White threatens lawsuit if Pacquiao reached out to McGregor

December 11, 2017

Dana White shot down any rumors of a Manny Pacquiao-Conor McGregor fight by stating that if the Filipino boxer had any contact with McGregor, it would like end in a lawsuit.

During the UFC Fresno post-fight press conference, White was asked about the potential fight.  “That would be weird because he’s [McGregor] under contract with us,” said White of McGregor.  “If that’s true, I will be suing Manny Pacquiao and whoever’s representing him, so I’m assuming that’s not true.”  White went on to state that McGregor’s next fight will be in the UFC.

Of course, those “representing” Pacquiao likely means Bob Arum, his promoter.  White and Arum do not like each other and unlike the Mayweather-McGregor negotiations, one would expect a more contentious business dealing with the two sides.

Payout Perspective:

It could be that Pacquiao’s representatives did not directly include Arum and was just something floated out there to see public/media reaction.  White threatening of a lawsuit would relate to alleged tampering and/or interference with a business relationship and/or existing contract.  If Pacquiao wants to fight McGregor, he’d have to contact White and the UFC since that is what appears to be the arrangement with the current UFC lightweight champion.  We will see if this is the beginning of something (i.e. Pac-Mac) or nothing at all.

Arbitration could determine boxer Trout’s Ali Act claim

December 8, 2017

Although not given enough publicity, the lawsuit filed by Austin Trout against the World Boxing Organization which was moved to U.S. federal court in Puerto Rico continues with the WBO attempting to move the case to arbitration while Trout seeking to maintain it in federal court.

Notably, Trout claims damages for violations of the Muhammad Ali Act, Breach of Contract and Fraud.  The lawsuit was originally filed in November 2015 in New Mexico state court.  It was then removed to New Mexico federal court in February 2016 and then moved for dismissal for improper venue as it argued that the case should be in Puerto Rico where the WBO operates and pursuant to the “Contract Venue Provision” in the contract Trout had with the organization.  Although the Court denied this motion for dismissal, the WBO filed a Motion to Transfer venue to Puerto Rico in August 2016.  In July 2017, the federal court in New Mexico transferred the case to Puerto Rico.

After requesting that the lawsuit be moved to Puerto Rico, the WBO moved to compel arbitration of the matter citing the contract Trout signed with the promotion.  Trout’s attorney argued that the Ali Act claim is based on federal legislation and could not be decided by an arbitration.  It would not be a claim encompassing what was contemplated when resolving a dispute with arbitration.

Trout’s attorneys argue that the WBO never indicated that in its pleadings prior to the Motion to Compel Arbitration that it contemplated moving the case to arbitration.  Arbitration is a form of alternative dispute resolution outside of the court system.  It is decided by one or more arbitrators that renders an arbitration award that is usually binding and cannot be appealed.

The WBO cites Section 35(e) which states that Arbitrations pursuant to the laws of Puerto Rico and the U.S. Arbitration Act is the sole remedy for grievances.  This would be a binding Arbitration which means there would be no means for appeal.

Section 35(e) as cited by the WBO in its briefing:

All WBO participants acknowledge and agree that the mandatory resort to the WBO appeals regulations is the sole and exclusive remedy for any claim, appeal, grievance or contest that arises from any right or status that is or could be subject to these regulations or which result or could result from or relate to the interpretation of application of these regulations. These WBO Grievance Committee determinations are Arbitrations within the contemplation of the arbitration laws of Puerto Rico, 32 LPRA § 3201 et. seq. and the U.S. Arbitration Act, Title 9 of the United States Code and the Inter-American Convention on International Commercial Arbitration of July 30, 1975 and the convention on the recognition and enforcement of Foreign Arbitration Awards, June 10, 1958. All WBO participants stipulate and agree that the nature of the sport requires a prompt, final, and uniform resolution of all disputes concerning application of these regulations by a tribunal experienced with the application of these Regulations and with a special knowledge and experience in world championship professional boxing.

The WBO argues that Trout’s claims “come within the compass of an arbitration clause.”

