Mark Hunt lawsuit gone, but not forgotten

May 31, 2019

It appears that the Mark Hunt lawsuit will be coming to an end in the not-too-distant future.  With the parties dismissing their appeal to the Ninth Circuit, one might anticipate a settlement.  However, his case still presents an interesting legal issue that was not addressed by the trial court which dismissed most of his claims.  The question of whether there is an assumption of risk that a fighter will step in with another that is using PEDs.

In Hunt’s lawsuit, he filed a Civil RICO claim which alleged that the UFC and Dana White devised a scheme which allowed doping fighters to fight in the UFC.  The Court concluded that the scheme was “fatally speculative.” This, along with all of Hunt’s claims (save one) were dismissed by the trial court.

The trial court which decided the merits of Hunt’s case dismissed 9 out of the 10 claims in his lawsuit.  It held that the allegations were “non-cognizable damages or failed to plead facts to show” a proximate cause to his financial losses.

There were specific problems the Court had with the majority of Hunt’s claims.  Namely, his damages with respect to his allegations.  For non-lawyers, each of the allegations must have a duty, a breach of that duty, a proximate cause resulting in damages.  Here, the Court had issues with Hunt’s claim that his loss to Brock Lesnar at UFC 200 caused him to lose out on post-event marketing deals including loss of income from his clothing brand.  The damages claimed by Hunt were speculative in nature and could not stand as concrete damages.

The Court did not side with Hunt’s notion that doping fighters like Lesnar are “bigger, strong, faster, hit harder, and can handle damaging hits better,” and ‘misses the forest for the trees.’  As the Court explains, there are ‘numerous other factors’ that could account for why Hunt lost the bout or why it was (in Hunt’s view) such a lopsided defeat.’

In one of the more interesting parts of the Court’s opinion it dismissed Hunt’s battery and aiding and abetting claims against Lesnar because Hunt consented to the fight.  Notably, the Court highlighted that there was no evidence offered that suggested Lesnar did anything outside “the range of the ordinary activity,” in an MMA bout.

When it rendered its opinion citing that Lesnar did not do anything during their bout which was outside the “range” of ordinary activity in MMA, it cited to a California case in which a pitcher intentionally threw a ball at a batter’s head which injured the batter.  In a lawsuit over the damages claimed by the batter, the Court sided with the pitcher stating that while throwing at a batter’s head is “forbidden by the rules of baseball,” it “is an inherent risk of baseball.”  By analogy, the Court states that even though Lesnar tested positive for a performance enhancing drug, there was no evidence submitted which revealed he did something outside the scope of an MMA bout.  Thus, there can be no battery claim against Lesnar.  And since there is no battery claim, the underlying claim of aiding and abetting cannot occur.

The parties have (presumably) settled their case but the notion that Lesnar’s participation while on PEDs poses the question of whether the use of illegal drugs is within the “range” of ordinary activity.  Certainly, that can be the scenario with the Court’s conclusion flipped on its head.  Specifically, if the Court interpreted the case law on the premise of whether the actions occurring were within the scope of what’s ‘normal’ within the sport.  Consequently, you might infer from the trial court ruling that PED-use is normal which it should not.

The Court seems to draw a distinction with what an athletic participant could expect as opposed to the potential for actions outside of the scope of normal athletic participation.

The tort doctrine of “assumption of the risk” is that a plaintiff should not be able to recover for injuries caused to the plaintiff if he or she willingly assumed the risk inherent in the activity.

So, is using PEDs a “risk inherent in the activity”?

There are obvious cases out there which have addressed the threshold question of a “risk inherent in the activity.”

The most notable case involving sports assumption of the risk was an impromptu football game during halftime of a Super Bowl.  In Knight versus Jewett, a football game between friends turned into a lawsuit when a man stepped on a women’s hand causing an injury which resulted in the amputation of one of her fingers.  A lawsuit was filed based on the claims of assault and battery and negligence.  The Court held that the plaintiff could not recover for her personal injuries since the injury occurred in the ordinary course of the football game.

