Appellate Court issues opinion in Wilder-Povetkin case, escrow money goes back to promoter

June 19, 2019

The Second Circuit Court of Appeals issued a decision last week in the Deontay Wilder-Alexander Povetkin/World of Boxing appeal filed by the parties.  It appears that the long, winding lawsuit may have finally ended.  Maybe.

While the appellate court filed an order last week, World of Boxing still holds a defamation claim against Wilder.  This was the related to Wilder’s allegations that Povetkin was essentially a cheater for using a banned substance.

2nd Circuit Court of Appeal… by on Scribd

The original lawsuit and summary of the jury trial can be found here.

In the appeal, both parties claimed a breach of an agreement for a fight that was to take place in Russia in May 2016.  Povetkin tested positive for a banned substance, Meldonium, prior to the fight.  Povetkin and his promoter World of Boxing claim that Wilder’s failure to go to Russia for the fight was grounds for a breach of the Bout Agreement.  Wilder argues that Povetkin’s failed test was a breach of the Bout Agreement.

In February 2017, a jury took 32 minutes to determine that Povetkin ingested a banned substance post-January 2016.  However, the trial court ruling did not matter much as s Summary Judgment ruling later that year fell in the favor of Povetkin.

From our post this past fall:

One of the overarching issues in the lawsuit as to who is to blame for the failed fight in Russian in May 2016.  You might infer from the news of a failed drug test from Povetkin that it was the Russian.  However, Povetkin claimed that Wilder’s failure to appear in Russia forced the hand of the regulating body, the WBC, to call off the fight.

The WBC Bout Agreement takes precedent here as the Court examines the contract in applying basic contract principles.  But in its application, there seem to be things that don’t make sense.

“We begin by noting that the Bout Agreement contains no language mandating that each fighter refrain from ingesting banned substances.”

The original Court ruling determined that Wilder did not breach the Bout Agreement when Wilder did not show up to Russia.  But the escrow payment lodged by World of Boxing (who won the purse bid) was still in question.  Wilder argued that language in the contract ensured that a Court had to order funds to be released if a dispute (like here) were to arise.  WOB argued that a contract clause allowing for liquidated damages in the amount of $2.5 million be awarded and paid by Wilder.

Yet, the WBC Contract was the overarching factor here:

The WBC did not issue a ruling on Povetkin’s positive drug test until August 17, 2016.  It noted that it called the bout off and reserved any further ruling.  It then determined that it was not “possible to ascertain that Mr. Povetkin ingested Meldonium after January 1, 2016.  After two additional rulings by the WBC which opposed the August 17, 2016 ruling, it overturned the decision and stuck with its August ruling.  It based this on a study showing Meldonium having the ability to stay in one’s system for more than five months.  It also noted Povetkin had negative drug tests six other times.

The Second Circuit essentially affirmed the District Court decision with respect to both parties’ claims of breach.

“Although a jury found that Povetkin ingested a banned substance, the Bout Agreement did not by its terms require that the fighters refrain from ingesting banned substnces.  And the WBC itself concluded that it could not be determined that Povetkin had violated its anti-doping rules by ingesting meldonium.”

As for the World of Boxing’s claims that Wilder’s failure to travel to Russia forced the WBC to postpone the fight was a breach, the Court was not persuaded.  They asserted that the district court “inappropriately shifted the burden onto them to prove that the WBC would have rescheduled the fight but for the Wilder Parties’ actions, when all they had to show was that they were ready and willing to perform.”  The appeals court did not find this argument viable citing that “the crux of its decision” was premised upon Povetkin’s drug test failure and not Wilder’s actions not to show up in Russia.

According to the appellate court:

They [WOB] might have wanted to perform under the Bout Agreement; however, given that the fight was postponed due to Povetkin’s positive test, that Povetkin was under continued investigation for said positive test, and that he was later suspended further for use of another banned substance, the WOB Parties were not able to perform.

Probably the most important part of the appeals court decision was what to do with the money in the Escrow account and whether a $2.5 million liquidated damages clause could be triggered as well as who was entitled to the $4,369,365 placed into the escrow for the fight.  The appeals court found in favor of WOB:  “[w]e see no reason why WOB should not be entitled to return of the funds held in escrow,” wrote the court. “Absent any viable breach of contract claim against it, we agree that WOB’s funds should be returned to it.”

However, the appeals court sided with Willder in noting that the $2.5 million liquidated damages clause was not triggered by his actions.

Per the Second Circuit opinion:

We agree with the district court that the Wilder Parties did not act objectively unreasonably in objecting to disbursement of the funds. While WOB is correct that the Escrow Agreement clearly contemplates that the money goes to Wilder if the fight takes place and to WOB if it does not, it does not necessarily follow that those provisions “should end the matter.”

Payout Perspective:

There will still be the matter of the prevailing parties’ Bill of Costs which grants the winning side the right for the other side to pay a list of costs expended for the appeal.  As contentious as this litigation has been, there will likely be a fight over that.

As for the Appellate Court opinion, its disappointing in its interpretation of the contract which seemingly allows for the use of performance enhancing drug with maybe the unwritten, unspoken warning that you not test positive for PEDs or get caught using them.  As I asked when the district court issued its decision, what were they thinking? The opinion reflects the strength of the basic legal contract and that promoters wield a massive amount of power.  Note that a jury sided in favor of Wilder, but you can argue that in the end, he lost.

This, and the Austin Trout appeal, which is pending a decision in the First Circuit are under-the-radar big legal issues in the world of boxing with ramifications down the road.

MMA Payout will have more on this soon.

 

 

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