On November 30th, Trout filed a sur-reply in opposition to the motion.  A sur-reply is an additional reply to a motion filed after the motion has already been fully briefed.  In general, courts frown up these types of briefs because they are not requested by the court and creates more work that many believe is unnecessary.

Nevertheless, the additional brief cites that the contract venue clause contained in the WBO contract governs the forum in the present case and thus should stay in the court system.

The pertinent contract language according to Trout is Section (d).

Section 35(d) of the WBO Championship Regulations states:

These Regulations are to be interpreted in conformity with the Laws of the Commonwealth of Puerto Rico. All WBO participants agree and consent that the exclusive venue for any or all action in which the WBO is made a party, whether it is to enforce, interpret or declare the application of these Regulations or to appeal from any determination of the WBO, including, but not limited to a determination of the Complaints and Grievance Committee, may be maintained only in the Superior Court of the Commonwealth of Puerto Rico, or, if applicable, in the U.S. District Court for the Commonwealth of Puerto Rico.

The WBO advocates that it’s the arbitration clause and not where the case should be litigated governs this issue:

The clauses here are not mutually exclusive. One clause—Section 35(d)—dictates applicable law and a chosen location for possible lawsuits involving WBO, and the other—Section 35(e)—dictates the selected procedure for disputes regarding WBO regulations.

The organization also claims that it has not waived its right to arbitrate.  It contends that there is no trial date and despite the fact that the lawsuit was filed in 2015, the delay in litigation of the case was due to securing proper venue and jurisdiction.  It also argues that the Ali Act violation claimed by Trout is subject to arbitration.

Of course, the argument by Trout’s side is that Section 35 (e) relates to “disputes regarding WBO regulations.”  The Ali Act, according to Trout, is outside the contemplated WBO regulations.  This would be a strong argument to keep it in federal court.

Payout Perspective:

This will be an interesting lawsuit to monitor due to the Ali Act claim.  Trout’s attorneys claim that the WBO had not brought up the issue of moving to compel when moving the jurisdiction and then venue.  But, this argument is not persuasive of whether or not the claims should be arbitrated per the contract.

If the court grants the motion, we could see an arbitration panel deal with an Ali Act claim (barring a motion to dismiss the claim prior to arbitration) and make a final determination on it which might be something of first impression.  The argument that the claims are from federal legislation (i.e., Ali Act) and not related to the WBO Rules is the strongest argument against arbitration.  MMA Payout will continue to follow.

Court allows discovery to continue in part in Mark Hunt lawsuit

December 6, 2017

The Court in the Mark Hunt lawsuit has ordered that discover to continue with respect to all claims except for his RICO claims in his First Amended Complaint until the determination of the Motion to Dismiss filed by Zuffa/Dana White and Brock Lesnar.

The 3-page ruling indicated that discovery (requests for documents and answering of questions) related to Hunt’s RICO claims against the UFC and White.  However, the other claims including breach of contract and battery (for Brock Lesnar) may proceed forward.

Order on Motion to Stay Discovery in part in Hunt case by JASONCRUZ206 on Scribd

The Court notes the changes made from the original Complaint from the First Amended Complaint including changes in the breach of contract claim and the battery claim.  According to the case law cited by the Court, it may stay discovery from a “preliminary peek,” initially a cursory scan of the Motion to Dismiss to determine whether it might win on the merits and dismiss the need for discovery.

The Court was not convinced from its “preliminary peek” at the motion to dismiss that it will certainly be granted for all claims.

Payout Perspective:

If you think the peek is awkward because it provides foresight into a potential outcome of the actual motion, you are not alone.  However, this is the legal authority that is followed.  A minor win for Hunt as this might precipitate a settlement between the parties so that the UFC will not have to spend money on discovery.  Yet, the Court may decide the Motion to Dismiss at any point.  One might suspect that since the Order was issued for the stay in December for a motion to stay that took place in July, it may take more time for the Court to decide the Motion to Dismiss.

EVOLVE files Motion to Dismiss FloSports lawsuit

November 28, 2017

WWN, Inc., the owner of the EVOLVE wrestling promotion, has filed a motion to dismiss for lack of personal jurisdiction and/or motion to dismiss for failure to state a claim against Flosports, Inc.  The lawsuit, which originally filed in state court in Texas, was sent to federal court in the state earlier this month.  FloSports claims that WWN misrepresented its live streaming data to entice the company to invest in its live stream and internet PPVs.

