World Series of Fighting and PFL file appeal against former officers of WSOF

June 20, 2018

The World Series of Fighting litigation continues in Nevada.  Despite re-emerging earlier this month as the Professional Fighters’ League, the lawsuit(s) continue over the power struggle between individuals, entities and now with a new investment group, more litigants. In this instance, the lawsuit hinges on a licensing agreement which contained an arbitration provision.

The licensing agreement between the parties described below is related to a prior Settlement Agreement and Operating Agreement between the two sides.  As you might infer, this business divorce is a mess.

There has been a plethora of lawsuits filed by different people and entities and this one is the latest involving the inception of WSOF.  The lawsuit in question pits rival entities over the split up and sale of World Series of Fighting when it was sold to investors that repackaged it as the PFL.

In this lawsuit plaintiffs are WSOF Global and its head Vince Hesser and Zion Wood Obi Wan Trust (Zion) and Shawn Wright (collectively referred to as Plaintiffs).  The defendants include MMAWC, LLC doing business as World Series of Fighting, MMAX Investment Partners, Inc., doing business as PFL, Bruce Deifik, Carlos Silva, Nancy and Bruce Deifik Family Partnership and Keith Redmond, Inc.

The lawsuit claimed that MMAWC, LLC, which did business as WSOF experienced several financial shortfalls during 2012 to 2015.  The plaintiffs had made “extensive loans” to the promotion to allow the promotion to continue and operate.  But, WSOF refused to repay the loans.

Zion Wood Obi Wan Trust Complaint by JASONCRUZ206 on Scribd

Additionally, Shawn Wright and Vince Hesser had written agreements with WSOF for other contractual payments and worldwide licensing.  WSOF Global had acquired rights to the intellectual property of WSOF overseas and had invested in the brand under the assumption it was planning to expand.  But, WSOF refused to honor the terms of the agreement per the Complaint.  Zion’s membership interest was 10.5% and WSOF executed agreements that it was non-dilutable.

The dispute was thought to have been resolved after the organizations entered into a Settlement Agreement.  As part of the agreement, Zion agreed to reduce its 10.5% non-dilutable interest in WSOF to 4.50% of the total outstanding ownership units in WSOF, which interest shall remain non-dilutable.  But, Zion believed that Bruce Deifik created a new entity and put all of the WSOF assets into the PFL organization.

Zion did not have an interest in the “Successor Company,” PFL.  As a result, it believed that its shares were being diluted.

The Complaint stated WSOF sold the company for $15 million, but without input from Zion and WSOF Global, Inc., who held shares in the WSOF.  Additionally, Plaintiffs claimed it was being shut out from finding out the real value of the deal which would help them assess the purported amount that they would have been entitled.

The Complaint also mentioned a WSOF event in New York City on New Year’s Eve 2016.  The WSOF reported $0 income from broadcasting rights to New York State.  But, it reported to Zion that they spent $190,000 in broadcasting revenue from NBC to the NYC event.  This would be inconsistent reporting.

But, the big issue here is the licensing deal between Vince Hesser, the owner of WSOF Global, and WSOF.  An Amended Master License Agreement gave Mr. Hesser the exclusive right to license the WSOF brand outside the United States.  A dispute arose over the licensing agreement and was thought to have been subsequently settled.  WSOF Global claims to have rights that “consist of over 100 international events per year, at a cost to produce of tens of millions of dollars, which dwarf the mere 8-10 events per year” from WSOF.

But, when the WSOF sold to PFL, it failed to comply with the licensing agreement.  The obvious breach was the change of the name to the Professional Fighters League which plaintiffs claimed damage them.  The PFL did not grant WSOF Global the right to use the PFL name in the Settlement Agreement and Amended License Agreement.

Prior to the name change, WSOF Global claimed that it was working on a sports partnership to bring MMA content to China.  It claims it received $16 million to further the promotion of WSOF in China and to promote foreign fighters in their events alongside Chinese fighters.  This would appear to be part of the damages to be claimed in this lawsuit.

WSOF stated that the parties should be compelled to arbitration to resolve these disputes and pointed to the clause in the Amended Licensing Agreement.

The arbitration clause in the parties’ licensing agreement compels the Court to dismiss this case and force the parties to arbitration.  But, the plaintiffs contend that they did not specifically authorize the arbitration agreement.  Under the state law in Nevada, a party must grant “specific authorization” that they have agreed to their arbitration provision otherwise it is void.  Plaintiffs cite the lack of specific authorization in the contract to show that the arbitration provision was void.

In its reply to the opposition of moving the case to arbitration, WSOF argued that the parties jointly drafted and authorized the agreement which included the arbitration clause.  Thus, despite WSOF’s assertion that Plaintiffs had knowledge of the clause and the opportunity to point out the issue, it did not.  Moreover, it agreed to the overall agreement.

