/9-165/7; Pl.Ex. 83), three days before FIFA now contends MasterCard’s 90-day acceptance period expired. Mr. Schuster confirmed at trial that FIFA controlled when draft contracts were sent out. His testimony that in sending the first draft long-form agreement to MasterCard three days before the supposedly applicable 90-day deadline expired FIFA intended in good faith that the deadline apply was wholly incredible.
(See
Trial Tr. p. 168,1. 5 — p. 170,1. 2).
131. Mr. Stuart’s testimony that the various dates for “next steps”
(e.g.,
Trial Tr. 33, 39, 42-43, 44-45, 71-74) given by FIFA to MasterCard with respect to the “financial services light” offer were “movable target date[s],” (Trial Tr. p. 39, 1. 15), not drop dead dates, and that FIFA was well aware and accepted that the reason the dates were not complied with was because the legal terms were still working was entirely credible. (Trial Tr. 45, 72-74).
FIFA’s Double Standard of Disclosing to VISA Negotiations with MasterCard but Concealing from MasterCard Negotiations with VISA
— August
and September 2005
132. During the months of contract negotiations that followed FIFA’s circulation of a draft long-form agreement, FIFA applied a clear double standard with respect to the information it disclosed to VISA and MasterCard concerning the existence and status of its negotiations with the other company. Whereas Mr. Valcke and his team consistently were open with VISA regarding the status of their negotiations with MasterCard, they did not disclose to MasterCard that FIFA was engaged in contract negotiations with VISA.
133. The next meeting of the FIFA Board following circulation of the draft long-form agreements was scheduled to take place on October 26, 2005. In advance of that meeting, as Mr. Valcke testified, Mr. Shepard and his colleagues at VISA “kn[e]w exactly where we are with MasterCard; that we’re in negotiations with MasterCard and that MasterCard will also have an agreement signed on the table and will have to make a choice.” (Valcke Tr. 171/5-171/15; Pl.Ex. 152).
134. MasterCard was given none of this information. Prior to the parties’ first contract negotiation session in Brussels in late September 2005, no one from FIFA had disclosed to Mr. Stuart or his team that FIFA was engaged in sponsorship discussions with VISA. (Schuster Tr. 199/11-199/15). Mr. Schuster recommended to his team that FIFA be frank with MasterCard about their discussions with VISA, but, after internal discussions, Mr. Schuster “was easily convinced that it’s not a good idea” (Trial Tr. p. 152,1.18-21), and the FIFA negotiating team decided not to disclose their VISA discussions to MasterCard. (Schuster Tr. 202/3-202/11; Pl.Ex. 151).
135. When asked to explain FIFA’s decision, Mr. Schuster likened the situation to a marital infidelity. He testified: “Well, if you tell your wife that you’re cheating on her, it’s a disruption of your marriage. If she doesn’t know about it until the end, and you live happily until 90 and it was just one occasion, then maybe it’s the better way. And we choose this one. Whether it’s something that higher forces will one day see as: you should have been more honest maybe, I don’t know. In our [sic], we felt we do not have to tell it. We don’t have to, there is no obligation to. I thought — as you rightly stated, I thought
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it would be better to tell it. The majority of our team: no, maybe it’s not better to do it or if then in a subtle way. So we decided not to.” (Schuster Tr. 202/24-203/18; Trial Tr. p. 153,1.1-15).
MasterCard Confronts FIFA with Rumors of a VISA Deal and Receives Assurances that FIFA “Will Not Sign a Deal with Anybody”
— September
2005
135. Despite FIFA’s decision to conceal its discussions with VISA from MasterCard, by September 2005, rumors of FIFA’s and VISA’s dealings began to circulate in the marketplace. Mr. Stuart became aware of those rumors, for the first time, in the beginning of that month. Mr. Stuart read or heard a report originating from Asia that FIFA and VISA had signed a sponsorship deal for the 2010 and 2014 World Cups, and he confronted Mr. Valcke with that rumor. (Stuart Decl. ¶ 53). This was the first time that VISA was discussed between the two parties. (Schuster Tr. 207/24-208/2).