FloSports has a niche in the online industry by streaming a broad spectrum of smaller sporting events to a direct-to-consumer subscriber base.  The business model has grown significantly since its inception and even drew an investment from the WWE.  The company offers streaming of professional wrestling events of which it had a deal with EVOLVE

The crux of the Complaint filed on September 15, 2017 [now Amended Complaint filed on 11/27/17] is that FloSports claims it was induced into a 5-year Exclusive Media Agreement due to a misrepresentation of the number of wrestling fans purchasing viewership access to WWN’s events.  Prior to FloSports, it appears that EVOLVE ran its own iPPVs and Video-on-Demand.  FloSports claims it invested “hundreds of thousands of dollars” in reliance on this information.  But, the numbers were false.  WWN claims that the numbers were based on previous ownership.

Motion to Dismiss for Lack of Jx by JASONCRUZ206 on Scribd

The parties disagreed on which entity contacted the other first.  WWN claims FloSports contacted it about potentially streaming on its web site while WWN claims in its Motion to Dismiss that it was FloSports that attempted to recruit the Florida-based company.

FloSports’ original complaint had scant facts about the background behind the filing of the complaint and causes of action.  WWN removed the case to federal court in Texas and then filed a Motion to Dismiss on the grounds that there is a lack of jurisdiction and for a failure to state a claim upon which relief can be given.  The Amended Complaint provides a deeper factual picture including a timeline of events.  This was filed with its response to the Motion to Dismiss which may address perceived holes in the plaintiffs’ original lawsuit.

Amended Complaint FloSports by JASONCRUZ206 on Scribd

In it’s Motion to Dismiss, WWN argues that even if the court finds jurisdiction over the Florida company, it must dismiss FloSports’ cause of action for negligent misrepresentation since it is essentially a tort claim.  Under what is known as the “Economic Loss” rule, a party suffering only economic harm may recover damages for that based upon a contract theory and not on a theory for negligence or strict liability.  In its Amended Complaint, FloSports does away with the negligent misrepresentation claim and inserts a claim for fraudulent inducement and fraud.  Similar to its original cause of action for negligent misrepresentation, FloSports claims that it was given false data by WWN to invest in the EVOLVE franchise.

The 5-year Exclusive Media Agreement is included in the FloSports opposition brief and is embedded below.

Exclusive Media Event Agreement by JASONCRUZ206 on Scribd

The Agreement allows an out for FloSports starting in January 2018.  However, they must give a 12 month notice which appears to mean that they would have to pay the rights fee for the year.  According to the Agreement, FloSports paid $75,000 in 2016; $500,000 in 2017; $550,000 in 2018; $605,000 in 2019; $670,000; $740,000 in 2021.  There are also incentives in the contract if EVOLVE exceeded certain benchmarks.  Obviously, the glaring step-up is from 2016 to 2017 where the rights fee shoots up from $75,000 to $500,000.

Payout Perspective:

The legal part of the matter involves a basic civil procedure question one might find itself answering on a first-year law school exam.  Does FloSports have the right to sue WWN in Texas when the Florida-based company claims it has no ties to Texas and has only minimal contacts with the state?  If not, then the court would dismiss the action in Texas although FloSports would be able to refile in Florida.  This first question would determine whether it is necessary to answer the second question which is whether FloSports’ claim for negligent misrepresentation is viable.  According to WWN, it cannot stand since it argues that the “economic loss” rule prevails here which precludes a party from repackaging a breach of contract claim into a tort claim.  This is a moot point if we are to accept the Amended Complaint.  Still, I would assume that WWN argues that the Fraud claim not stand as it is the same/similar to the original claim.  From an anecdotal standpoint, fraud claims are hard to prove and while the Court may allow it past the initial pleading stage, the real issue here is the breach of contract.