The Court found in favor of Plaintiffs’ arguments and voided the arbitration provision and denied WSOF’s motion to compel arbitration.  Shortly after the ruling, WSOF filed to appeal the decision.

In its appeal statement WSOF noted, “When the parties finalized the Arbitration provision, however, the parties did not include language and initials or separate signatures to further manifest their agreement to the Arbitration provision…”

WSOF Case Appeal Statement by JASONCRUZ206 on Scribd

Despite the fact that WSOF believed that the Arbitration provision should have been allowed, the Court found it void due to the lack of a “specific authorization.”

The appeal will be heard in the state appellate court in Nevada.  The lawsuit was filed in the District Court of Clark County, Nevada.

Payout Perspective:

While there is the possibility that the Plaintiffs in the lawsuit may amend its RICO claim, it was dismissed by the Court.  However, the case is not going to Arbitration due to the fact the Court voided the provision.  While WSOF may allege that having the parties sign a section consenting to Arbitration is duplicative if you consider they signed the Agreement.  Also, in this instance, the parties allegedly collaborated on putting together the Agreement.  Yet, the Nevada state rules are explicit that there must be a specific authorization which appears to be more than just signing the contract overall but making an affirmative concession to the clause.

As it goes for the overall transaction, it appears that Hesser and Wright are creditors to the WSOF entity and were not privy to the sale of assets to the successor company, PFL.  While there was a transaction to do business under the WSOF brand, there was not one to do under any successor brand.  It would seem that either poor business acumen, lack of communication or a bad business deal has transpired.  Maybe all of the above.

One thing is for certain, both sides have shown errors in contractual drafting.  Plaintiffs should have included clauses that would have protected itself form any sale of assets from the debtor (i.e., WSOF).  For WSOF, it should have drafted an Agreement in compliance with the Nevada state law that would ensure specific authorization for Arbitration.  While Arbitration may have been a faster, cost-efficient way to resolve a dispute, it looks like this case will be litigated.  But first, the appeal.

MMA Payout will keep you posted.

Canadian MMA promotion sues WSOF for breach of Franchise Agreement

February 15, 2018

A Canadian mixed martial arts regional promotion has filed a lawsuit against MMAWC, LLC and associated entities with the World Series of Fighting promotion in Clark County Superior Court in Nevada.

The lawsuit, filed on February 1, 2018, also names Carlos Silva, Ray Sefo and Keith Redmond.  Aggression Fighting Championship (“AFC”) claims that in mid-2013 was approached by WSOF looking to expand its business into the Canadian market.  WSOF claimed it wanted to acquire AFC and rename it World Series of Fighting Canada.  According to the lawsuit, it claims that WSOF represented that it had “substantial money behind the company” and an “ironclad network deal with NBC” and had retained IMG to sell events internationally.  AFC claims that WSOF would “cover all increased costs of events to rebrand the AFC, and Plaintiff would be reimbursed all event expenses.”  WSOF claimed it would share all broadcast revenues.

AFC executed a 5-year “licensing agreement which began on August 21, 2013 and expired on August 21, 2018.  But, AFC claims WSOF never provided a Franchise Offering Circular, financial statement or any of the required disclosures for selling a Franchise.

The lawsuit states that after WSOF took over AFC, that WSOF was “forcibly evicted from their office space and there was internal fighting related to non-payment of loans, expenses and vendors.”

AFC claims that it “advanced several tens of thousands of dollars for costs and expense for these events.”  It also paid a “monthly stipend” to WSOF.  Despite requests for payment, WSOF did not “honor the terms of the Franchise Agreement.”

AFC claims that WSOF has failed to pay any Canadian broadcast or streaming revenue to AFC or merchandise revenue.

Interestingly, AFC notes that as part of the “Franchise Agreement,” AFC can use the “Professional Fighters League” name in Canada.

There are ten causes of action in the Complaint, among the claims AFC claims breach of contract of the Franchise Agreement, the implied covenant of good faith and fair dealing in contract, failing to inform AFC that they did not honor the obligations of the Franchise Agreement, intentional interference with prospective economic advantage and tortious interference with contract. It also claims that Silva, Sefo, Redmond and Bruce Deifik breached their fiduciary duty as managers, directors and/or officers of WSOF/PFL. There is also a Civil RICO claim as a result of these claims.

