July 4, 2015
Attorneys on behalf of the plaintiffs in the UFC Antitrust Lawsuit have filed an opposition to UFC’s Motion to Stay Discovery in the lawsuit that is now in the U.S. District Court of Nevada.
You might recall that Zuffa filed a Motion to Stay Discovery pending the court decision in its Motion to Dismiss. The Motion to Stay Discovery was to be heard September 10, 2015 when the lawsuits were in San Jose. Since the filing, the court determined that based on the forum selection clause found in fight contracts signed by many of the plaintiffs, the venue should be transferred to the federal district court in Las Vegas, Nevada. Zuffa argued that since there was a likelihood that the curt would grant its Motion to Dismiss and would resolve all issues, discovery would be a moot point. It also stressed the fact that the discovery process is “extensive, burdensome and costly.” Zuffa cited the discovery requests which seek a voluminous amount of financial information from Zuffa. In addition, Zuffa suggested that federal courts in California evaluated a request for stay during the pendency of a dispositive motion based on whether: 1) the pending motion must dismiss the entire case (or the issue in which discovery is aimed), and; 2) whether the court may determine the motion without the discovery. Zuffa argues that the court can dismiss the case without the need for conducting discovery.
In its opposition, plaintiffs claim that the UFC’s motion to dismiss is “highly unlikely to succeed” and due to the fact that there are factual issues to resolve, discovery is required. It also argues that a stay of discovery would hurt the plaintiffs’ case.
Plaintiffs state that the UFC’s Motion to Dismiss raises “at least four contentions” requiring discovery.
- Discovery related to UFC’s assertions that its exclusive contracts with fighters, sponsors, venues and others do not substantially foreclose competition or impair rival promoters.
- Discovery seeking to determine whether “minor league” promoters do not compete with the UFC.
- Discovery related to the argument that “Plaintiffs do not show how excluding would-be rivals from access to some venues, sponsors and TV networks amounts to substantial foreclosure.”
- Discovery regarding the UFC challenge of the term “elite MMA fighter” used in the industry creates a factual dispute.
Perhaps a dig at the UFC, the plaintiffs’ brief (on page 4) cites Bob Arum (a noted Dana White foe) stating that the boxing promoter “pays his boxers approximately 80% of the proceeds of events.” The brief quotes Arum: “[b]ecause of the monopoly that the UFC has, [the UFC] pay]s][its] fighters maybe 20% of the proceeds that come in on a UFC fight.”
Its the standard litigation story that one side is stalling discovery, while the other side wants to facilitate discovery.
The opposition sets forth certain discovery requests it believes necessary for its case. Essentially, it is laying the groundwork to broker a compromise with Zuffa to allow limited discovery. The strategy here is for the court to determine what is fair and the fact that the plaintiffs outline a proposed plan may have the court allow the discovery to “see how it goes.” Probably not what Zuffa wants, but one could see this happening.
If Zuffa wins its motion to stay discovery, it will save a lot of time and money and the litigation will hinge on the Motion to Dismiss. If the court sides with plaintiffs and/or grants limited discovery, the plaintiffs may have a greater opportunity to withstand a dismissal.
We will see what the court decides.
July 1, 2015
Top Rank Boxing has sued Al Haymon and Waddell & Reed Financial in the U.S. District Court for the Central District of California in Los Angeles. Similar to the lawsuit filed by Golden Boy in May of this year, it claims that Haymon and his business holdings violate antitrust law, the Muhammad Ali Act and California state Unfair Competition law.
The lawsuit, provided by the Los Angeles Times, filed on July 1st claims that Haymon attempts to circumvent the above-mentioned laws through his Premier Boxing Champions promotion. Top Rank claims that Haymon and Waddell & Reed are seeking to “buy up and monopolize the entire vertical channel” of top fighters, “tying out” promoters, excluding promoters from major venues and using its “time buy” strategy as a “predatory ‘payola’ scheme.”
As stated in the Golden Boy lawsuit two months prior, the lawsuit identifies the scheme in which it claims that Haymon is using his market power in one business to take over a different business. Haymon has a deep stable of boxers that fight exclusively on PBC/Haymon promoted cards thus foreclosing out the fighter market as well as the promotion for these fighters.
In an update from the Golden Boy lawsuit, Top Rank identifies a June 2015 issue in which California state regulators identified Haymon reserving venues such as Staples Center and The Forum so that other promotions would not be able to hold events there. Per the LA Times, this was a reason why a fight between Lucas Matthysse and Ruslan Provodnikov was sent to a New York casino rather than a more attractive venue in Los Angeles.
Seeking to twist the dagger a little more, Top Rank picks up on Haymon’s music promoter background to accuse him of “payola.” This is based on brokering “time buys” with a host of networks to air PBC exclusively. Thus, the argument would be that other promoters are excluded from negotiating with those networks.