As mentioned above, a baseball player suffered a brain injury when he was the subject of a “beanball” by a pitcher.  But the California Supreme Court stated that the “beanball” was a part of the game and any claim was barred by the assumption of the risk doctrine as it was based upon its anecdotal theory based on empirical data.  The dissent stated that assumption of the risk should be based on “what risk the plaintiff consciously and voluntarily assumed” and not what risks are inherent in a particular sport.

Arguably, Hunt could have asserted that the implementation of the UFC Anti-Doping Policy was a sign of a “risk inherent in the activity.”  It’s clear that Hunt consented to an MMA bout where he may receive bodily harm from his opponent.  But, is the inherent risk of testing UFC fighters a potential factor in the activity.  This is a broad interpretation as “activity” used by Courts is the actual activity occurring and not an ancillary part of the sport.  The Court that decided to dismiss the bulk of Hunt’s lawsuit viewed the “activity” as the bout with Lesnar and not the fact that Lesnar was subject to drug testing.  Moreover, there is no evidence that Lesnar specifically took PEDs to injure Hunt but he may have taken a banned substance to be able to compete with Hunt.  Whether taking a banned substance is “reckless” seems to be a factual claim.  On the other hand, the UFC Anti-Doping Policy anticipates the possibility of athletes using banned substances and Lesnar’s flagged tests reflects the fact that his behavior was not reckless but negligent.

With the appeal seemingly gone, the question lingers until another lawsuit occurs.  While Hunt’s RICO claims were tenuous at best, the question of assuming the risk in a sport and whether the injured person ‘consciously and voluntarily assumed’ the risk is a compelling question of law.  The dissent in the ‘beanball’ case is recognition that there are certain actions within sport that are not contemplated by an injured party.  Even if there are “inherent risks” in participating in a sport, whether a participant acknowledges the issue and voluntarily assumed the risk could be a concern in the future.

Report: UFC-CBD sponsor deal for 5 years at $15M per year

May 30, 2019

The Sports Business Journal reports that the UFC’s recent sponsorship deal with Aurora Cannabis is for 5 years and $15 million per.  The report is based on a source obtained through the SBJ.

CBD products are formulated from the non-psychoactive chemical in marijuana plants.  Nate Diaz was seen at his last post-fight with a vape pen stating he was using CBD.

With little fanfare, the CBD company inked a sponsorship deal with the UFC last week.  It has yet to be announced by the company formally although the SBJ article notes that an industry source says the deal is worth 5 years at an annual average of $15 million.  The UFC’s senior vice president of global partnerships, Paul Asencio, did not confirm or deny the report.  Asencio said that the deal took less than 3 months to complete and that the UFC had meetings with “five or six other CBD companies.”

UFC fighters have been promoting CBD products for a while now on podcasts and other venues as the industry is booming.  The SBJ article reported on the rise of CBD sponsorships and how some believe it is the next big industry.

The deal with Aurora Cannabis includes octagon placement and content rights and is one of the UFC’s five largest sponsorships.

Payout Perspective:

The report is not surprising given the rise of the industry and the fact that several states have fully legalized marijuana.  The UFC has been active in its signing of sponsors to its various exclusive categories.  It has always been an early adapter and with the ownership change it has made moves to sign a vodka sponsor, hard liquor sponsor and more.  With scooping up a CBD sponsor seemed natural.

PBC on FS1 Saturday night draws 208,000 viewers

May 29, 2019

PBC on FS1 Saturday night drew 208,000 viewers.  The prelims which aired prior to the main card drew 167,000 viewers.

The main card featured Austin Trout going up against Terrell Gausha.  The two fought to a majority draw.

The prelims began at 7:14pm ET due to an overrun.  The main card started at 8:00pm ET and went over 3 hours.  It did overlap with the ESPN event Saturday night.