137.Mr. Valcke told Mr. Stuart that there was no truth to the rumor and that FIFA was looking forward to its first contract negotiation with MasterCard on September 26 in Brussels, (Stuart Decl. ¶ 53), a month after FIFA now contends MasterCard’s 90-day acceptance period expired. As he admitted in his testimony, Mr. Valcke also assured Mr. Stuart that “FIFA would not enter into an agreement with regard to the Financial Services package for 2007-2014 unless and until it concluded that it could not reach an agreement with MasterCard.” (Valcke Tr. 176/18-176/23; Trial Tr. p. 380, 1. 15-20). Mr. Valcke then said to Mr. Stuart “[ljet’s just keep negotiating in good faith until we reach a deal,” and “by October 31, 2005, MasterCard was at [FIFA’s] asking price of 180 million dollars,” and “VISA was nowhere near that figure.” (Trial Tr. p. 380,1. 21-p. 381,1. 3).
138. Mr. Valcke’s assurance was reiterated by Mr. Schuster several days later in writing. On September 15, 2005, Mr. Stuart sent an e-mail to Mr. Schuster regarding the parties’ upcoming negotiation in Brussels. (Stuart Decl. ¶27; Pl.Ex. 87). Mr. Stuart recounted the rumor he had heard regarding VISA and Mr. Valcke’s denial of it. (Stuart Decl. ¶ 27; Pl.Ex. 87). Mr. Stuart wrote that, while he could understand that “VISA may have placed a bid,” he considered that MasterCard and FIFA were “in negotiations” and trusted that such was Mr. Schuster’s view, as well. (Stuart Decl. ¶ 27; Pl.Ex. 87).
139. Mr. Schuster responded by e-mail the next day. After cryptically stating that “we are now in a kind of open market situation,” Mr. Schuster confirmed that “we definitely do not have a signed deal with any other company for the remaining sixth [and final Tier 1 sponsorship] spot.” (Stuart Decl. ¶ 54; PLEx. 88). He then reiterated: “As Jérome has confirmed to you on the phone, we will not sign a deal with anybody before knowing whether we can reach an agreement with you.” (Stuart Decl. ¶ 54; Pl.Ex. 88; Schuster Tr. 204/24-205/23, 207/24-209/6).
140. Mr. Schuster testified that, when he made that representation to Mr. Stuart, he was giving Mr. Stuart both his and Mr. Valcke’s “word.” (Schuster Tr. 205/9-205/15;
see also
Trial Tr. p. 172, 1. 7-22). When asked whether he “stood behind th[e] statement,” Mr. Schuster responded: “Absolutely.” (Schuster Tr. 205/9-205/23).
The FIFA Board Approves MasterCard as the Financial Services Sponsor and MasterCard Confirms Its Acceptance of the “Financial Services Light” Package
— October
2005
141. By the time the FIFA Board met on October 26, 2005, MasterCard and FIFA had held two positive contract negotiation sessions. (Stuart Decl. ¶¶ 56-59).
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142. Mr. Schuster, in his testimony, described the first session in Brussels on September 26, 2005 as “[fantastic.” (Schuster Tr. 212/16-212/18). According to Mr. Schuster, “we thought we are on track to a very good partnership [and] we kept on working like crazy and pushing.” (Schuster Tr. 212/16-213/8).
143. Because of the substantial progress the parties had made, following the September meeting and in advance of the next contract negotiation session in Frankfurt on October 24, representatives of MasterCard proposed that the parties enter into a letter of intent to reflect their mutual commitment to signing the long-form agreement. On October 21, 2005, MasterCard’s outside counsel sent an email to the Head of FIFA’s Commercial Legal Department, Mr. Houseman, indicating that “MasterCard proposes (as John [Stuart] has already mentioned to Stefan [Schuster]) on their conference call yesterday that we consider entering into a letter of intent (provided, of course, that our Monday discussions are successful), while we continue to fine tune this long form agreement.” (Stuart Decl. ¶ 57; Pl. Ex. 31).
144. Mr. Houseman assured MasterCard’s counsel that, given the relationship of the parties, a letter of intent was entirely unnecessary. He explained that “our relationship with MasterCard is strong enough for us to be able to lend credibility, weight and support in our Board presentations to reflect what will hopefully be a broad understanding across all key business points.” (Stuart Decl. ¶ 57; Pl.Ex. 31). He further added that “there is a certain amount of reticence on the side of the Board to enter into LOI’s on complex deals such as this.” Thus, “we do not feel that an LOI [letter of intent] is necessary.” (Stuart Deck ¶ 57; PLEx. 31).