The story here is that FloSports is not receiving its anticipated return on investment from the EVOLVE shows and believes that they were duped into believing that this was a popular promotion that had followers that purchased its iPPVs.  Notably, EVOLVE does not address the veracity of the data it provided FloSports but the focus is on the jurisdictional issue because if the Court has no jurisdiction it cannot rule on the underlying facts.  EVOLVE may have a explanation for the data but I assume it is strategically withholding that until a ruling on the procedural issue.

Former UFC fighter handed 10-month prison sentence for role in attempted fixing fight

November 24, 2017

Tae Hyun Bang has been sentenced to a 10-month prison sentence after being found guilty of taking bribes for alleged fight fixing.  The former UFC lightweight was sentenced in the Seoul Central District Court in South Korea per the The Korea Herald.

The alleged scheme occurred at UFC Fight Night 79 in November 2015.  It was the company’s first visit to South Korea and Bang took on Leo Kuntz.  Bang was given $92,160 in U.S. dollars for his role.  The brokers who gave him the money were given jail sentences as well.

According to the court match fixing damages the credibility of the sport and had a bad effect on the country’s credibility.  Bang took the bribe and then bet roughly half of the money he received on Kuntz.  He was to lose the first two rounds of their three-round bout.  Thus, ensuing victory for Kuntz.  The UFC noticed the huge swing in betting lines and warned both fighters about the consequences of fight fixing.  Bang ended up winning the fight via split decision.

Bang had claimed he had not known of any scheme to fix the fight but received death threats due to his win.

Payout Perspective:

This is an unfortunate result for Bang who may have been an unwilling participant in this scheme.  10 months seems like a substantial amount of jail time for his part.  Yet, he took the money and then attempted to make money on the scheme but with organized crime involved, its hard to say what may have happened if he did not comply.  The jail term shows the seriousness of credibility in the sport especially when gambling is involved.  For the UFC, it is an important issue since we know that sports betting is inherently tied to this sport.

Werdum charged with assault after hitting Covington with boomerang

November 16, 2017

Fabricio Werdum is in trouble after a video showed him throwing a boomerang at UFC welterweight Colby Covington.  According to an Australian news outlet, Werdum has been charged with common assault.

Werdum is the headliner of Saturday UFC Fight Night card in Sydney, Australia where he faces Marcin Tybura.

The video shows the two getting into an argument and then Werdum appears to throw a clear plastic bag which had a boomerang inside of it.

Covington went on Facebook Live after the incident and used an anti-gay slur in the direction of Werdum.  Just last month, Werdum was disciplined for using a similar slur in a confrontation with Tony Ferguson.

It appears that Werdum will have to return for a court date in December.

Payout Perspective:

This is something that you cannot do especially outside of a hotel in a country where the company is trying to develop a presence.  Werdum is in the wrong for throwing a boomerang at Covington and Covington is wrong for his continued generalizations against the people of Brazil.  The UFC has to step in and it will be interesting to see what it will do to Werdum who is in trouble for the second time in two straight months.  Covington has been under fire after his post-fight comments in Brazil calling the people of Brazil “Filthy Animals.”  We’ll see if there are any repercussions for Covington although it would seem in the legal case he is the victim.

Jon Fitch’s Statement before Congressional Subcommittee supports Ali Act Expansion

November 14, 2017

Former UFC Fighter Jon Fitch submitted a Statement at the Congressional Subcommittee Hearing on MMA as well as an op-ed piece in the Washington Examiner on the day of the hearing.  Each supports the proposed legislation expanding the Ali Act.

The Statement submitted and filed for the Congressional Subcommittee Hearing last week was on MMAFA letterhead.

Fitch’s primary argument is that he was passed over for fights despite being the ranked number 1 contender in the UFC.  He stated that he was criticized for “employing a tactical style” emphasizing his wrestling background rather than fighting in a more “exciting” fashion.

He cites being presented with a merchandising agreement by the promotion which required he give the UFC image rights “in perpetuity and for no compensation” for a video game.  He was released by the UFC for a time due to his refusal to sign the agreement.

Unlike Marc Ratner’s description of the MMA business model, Fitch describes it as a “structurally flawed model inconsistent with sport and designed to achieve a monopoly over an entire sport.”  Fitch gave the anecdote of winning the World Series of Fighting title and then being stripped of the title when “new investors” took over WSOF and it was changed into the Professional Fighters’ League.  He “regained” the title at PFL’s first official event in July.

