Trout case may have impact on future of Ali Act litigation

January 5, 2018

Maybe the most important case as it relates to the expansion of the Ali Act may involve boxer Austin Trout and his current lawsuit against the World Boxing Organization in Federal Court in Puerto Rico.

Last month, the WBO is moving to dismiss the case and invoke the arbitration clause which was a part of his promotional contract with the company.  Trout had filed the lawsuit which includes claims for violation of the Ali Act in boxing.  The WBO argues that Trout agreed to the contract and should be held to its arbitration clause and that he forfeited his right to a jury trial.  Trout states that the Ali Act is federal law and that it is not governed by the WBO Promotional contract.  His attorneys also claim that that the arbitration would be unreasonable or unjust.  The other overarching argument is that the WBO has waived its right to compel arbitration by litigating the case.

The case, originally filed in state court in New Mexico where Trout resides, has been around for 2 years but due to jurisdictional fights, nothing substantive has happened in the case.  Due to the hurricane that hit the island, there was an additional delay.

You can find the background of the lawsuit in our September 2017 post which includes copies of the Complaint and Amended Complaint.

Payout Perspective:

There’s no timeline as to when the Court might render a ruling on the WBO’s Motion to Dismiss.  But, the overarching issue for fans of the Ali Act Expansion is whether an organization can contract out of the lawsuit.  This means that even if there is a federal law which grants a plaintiff a right to sue, the fact that there is an arbitration clause in the contract may render the claim moot as to a trial and it may (or may not) go forward in arbitration.  There are several layers to consider here as to whether the Ali Act is something that was contemplated as part of a contractual dispute that would go to arbitration.  If it is a part of the contract and the arbitration clause is valid, it would make it easier for organizations to litigate claims.  On the other hand, I have been an advocate for arbitration and/or mediation to resolve Ali Act violations due to the fact that litigation is long and expensive.  You could also bifurcate the claims as to taking the Ali Act to trial while arbitrating any other claims.  The other issue is who would be the trier of fact (i.e., jury, judge or arbitrator).  Also, who would be the arbitrator (a panel or just one individual).  Thinking ahead, if an expansion to the Ali Act takes place, it would be interesting to see if the UFC amends its fighter contracts to institute clauses to limit them to binding arbitration similar to the UFC Anti-Doping Program.  MMA Payout will keep you apprised of this lawsuit.

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.

Mighty Mouse doesn’t know if he’ll be paid for being ready to fight at UFC 215

September 12, 2017

In an interview with MMA Fighting on Monday, Demetrious Johnson stated that he did not know whether or not he’d be paid as a result of Ray Borg having to pull out last minute.  While the fight by reset soon, there is the issue of whether Johnson is compensated for being ready.

Johnson recently retained First Round Management to handle his business dealings which include negotiating with the UFC.  In the interview, Johnson said that First Round Management (the agency owned by Malki Kawa) was working with the UFC in terms of compensation.  The UFC indicated to Johnson that they don’t usually pay athletes with they can get the rebooked quickly.

MMA Junkie notes that “the UFC is not contractually obligated to pay fighters whose opponents are unable to compete, the promotion often pays out show money when last-minute issues cancel a fight.”

You might recall that Tony Ferguson was not paid $250,000 show money when his fight with Khabib Nurmogomenov fell through due to Khabib’s needing to be hospitalized.  Ferguson was offered a replacement fight but was not going to be compensated the same.

Payout Perspective:

It’s clear that the standard UFC bout agreements do not address issues if one of the fighters has to pull out during fight week.  The fact that the UFC sometimes pays fighters, and sometimes it doesn’t, but nothing is specifically written shows its leverage in the contract.  One would have hoped that Johnson’s management would have guaranteed his pay entering into the fight in the case that his opponent could not fight.  They could have taken the Tony Ferguson incident as a lesson.  Appears they did not.