145. In fact, Mr. Houseman was misleading Mr. Stuart. Mr. Blatter, President of FIFA and Chairman of the FIFA Board, testified that, in fact, the FIFA Board was not reluctant or reticent to approve letters of intent with prospective sponsors. (Blatter Tr. 45/3^45/6). Indeed, as described above, the FIFA negotiators earlier had informed VISA that their goal was to sign a “binding letter of intent” with VISA. The reason that FIFA was reluctant to enter into a binding letter of intent (obvious in hindsight,' but, at the time, unbeknownst to MasterCard) was to keep open its options with VISA. Even Mr. Houseman had to concede that fact when shown his own e-mail stating that the response to MasterCard’s request for a letter of intent was “[n]o, yes or maybe depending on VISA.” (Houseman Tr. 355/14-356/5;
see also
PLEx. 292).
146. Mr. Schuster’s testimony to the effect that MasterCard’s offering to enter into a letter of intent with FIFA indicated that “MasterCard knew that FIFA could choose VISA as its partner at any time it chose to after MasterCard’s first right to acquire period expired” is ludicrous and incredible. Rather, FIFA declined MasterCard’s offer of a letter of intent because of the status of FIFA’s negotiations with VISA, hoping to delay MasterCard in favor of VISA.
(See
Trial Tr. p. 174,1. 10 — p. 186, 1. 6). Also without credibility is Mr. Schuster’s testimony about the supposedly risky situation FIFA was in in September and October of 2005 in light of MasterCard’s offer to enter into a binding LOI.
(See
Trial Tr. p. 214, 1. 23-p. 216, 1. 4, p. 225,1.13-p. 226,1. 3).
147. The negotiations continued to be positive through the second session in Frankfurt on October 24, as well. (Stuart Decl. ¶ 58). That night, after the Frankfurt meeting, Mr. Stuart called Mr. Valcke and told him that MasterCard’s senior management had approved going forward with the deal, but that management be
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lieved that the asking price was too high. Mr. Stuart told Mr. Valcke that MasterCard believed that an appropriate price for the sponsorship was $170 million rather than $180 million. (Stuart Decl. ¶ 59). Unlike Mr. Stuart’s response to the “financial services” package on May 11, 2005, he did not indicate to Mr. Valcke that MasterCard was rejecting the “financial services light” package. It also did not suggest that the $170 million figure was MasterCard’s bottom line or that FIFA had to “take it or leave it.” Rather, Mr. Stuart left open the possibility that MasterCard could still accede to FIFA’s $180 million asking price. Mr. Valcke told Mr. Stuart that he would discuss MasterCard’s position at the FIFA Board meeting on October 26 and get back to Mm. (Stuart Decl. ¶ 60).
148.In spite of Mr. Stuart’s suggestion that MasterCard might not be willing to pay the $180 million asking price for the sponsorship, Mr. Valcke clearly understood from Mr. Stuart’s comments that, in fact, MasterCard would be willing to pay the full price, because, at the FIFA Board meeting two days later, Mr. Valcke told the Board that MasterCard’s price commitment was $180 million. (Valcke Tr. 185/15-186/7; Pl.Ex. 184). Neither party considered Mr. Stuart’s inquiry to be a counteroffer, a rejection of the “financial services light” package or anything other than an inquiry whether the package could be had for less than $180 million. In contrast to MasterCard’s willingness to pay $180 million, VISA, which submitted a multi-part counter-proposal to the “financial services light” package on October 21, 2005, proposed to pay $140 million in cash, with the potential for more in “incentive fees,” in addition to “Value in Kind” programs supposedly worth $15 million. (PI. Ex. 107). At the October 26, 2005 meeting of the FIFA Board, Mr. Valcke presented VISA’S offer as a total of $170 million, consisting of $154 million in cash, plus $16 million in “promotional value.” (Pl.Ex. 184; PLEx. 96; Blatter Tr. 190/1-190/6, 190/23-191/19; Lampman Tr. 252/16-253/3).
149. Based on Mr. Valcke’s presentation, the FIFA Board, chaired by Mr. Blatter, President of FIFA, “unanimously agreed to proceed with the final agreement with MasterCard” and declared that the final Tier I sponsorship had been “sold to” MasterCard. (Pl.Ex. 184).
6
The minutes of that meeting, which FIFA withheld for months in discovery, state:
The remaining Financial Services Category in Tier 1 (FIFA Partners) was presented with the following two offers for the period 2007-2014:
MasterCard USD 180 mio. cash Visa US 154 mio. cash + USD 16 mio. promotional value (Total USD 170 mio).
The category is newly split into Payment Services (Credit cards) and Retail Banking whereas FIFA will carve out the retail banking rights in the host country (20% reduction of the rights fee for the FIFA Partner) and will sell these rights as a National Supporter package (Tier 3). The host country bank does not necessarily have to be a FIFA Partner’s bank.