The lawsuit states that losses could exceed $200 million in PBC’s first two years in existence. And while PBC may operate in the red, its “loss leader” strategy allows Haymon to gain an unfair advantage in the promoter market.
The Complaint seeks $100 million in damages against Haymon, et al.
“The enemy of my enemy is my friend,” is an ancient proverb that might prove true in federal court in Los Angeles as both Golden Boy and Top Rank are digging in its heels against Al Haymon. While it’s still too early to tell whether the two longtime adversaries will work together in its fight against Haymon, it will be an intriguing sidebar to this legal heavyweight battle. The allegations mirror one another and offer some interesting legal issues. One of interest to the boxing industry is Haymon’s alleged conflict of interest in serving as a “de facto” manager (although he’s labeled as an advisor) and promoter. This is something specifically addressed in the Ali Act as prohibited. MMA Payout will keep you updated.
June 7, 2015
Show Money Episode 5 is back with Bloody Elbow’s John Nash and Paul Gift. In this episode we discuss the status of the UFC antitrust lawsuit and the PBC lawsuit filed by Golden Boy.
If you would like to know a little more about the PBC lawsuit, you can find some more information here.
June 3, 2015
The Honorable Edward Davila has granted Zuffa’s request to transfer the venue of the class action antitrust lawsuit filed by former UFC fighters to Las Vegas, Nevada. In an order dated June 1, 2015, the U.S. District Court for Northern California, San Jose Division granted Zuffa’s Motion to Transfer Venue to the U.S. District Court of Nevada, Las Vegas Division.
In an homage to the parties before it, the court offered in its order, “At the final bell, it is Defendants arguments that clinch this round because the relevant forum selection clause and the sec 1404(a) convenience considerations both favor a Nevada forum.”
The preceding paragraph of the order offered more fight references:
“…Plaintiffs allege that Defendant, now the heavyweight of the industry, has violated Section 2 of the Sherman Act…”
“Defendant now seeks to knock these cases out of the Northern District of California and into its home venue…”
As stated above, the court found in favor for Zuffa based on two arguments. First, it held that the forum selection clause in the fighters’ fight contracts/bout agreements should be recognized. With those clauses pointing to Zuffa’s home district of Nevada (or Las Vegas), the case should be decided in that forum. This finding was directly opposite to the plaintiffs’ argument that the contracts and its forum selection clauses in the underlying contracts should not be addressed in an antitrust claim such as this.
Thus, the question was whether the plaintiffs’ antitrust claim is one “to interpret or enforce” any provision of Zuffa’s agreements so that they are transferred to the contractual venue. The court held that the “substance of a claim is what matters, not its title.” It therefore decided that the lawsuit was an action “to interpret” the contracts and thus the forum selection clause should be followed.
In case you were wondering, for those plaintiffs that did not sign contracts with forum selection clauses, the court stated that since they joined this lawsuit, their claims would follow the disposition of the case. Thus, they go to Nevada too.
While most of the court order reflects on the forum selection clause, it also addressed the convenience of venue factor in deciding in favor of Zuffa. Essentially, it determined that the relevant parties and witnesses reside in Nevada and most of Zuffa’s employees would need to travel to San Jose if the case stayed in Northern California. The court did not buy the plaintiffs’ convenience of venue arguments stating it did not convince the court that “Nevada is any less convenient” for the plaintiffs despite arguing that Le and a couple other fighters resided in San Jose and that the San Jose area has a local interest in the lawsuit.
The court also shot down plaintiffs’ argument that San Jose was familiar with antitrust cases and is more efficient in getting them to trial than Las Vegas. The court acknowledged this fact but stated, “ [e]ven assuming Plaintiffs are correct that the legal process in Nevada generally takes longer than it does in this [San Jose] district, that is simply not enough to overcome those other factors showing why this specific litigation is appropriately venued there.”
The Order is below and can also be pulled of Pacer for free. Of course, if you pull it from here, please give us an h/t since we did the work for you.
The case would appear to swing in favor of Zuffa now that it is being moved to federal court in Las Vegas. The pending Motion to Stay Discovery and Motion to Dismiss will be heard in the new venue in Las Vegas. For the Motion to Stay Discovery, the parties have agreed to allow the plaintiffs to file opposition to the motion 30 days after the disposition of the Motion to Transfer. So, the pleadings will be filed by plaintiffs by the end of June with a Reply by Zuffa following 14 days after the opposition is filed.
While it may not be the end for Zuffa, the loss could be considered as significant. Its clear there was a reason why the plaintiffs filed in San Jose. They were aware of the potential risks of filing with just a small amount of its plaintiffs having ties to the district. But, the key was how much weight the court would give the forum selection clauses in the contracts. Its clear from the order that the court took a pragmatic approach to the issue (i.e., what do the underlying contracts state) rather than a theoretical one.
We shall see what transpires with the transfer to Nevada.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.