Potential issues looming in UFC lawsuit

December 22, 2014

Last week’s lawsuit filed by Nate Quarry, John Fitch and Cung Le could bring change to the UFC.  Or, it could be a legal challenge that will fall by the wayside.  Here are some potential issues to look forward to in the days and months to come.

Officially, the UFC has been quiet with respect to the lawsuit with only a short statement stating that it would “vigorously defend itself and its business practices.”  With that being said, the UFC will file an answer to the complaint.  If it is served the complaint, it must file an answer within 21 days after receiving service of the lawsuit.  Or, if it has “waived” service under Federal Rule of Civil Procedure 4(d), it would be able to file an answer within 60 days of the waiver.   The official statement provided Tuesday by the UFC indicated it had not received the lawsuit but it’s not known at this point whether official service was provided and/or the UFC agreed to waive to allow for more time to analyze the Complaint.

Paul Gift over at Bloody Elbow gave a very good two-part textbook edition of antitrust law.  If you have time and are willing, you should carve out some time to read.

Sports professor Mike McCann gave an overview of the lawsuit in an SI piece which includes potential defenses that the UFC may utilize in its legal strategy.

McCann points out a key piece that this lawsuit differs from other antitrust challenges in other sports leagues like the NFL or NBA.  The UFC is a “single-entity” and unlike other pro leagues which have teams owned by different individuals/entities, the UFC is one company.  The key aspect of this as McCann points out is that the UFC avoids any scrutiny from its employment rules with fighters since it is solely owned.  Section 1 of the Sherman Antitrust Act regulates competitors.  The lawsuit filed Tuesday is predicated on section 2 of the Sherman Antitrust Act and not section 1.

The substantive legal defenses include the practical idea that the fighters voluntarily signed contracts to fight in the UFC.  This is the likely reason why the plaintiffs’ tailored its Complaint to read that the injured class is “Elite Professional MMA Fighters.”

There is also the argument that the UFC just did better in business than everyone else in the marketplace.  Despite the tombstone picture of “dead” organizations presented by plaintiffs in its Complaint, the UFC will argue that its superior business acumen allowed it to thrive while those other companies did not.

There is also the issue of the Federal Trade Commission investigation from 2011 to 2012when the UFC purchased Strikeforce, World Fighting Alliance and other MMA organizations.  The FTC decided not to pursue the matter.  MMA Payout’s FOIA request led to nothing of substance from the investigation.  While some may carve out a distinction between the FTC’s decision not to investigate further and whether there was actual wrongdoing, the fact remains that an investigation into the company led to nothing.  However, if the UFC intends to utilize this issue in some way, I would not look to the FTC as willful helpers.

As for procedural hurdles, the plaintiffs are in need of fighters to join the class.  Tito Ortiz identified that he was contacted about the lawsuit but chose not to participate.  There are only names being floated around but no other fighters have officially stepped up.  At a certain point, the plaintiffs will need to go to the court to certify the class which the UFC lawyers will likely oppose.  If the court denies the class, the likely result would have the three named fighters bring these claims on their own.  With 5 reputable firms involved in this lawsuit on behalf of plaintiffs, one would assume they have a notion of fighters that are willing tot join the lawsuit.

The UFC has stated it would “vigorously defend” its business practices.  This will likely take the shape of a motion to dismiss the lawsuit from the outset.  Essentially, the UFC will deny the claims made in the lawsuit offering its own perspective on plaintiffs’ claims.  If nothing else, the motion to dismiss is the first strategy in avoiding any type of substantive discovery.  What the UFC does not want to happen is a discovery process (which we anticipate would be long and drawn out) which might reveal documents that could be damaging for the case and from a PR perspective.

The UFC might also seek to transfer the venue to the district court in Nevada.  While Le lives in San Jose.  Quarry and Fitch live in Oregon and Nevada respectively.  Although the UFC has held events in the San Jose area, the standard form contracts the fighters signed probably indicate that the jurisdiction for any dispute is in Nevada, where the UFC offices are located.  The UFC might argue that plaintiffs are “forum shopping,” essentially finding a location with a sympathetic jury.  California, especially Northern California, is more open to plaintiffs’ cases.  Although I do not know the landscape of Nevada juries, it’s likely they are more conservative.  With one of the plaintiffs a Nevada resident, the UFC might argue that the venue of the case be transferred to Nevada.

Payout Perspective:

Entering the first quarter of 2015, one might think there is looming pressure for the business to turn around.  With three big PPV shows (notice the $5 increase for UFC 182?) in the first quarter, the announcement of the Reebok deal, the CM Punk signing and now the Rampage Jackson deal one would think that the company is hoping S&P will raise its financial outlook and steady its credit rating.  It would not be out of the realm of possibility for S&P to downgrade its status if Zuffa business does not get better.