Johnson is a champion and this is a disservice to him and shows the utter disrespect he has been talking about.  Of course, he may be partly to blame here since his representation didn’t get written confirmation of payment.  Even if the fight were to be given a quick turnaround date, there are expenses Johnson (as an independent contractor) incurred in the lead-up to this fight.  What happens if the next date, Borg injures himself and has to pull out again.  Are you going to hope for another quick turnaround?  Bear in mind, Johnson is a world champion and not a guy opening an event on Fight Pass.

16 for 16: No. 10 WSOF legal woes continues

December 23, 2016

The World Series of Fighting will cap off its year with a show on New Year’s Eve in New York.  However, there might be cause for concern for the organization as legal problems persist.

3 new lawsuits were filed in Nevada this year which call into question the financial stability of the company.  The lawsuits reveal the fact that the company has internal issues with the people that run it and the people that fund it.  Based on the information gathered from the lawsuits, the people investing and claiming ownership (even a small %) are not the most professional people you may know.  You may recall a lawsuit in 2015 saw issues with loans and an assignment of rights for use internationally.  The new lawsuits see similar problems with loans to keep the organization afloat.

In addition to the legal troubles, WSOF cancelled two events in order to bolster its New Year’s Eve show in New York.  WSOF opened an office in New York last year and supported the push to legalize professional MMA in the state so it makes sense that they want a show in the state by year’s end.  But a New Year’s Eve show conflicts with the College Bowl Playoffs on television.

Notwithstanding what may happen on its New Year’s show, the ratings for WSOF on NBC Sports Network are slightly behind 2015’s average of 189,000 viewers.

Will WSOF survive its legal and financial woes in 2017 and continue through the year into 2018?

Update on Wilder-Povetkin lawsuit includes more discovery fights

November 17, 2016

Attorneys for Deontay Wilder and Alexander Povetkin continue to joust in letters in the lawsuit filed in the Southern District of New York.  A February 2017 trial date may be nixed due to issues related to finalization of a protective order to iron-out discovery issues.

After a discovery conference, last week, the parties continue to dispute the contents of the order with the court.

The discovery fight centers around a number of issues.  One is related to text and direct messages from the phones of Wilder and promoter Lou DiBella.  Notably, attorneys for DiBella state that his phone was destroyed in a hot tub over 4th of July weekend.  They indicate there are no responsive texts or direct messages from Wilder’s phone.

Letter From Judd Burstein 11.09.16 by JASONCRUZ206 on Scribd

Attorneys for Povetkin and his promoter, World of Boxing, requests information concerning an injury suffered by Wilder in July 2016.  The heavyweight champion’s attorney objected to the request citing it as not relevant and likely the believe that such production of information (if any) would not lead to discoverable information.

Wilder Letter Re Protective Order by JASONCRUZ206 on Scribd

WOB Letter Re Protective Order by JASONCRUZ206 on Scribd

From the court record, it appears that the parties are seeking to fast-track the case to trial with little, if any motions, in the case.  However, attorneys for Wilder filed a Motion to Disqualify the attorneys for Povetkin.  The Motion was then withdrawn by Wilder’s attorneys.  Despite the withdrawal, they cautioned attorneys for Povetkin that they would be violating professional responsibilities if they did not withdraw as trial counsel.  The crux of the issue relates to two of the attorneys of record involved in the contract negotiations for the Wilder-Povetkin fight.  The motion sought to disqualify the attorneys as well as bar them from potentially depose the attorney that they were involved in negotiations.

Motion to Disqualify by JASONCRUZ206 on Scribd

The lawsuit arises out of a cancelled fight and money sitting in an escrow account.  Wilder was set to face Povetkin in Russia in May 2016.  A contract was agreed to which included clauses that put over $4.3 million (a portion of payouts for fighters, as well as administrative fees, etc.) into an escrow account as well as a liquidated damages provision of $2.5 million for breach of contract.  It was discovered that Povetkin tested positive for the use of Meldonium which Wilder believe cancelled the fight.  As a result, he did not travel to Russia for a fight he did not believe would take place.  Povetkin’s camp claim breach of the fight agreement since the governing body had to cancel due to Wilder not showing up in Russia.  In addition, they claim that they should be entitled to their share of the purse in the Escrow account however, Wilder’s side has prevented the money from being disbursed without a court order.

