FTC reopens investigation on Zuffa business practices

May 14, 2015

MMA Junkie reports that the Federal Trade Commission has reopened its investigation against Zuffa and has contacted people within the MMA industry about Zuffa’s business practices.

The government investigation occurred after Zuffa acquired Strikeforce.  The agency evaluated Zuffa’s financial documents and talked to UFC execs but the investigation yielded nothing to command a further inquiry at the time.  The FTC closed its investigation of Zuffa in early 2012.  MMA Payout’s FOIA request for documents related to that investigative led to nothing of substance except for a couple form letters which indicated that it “reserved the right to reopen the investigation if it deemed it necessary.”

It appears that it was necessary.

With the filing of the antitrust lawsuit by former UFC fighters, it appears that the FTC will take another look at Zuffa business practices.

The news comes out a day after Zuffa filed a motion to stay discovery pending its Motion to Dismiss plaintiffs’ complaint.

Payout Perspective:

The reopening of the investigation may help plaintiffs in its position that its complaint is valid.  It also will help with opposing Zuffa’s motion to stay discovery.  The FTC investigation may help plaintiffs with the argument that Zuffa’s financial documents are relevant to the litigation as you might expect an anticipated discovery fight over that information.  While the investigation by the FTC and the antitrust lawsuit are independent of one another it is clear that you might infer a tie-in between the two.  We will see how both lawsuit and government investigation proceed.

Golden Boy sues Haymon for antitrust violations

May 9, 2015

Golden Boy Promotions LLC and boxer Bernard Hopkins filed suit this week against Al Haymon and a variety of Haymon’s businesses and associates with respect to violations of the Sherman Antitrust Act.  The lawsuit was filed in federal court in Los Angeles.

The lawsuit paints the picture that many competitors have accused Haymon of for some time.  He is attempting to monopolize professional boxing in the United States and drive out all competition.  The lawsuit accuses Haymon of “blatantly” ignoring the “firewall” imposed by federal (specifically the Muhammad Ali Boxing Reform Act) and state laws which preclude a manager also acting as a promoter for a fighter.  The lawsuit claims that he has forbidden “hundreds of boxers” he manages from signing with another promoter.

The lawsuit names Waddell & Reed Financial, Inc. and Waddell & Reed, Inc. as defendants that financed and aided Haymon through an investment fund that funded the boxing enterprise.  Plaintiffs claim that these defendants provided more than $400 million dollars to finance Haymon.

The lawsuit claims that Haymon, et. al have created a “tying” relationship in violation of antitrust laws.  This is done through agreements affecting to separate relevant markets.  The first market is for management of Championship-Caliber Boxers and the market for promoters.  As described in the Complaint, the management market is the “tying” market whereas the promotion market is the “tied” market.  Essentially, the fact that Haymon manages so many fighters it affects the promotions market since he has exercised control over the direction of each fighters’ career.

The Complaint filed by Bertram Fields of Greenberg Glusker Fields Claman & Machinger, LLP in LA states that Haymon acted as an unlicensed promoter.  In fact, the Complaint cites an LA Times article which states that Haymon was the “main promoter” for the Floyd Mayweather-Manny Pacquiao fight.  The scheme articulated by Plaintiffs is that Haymon is using his dominance in one business to “take over and monopolize another business that federal and state law prohibit them (Haymon, et. al) from even entering.”

Plaintiffs are seeking damages in excess of $100 million which, according to relevant statutory law, could lead to treble (3 times) damages.  Thus, the lawsuit could be for more than $300 million.  In addition, Golden Boy is seeking an injunction from Haymon’s continued promotion.  This possibly could mean the severing of his multi-network affiliations with airing Premier Boxing Champions.

Perhaps not a coincidence, the Oscar de la Hoya led Golden Boy filed the lawsuit on Cinco de Mayo.  Plaintiffs seek a jury trial.

Payout Perspective:

We will have more on this in the weeks to come but if you were to compare this lawsuit to the one filed by the former UFC fighters, I would tend to believe that this antitrust claim has much more of a bite to it. Although it’s likely to sustain a Motion to Dismiss from Haymon’s lawyers, I think it has a better chance of making it to the discovery stage of the lawsuit.  We shall see how this will go.