Payout Perspective:

Probably not the best night for the event as there was also a card on ESPN and DAZN.  This had to be one of those events where PBC was fulfilling its goal of telecasts for Fox as even the crowd at the event in Mississippi looked sparse.

Top Rank Boxing draws 556,000 viewers Saturday night

May 29, 2019

Top Rank Boxing on ESPN drew 556,000 viewers on Saturday night.  The main event saw an upset as Jamel Herring defeated Masayuki Ito to win the WBO junior heavyweight title in Kissimmee, Florida.

The event aired Saturday night at 10pm and featured the matchup of the former Marine taking the title from Ito.  The event drew 171,000 viewers in the A18-49 demo and a 0.38 market share.

Notably, the event outdrew ESPN2 which showed women’s college softball super regional action at the time.  The games averaged in the 300K viewer range.  The event did air opposite the Bucks-Raptors Conference Finals which drew 6.4 million viewers.

Top Rank on ESPN Ratings

Top Rank Boxing on ESPN (2/2):  880,000 viewers

Top Rank Boxing on ESPN (2/10):  655,000 viewers

Top Rank Boxing on ESPN (2/15) 704,000 viewers

Top Rank Boxing on ESPN (3/23) 469,000 viewers

Top Rank Boxing on ESPN (5/4) 480,000 viewers

Top Rank Boxing on ESPN (5/11) 740,000 viewers

Payout Perspective:

The event was likely overshadowed by the NBA and although the backstory behind Herring was a good one.  The 556,000 is a little better than 2 of the past 4 Top Rank shows which you might see as an improvement.

Yoel Romero just received a huge judgment. Will he ever see it?

May 28, 2019

Yoel Romero obtained a judgment against supplement maker Goldstar in state court in New Jersey.  At a hearing to determine damages, the Court issued an order granting him damages totaling $27 million.  Of course, the issue will be collecting on the amount.

Romero was suspended by the UFC for violating the UFC Anti-Doping Policy and was suspended for 6 months.  For working with USADA in determining the alleged tainted supplement, he received a lighter sentence that the guidelines.

Once the source of the alleged failed drug test was identified, Romero decided to sue the supplement company.  Romero used the product Shred Rx made by Goldstar Performance Products.  Despite filing the lawsuit, Goldstar Performance Products never responded to the lawsuit.

According to its web site, the company is based out of East Hanover, New Jersey and features a variety of supplements.  It was noted that the supplement contained Ibutamoren, a banned substance. The substance increases lean body mass to create bigger muscles.

As a penalty for not responding to the lawsuit, Romero moved for an order of default and default judgment.  This came to fruition this past December.

Yoel Romero Default by Jason Cruz on Scribd

In requesting this order from the Court, it essentially confirms that the allegations brought by Romero are true and that a hearing may be set to claim the damages.  On Tuesday, the hearing day came for Romero.  Howard Jacobs, the renowned doping lawyer from Southern California, made a special appearance before the Court to argue the damages for Romero.  It was announced that the Court awarded $27.45 million to Romero.

Of course, this is great.  But, with everything legal, you should leave it up to the lawyers.  Real lawyers.  Obtaining a judgment is one thing.  No doubt a success.  But collecting on the debt is another.

Most MMA fans probably don’t know that there must be another proceeding (a completely separate lawsuit) for Romero to realize on the judgment.  This might include having to pay to get the money from the defendant and even repossessing property to realize on the actual dollar amount.  Even then, it’s unlikely he’ll see that much money.  Moreover, in these situations where a company just flat out doesn’t respond to a lawsuit, the plaintiff is just holding a piece of paper.  Even if there were assets, they may be in line with more senior creditors trying to get money from them.  But most likely, they won’t get the amount the Court granted them.