Resolution
It was unanimously agreed to proceed with the final agreement for MasterCard.
After only one year the top level Tier 1 of 6 FIFA Partners has been sold to: adidas, Hyundai, Sony, Coca-Cola, Emirates, MasterCard
(Pl.Ex. 184).
150. The day after the FIFA Board meeting, on October 27, 2006, Mr. Valcke
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called Mr. Stuart and told him that the price that Mr. Stuart had quoted a few days earlier of $170 million was the same price that VISA had bid. (Stuart Decl. ¶ 60). He then added that, in light of MasterCard’s long-standing partnership with FIFA, the FIFA Board had voted to proceed with MasterCard instead of VISA, so long as MasterCard agreed to pay the full asking price. (Stuart Decl. ¶ 60; Valcke Tr. 188/5-188/12.) Mr. Valcke also said that the decision was reflected in the minutes of the meeting. (Stuart Decl. ¶ 60). Mr. Stuart responded that he would relate the information to MasterCard’s senior management and that he would get back to Mr. Valcke by October 31, 2005, which Mr. Stuart did. (Stuart Decl. ¶ 60). On that date (less than 180 days after being presented with the “financial services light” package), Mr. Stuart called Mr. Valcke and confirmed that MasterCard agreed to pay the $180 million asking price for the “financial services light” package. (Stuart Decl. ¶ 60; Blatter Tr. 170/25-171/7; Lampman Tr. 252/8-252/15; Schuster Tr. 216/1-216/7; Valcke Tr. 188/13-188/18).
151.Accordingly, as FIFA’s witnesses admitted, they “knew, by the end of October 2005, that MasterCard had accepted the Financial Services ‘Light’ package.” (Schuster Tr. 216/8-216/13). As Mr. Valcke conceded, all the parties had to do, at that point, “was get it on paper, get it signed and it was over.” (Valcke Tr. 189/2-189/8). In fact, Mr. Lampman admitted that it was his “feeling at the time” that “FIFA was within a couple of weeks of signing an agreement with MasterCard.” (Lampman Tr. 253/8-253/12). Furthermore, according to Mr. Blatter, FIFA’s President and Chairman of the FIFA Board, “if the FIFA Board approves entering into a contract with somebody,” Mr. Blatter or another authorized signatory, at that point, “is obligated to sign that contract on behalf of FIFA.” (Blatter Tr. 121/11-121/18,121/23-122/5).
152. When asked whether Mr. Stuart’s confirmation of MasterCard’s willingness to pay $180 million for the “financial services light” package should have thus been “the end of the matter,” Mr. Valcke testified: “I would say potentially, yes.... ” (Valcke Tr. 188/17-188/18). Due to FIFA’s actions described below, however, it was not the end of the matter.
FIFA Continues to Negotiate with VISA Despite FIFA Board Approval of MasterCard
— October
2005-December 2005
153. Despite the clear mandate of the FIFA Board on October 26 “to proceed with the final agreement for MasterCard,” Mr. Valcke lied to his staff about the results of that meeting. Following the meeting, he reported to his two Sales Directors, Messrs. Lampman and Schuster, and to his chief legal advisor, Mr. Houseman, none of whom attended the meeting, that the FIFA Board “gave permission to close with VISA or MC, as [Mr. Valcke] sees fit.” (Pl.Ex. 57; Pl.Ex. 97; Lampman Tr. 254/21-256/16, 264/7-265/11, 267/6-267/18; Valcke Tr. 454/5-454/18). When questioned about his misinformation to his staff, Mr. Valcke admitted that he wanted his staff, notwithstanding the FIFA Board’s decision, to continue working on a long form agreement with VISA. (Valcke Tr. 454/13-454/19;
see
Trial Tr. p. 388, 1. 22-p. 389,1. 5.).
154. Mr. Valcke similarly lied about the outcome of the FIFA Board meeting to Mr. Shepard, whom Mr. Valcke told that the FIFA Board had approved consummating a transaction with
VISA.
Mr. Valcke did not consider this to be a “commercial lie” but “just a commercial practice,” “a way to keep the two [companies] in.” (Trial Tr. p. 388,1.12-20.)