Golden Boy eyes potential antitrust lawsuit against Haymon, PBC

May 1, 2015

There are reasons why Al Haymon never speaks, one of those may be to prevent the threat of litigation.  A recent article about Haymon’s Premier Boxing Champions may bring on an antitrust lawsuit involving rival Golden Boy Promotions as chief plaintiff.

A recent Sports Business Journal article featured Haymon’s PBC and went over how funding was structured.  Although Haymon did not provide comment for the article, factual information in it allegedly strengthened the argument that Haymon’s business model for PBC violates portions of the Muhammad Ali Boxing Reform Act.

A draft of the Complaint has been viewed by SI.com and it appears that Golden Boy Promotions is seeking a temporary restraining order and then a permanent injunction against his business practices that violate state and federal laws.  It also requests monetary damages against Haymon.

The claim is that Haymon is using his monopoly as a boxing manager to create another monopoly for promoting TV fights.

Golden Boy is hush on if and when this lawsuit may be filed.

Notably, the SI article includes a letter dated April 28, 2015, from the Association of Boxing Commissions (“ABC”) to the Department of Justice in which it claims that Haymon is in violation of the Ali Act.  Essentially, through his controlled companies Haymon is acting as manager and promoter which the ABC claims to be a violation of the “Firewall provision” of the Ali Act (specifically section 5(b) of the Act).  ABC also calls into question the contracts Haymon fighters must sign.  Essentially, ABC believes that they are in “restraint of trade” and “contrary to public policy” as the contracts exceed 12 months.  A footnote in the letter notes that UFC, Bellator and other MMA promotions have this contractual model.  It also notes that MMA is not covered by the Ali Act.

Payout Perspective:

This will be an interesting lawsuit and with the Zuffa antitrust lawsuit ongoing, we can see some major waves happening in the business of combat sports.  Haymon’s boxing business model is unique and received much scrutiny by rival promoters.  There have been attempts in the past to sue Haymon but those were summarily dismissed and/or settled.  If Haymon and PBC are sued, we may see some interesting information divulged from the factual discovery process in the lawsuit.  It could also overturn the current wealth of boxing on multiple networks by PBC.  MMA Payout will keep you posted.

Zuffa files Reply Brief in Motion to Transfer Venue

April 29, 2015

Zuffa has filed its Reply Brief in response to the Plaintiffs’ Opposition to Zuffa’s Motion to Transfer the Venue.  Predictably, the big issue will be whether or not the fighter contracts which avail them to the Nevada should be interpreted by the Court.

In its Motion to Transfer Venue from San Jose to Las Vegas, Zuffa lawyers argued that the fighters that filed suit against Zuffa executed contracts or bout agreements which availed themselves to Nevada or Las Vegas as the fora for which a lawsuit would arise.  There are variations within the contractual language of the plaintiffs but the gist is that the contract limits lawsuits to Nevada.

The Plaintiffs argued in its opposition that the contracts were not at issue and need not be interpreted to adjudicate this matter.  Thus, the forum selection clause dictating forum were inapplicable.

In its Reply Brief, Zuffa argues that a “crucial component” of Plaintiffs’ case is that Zuffa’s contracts improperly restrict competition.  Thus, at some point, this will need to be demonstrated through “specific terms of the contracts” and how it illegally bars completion.  It contends that Plaintiffs cannot just show market share or a disparity of purses but through fighter contracts.  Moreover, it opposes Plaintiffs’ interpretation of the contracts that they impose perpetual and indefinite terms on athletes.

Zuffa cites the Ninth Circuit case of Simula, Inc. v. Autoliv, Inc. which it argues is binding authority.  Zuffa argues that Simula advises that when a plaintiff argues antitrust claims which have anticompetitive effects, the contracts must be interpreted.  In that case, the Court determined whether an arbitration provision in a contract should be followed.  In addition, it determined that with antitrust claims under Sherman Act 1 and 2, the Court would have to evaluate an agreement between the parties.