Fitch goes on to advocate for the amendment to the Ali Act arguing that “sport’s natural growth is stunted” due to the coercive “contractual practices” in the sport.  He cites the lack of disclosure of fight purses by promoters which is required under the Ali Act.  He notes the Chris Algieri situation as a prime example.  We wrote about this in April 2016 and presented the problem with the Ali Act for boxers.

He also stressed that the Ali Act “requires rankings to be based on merit, not contractual subservience.”  Here, Fitch emphasizes the need for objective rankings giving the analogy with Major League Baseball changing the World Series simply based on popularity of team.

In conclusion to his statement, Fitch reiterated the stunting of growth in MMA due to anti-competitive restraints and that when the restraints are removed, “deep-pocketed investors will be made in MMA.”  He believes that the elimination of artificial restraints will cause organic growth benefiting all by increasing revenues for all in the sport.

Similarly, Fitch’s Washington Examiner op-ed was briefer than his Statement to Congress but touched on the same points including the rankings system and the fact that the titles do not matter.  The opinion piece called for sanctioning bodies that would provide the fighter with consistency and ensure that the top contender would have a shot at the title.

Jon Fitch Statement by JASONCRUZ206 on Scribd

Payout Perspective:

Fitch provides the fighters’ perspective of the MMA industry and it is vastly different from that of Ratner’s viewpoint of MMA.  Ratner believes that MMA is devoid of the corruption that plagued boxing which led to the Ali Act.  Fitch sees it differently.  He provides a first-hand account of the issues he knows of in MMA including the issue with the UFC related to the forfeiting of his image rights for the EA video game and giving up his WSOF title when new owners took over.  Certainly, you can point to the fact that neither addresses that he is a plaintiff in an antitrust lawsuit against the UFC which may sway the reader’s view when objectively looking at the opinion.

Ratner’s Statement before Congressional Subcommittee outlines Opposition to Ali Act Expansion

November 13, 2017

The UFC’s Marc Ratner submitted a Statement to the Congressional Subcommittee Hearing on MMA.  The statement opposes the expansion of the Ali Act to combat sports citing issues such as state’s rights and

Ratner, the company’s Senior Vice President of Government and Regulatory Affairs, highlighted his long-time work with boxing and assisting in the passage of the original Ali Act.  He testified about 20 years ago in which he expressed concerns about “conflicts, cronyism, and corruption” in boxing.  He stated that the problems he saw in boxing are “absolutely not present in MMA.”

He highlighted the UFC’s “rags to riches” story of a business that worked its way up from the bottom and did most of the lobbying from state to state by itself, without help from any other MMA organization or promotion.

Ratner emphasized that state regulation works and federal oversight were be an overreach by government.

In addition, he addressed the many mixed martial artists, including female fighters, that have worked themselves into positions where “[d]ozens upon dozens” are millionaires because of the opportunities provided by the UFC.  He also expressed the fact that only a “very small minority of fighters” are supporting this legislation.

Ratner also argued that the reason for the Ali Act was to address corruption in “so-called sanctioning organizations.”  He described these as “privately run businesses that rank fighters for a fee.”  Unlike these boxing sham organizations that either pushed or held back boxers, MMA does not rely on sanctioning organizations.  He cited the UFC rankings which are voted on by sports reporters.  He added, “[w]e put on the fights that fans want to see and they want to see competitive fights.”

He concluded that the proposed legislation would impose boxing’s sanctioning organization model onto MMA.  He claimed that MMA is predictable and transparent in its current state.  He also warned that the growing number of sanctioning organizations in boxing has created a lack of uniformity in the sports and its rankings.

Marc Ratner Statement by JASONCRUZ206 on Scribd

Payout Perspective:

Ratner’s argument against the proposed legislation is plausible based on his viewpoint of the reasons behind the enactment of the original Ali Act.  At this point, the proposed legislation mirrors the Ali Act without any specific differences between the original and the proposed expansion of the law.  The argument that there is nothing wrong with MMA is a bright line view and in comparison to boxing at the time that lawmakers sought to enact the Ali Act might be true.  But, it’s hard to say that just a minority of MMA fighters support the act.  Of course, there are some that do not want to publicly support the Ali Act expansion for concern of repercussions.