Payout Perspective:

The discovery fight is not new to many litigation attorneys.  The trial judge will need to sort out the situation and allow time for the parties to obtain the information they believe they need to go to trial.  It does seem like this case will go to trial although litigation is a game of chicken to see who concedes first.

Show Money Episode 13 talks GSP contract, Zuffa purchase and WSOF woes

October 27, 2016

It’s another episode of Show Money with Bloody Elbow’s Paul Gift and John Nash.  In this episode, we talk GSP’s contract dispute, the WME purchase and WSOF’s troubles.

 

GSP’s legal team maintains UFC breached contract

October 18, 2016

Georges St-Pierre’s legal team has maintained that the former welterweight champ’s contract with the UFC is over due to the company’s breach per an ESPN report.

After GSP proclaimed that he was a “free agent” in an interview Monday on The MMA Hour, the UFC rebutted the statement with one of its own stating that he was still contractually obligated to fight for the company.

GSP’s lawyer, Jim Quinn of the law firm Weil, Gotshal and Manges out of New York, maintains that GSP’s contract is terminated.  He indicated that the UFC could take legal action or offer a new contract to the fighter.

One of the issues GSP’s lawyers contend that caused a breach was the lack of fights given the St-Pierre.  His lawyers state he has never received an actual bout agreement.  St-Pierre’s lawyers gave the UFC 10 days to offer St-Pierre a fight.  According to his laweyrs, the UFC responded on the final day in which it offered St-Pierre former welterweight champion Robbie Lawler.  But that did not come to fruition.

GSP’s current contract was signed in 2011 per ESPN.  Of course, the UFC has evolved since then.  Notably, as pointed out in the story, is that the UFC has Reebok as its official clothier.  Also, fighters are no longer able to have outside sponsors (aside from official UFC sponsors) to promote during fight week.  St-Pierre had (or has) a deal with Under Armour in addition to other non-UFC sponsors.

Although not mentioned in the ESPN story, the UFC anti-doping policy came into effect in 2015.  It’s not known whether GSP signed an addendum to his contract binding him to USADA testing.

Payout Perspective:

It appears we may have a new legal dispute on our hands.  To be fair, GSP’s lawyers gave an artificial deadline (unless a 10-day deadline to settle this type of dispute was set forth in GSP’s contract) for the UFC to offer St-Pierre a fight.  But, it seems that the UFC could have made strides to keep GSP either by offering a fight and/or come to a contract extension under new financial terms.  Whether or not an actual bout agreement is mandatory as an offer for a fight appears to be a big question in this legal dispute.  We will see if the parties will attempt to resolve the situation short of a lawsuit.

Legal letter-wrangling goes on in Wilder-Povetkin lawsuit

August 8, 2016

The letter-writing battle between parties in the Wilder-Povetkin lawsuit is heating up as the parties have exchanged terse letters with the court about Wilder’s Motion to Dismiss the Povetkin lawsuit.

For background on the lawsuit, you can look here.  Long story short, a bout between Deontay Wilder and Alexander Povetkin set in Russia for this past May was called off by the sanctioning body due to the fact that Povetkin tested positive for Meldonium.  While the positive drug test is a factor in the subsequent events that transpired, it was not the key trigger which the parties are seemingly battling over.

At this point, the parties are fighting over Povetkin’s request to release over $4 million in funds lodged in an Escrow Account related to the WBC calling off the fight.  Wilder’s attorneys notified the escrow agent not to release the funds.  Povetkin’s attorneys claim that this was against the terms of the agreement and as a result it constituted a breach which triggered a liquidated damages clause of $2.5 million.  Povetkin’s attorneys also claim that the fight was called off due to the fact that Wilder never intended to go to Russia for the fight.  Thus, it was Wilder that breached his contractual duty to the escrow agreement as well as the bout agreement.  In addition, Povetkin filed a defamation claim against Wilder and his promoter as a result of the comments regarding failing a drug test.