As Zuffa argument goes, since the contracts will need to be evaluated, Nevada would be the proper forum since it would be “more familiar” with the governing law.  It also argues that since the plaintiffs contend that this is a nationwide class action, the relevancy of the location main class representative is not relevant.  Thus, it rebuts the argument that Le and others live in Northern California since the lawsuit alleges to be a nationwide class action.  It also contends that the residence of the plaintiffs is “substantially diminished” when the plaintiff’s venue choice is not its residence.  This would be the case, as pointed out by Zuffa, by plaintiffs such as Brandon Vera and Gabe Ruediger.

As for Plaintiffs suggestion that San Jose is more expeditious to trial and has handled more Antitrust cases, Zuffa summarily dismisses these contention citing they are not elements in determining a motion to transfer venue.  It also argues that there is not a strong local interest in the underlying litigation.

The hearing on the Motion to Transfer Venue will be held in San Jose on May 7th.

Payout Perspective:

It will be interesting to see how the court addresses and interprets the Simula case.  While the case does point out that it needed to look at the underlying agreement when deciphering an antitrust case, the main issue there was whether an arbitration provision found in the contract applied to the dispute.  Thus, the case hinged on whether or not there should be a stay of the lawsuit pending an arbitration or whether that case should be dismissed in its entirety.  The point being is that the court did not necessarily decide whether a forum selection clause bound the parties to the contractual provision when the lawsuit is premised upon anticompetitive behavior of a party (i.e. antitrust claims).  This is just a cursory look at the Simula case and certainly plaintiffs’ lawyers will analyze the case and make its own distinctions.   This is the last filing before the hearing next week so we shall see what arguments are presented by plaintiffs to rebut these assertions.  MMA Payout will keep you posted.

Mousasi sues Fear the Fighter, Makdessi

April 24, 2015

MMA Junkie is reporting that UFC middleweight Gegard Mousasi has sued clothing company Fear the Fighter and its president UFC fighter John Makdessi for unpaid sponsorship pay.  A source in the article indicates that Mousasi is owed over $25,000.

The lawsuit is filed in Canada and while it has not been disclosed, one assumes that he is seeking damages for breach of contract of the sponsorship agreement.  He claims Fear the Fighter has not paid him for his last 2 fights.  Also, Mousasi claims that other fighters are also owed money from Makdessi’s company.

Makdessi is a UFC lightweight fighting from Canada.  According to corporate records, he is the president of the clothing brand.  Makdessi is scheduled to fight Saturday at UFC 186.

Payout Perspective:

This is a first of its kind lawsuit where a fighter has sued a fighter.  Obviously, the circumstances are unique as Makdessi owns a company that sponsors fighters.  This situation actually lends itself to the argument that UFC-Reebok deal is warranted as the fighters would be guaranteed their pay.  The issue of sponsors not paying a fighter is not a new thing and the UFC sponsorship deal should help address the situation.  We shall see what is to become of this lawsuit and the reaction Makdessi may receive Saturday.

More on Appellate Court decision to allow Rampage to fight Saturday

April 22, 2015

A New Jersey Appellate Court has overturned the portion of the Preliminary Injunction preventing Rampage Jackson from fighting this Saturday at UFC 186.  According to the Court opinion issued Tuesday, the Preliminary Injunction, aside from his fight remains.

The rest of the issues will be determined by the trial court where Bellator sued Jackson for allegedly breaching his contract.  Jackson claims it was Bellator that breached the agreement.

The trial court granted Bellator MMA’s preliminary injunction which precluded Jackson from fighting April 25th.  However, Jackson filed an emergency appeal to reverse the trial court’s decision.  The appeal went under the radar until the announcement of the opinion on Tuesday.

The Appellate Court determined that any irreparable harm that may be suffered by Bellator due to Jackson fighting on Saturday was just “vague speculation” which overturns the trial court’s determination that Jackson’s involvement at UFC 186 would have caused reputational harm as well as the opinion of the trial court that Bellator’s investment in Jackson was more than just monetary.