In the event that Goldstar is still around, there can be several issues at hand.  First, they may be claiming no jurisdiction because they have no contacts with the state court in New Jersey.  This might be a little far-fetched based on its business address and the old “International Shoe” test for you lawyers out there.  Second, they might still appear in the lawsuit within a certain period of time. If so, they can ask the Court to ‘set aside’ the judgment.  There might be a monetary penalty if the Court thinks they were just being lazy, but not a $27.45M penalty.

In the end, the judgment looks great on paper.  But, unfortunately for Romero, it may be that all he’ll have is paper to hold the judgment.  MMA Payout will keep you posted.

Could the UFC be a publicly traded company?

May 27, 2019

With Endeavor filing paperwork to go public in the not too distant future, the UFC’s future became inextricably tied to its parent company.  Then again, it may be looking at its own IPO as well.

Embedded in the lengthy S-1 documents which details the finances of the soon-to-be publicly traded company on the New York Stock Exchange was language which indicates that the UFC could go public itself.

Via Endeavor’s S-1:

Our control of UFC is subject to certain consent rights held by other equityholders of UFC, whose interests in UFC may be different than ours and yours, and the terms of the preferred units issued as partial financing for the UFC Acquisition contain negative covenants that may limit our ability to pursue our business strategies with respect to UFC.

The bold is my outline of the language may allow for a UFC file IPO.

In addition, the UFC LLC Agreement also contains provisions relating to an initial public offering of UFC, which provide that (i) prior to February 18, 2019, an initial public offering of UFC may be requested or approved by at least one director designated by each of us, Silver Lake Partners and KKR, (ii) after February 18, 2019 but prior to August 18, 2021, an initial public offering of UFC may be requested or approved by at least one director designated by each of us, Silver Lake Partners and KKR, provided that a request or approval by any two of the directors designated by each of us, Silver Lake Partners and KKR is required if the valuation in the offering achieves a specified valuation, provided that the approval of the director designated by us is required under all circumstances prior to August 18, 2021, so long as we hold a majority of the equity entitled to appoint directors of UFC, and (iii) after August 18, 2021, any of us, Silver Lake Partners or KKR, subject to certain ownership requirements, may exercise a demand right with respect to an initial public offering without approval by us or our director designees. Any initial public offering undertaken pursuant to the UFC LLC Agreement must be completed in accordance with the agreement and could be dilutive to our ownership position in UFC. The demand rights granted pursuant to the UFC LLC Agreement may require UFC to undertake an initial public offering at a time or on terms that are not in your best interests, and such a transaction could adversely affect the value of our investment in UFC.

Since a limited liability company does not sell shares in itself (LLC’s have ‘member’ interests), the UFC, LLC entity would convert into a corporation.

The above language from the Endeavor S-1 suggests that a UFC IPO may not be in the best financial interests of the parent company, Endeavor.  However, based on the ownership interests outside of Endeavor, it may have to comply if the company receives a specific valuation.  Remember, the S-1 gives all of the prospective investors all of the information and risks of the company.  So, you might believe that Endeavor does not want the UFC to go public on its own, but its only a preventative warning in the case someone were to allege that they were led astray by the information.

While Endeavor states it has a majority stakeholder interest in the UFC (50.1% to be specific), the UFC LLC Agreement contains provisions for the company to file for its own IPO based on approval from enough directors. The first two provisions require director approval.  But, the last provision (i.e., iii) states that after August 18, 2021, a demand may be made to a UFC IPO without approval by directors.

The language seems to protect the lenders in the original UFC sale, Silver Lake Partners and KKR.  One might infer that the reason to go public would be to raise money from the sell of shares.  One has to believe that if a demand were to be made, the market conditions would reflect an opportunity to capitalize on a public willing to purchase a piece of the UFC.

The UFC as a publicly-traded company would indeed be an interesting scenario considering that Dana White doesn’t want to go public.  But, that may not be up to him.

