World Series of Fighting and PFL file appeal against former officers of WSOF

June 20, 2018

The World Series of Fighting litigation continues in Nevada.  Despite re-emerging earlier this month as the Professional Fighters’ League, the lawsuit(s) continue over the power struggle between individuals, entities and now with a new investment group, more litigants. In this instance, the lawsuit hinges on a licensing agreement which contained an arbitration provision.

The licensing agreement between the parties described below is related to a prior Settlement Agreement and Operating Agreement between the two sides.  As you might infer, this business divorce is a mess.

There has been a plethora of lawsuits filed by different people and entities and this one is the latest involving the inception of WSOF.  The lawsuit in question pits rival entities over the split up and sale of World Series of Fighting when it was sold to investors that repackaged it as the PFL.

In this lawsuit plaintiffs are WSOF Global and its head Vince Hesser and Zion Wood Obi Wan Trust (Zion) and Shawn Wright (collectively referred to as Plaintiffs).  The defendants include MMAWC, LLC doing business as World Series of Fighting, MMAX Investment Partners, Inc., doing business as PFL, Bruce Deifik, Carlos Silva, Nancy and Bruce Deifik Family Partnership and Keith Redmond, Inc.

The lawsuit claimed that MMAWC, LLC, which did business as WSOF experienced several financial shortfalls during 2012 to 2015.  The plaintiffs had made “extensive loans” to the promotion to allow the promotion to continue and operate.  But, WSOF refused to repay the loans.

Zion Wood Obi Wan Trust Complaint by JASONCRUZ206 on Scribd

Additionally, Shawn Wright and Vince Hesser had written agreements with WSOF for other contractual payments and worldwide licensing.  WSOF Global had acquired rights to the intellectual property of WSOF overseas and had invested in the brand under the assumption it was planning to expand.  But, WSOF refused to honor the terms of the agreement per the Complaint.  Zion’s membership interest was 10.5% and WSOF executed agreements that it was non-dilutable.

The dispute was thought to have been resolved after the organizations entered into a Settlement Agreement.  As part of the agreement, Zion agreed to reduce its 10.5% non-dilutable interest in WSOF to 4.50% of the total outstanding ownership units in WSOF, which interest shall remain non-dilutable.  But, Zion believed that Bruce Deifik created a new entity and put all of the WSOF assets into the PFL organization.

Zion did not have an interest in the “Successor Company,” PFL.  As a result, it believed that its shares were being diluted.

The Complaint stated WSOF sold the company for $15 million, but without input from Zion and WSOF Global, Inc., who held shares in the WSOF.  Additionally, Plaintiffs claimed it was being shut out from finding out the real value of the deal which would help them assess the purported amount that they would have been entitled.

The Complaint also mentioned a WSOF event in New York City on New Year’s Eve 2016.  The WSOF reported $0 income from broadcasting rights to New York State.  But, it reported to Zion that they spent $190,000 in broadcasting revenue from NBC to the NYC event.  This would be inconsistent reporting.

But, the big issue here is the licensing deal between Vince Hesser, the owner of WSOF Global, and WSOF.  An Amended Master License Agreement gave Mr. Hesser the exclusive right to license the WSOF brand outside the United States.  A dispute arose over the licensing agreement and was thought to have been subsequently settled.  WSOF Global claims to have rights that “consist of over 100 international events per year, at a cost to produce of tens of millions of dollars, which dwarf the mere 8-10 events per year” from WSOF.

But, when the WSOF sold to PFL, it failed to comply with the licensing agreement.  The obvious breach was the change of the name to the Professional Fighters League which plaintiffs claimed damage them.  The PFL did not grant WSOF Global the right to use the PFL name in the Settlement Agreement and Amended License Agreement.

Prior to the name change, WSOF Global claimed that it was working on a sports partnership to bring MMA content to China.  It claims it received $16 million to further the promotion of WSOF in China and to promote foreign fighters in their events alongside Chinese fighters.  This would appear to be part of the damages to be claimed in this lawsuit.

WSOF stated that the parties should be compelled to arbitration to resolve these disputes and pointed to the clause in the Amended Licensing Agreement.

The arbitration clause in the parties’ licensing agreement compels the Court to dismiss this case and force the parties to arbitration.  But, the plaintiffs contend that they did not specifically authorize the arbitration agreement.  Under the state law in Nevada, a party must grant “specific authorization” that they have agreed to their arbitration provision otherwise it is void.  Plaintiffs cite the lack of specific authorization in the contract to show that the arbitration provision was void.

In its reply to the opposition of moving the case to arbitration, WSOF argued that the parties jointly drafted and authorized the agreement which included the arbitration clause.  Thus, despite WSOF’s assertion that Plaintiffs had knowledge of the clause and the opportunity to point out the issue, it did not.  Moreover, it agreed to the overall agreement.

The Court found in favor of Plaintiffs’ arguments and voided the arbitration provision and denied WSOF’s motion to compel arbitration.  Shortly after the ruling, WSOF filed to appeal the decision.

In its appeal statement WSOF noted, “When the parties finalized the Arbitration provision, however, the parties did not include language and initials or separate signatures to further manifest their agreement to the Arbitration provision…”

WSOF Case Appeal Statement by JASONCRUZ206 on Scribd

Despite the fact that WSOF believed that the Arbitration provision should have been allowed, the Court found it void due to the lack of a “specific authorization.”

The appeal will be heard in the state appellate court in Nevada.  The lawsuit was filed in the District Court of Clark County, Nevada.

Payout Perspective:

While there is the possibility that the Plaintiffs in the lawsuit may amend its RICO claim, it was dismissed by the Court.  However, the case is not going to Arbitration due to the fact the Court voided the provision.  While WSOF may allege that having the parties sign a section consenting to Arbitration is duplicative if you consider they signed the Agreement.  Also, in this instance, the parties allegedly collaborated on putting together the Agreement.  Yet, the Nevada state rules are explicit that there must be a specific authorization which appears to be more than just signing the contract overall but making an affirmative concession to the clause.

As it goes for the overall transaction, it appears that Hesser and Wright are creditors to the WSOF entity and were not privy to the sale of assets to the successor company, PFL.  While there was a transaction to do business under the WSOF brand, there was not one to do under any successor brand.  It would seem that either poor business acumen, lack of communication or a bad business deal has transpired.  Maybe all of the above.

One thing is for certain, both sides have shown errors in contractual drafting.  Plaintiffs should have included clauses that would have protected itself form any sale of assets from the debtor (i.e., WSOF).  For WSOF, it should have drafted an Agreement in compliance with the Nevada state law that would ensure specific authorization for Arbitration.  While Arbitration may have been a faster, cost-efficient way to resolve a dispute, it looks like this case will be litigated.  But first, the appeal.

MMA Payout will keep you posted.

Got something to say?

You must be logged in to post a comment.