Brett Okamoto tweeted a pic of the 3 page order and MMA Junkie has obtained it as well.

Payout Perspective:

The Appellate Court’s opinion makes the ongoing lawsuit between Jackson and Bellator clear as mud.  It also presents the issue that Bellator may either amend its legal Complaint to include the UFC or sue them separately.  A footnote to the opinion indicates that there may be a time where the preliminary injunction would need to be further amended or eliminated altogether and that the parties return to the Appellate Court.  The message does not put a lot of faith in the trial court.  Sure, each party knew that they could seek relief from the appeals court but to have the court actually announce this in a footnote seems like an overseer of the trial court.

With that said, the Appellate Court opinion negates the trial court opinion on the issue of irreparable harm when it came to the issuance of the preliminary injunction.  In essence, it believed that the trial court may have over-analyzed the issue with respect to Bellator’s investment in Rampage, the contractual landscape of MMA fighters and the unique value of Rampage.  It also seemingly dismissed any argument or value in Bellator’s argument regarding reputation harm.

MMA Payout will continue to monitor.

Injunction overturned, Rampage back on UFC 186 card

April 21, 2015

In a surprising turn of events, the New Jersey court that issued the preliminary injunction preventing Rampage Jackson from fighting on Saturday’s UFC 186 card has reversed its decision. At this point, no court records have surfaced but Bellator has issued a statement indicating that it is “disappointed (the court) reversed the injunction as to the April 25 fight.

Jackson released his own announcement via social media:

Payout Perspective:

One can only guess the reasons for the Court to reverse its decision at this point. In its opinion issued on April 7th, it appeared that the Court seemed dead set that Rampage had breached his contract. Unless there was a procedural defect, the Court must have been persuaded by another issue it overlooked to reverse its opinion.  MMA Payout will have more as the information becomes available.

UPDATED: Not surprising, the UFC is pleased with Tuesday’s ruling overturning the preliminary injunction.  “We are happy with the decision from the New Jersey Court allowing Rampage to fight in Montreal this Saturday night,” UFC President Dana White said, “I am looking forward to seeing Rampage back in the Octagon.”

More on Plaintiffs Opposition to Zuffa’s Motion to Transfer Venue in antitrust lawsuit

April 11, 2015

MMA Payout reported earlier in the day of Plaintiffs’ Opposition to Zuffa’s Motion to Transfer Venue in its antitrust lawsuit filed in the U.S. District Court of Northern California in the San Jose Division.  We provide a little more insight into the filing by Plaintiffs on Friday.

In its opposition briefing arguing that the lawsuit should remain venued in San Jose, the Plaintiffs (i.e., Cung Le, Nate Quarry, Jon Fitch and the other fighters that filed in San Jose) argue that the forum selection clause in the UFC fighter contracts and/or bout agreements are inapplicable when it comes to this antitrust claim. Essentially, the Plaintiffs argue that the clause in the fighter contracts which Zuffa pointed to in its motion as binding the Plaintiffs to bring any legal action in Nevada does not apply when it comes to a claim violating antitrust laws. Essentially, the Court need not interpret the terms or enforce the contracts, but the contracts are evidence of Zuffa’s anticompetitive means.

Plaintiffs also argue that Zuffa fails to show that the present Court is an “inconvenient forum.” Plaintiffs argue that there are “significant ties” to the District in which they filed the lawsuit. They cite the fact that three fighters reside in the San Jose area and others train (notably, Jon Fitch) in the area. They also cite to the fact that Plaintiffs Le and Hallman fought for Strikeforce based in San Jose. Also, five of the Plaintiffs fought in San Jose while with the UFC. The Plaintiffs also cite to events that occurred in the area that are relevant to the lawsuit. The Plaintiffs bring up that EA Sports UFC, an issue raised in the lawsuit, was developed in Northern California.