 

PFL2 Prelims on ESPN2 draw 120,000 viewers

May 24, 2019

Professional Fighters League drew 120,000 viewers on ESPN2 Thursday night per Nielsen via ShowBuzz Daily.  Notably, the UFC 236 replay drew 191,000 viewers later that night on ESPN2.

The PFL2 aired for the second time on ESPN2.  The event took place at the Nassau Coliseum in New York.  The featured event of the 2 hour Prelims on ESPN2 saw Natan Schulte defeat Yincang Bao via rear naked choke.

The event on ESPN2 aired early in the night (7pm ET).  The UFC 236 replay (10pm ET) which featured Max Holloway and Dustin Poirier drew more than the live event.

The second season of the PFL debut on May 9th drew 137,000 viewers.

Payout Perspective:

The decrease in viewership may not be the best look for the PFL which is trying to gain some traction on ESPN in its second season.  Of course, the main card is airing on ESPN+ so don’t expect too much concern from the network.  Moreover, being placed on the deuce and being the prelims might not be the best way to put your best product out there.

As Austin Trout heads to ring on Saturday, his legal team has been fighting WBO in appeal of lawsuit

May 24, 2019

As Austin Trout returns to the ring on Saturday, last month his lawyers submitted their appeal brief in an effort to overturn a federal court decision to arbitrate his lawsuit, including his Ali Act claims.

For background of the case, you can go here.

The Court determined that based on legal rights under the Federal Arbitration Act, that arbitration was a suitable alternative instead of having parties going to trial

Appellant’s Brief.filed by on Scribd

In addition to its claims that the WBO waived its right to arbitration, Trout argues that the Ali Act cannot be arbitrated as it would fly in the face of the spirit of the act.  Essentially, its protections highlighted in the law runs contrary to the District Court ruling.

Trout alleges that the WBO violated the Ali Act when the promotion dropped him from its rankings.  In the alternative, it claimed that the Ali Act claims should remain in federal court even if the trial court decided that his other allegations could be arbitrated.

Trout’s appeal brief relating to the Ali Act claim argues that the intent of the legislation was to protect boxers from promoters and managers.  Trial court made an error when it granted the WBO to arbitrate its claims.

As stated by Trout’s attorneys:

“If allowed, compelling the arbitration of the claims under the Muhammad Ali Act will defeat the purpose of the Act.  Leaving Sanctioning Bodies, as the term is defined in the statute which includes the WBO, free to circumvent the must of courts of law over claims alleging the WBO is violating the Muhammad Ali Act, and will be able to ventilate such claims in arbitration before a panel designated by the WBO.”

The District Court stated that arbitration was a suitable alternative when agreed upon by the parties.  That is not the case here. It would appear that Trout agreed to the contractual obligations of the WBO and its arbitration clause provision embedded in the rules of the promotion and his contract.  Yet, upon closer scrutiny, the irony of the conclusion by the District Court is that it is inapposite to the outcome that the Ali Act wish to have prevented.  Here, the appearance that a promotion is taking advantage of a boxer through a coercive contract.  In his lawsuit Trout claimed that the boxer rankings of the WBO dropped him from its rankings, depriving him of a potential title fight.  The elimination rom the WBO ranking was not explained via written statement or to the Association of Boxing Commissions as required by the Ali Act.  Trout was left without an opportunity for a title shot and economic revenue through a chance to be champion.  For Trout, the contract of the WBO, as drafted an interpreted by the promoter, states that it would internally decide any grievance made by one of its contracted fighters.  For Trout, the contract of the WBO, as drafted an interpreted by the promoter, states that it would internally decide any grievance made by one of its contracted fighters.

The District Court ruling highlighted two cases which stated that arbitrations clauses in contracts would override the right to trial.  However, there are strong dissents to those cases. As a result, the WBO appears to sweep the Ali Act into the arbitration for Trout’s other claims listed in the lawsuit.