155. Thus, on October 30, 2005, four days after the FIFA Board meeting, Mr.
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Shepard e-mailed Mr. Valcke to thank him for the “great news on moving forward” and to tell him that VISA is “very excited about formalizing this agreement.” (PI. Ex. 153). In response, Mr. Valcke tried to temper Mr. Shepard’s expectations, telling him that FIFA had “[t]wo offers ... on the table” and that the process, at that point, was to “move on the final discussion of the agreement,” with the FIFA Board’s “final decision” to come “when and only when [the] agreement is signed by the company.” (Pl.Ex. 153) Again, Mr. Valcke did not disclose the truth to Mr. Shepard that the FIFA Board had unanimously agreed “to proceed with the final agreement for MasterCard.”
156. Mr. Valcke could not, however, completely control the flow of information concerning the FIFA Board’s decision. Within days after the FIFA Board approved MasterCard as the final Tier 1 sponsor, a member of FIFA’s Executive Committee, Julio Grondona, publicly “expressed his congratulations to MasterCard for their renewal with FIFA.” (Pl.Ex. 154; Valcke Tr. 189/20-190/3). Mr. Shepard learned of Mr. Grondona’s public remarks and contacted Mr. Valcke about them. Mr. Valcke assured Mr. Shepard that Mr. Grondona had “mixed information” and that “we have not finalized and are still in the process with both of you.” (Pl.Ex. 154). According to Mr. Valcke, he told Mr. Shepard that he would get Mr. Gron-dona “under control” and make sure he “shuts his mouth in the future.” (Valcke Tr. 189/20-190/13). Mr. Valcke then contacted the Secretary General of FIFA, Urs Linsi, and urged him to tell Mr. Grondona “to stop!!,” because “we want to keep both Visa and MasterCard in the race to make sure we will get the best terms.” (Pl.Ex. 155). Again, Mr. Valcke did not disclose the truth to Mr. Shepard.
157. Having plugged the leak concerning the FIFA Board’s decision, Mr. Valcke and his staff continued to negotiate contract terms with VISA, notwithstanding that the FIFA Board unanimously resolved “to proceed with the final agreement for MasterCard.” (Pl.Ex. 42; Pl.Ex. 412; Pl.Ex. 413).
The FIFA Finance Committee Approves MasterCard as the Financial Services Sponsor
— December
2005
158. As Mr. Blatter testified, approval by FIFA of a sponsorship agreement involves three steps: first, the FIFA Board (which FIFA’s President, Mr. Blatter, chairs) has to approve the contract; then, FIFA’s Finance Committee (on which Mr. Blatter sits) must approve it; and, lastly, FIFA’s Executive Committee (also chaired by Mr. Blatter) must also approve it. (Blatter Tr. 45/7-45/13). Typically, the FIFA Board, FIFA Finance Committee and FIFA Executive Committee meet on consecutive days during the same month, three or four times per year. (Blatter Tr. 47/12-48/9). October 2005, the month during which the FIFA Board met and approved MasterCard as the final Tier I sponsor, was an exception. ' The FIFA Finance and Executive Committees did not meet that month. Rather, those two committees did not meet until early December 2005.
159. Between the time that the FIFA Board met in October 2005 and the meeting of the FIFA Finance and Executive Committees in early December 2005, there had been no change in the relative negotiating positions of MasterCard and VISA— notwithstanding Mr. Valcke’s and his team’s effort to negotiate better terms with VISA. As Mr. Schuster summarized in an e-mail shortly before the Finance and Executive Committee meetings, FIFA’s “key issues ... with VISA” included that the “overall value of the offer [was] lower then [sic] competitor (i.e.
USD 170 v. 180)”
and the guaranteed “cash compo
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nent [was] significantly lower, i.e.
USD 140 v. 180.”
(Pl.Ex. 190;
also
Valcke Tr. 200/15-200/17).
160. The FIFA Finance Committee met on December 5, 2005. (Pl.Ex. 190). The minutes of that meeting, which FIFA also withheld for months in discovery, state:
The Director of Marketing
&
TV [Mr. Valcke] then presented the financial details for the Financial Services Category for the 2007-2014 period, recommending that an agreement with MasterCard be concluded. He continued with an overview of the concluded FIFA Partner agreements post-2006 and a comparison of the 1999-2006 and 2007-2014 periods. The committee took note and approved the agreement with MasterCard for the 2007-14 period.
(Pl.Ex. 182).
161. With both the FIFA Board and FIFA Finance Committee having now approved an agreement with MasterCard
(see
Valcke Tr. 382/15-382/22), the next and last step in the process was for the Executive Committee to approve the agreement. The Executive Committee met on December 7, 2005, and, consistent with FIFA’s standard practice, the meeting was audio recorded. (Pl.Ex. 12; Blat-ter Tr. 49/2-49/4).