In rebuttal to the Zuffa argument that the UFC’s documents and witnesses are located in Vegas and thus convenience would dictate that a transfer is warranted, Plaintiffs argue that UFC document production would not be inhibited. Essentially, with the technological advances of document discovery, the fact that Zuffa is in Vegas and the Plaintiffs are in Northern California is of no significance. The Plaintiffs argue that the depositions of UFC employees can be taken in Vegas without the need to transfer the whole case and if a trial were to take place, the relevant employees to testify at trial could be compelled to the forum at time of trial.

An interesting argument pointed out by Plaintiffs is that they cite the fact that the Court is experienced in antitrust law. The Northern District of California had 96 cases involving federal antitrust claims in 2014 whereas the District of Nevada only had 4. Plaintiffs state that from 2010-2014, the Court had “25 times the number of antitrust actions” than the District of Nevada.

Plaintiffs also point to “strong local interest in the underlying litigation” arguing that it should provide a forum to the Plaintiffs that reside and train in San Jose and the issue that UFC allegedly enforced its illegal monopoly and monopsony with Northern California-based Strikeforce is of interest to keeping the case in San Jose.

Finally, Plaintiffs argue that San Jose is relatively faster in terms of the time taken to file a lawsuit to the time a case goes to trial.  Cung Le and Jon Fitch also signed declarations to support this opposition although each did not have any significant information.

Payout Perspective:

After reviewing the opposition brief of the Plaintiffs, it is clear that the key argument here is whether the forum selection clause will be enforced by the San Jose court. Zuffa argues that the Plaintiffs signed the contract and thus it should be enforced and binds them to a venue in Las Vegas. However, Plaintiffs contend that the actual terms and/or interpretation of the contract are not an issue and thus the forum selection clause is not relevant. The other arguments are of lesser strength. Notably, the “significant ties” argument posed by Plaintiffs is hard to accept.

MMA Payout will keep you posted once Zuffa files its

Plaintiffs in Zuffa antitrust case file opposition to motion to transfer venue

April 11, 2015

The Plaintiffs in the Le v. Zuffa, LLC (and related) antitrust case(s) have filed its opposition to Zuffa’s Motion to Transfer Venue to Las Vegas.  Its main argument is that the forum selection clauses in the plaintiffs fight contracts are inapplicable in this antitrust action.

Earlier this year, Zuffa filed a motion to transfer venue from the federal court in San Jose to the federal court in Las Vegas citing, among the issues, the contractual agreements signed by the fighters.  Also, it argued that many of the witnesses are residing in Vegas thus it would be more convenient for this litigation to occur in Las Vegas.

On Friday, Plaintiffs filed opposition to the motion which states that the forum selection clauses (the contractual language in the fight contracts binding fighters to bring legal action in Vegas) are not applicable in this antitrust matter.  It argues that the contractual language only related to issues “to interpret or enforce” the contracts and Plaintiffs argue that the contracts are only relevant to the effect that the UFC used them as part of its anticompetitive scheme.  The Plaintiffs go on to state in its pleadings that the UFC “torture the text of the Agreements and ignore the weight of authority that defeats its Motion.”  Essentially, the UFC misinterprets its own contracts in this matter.

UFC has issued its own statement in relation to the opposition filed Friday:

“As expected, the plaintiffs have filed their opposition to our motion to dismiss. Nothing in their opposition changes our view that their complaints are filled with conclusory allegations that are not adequate to support their antitrust claim. As we laid out in our motion to dismiss, UFC has competed in a lawful manner that has benefited fighters and built UFC into a premier organization in the sport of Mixed Martial Arts.

Indeed, UFC properly competes with other MMA promoters, fairly compensates its athletes and has created a product that is enjoyed by millions of fans around the world. Our legal position is solid and we intend to prevail in this lawsuit.”

The hearing date on the motion to transfer venue is set for May 7th.

In addition to this motion, Zuffa has filed a motion to dismiss with the opposition brief pending.