Trout decided to sign a contract with the WBO.  There is no argument set forth by the parties that Trout did not have an opportunity to negotiate the contract he signed with the promoter.  Yet, it would seem that Trout was unaware that if he had an issue down the road with his contract, that the dispute would go to arbitration where the arbiters of the dispute were chosen by the WBO.  This would appear to be contrary to the filing of this lawsuit. Moreover, the overarching protection for boxers, found in the protections highlighted in the Ali Act, such as contractual disagreements, fraud or issues with rankings, could be usurped with one fail swoop in a contractual clause.

In its Order Compelling Arbitration of Trout’s Ali Act claim (see embedded opinion below), the Court order does not address the strong dissent in Mitsubishi Motors v. Soler Chrysler-Plymouth which it cites in its opinion.  The dissent, written by Justice John Paul Stevens, brought up strong questions regarding the arbitrability of the case and which similarly resonate with the present case here on appeal.  In Mitsubishi Motors, Justice Stevens noted that it was the first time that the Court held a statutory claim to be arbitrable.  “It is reasonable to assume that most lawyers and executives would not expect the language in the standard arbitration clause to cover federal statutory claims.”  This was premised upon the belief that the complexities of the issue in Mitsubishi – an antitrust matter – was too complex to arbitrate.  Neither party has brought up any case in combat sports which has tested the complexities of the Ali Act simply because there are few and far between.  This would seem to conclude two points.  First, it is unknown whether the issues in the Ali Act are complex for that of a private arbitration.  Secondly, the Ali Act legislative history which is included in Trout’s appellant brief, contemplates that aggrieved boxers may file a lawsuit and have those issues determined by a Court and not through arbitration.

In CompuCredit v. Greenwood, Justice Ginsburg notes in her dissent that the Federal Arbitration Act remains the Court’s “responsibility to examine carefully “the text of the [statute], its legislative history,” and Congress’ “underlying purposes.”  The District Court cites the Federal Arbitration Act as superseding Trout’s cause of action.

The passages from two dissenting opinions are not profoundly authoritative.  However, they provide shed a light on the rationale behind the Ali Act and the recognition that the District Court ruling contradicts the legislative intent of the establishment of the law which is the protection for boxers.

While we await the Answering Brief from the WBO, the Trout case seems to have gone under the radar of many boxing fans, it is a huge case for the Ali Act and the future of the law.  If promoters are allowed to skirt the meaning of the rule by utilizing arbitration clauses in its contracts deeming itself or a self-appointed arbiter as the self-binding authority, it would render the Ali Act toothless, mute and useless for the boxers it sought to protect.

MMA Payout will continue to update you.

Endeavor files paperwork for IPO

May 23, 2019

Endeavor, the company that currently owns the UFC, has filed paperwork with the Securities and Exchange Commission to become a publicly traded company on the New York Stock Exchange.

Endeavor states that it plans to raise $100 million in the offering which is a standard figure for companies until it provides an actual figure at a later date.  Proceeds from the company receives from this offering will go towards working capital and general corporate purposes.

According to the S-1 filed today, it reported revenue of $3.6 billion.  The company posted a net income of $231.3 million in the year ended December 31, 2018.

Endeavor is the combination of Ari Emmanuel’s company with Patrick Whitesell’s IMG sports and modeling agency in 2013.

According to the filing, Goldman Sachs will be the IPO’s lead banker.  KKR Capital Markets, J.P. Morgan, Morgan Stanley and Deutsche Bank are also underwriters on the IPO.

Zuffa is included in the voluminous S-1 statement.  It includes information on its finances, debt as well as information on the UFC antitrust lawsuit as a potential liability.

MMA Payout will take a look and provide a further in-depth analysis of the S-1.  But, as for now, it looks like the UFC may be a part of a publicly-traded company in the near future.  How does it affect its business?  We will see.

Show Money 28 talks UFC PPV buys, Endeavor buyout rumors and ONE

May 22, 2019

Its once again that time when we talk with John Nash and Paul Gift about the business of combat sports.

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