Ratner also suggests that the UFC rankings are independent because sports reporters provide the rankings.  Who is it that picks these sports reporters?

His point that numerous sanctioning bodies in boxing creates uncertainty in the rankings is a viable argument.  But does that mean that the expansion of the Ali Act would mean multiple fighter rankings?

The old argument of state’s rights versus federal rights is argued by Ratner as he suggests that state athletic commissions are able to oversee MMA rather than having a federal authority.  It is true that the current system is working, but take the Conor McGregor incident at Bellator 187 as an example.  Who has the authority to oversee McGregor’s actions.  The Association of Boxing Commissions?  Bellator?  The UFC?  The regulatory body overseeing the Bellator event in Dublin?  While state athletic commissions and tribal regulators can enforce actions in its jurisdictions what happens with interstate issues like that of McGregor.

While Ratner provides some arguments against the Ali Act expansion, there are indeed issues in MMA that a federal law can address.  The question is whether this proposed version can do it.

Bellator files Statement on Ali Act for Congressional Hearing

November 12, 2017

Bellator MMA submitted a statement to last week’s Subcommittee Hearing on MMA.  The Statement was written by Tracey Lesetar-Smith, Vice President of Business and Legal Affairs at Viacom Media Networks and supports the expansion of the Ali Act to combat sports.

The statement, which becomes part of the Congressional record on MMA, gives a brief history of the boxing and MMA ecosystems.  Lesetar-Smith states that boxing had a pre-existing, sanctioning-body architecture while MMA “organically developed” under a “league” system.  This is described as a different business model than that of boxing.  Unlike the UFC, Bellator states that it “co-promotes events with smaller domestic local promoters and international fight promoters to enhance [its] events and allow them [local promoters] opportunities to showcase their league talent.

Lesetar-Smith made it clear that boxing and MMA use “multi-year, multi-fight, exclusive promotional contracts” and it is not prohibited in the original Ali Act.  There was a distinction made between these contracts and those “coercive contracts” addressed in the Ali Act.

She explained why the organization uses exclusive contracts.  “Bellator invests a great deal of time, resources, and capital into promoting and marketing each long-term athlete and therefore the exclusivity and duration of each contract reflects a desire to seek a return on investment.”  The multi-fight contracts also allow for Bellator to plan and budget for events in advance.  There is also an “outlay” of money for fighters that they do not immediately recoup.

The Statement notes that the UFC “utilized tactics that made competition in the MMA industry very challenging.”  This has made it a challenge to compete with the UFC.

The “unimpaired movement of skilled athletes to organizations” is one of the primary things that can overturn UFC market share according to Bellator.

Bellator states that it relies upon State and Tribal Athletic Commissions to regulate its events.  However, lack of funding, staff and resources have made regulation a challenge.  Bellator requests that the federal government “advocate for and support the work of these Commissions.”  It also champions the health and safety of its fighters and expressed concerns regarding traumatic brain injury and Chronic Traumatic Encephalopathy (CTE) and pushed for further safeguards.

Bellator Statement in Support of Ali Act by JASONCRUZ206 on Scribd

Payout Perspective:

The issue of fighter safety as it relates to TBI or CTE is not addressed in the proposed legislation although Bellator advocates for it.  The requests that the federal government support further health and safety measures is admirable but it also would mean a budget and allocation of federal spending which may not be feasible in this present economic client.  Whether or not you believe that free agency over time will level the field for which Bellator may catch up to the UFC, it is plausible but may not be possible especially with the mainstream appeal of the brand and its new owners.  Yet, Bellator’s statement is the flip side of the UFC’s position on the Ali Act.  It’s an interesting position but remember, among other key differences between the organizations, Bellator does not rely on PPV revenue as much as the UFC nor does it pay its fighters as much.

Show Money Episode 20 takes a look at the Congressional Hearing on MMA and more

November 12, 2017

Its another episode with Paul Gift and John Nash discussing this past week on the Subcommittee Congressional Hearing on MMA.

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