The news of the lawsuit will not help Zuffa’s financial outlook since you can expect its legal budget to increase due to this.  A potential Bellator battle could be on the horizon as well since the UFC signed Rampage Jackson despite Scott Coker’s claim he is still under contract.  With a newsworthy December, we can expect more happenings in the first part of 2015.

22 Responses to “Potential issues looming in UFC lawsuit”

  1. BrainSmasher on December 22nd, 2014 1:59 AM

    Before the trolls come in and put their graffiti all over your work. Just want to say nice write up Jason!

  2. Diego on December 22nd, 2014 4:50 AM

    Agreed.

  3. JF on December 22nd, 2014 6:09 AM

    I think the next 3 PPV’s will be very good. I don’t believe the PPV business model is dead, I just think the UFC PPV cards were awful and I didn’t pay to watch 90% of them either,

    This being said, Anderson Silva is finished, GSP and Lesnar are not coming back, I don’t see a lot of PPV caliber stars in the long run.

  4. LeonThePro on December 22nd, 2014 7:10 AM

    @JF – Before Anderson Silva’s mega-event at 168 he was hovering around 500k or so, and that was with a mythical status. Now, he’s lost twice (badly), been injured, and has no belt. I don’t see the Diaz ppv doing big numbers at all.

    I agree that the Jones and Weidman ppvs look good. That’s a dick move to increase the ppv by $5 for 182 – if they are doing that they should of lowered the price of the shit PPVs by $5 as well. What a shitty thing to do to for your customers. UFC could learn a thing or 2 about customer service – I’m sure loyal fans that buy ALL ppvs would appreciate the $5 off move.

    The best thing the UFC could do is learn how to make stars. Outsourcing to WWE and buying washed up fighters (Rampage) with a name just isn’t going to cut it anymore. I’m sure if they had a Conor MCgregor personality from Canada that country would get fired up again. They need more personalities and more grudges.

  5. FightBusiness on December 22nd, 2014 10:22 AM

    The more gentrified the UFC becomes the less popular it will become. This sport was built on a white male fan base. Once 80% of fighters are black and hispanic there base will dwindle. Silva was a draw but that was during a time when most fighters in the UFC were white so they would still tune in but once 80% of fighters are minorities the sport will dwindle in popularity. Proof of this will be on Jan 3. If that fight doesnt clear 500k it will be proof the white audience is losing interst because culturally they cant relate to the fighters anymore. And no minirities wont swap UFC for Boxing. Boxing will always be the number 1 sport amongst minorities

  6. FightBusiness on December 22nd, 2014 10:23 AM

    by the way I’m not saying white fans are racists. its just every group of people likes to follow someone they can relate to culturally. You see that in Boxing all the time

  7. tops E on December 22nd, 2014 12:24 PM

    Ufc bubble will burst hahahahahaha….

  8. Mmatruth on December 22nd, 2014 4:22 PM

    Fightbusiness how did Mike Tyson vs Hollyfield do? What about Tyson vs Lewis? You are probably an old washed up British fuck. No one under 40 gives a shit about boxing it’s an old mans sport that won’t last. Once grandpas from baby boomers die off no one will care.

  9. FightBusiness on December 22nd, 2014 4:27 PM

    MMA- I dont quiet get your Tyson references and by the way I am actually a Hispanic in my thirties.

  10. FightBusiness on December 22nd, 2014 4:27 PM

    MMAtruth- I dont quiet get your Tyson references and by the way I am actually a Hispanic in my thirties.

  11. Jeremy on December 22nd, 2014 6:00 PM

    LeonThePro,

    Prior to 168, Silva had a number of PPVs over 500k.
    Here are some of Silva fights prior to 168:
    162 550k
    153 410k
    148 925k
    134 335k
    126 725k
    117 600k
    112 500k

    It simply depends on the match-up, how compelling is it? It this case, we have two well known fighters that are returning after some time off. For both fighters, there are fans that are excited to see them back.

  12. LeonThePro on December 22nd, 2014 6:20 PM

    According to your numbers his average is 577k so yea my guess was pretty dam close. My point is very relevant he will do 375k give or take.

  13. Mmatruth on December 22nd, 2014 6:43 PM

    Uhh the point is those were 2 huge fights that were black on black crime that were massively successful. Before you come spewing your hate, and are a boxing fan admittedly, you should look to the sports history. There were any popular black fighters amongst white fans. Ppl wanna see the vicious Heavyweight KO .. That is all.