Payout Perspective:

Notably, next week a hearing is scheduled fora Motion to Dismiss and/or compel arbitration in the case of WSOF and Shawn Wright as trustee for a company (WSOF Global, LLC) that provided loans to WSOF.  That case also deals with the issues related to the WSOF and PFL.  Here, it appears that the Canadian company is attempting to recoup money after a broken franchise deal from WSOF.  Since the new ownership took over, AFC probably feels duped that they were not compensated from the still existing franchise agreement.  One would assume that the new investors would take over the liabilities of the previous regime.  Then again, the multitude of lawsuits reflect ongoing issues with the structure of the prior company.  One would think we see this case go to arbitration as well as the Shawn Wright situation.  MMA Payout will keep you posted.

 

MPO Year in Review – WSOF repackages as PFL

December 26, 2017

The World Series of Fighting went under new management and repackaged itself as the Professional Fighter’s League.

The league, which is set to roll out in 2018, promises steady pay and fights for its athletes which will see them compete for a $1 million payoff.

Via our April post:

The inaugural season will run for 10 months and will feature seven different weight classes.  Similar to league play, fighters will compete in three regular season fights with the best records moving to a playoff and then a championship round.  There will be $10 million in prize money with $1 million going to each winner of the 7 divisions.  The remaining 3 divisions will go to regular season and playoff competitors.

The Washington Post reported that the PFL’s new investors included Russ Ramsey, an investment banker and hedge fund manager along with venture capitalists Donn Davis and Mark Leschly.  Sports franchise owner Ted Leonsis is also an investor.  Leonsis owns the Washington Capitals, Mystics and Wizards.  Also, members of the Lerner family who own the Washington Nationals are investors.

The company’s first event took place this past July.  It also held an event in Everett, Washington and also a special Thursday night event in D.C.  in November.  The event drew 238,000 unique views in the online-only event.

Last spring, the company was hoping to secure a television deal but there has yet to be a movement on that area.

Recently, a PFL-signed athlete threatened to sue the company after he learned he would not be part of the upcoming season.

No word on the status of the company and its 2018 events for the PFL which is a little concerning because of the lack of promotion.  If the PFL is looking to make a splash in 2018, we might not see the promotion until the spring of 2018.

Former fighter threatens to sue PFL

December 20, 2017

MMA Fighting reports that former Professional Fighter’s League fighter Bruce Boyington is threatening legal action after he was informed by the PFL that he would not be included in the company’s 12-man lightweight division 2018 season.

Boyington is 14-11 and has lost his last 3 fights.  He claims to have had a four-fight contract with the predecessor entity, World Series of Fighting.  But, he’s being released having just fought one fight in the WSOF.  He believes that he was going to be a part of the PFL and turned down other fights and opportunities as he was waiting for the upcoming 2018 season.

This past year, the World Series of Fighting was purchased by new investors and promised a new format which would ensure that fighters would fight and be paid a salary.

Boyington took to social media to advocate his case against PFL.

In response, Ray Sefo addressed the issue:

Payout Perspective: 

There are two sides to every story.  Does Boyington have a case?  We are not sure because you’d have to look at his contract with the company.  One would think that he was classified as an independent contractor and as a result it’s likely he could be released from his contract at any time. Boyington notes that he relied upon the contract and turned down other offers to fight to stick with the PFL (these are his damages he’d claim in a lawsuit). But, Sefo seems to state that even if there was some duty to give a reason for his contract to be terminated, losing 3 in a row would be a valid one.  The underlying issue of the state of the PFL is compelling since the reboot of the company was to provide a fresh start and offer fighters an opportunity with fights and steady pay.  We will see if PFL can come through in 2018.

PFL 1 on NBCSN draws 291,000 viewers Friday night

July 5, 2017

The debut of the Pro Fighters League: Daytona drew 291,000 viewers on Friday night per Nielsen via ShowBuzz Daily.

The 143-minute telecast drew a 0.06 rating in t he A18-49 demo.

Under the World Series of Fighting name, the promotion last drew over 291,000 viewers on NBCSN at WSOF 10 when it garnered 365,000 viewers.  Its last event, WSOF 34, it drew 951,000 viewers when it appeared on NBC.

The main event for PFL featured Jon Fitch and Brian Foster with Fitch winning via submission.

The event took place at NASCAR’s Daytona International Speedway.  The race was cancelled due to rain and the fights were moved up as a result.  However, there were reports of issues with the mat and one has to wonder if the fights should have gone on due to the conditions.

Payout Perspective:

An inauspicious start to the new PFL.  There were only 4 fights on the card and that may have been good due to the weather.  Frankly, I thought the event took place on Saturday and not Friday night.  The lack of promotion and notice for the PFL is concerning as you would think that a debut would come with more fanfare.  NASCAR did promote the event but I wonder if there was enough buzz for the event.