162. As he had done during the prior meetings of the FIFA Board and FIFA Finance Committee, Mr. Valcke made a presentation concerning the “financial services” category. (Pl.Ex. 12; Pl.Ex. 419). He explained to the Executive Committee that “VISA is coming in with an offer of 170 million USD, including 16 million promotional value” and that “negotiations with MasterCard stand at 180 million USD.” (Pl.Ex. 12; Pl.Ex. 419). Mr. Valcke then displayed a slide demonstrating “where we will be having the Financial Services agreement closed.” (Pl.Ex. 12; Pl.Ex. 419). That slide showed that the “financial services” agreement would close at $180 million in cash — the amount of MasterCard’s commitment. (Pl.Ex. 94). Mr. Valcke assured the Executive Committee that “[w]e will have the agreement closed either by the end of this week or — Ra-sure — by the end of this year.” (Pl.Ex. 12; Pl.Ex. 419).
163. According to the audio recording of the meeting, following Mr. Valcke’s presentation, Mr. Blatter asked “[d]o you need a decision on the ‘MasterCard or Visa’ issue?” (Pl.Ex. 419;
also
Pl.Ex. 12). Mr. Valcke then responded “[t]he decision is only to give us the ‘green light’ to finalize at the basis which is not less than what you have seen, than 180 million USD.” (Pl.Ex. 419;
also
Pl.Ex. 12). Mr. Blatter asked: “The final decision will be taken in March then?” (Pl.Ex. 419;
also
Pl.Ex. 12). To which Mr. Valcke responded, “[n]o, we can take it now.” (PLEx. 419;
also
Pl.Ex. 12). Mr. Blatter then asked: ‘We can take it now?” (Pl.Ex. 419;
also
Pl.Ex. 12). After Mr. Valcke replied “yeah,” Mr. Blatter remarked: “O.K. Good. Do you agree?” (Pl.Ex. 419;
also
Pl.Ex. 12). On the audio recording, a faint “yes” is then heard, Mr. Blatter makes a joking remark and then the sound goes dead. (PLEx. 419). After several seconds of silence, the audio recording abruptly continues: “Thank you. Is there any other thing marketing and television.” (PL Ex. 419). Although there is static at various points on the audio tape, it is only at this one critical moment that the sound goes completely dead, that is, all background noise and, indeed, all sound ceases.
164. FIFA has provided no explanation for the mysterious gap in the audio recording.
165. Despite the audible assent to “take the decision” regarding the financial services category at the December 2005 Executive Committee meeting, the min
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utes of the meeting produced in discovery-make no reference to any decision being taken. With respect to the financial services sponsorship, the minutes state only: “Following the completion of the new contracts with five FIFA Partners for 2007 to 2014, discussions were being conducted with financial services corporations MasterCard and VISA with a view to determining the sixth and final FIFA Partner for the period by the end of 2005.” (Pl.Ex. 183).
166. FIFA has provided no explanation for why the written minutes it produced do not comport with the audio recorded proceedings that took place during the December 2005 Executive Committee meeting.
167. In summation, however, FIFA admitted that the FIFA Executive Committee, in fact, approved proceeding with MasterCard. (Trial Tr. p. 485, 1. 2-3).
7
FIFA and MasterCard Proceed to Finalize a Long-Form. Agreement, while FIFA Continues to Negotiate with VISA
— De
cember 2005-January 2006
168. By the second week of December, 2005, the FIFA Board, FIFA Finance Committee and the Executive Committee had approved an agreement with MasterCard
(see
Valeke Tr. 382/15-382/22), and Mr. Valeke acknowledged in e-mail that FIFA was “close to finaliz[ing][a] long form [agreement] with MC [MasterCard].” (Pl.Ex. 51). Nonetheless, Mr. Valeke told his staff that FIFA “can not officially make a decision” in favor of MasterCard “without having same [a long form agreement] with VISA.” (Pl.Ex. 51).
169. Thus, Mr. Valeke and his staff continued to negotiate contract terms with VISA. (Pl.Ex. 412; Pl.Ex. 413). Given how close FIFA was to finalizing an agreement with MasterCard, however, as Mr. Houseman acknowledged, if FIFA were to “end up going with VISA,” those two parties would “need to perform a thorough ‘catch up’ exercise.” (Pl.Ex. 34).
170. The re-surfacing of a long-standing issue relating to MasterCard’s longstanding challenge to FIFA’s efforts to register its overlapping soccer balls logo in various categories, including credit cards, delayed the progress of FIFA’s negotiations with MasterCard in late December 2005 and afforded FIFA the opportunity to “catch up” on its contract negotiations with VISA, (Stuart Decl. ¶ 61), all by FIFA’s deliberate plan.