  14. Mmatruth on December 22nd, 2014 6:49 PM

    Boxing is a skeleton of what it once was. You got a boring Floyd and tiny Manny running the gamut for a temporary glory. These guys are like the bantamweight division of the UFC, who cares? Once they fade boxing will shrivel once again to a new low. The younger generations will surf the web – fuck cable – and it will end up being a sideshow like in that movie Snatch.

  15. Jason Cruz on December 22nd, 2014 7:42 PM

    @BS and @Diego

    Thanks guys.

  16. Jeremy on December 22nd, 2014 8:13 PM

    Leon,

    It is also worth taking into account that 3 of those shows, the ones with lowest numbers, were overseas shows which always do weaker numbers.

    375 for Diaz/Silva, on Superbowl Saturday? I don’t see it doing less than 500k.

    And Fightbusiness,

    Penn, Jackson, Anderson Silva and (pre FS1) Jones have all done nice buy rates.

  17. BrainSmasher on December 22nd, 2014 8:35 PM

    I think the problem the UFC is having is a lack of focus on US based fighters. They are clearly trying to expand globally and in order to do that you have to put on fights with fighters from those countries. You have to make match ups that promote those fighters up the ranks. When that happens there is just no room or time for American fighters. All of our measurements of the UFC success is using American PPV sales and ratings. Kind of pointless. How many Brazil cards are there? How many new Brazilians are in the UFC? Promotion money and time going into Aldo, Barao, etc. YThis isn’t the American UFC anymore. The UFC brings in fighters and caters to fans where they have a presence. Now they are expanding. Their focus shifts and it is naturally going to effect numbers state side. The UFC pushed in the UK and there was an influx of UK fighters and pushing them up the ranks. Now the UFC has moved on and im sure will revist the UK and make another push. Just as they will shift their focus back to American fighters for a while. Once the growing pains are wored out and they are settled down here in the US. Its a great time to focus else where when the new divisions, new fighters, loss of big draws, and new TV deal cob webs are going to make your efforts in vein anyway. We are already seeing them shift focus back with the “Time is Now” campaign. Major cards starting off the year. English speaking McGreggor and Gustaffson and Dillashaw as champ. Once they build some stars and get the viewers tuning in. People will learn the new crop of fighters and they will have more big names and more stars and more champs for people to follow. There will always be down turns. Its what you do during them that counts and the UFC was growing the sport outside the US during this bad stretch. Now things look promising.

  18. FightBusiness on December 22nd, 2014 8:46 PM

    MMA Truth- I am almost certain 70% of the people who watched Tyson vs Holyfield were minorities. Also that was a HUGE once in a lifetime ppv. During regular fights 80% the audience are minorities. Boxing is a skeleton of what it used to be simply because of horrible promoters. Not because the public doesnt like the product. The product is so loved that despite the horrible treatment the fans have received the sport can still get over one million ppv buys when an event is good. Floyd is boring but you know what? He’s undefeated. Numbers dont lie. Pac is a midget and he can still out draw Jon Jones. LOL. What does that say about the UFC? The only person spewing hate is you. You darn right I’m hating. I hate dishonesty and disrespect. “Rhonda Rousey would kill Floyd mayweather”. By the way your arguments that Boxing will die after Mayweather is wishful thinking. Roid head Rogan said the same thing about Delahoya and Bernard Hopkins. GGG, Canelo, Andre Ward, Kovelov & Mikey Garcia are fun fighters that will keep fans entertained (not major ppv stars) Errol Spence , Franke Gomez , and Felix Verderjo will soon follow are up and comers who will be HUGE in 2 years.

  19. d on December 22nd, 2014 10:47 PM

    FIghtbusiness, your delusions are amusing. Give a legitimate reason why 80% of the fighters will be minorities and even if that were going to happen, which there is zero evidence of, your analysis of who watches black on black,etc fights is delusional. The majority of people who watched Tyson Holyfield were white. Maybe 20% were minorities. You don’t know what you are talking about. You just make shit up.

    80% of the audience is not minorities, they are middle aged white people. Do some research.

  20. jack on December 22nd, 2014 10:48 PM

    @FB

    “This sport was built on a white male fan base. Once 80% of fighters are black and hispanic there base will dwindle.”

    This is one of those things you’re not supposed to notice let alone say but there is truth here.

  21. d on December 23rd, 2014 12:53 AM

    Jack once again proving he is a total moron.

  22. Mmatruth on December 23rd, 2014 5:29 AM

    FB that was a ignoramus comment playboy. The minorities are the majority in NBA and NFL are you telling me white people don’t watch those sports either. Smh

Got something to say?

You must be logged in to post a comment.