Formerly WSOF, Professional Fighters League announces new structure for fighters

April 19, 2017

The World Series of Fighting is being repackaged as the Professional Fighters League.  The league will begin in January 2018 according to a press release sent out on Wednesday.

The inaugural season will run for 10 months and will feature seven different weight classes.  Similar to league play, fighters will compete in three regular season fights with the best records moving to a playoff and then a championship round.  There will be $10 million in prize money with $1 million going to each winner of the 7 divisions.  The remaining 3 divisions will go to regular season and playoff competitors.

The Washington Post have announced that a group led by several D.C.-area businessman are spearheading the re-launch effort.  Russ Ramsey, an investment banker and hedge fund manager along with venture capitalists Donn Davis and Mark Leschly are the co-founders of the Professional Fighters League.  Sports franchise owner Ted Leonsis is also an investor.  Leonsis owns the Washington Capitals, Mystics and Wizards.  Also, members of the Lerner family who own the Washington Nationals are investors.

There is no current television deal as the NBCSN TV deal expires at the end of 2017 although according to MMA Fighting, talks are underway with several media outlets.  MMA Fighting obtained an email to fighters from Ray Sefo stating the change.  It also noted that every fighter will have regular fights (no less than 3 per year), they will receive a monthly paycheck and have the opportunity to be champion.

Payout Perspective:

The announcement was a surprise for fighters as none knew of the details of the new venture.  Of course, there are still more questions to ask.  First, are the fighters now employers?  Second, with the mandate that every fighter have at least three fights, how many former WSOF fighters be included on its roster.  Third, will fighters receive insurance.  Of course, what happens if a fighter is injured and cannot fight the rest of the year.  Will they continue to receive a monthly paycheck.

Obviously, the infusion of cash from the investors seems to be the reason for the newfound promises.  Of course, the big need is for a media rights distributor that will pay for the content with the hope that it can find key sponsorships to carry it through the inaugural season.  We shall see what happens.

WSOF draws 146,000 viewers

March 21, 2017

World Series of Fighting 35 drew 146,000 viewers on Saturday night on NBC Sports Network per Sports TV Ratings.

The event also drew 45,000 viewers in the A18-49 demo.

The main event featured Blagoy Ivanov defeating Shawn Jordan in a heavyweight matchup.

World Series of Fighting – 2017

WSOF 34 951,000 NBC
WSOF 35 146,000 NBC Sports

Payout Perspective:

The event was on the same night as the first weekend of the NCAA Tournament and the GGG- Danny Jacobs PPV.  The event is on par with most of the events in 2016 and considering that there was not much buzz for this event the ratings are decent.

WSOF postpones another event

January 17, 2017

MMA Fighting reports that the World Series of Fighting has postponed its WSOF 35 event set to take place February 28th. It has now been moved back to March 18th per WSOF president Ray Sefo.

No location has been announced for the moved card which had just one fight announced as of now: Blagoy Ivanov vs. Shawn Jordan.

You might recall that the promotion canceled two events to help with its New Year’s Eve show in New York City.

The promotion is in flux as bantamweight and lightweight champions, Marlon Moraes and Justin Gaethje are exploring free agency while welterweight champion Jon Fitch is contemplating retirement.

In addition, there are a spate of lawsuits involving the investors and owners of WSOF.

Payout Perspective:

With the promotion looking like it’s in turmoil, moving its next event seems like a harbinger of things to come. The promotion has failed to gain traction in its existence and with its core fighters perhaps moving on, we might see WSOF fold in 2017.

UPDATED: WSOF 34 draws 951,000 viewers, prelims draw 71,000 on NBCSN

January 4, 2017

World Series of Fighting drew 941,000 951,000 on NBC Saturday afternoon according to Nielsen.  The rating makes it the highest-rated televised WSOF event ever.

The preliminaries on NBC Sports Network drew 71,000 viewers per Sports TV Ratings.  The prelims aired from 11:30-1pm PT.  The main card aired on NBC from 1-3pm PT.

Notably, the WSOF event took place during the first NCAA College Football semifinal at the Peach Bowl between Washington and Alabama.  The game drew 18,397 million viewers on ESPN per Sports TV Ratings.

Also of note, the UFC 207 PPV post-fight replay on FS1 drew 76,000 viewers at 3-4am PT.

Payout Perspective:

The Saturday event bests the WSOF’s last time on NBC when it drew 741,000 for WSOF 11 on July 5, 2014.  This past Saturday’s event, which took place in New York, featured Jake Shields-Jon Fitch and Justin Gaethje-Luiz Firmino.  Considering WSOF was up against one of the national semifinals for college football, reaching close to 1 million viewers is a success.  Of course, the question of whether the WSOF can remain afloat in 2017 is another question.

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?

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