Zuffa files Reply Brief in support of Motion to Dismiss in antitrust lawsuit

Late last week, Zuffa filed its Reply Brief in support of its Motion to Dismiss the Plaintiffs’ Complaint in the class action antitrust lawsuit filed in Northern California.  The Reply Brief addressed issues from Plaintiffs’ Opposition.  The hearing is set for July.

First we take a look at the Opposition Brief.

In Plaintiffs’ Opposition, they focused several issues including rebutting Zuffa’s contention regarding the definition of “Elite MMA Fighters” with respect to it as a key input for MMA Promotions, the UFC engaged in Anticompetitive conduct to exclude competitors and monopsonize the market for the defined Elite MMA Fighters, the UFC dominates the relevant markets and the UFC’s scheme caused antitrust injury to Plaintiffs.

In its Opposition brief, the Plaintiffs argue it sufficiently outlined that the UFC has monopoly and monopsony power.

Secondly, it contends that Plaintiffs “plausibly allege exclusionary conduct in violation of Section 2” of the Sherman Antitrust Act.  It argued that the UFC’s conduct “substantially foreclosed competition.”  Plaintiffs state that this was done through its exclusionary contracts with respect to its fighters, identity rights (e.g., exclusive use of a fighter’s images in such things as video games) and through “exclusive dealing agreements with venues, sponsors and distributors.”

Plaintiffs contend it sufficiently alleged anticompetitive effects resulting in an antitrust injury.

In order to survive a Motion to Dismiss, a party must have allegations that, “taken as a whole, are facially plausible” according to the Supreme Court case of Bell Atlantic Corp. v. Twombly.  The Twombly case, decided in 2007, changed the way federal courts analyze complaints as the rule prompted more detailed.  In the Opposition, Plaintiffs contend it laid out direct and circumstantial evidence to support its allegations in its Complaint.

Some notable arguments in its Opposition:

• It argued that the distinction between “Elite” and non-Elite fighters is well understood in the industry.  In its argument regarding the definition, Plaintiffs cite the case of International Boxing Club of New York, Inc. v. United States.  In this antitrust case, the Supreme Court affirmed a market limited to “championship” boxing contests rather than all professional boxing contests.  Thus, Plaintiffs argue that in the past, courts have upheld a relevant market based on a quality distinction of one league over another.  To further support its claim, it notes in a footnote that investment analysts such as Moody’s describes UFC fighters as “elite” as well as fan blogs and web sites.
• Plaintiffs plausibly allege direct evidence of monopoly and monopsony power. The Plaintiffs contend that it need not cite circumstantial evidence as prior cases have found direct allegations sufficient.
• Plaintiffs rebut the argument claimed by Zuffa that it must provide a number with respect to the amount it has foreclosed competition stating that it indicated that it foreclosed competition 100%, but in the alternative, it cites cases stating that dispute about the degree of foreclosure need not be resolved on the pleadings.
• Plaintiffs argue that Zuffa misinterprets the law with respect to the need it must show specific facts as to the extent of the UFC’s use of exclusive contracts with MMA fighters and that Plaintiffs must separately show foreclosure of competition by means of the exclusive contracts. In this case, Plaintiffs argue it may allege foreclosure as a result of cumulative conduct and that the contracts are a portion of the “chokehold” the UFC puts on the market for MMA events.

In its Reply to Plaintiffs’ Opposition, Zuffa hammers home the argument that the Plaintiffs’ Complaint was not sufficiently pled in accordance with Twombly.  It first argues to the Court about the sheer cost in discovery that an antitrust case encompasses and that was one of the reasons why the Supreme Court decided the way it did in Twombly.  It then argues that Plaintiffs’ Opposition fails to explain with plausible facts 1) any anticompetitive conduct by Zuffa, 2) that such conduct caused substantial foreclosure in any relevant market, or 3) that Plaintiffs suffered antitrust injury as a result of anticompetitive conduct.

In addition, it argues that Plaintiffs’ “Monopoly Broth” theory does nothing to support its case.  It also states that the allegations fail to show UFC’s Conduct resulted in substantial foreclosure and that it failed to properly plead defined relevant markets.

Among the key takeaways from Zuffa’s Reply Brief, Zuffa characterizes Plaintiffs’ argument that the alleged cumulative conduct equates to antitrust injury as a “monopoly broth.”  This terminology is based on a law review article by a University of Michigan law professor which cites the uses and abuses of utilizing a compilation of issues to make an antitrust case.  The law review argues for a corrective use of the “monopoly broth.”

Also in the Reply Brief, it cites cases which supports Zuffa’s contention that courts must still examine the various issues individually.  Next, Zuffa argues that Plaintiffs’ claim that the UFC foreclosed 100% of the alleged market for Elite fighters is flawed.  They claim that Plaintiffs’ argument is circular since, according to Plaintiffs theory, all fighters under contract with the UFC are “Elite,” few or no fighters not under contract with the UFC are “Elite,” and thus UFC contracts foreclose access to 100% of Elite fighters.

Payout Perspective:

This week, we may find out whether or not the Motion to Dismiss will be argued in San Jose or Las Vegas dependent on the Motion to Transfer Venue.  The above is just some of the arguments the parties will argue in July when the Motion will be decided.   The Motion to Dismiss may be decided based on whether the Court views Plaintiffs sufficiently pled antitrust injury in its Complaint through its “monopoly broth.”  Zuffa articulates in its Reply Brief reasons why Plaintiffs fail to satisfy the Twombly analysis for a sufficient Complaint and appeals to the economic factors in arguing the huge expense this lawsuit will have on Zuffa for a Complaint with little or no concrete allegations.  We will see whether the Court takes the position that Plaintiffs’ argument that the compilation of activities by Zuffa equates to an alleged antitrust claim or whether it sides with Zuffa in finding that Plaintiffs fail to provide sufficient facts for its allegations.