171. By late January 2006, however, even the trademark issue had been substantially resolved (by means of “parking” the issue for the 8-year term of the sponsorship), and negotiations with MasterCard entered their final stage. In an email dated January 24, 2006, Mr. Valeke acknowledged to Mr. Stuart that he “got feed back of the last conference call and understood there is [sic] no more issue and even the trademark one is solved or at least agreed.” (Pl.Ex. 157). Mr. Valeke asked Mr. Stuart for a “timetable” as to “when the contract should be signed” and “when the announcement could take place.” (Pl.Ex. 157). Likewise, FIFA’s lead draftsperson, Mr. Houseman admitted that he “clearly believed” that, by late January 2006, “a long-form contract with MasterCard had been fully negotiated and could be accelerated to signature.” (Houseman Tr. 207/17-207/21;
also
Pl.Ex. 50).
172. In light of their progress, FIFA’s representatives targeted the next meeting of the FIFA Board, on March 14, 2006, as the date for executing the agreement. (Stuart Decl. ¶ 63; Pl.Ex. 192).
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FIFA Presses VISA to Match MasterCard
— February
2006
173. Even while scheduling a time to sign and announce a contract with MasterCard, Mr. Valcke and his team continued to move forward with their negotiations with VISA, scheduling to meet with VISA’S negotiating team in Turin, Italy, during the Olympic Winter Games, in February 2006. (Pl.Ex. 158).
174. On January 25, 2006, with Mr. Houseman “looking to get the clean agreement to MC [MasterCard]” and MasterCard and FIFA being “in the very final stages, probably just a couple of days away from getting it signed,” Mr. Schuster wrote to Mr. Valcke: “Jéróme, I know it’s not an easy one ... but when are you planning to talk to Tom [Shepard] about the gap of USD 30mm he has to fill?” (PLEx. 158). Mr. Valcke responded: “The question is good!!” (PLEx. 158). He wondered rhetorically whether he should raise the issue then or “keep this issue for the decision period ... as soon as we have the MC signed contract.” (PLEx. 158).
175. Mr. Valcke apparently opted not to raise the shortfall in VISA’S price at that time, because, on February 21, 2006, Mr. Schuster e-mailed Mr. Valcke again to “suggest that [he] inform TS [Tom Shepard] that there is a huge gap in terms of cash and that he has to come back to you with a realistic offer before the end of this week.” (PLEx. 160).
176. Mr. Valcke e-mailed Mr. Shepard the following day, continuing his practice of informing VISA of the details of FIFA’s negotiations with MasterCard while hardly disclosing to MasterCard the fact of FIFA’s negotiations with VISA, much less the details thereof. After disclosing that FIFA had just sent a “clean agreement” to MasterCard, Mr. Valcke wrote: “To be honest [sic] there is a gap between your two offers, but you know about.” (PLEx. 161). Mr. Valcke then told Mr. Shepard what the exact gap was, apprising him that MasterCard had agreed to pay the full $180 million asking price for the “financial services light” package. Mr. Valcke wrote: “In term of pure cash we are talking about a difference of 30 mio USD and in fact they are where we have been with both of you start the negotiation after having decided to have a category minus certain rights for the host bank in each FIFA competition.” (PLEx. 161). Mr. Valcke endeavored to call Mr. Shepard that day to “talk about the financial side.” (PLEx. 161).
177. After Mr. Shepard replied in email that he would talk to Mr. Valcke later, but that he did not “think the number delta is correct,” Mr. Valcke explained that “FIFA’s members are always sensible about the value of the agreement we are signing and cash is the main component.” (PLEx. 172).
178. In their testimony, virtually all of FIFA’s witnesses dismissed the value of the “Value in Kind (VIK)” or “Marketing in Kind (MIK)” component of VISA’S bid. Mr. Valcke testified that “we don’t care about VIK ... what is important is the cash component.” (Valcke Tr. 198/7-199/6). He explained that VIK or MIK represent amounts that a sponsor “will invest in order to promote the event,” but that they have “no value” to, or “no impact on,” FIFA’s account. (Valcke Tr. 198/7-199/6). According to Mr. Houseman, he was at the time, and still is, “of the view that marketing in kind and value kind did not add much value to ... the cash consideration that VISA had offered.” (Houseman Tr. 262/11-262/15). Mr. Houseman testified that, in his experience, VISA’s marketing in kind commitment represented “probably about a quarter of what a sponsor would normally do by way of activation” of its sponsorship rights. (Houseman Tr. 262/16-262/22). As Mr. Valcke
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summarized at trial, “Cash is king everywhere you need money.” (Trial Tr. p. 389, 1.16).