While the Motion to Dismiss was filed in late July, the court in which the lawsuit is assigned has a rule in which the parties must submit a 3 page letter as part of Pre-Motion Conference prior to filing of a Motion to Dismiss.  The letter is to outline the reasons for the motion and give the non-moving party a chance to amend (change based on the argument) the Complaint.  Povetkin’s attorney identify this misstep last week as well as arguing its claim to the court.

While Wilder’s attorney gloss over their missteps in a letter to the court dated August 5th they take direct aim at Povetkin’s attorneys for its substantive arguments to the Court.  Povetkin’s attorneys responded to the letter and requested a Pre-Motion Conference.

Wilder's letter to court Aug 5, 2016

Letter From Arnold and Porter.08.05.16

Rules of Practice by JASONCRUZ206 on Scribd

UFC renews broadcast deal with BT Sport

July 27, 2016

UFC has renewed its broadcast rights partnership with United Kingdom and Ireland provider BT Sport per press release.

The deal allows for BT Sport to the exclusive right to air live UFC events throughout the UK and the Republic of Ireland.  The deal allows for BT Sport to show over 150 hours of live UFC coverage including all of the numbered UFC PPVs and all EMEA (Europe, Middle East and Africa) events.  Terms of the deal were not disclosed although the deal will run through 2018.

According to the Daily Mirror, there was some competition for the UFC rights deal with Sky.

Payout Perspective:

The timing comes prior to the big Conor McGregor-Nate Diaz rematch at UFC 202 which should garner a lot of viewers in the UK and Ireland due to Conor.  The deal solidifies the UFC’s broadcast deal in an area with which they hope to grow with the new ownership.

Bellator files Cross-Complaint against Light

July 20, 2016

The Zachary Light-Bellator lawsuit in California is getting personal.  Bellator has filed a Cross-Complaint against Light stating that he stole money from the company and did not pay back a loan given to him due to the fact he was in financial trouble.

Light filed the lawsuit claiming wrongful termination back in May in Los Angeles Superior Court.  Bellator was granted an extension to respond to the Complaint and it’s also filed its own Complaint against Light filed July 12th.

The cross-claim digs right into Light stating that Light told Bellator, that, “despite his sizable income, he had difficulty managing his family budget and was experiencing financial distress.”  Bellator loaned Light $9,403.00 and entered into a written agreement to pay back the loan.  Bellator attached a copy of the alleged agreement as an Exhibit to its Cross-Complaint.  The company also claims that Light stole $4,600 in cash from VIP ticket sales from Bellator 136.  Bellator claims Light now owes $5,050.00 plus interest.

Conversion, the civil claim alleged by Bellator, is essentially stealing.  It also claims theft under California law and a breach of written contract which alludes to the purported failure of Light to repay the loan.

Bellator claims that as part of his job, Light “would collect the money he received from the sale of consignment and VIP tickets in connection with Bellator events, and remit the money to Bellator personnel shortly after he received it from purchasers.”  He would then give the money to Bellator’s Chief Financial Officer, Michael O’Roark or Jane Estioko, Manager of Talent Relations.  However, Bellator claims that Bellator remitted to Bellator “at least some of the money” he failed to give “thousands of dollars he collected.”  The Monday after the event, Bellator 136, Light did not report for work citing medical reasons.

With respect to his financial issues, Light and Bellator entered into an “Authorization for Deduction” on December 18, 2014 for $6,974.57 in which he would repay the loan in monthly installments of $240.50 from his paychecks.  It also appears that Bellator was charging him interest on this loan.  The exhibit to the Cross-Complaint is below.

Zach Light Payment

Payout Perspective:

Light will have an opportunity to respond to these allegations.  Obviously, these claims were filed as a result of Light’s lawsuit.  The lawsuit is turning personal as Bellator infers the fact Light has had financial difficulties throughout.  The loan was from December 2014 and the alleged theft occurred in April 2016.  Were there any other issues in between this time that Bellator is holding back for the lawsuit or are these two issues the only claims against Light?  Certainly Light will deny both claims.
The one question is why would Bellator give Light the responsibility of handling money on the company’s behalf if it believed he had an issue with finances.  MMA Payout will keep you posted.

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