Payout Perspective:

MMA Payout will keep you posted on this motion.  Plaintiffs argue several other points in its opposition which will cover in the coming days.  Essentially, the Plaintiffs argue that despite the fighters signing their fight contracts which subject them to jurisdiction in Las Vegas, the headquarters of the UFC, the claims that they bring do not relate to the enforcement of the contract.  The contract is only evidence of the anticompetitive nature of the organization.  In addition, Plaintiffs argue that key individuals do reside in San Jose and thus it should stay in the district.  Also, they claim that based on median time of filing to trial, it is faster (25%) to trial in San Jose than Las Vegas.

Court opinion in Bellator-Rampage lawsuit made available

April 9, 2015

A copy of the court opinion by Judge Karen Suter which granted Bellator MMA’s injunction in its lawsuit against Rampage Jackson was made public.

After oral argument on April 2nd, the Court issued its opinion on April 7th.  MMA Fighting provides a copy of the lawsuit here.

The court made it abundantly clear that it was not deciding the merits of the case and specifically that it was not deciding whether the contract between Bellator and Rampage was breached.  However, it made clear that Bellator had proved its case

Although the Court referred to several cases involving boxers that sign promotional agreements and then seek additional help from other promoters, the Court distinguished this case based on the exclusivity of Bellator’s agreement with Rampage.  It sided with Bellator in its argument that it was likely that Rampage breached its contract despite the arguments raised.

As previously stated, the Court found “clear and convincing” of the following on behalf of Bellator.  The four factors in determining a preliminary injunction are as follows:

  1. A substantial likelihood of success on the merits of the case;
  2. There is a substantial threat of irreparable damage or injury if the injunction is not granted;
  3. The “balance of harms” (threatened injury) weighs in favor of the party seeking the preliminary injunction;
  4. Granting an injunction would serve the public interest.

Some interesting points from the 25 page ruling.

  • The Court emphasized the exclusivity of the contract between Bellator and Jackson. It also stressed the fame and notoriety of Jackson as evidence that Bellator would suffer injury if Jackson were allowed to participate at UFC 186.
  • The Court did not buy the argument that Bellator breached its contract since it did not provide Rampage or his management with PPV summary report. The Court indicated Bellator had substantially complied with the information and that not providing the PPV summary was not a material breach of the contract.
  • Rampage’s claim that his fights were not adequately promoted by Bellator and the need to obtain the PPV summary was necessary fell flat. The Court ruled that there was no marketing provision setting a certain amount of money that was required to promote his fights.  Even without producing the summary report for PPV, there would be no breach since the actual compensation Rampage received was not in dispute.  Furthermore, the Court opined that Rampage offered no rationale for why Bellator would not want to market and promote one of the company’s top stars.
  • The Court sided with Bellator with its argument that if Rampage were allowed to fight at UFC 186, it would harm Bellator more than just monetarily, but from a reputation and brand standpoint. Bellator argued that the “MMA community” would denigrate Bellator if Rampage were allowed to leave for the UFC.  Moreover, Bellator argued that denying the injunction would be a sign to other fighters and their managers that they could just “ignore their contracts” and leave for perceived better opportunities.  Bellator also argued that if Rampage were to leave, Bellator would have lost out on the time and money it had invested in promoting him.
  • The opinion also notes that on December 4, 2014 Scott Coker claims to have notified the UFC that Rampage was still under contract while negotiations by Rampage to the UFC were ongoing. This seems to call into question how much the UFC knew about the Bellator-Rampage contract dispute.  It also calls into question the UFC’s decision to sign him and then put him on a card prior to a legal determination.

Payout Perspective:

In the end, Rampage and his legal team may win this court battle, but the first big decision out of this case falls in Bellator’s favor.  The Court opinion preventing him to fight at UFC 186 is not a good indicator of things to come.  Certainly, the Court made it clear it was not ruling on whether a breach occurred, but the threshold for proving a preliminary injunction is warranted is high (“clear and convincing” as opposed to “more likely than not”).  We will see what Rampage’s legal team decides on whether it will appeal the decision.

Another issue that was raised in passing was the knowledge that the UFC may have known about the contract issues with Bellator.  There could have been potential legal action between Bellator and UFC regarding interference with a contract but it seems as though Bellator did not want to pick that fight just yet.

MMA Payout will keep you posted on this.

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