179. Thus, in his e-mail to Mr. Shepard, Mr. Valcke elaborated that if “[y]ou would be at 180 in cash plus your MIK [marketing in kind] program there will be no discussion,” “but with your current offer there is a real risk that the choice will be for the other one [referring to MasterCard].” (Pl.Ex. 172).
180. Even with this extraordinary advantage, bestowed on VISA by Mr. Valcke, of being able to match MasterCard’s price, by the end of February 2006, VISA still remained $30 million in cash lower than MasterCard, and Mr. Shepard told Mr. Valcke that VISA had made its “final offer.” (Schuster Tr. 221/21-221/23; Valcke Tr. 235/3-235/6; Pl.Ex. 162). Mr. Valcke testified: “definitely it gave the lead to MasterCard.” (Valcke Tr. 235/7-235/9).
FIFA Delivers a “Final” Contract to MasterCard to Execute and Assures MasterCard It “Will Be Countersigned by Blatter”
— March
3, 2006
181. FIFA’s witnesses concede that, by the beginning of March 1, 2006, negotiations with MasterCard had concluded. (Houseman Tr. 209/5-209/22, 210/5-210/9, 210/14-210/16; Schuster Tr. 221/11-221/14; Pl.Ex. 163). In fact, referring to the negotiations with MasterCard, Mr. Houseman declared in an e-mail on that date: “Finally, we are done!” (Pl.Ex. 35; Houseman Tr. 209/5-209/22). As Mr. Houseman admitted, the “FIFA negotiating team and the MasterCard negotiating team had reached agreement on all terms,” including the trademark issue. (Houseman Tr. 211/16-211/24).
182. Likewise, on March 1, 2006, Mr. Valcke sent an e-mail to Mr. Stuart confirming his understanding that “all was now agreed” and that, while there was still some wording in the contract that had to be cleaned up, “we are done.” (Pl.Ex. 163; Stuart Decl. ¶ 64). As Mr. Valcke described it to Mr. Stuart: “Next steps are a final information to the BoD [FIFA Board] on March 14 and the signature by Blatter on the 16th.” (Pl.Ex. 163; Stuart Decl. ¶ 64). Mr. Valcke noted that “[w]e will then [have] to decide on the timing for the announcement.” (Pl.Ex. 163; Stuart Decl. ¶ 64).
183. On March 3, 2006, Mr. Houseman e-mailed to Mr. Stuart and his team the “FINAL version” of the sponsorship agreement between FIFA and MasterCard for the 2007 to 2014 time period. (Pl.Ex. 36; Houseman Tr. 212/15-213/15; Stuart Decl. ¶ 65). He testified that he expected and desired MasterCard to conduct a final management review of the contract, execute it and return it to FIFA. (Houseman Tr. 213/3-213/15;
also
Lamp-man Tr. 274/19-275/20). At that point, as Mr. Lampman conceded, MasterCard had “good reason to believe they reached a final agreement” that would go before FIFA’s Executive Committee and be approved. (Lampman Tr. 290/25-291/19).
184. Nevertheless, Mr. Houseman admitted that, when he sent the contract to MasterCard, he understood that his negotiating team’s objective was not just to present to the FIFA Board the MasterCard contract, but “[t]wo separate contracts” — one with MasterCard and one with VISA. (Houseman Tr. 216/22-217/3). As Mr. Houseman also admitted, no one from FIFA ever told anyone from MasterCard that such was FIFA’s objective. (Houseman Tr. 216/22-217/3).
185. Within 72 hours of receiving the “FINAL version” of the contract, Mr. Stuart apprised Mr. Valcke that he “ha[d] completed the final documents” and was bringing them to MasterCard’s Chief Operating Officer, who was “standing in for the CEO,” to sign. (Pl.Ex. 164; Stuart Decl. ¶ 66). Mr. Stuart inquired to whom
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at FIFA he should send the contract once it had been signed. (Pl.Ex. 164; Stuart Decl. ¶ 66). He concluded by commenting on how “very good” his team was feeling about the agreement and — obviously with no clue as to the intimate dealings that FIFA had been having with VISA — on what a “great job” Mr. Valcke’s team did

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/2483961. Public record. Not legal advice.