Potential issues looming in UFC lawsuit

December 22, 2014

Last week’s lawsuit filed by Nate Quarry, John Fitch and Cung Le could bring change to the UFC.  Or, it could be a legal challenge that will fall by the wayside.  Here are some potential issues to look forward to in the days and months to come.

Officially, the UFC has been quiet with respect to the lawsuit with only a short statement stating that it would “vigorously defend itself and its business practices.”  With that being said, the UFC will file an answer to the complaint.  If it is served the complaint, it must file an answer within 21 days after receiving service of the lawsuit.  Or, if it has “waived” service under Federal Rule of Civil Procedure 4(d), it would be able to file an answer within 60 days of the waiver.   The official statement provided Tuesday by the UFC indicated it had not received the lawsuit but it’s not known at this point whether official service was provided and/or the UFC agreed to waive to allow for more time to analyze the Complaint.

Paul Gift over at Bloody Elbow gave a very good two-part textbook edition of antitrust law.  If you have time and are willing, you should carve out some time to read.

Sports professor Mike McCann gave an overview of the lawsuit in an SI piece which includes potential defenses that the UFC may utilize in its legal strategy.

McCann points out a key piece that this lawsuit differs from other antitrust challenges in other sports leagues like the NFL or NBA.  The UFC is a “single-entity” and unlike other pro leagues which have teams owned by different individuals/entities, the UFC is one company.  The key aspect of this as McCann points out is that the UFC avoids any scrutiny from its employment rules with fighters since it is solely owned.  Section 1 of the Sherman Antitrust Act regulates competitors.  The lawsuit filed Tuesday is predicated on section 2 of the Sherman Antitrust Act and not section 1.

The substantive legal defenses include the practical idea that the fighters voluntarily signed contracts to fight in the UFC.  This is the likely reason why the plaintiffs’ tailored its Complaint to read that the injured class is “Elite Professional MMA Fighters.”

There is also the argument that the UFC just did better in business than everyone else in the marketplace.  Despite the tombstone picture of “dead” organizations presented by plaintiffs in its Complaint, the UFC will argue that its superior business acumen allowed it to thrive while those other companies did not.

There is also the issue of the Federal Trade Commission investigation from 2011 to 2012when the UFC purchased Strikeforce, World Fighting Alliance and other MMA organizations.  The FTC decided not to pursue the matter.  MMA Payout’s FOIA request led to nothing of substance from the investigation.  While some may carve out a distinction between the FTC’s decision not to investigate further and whether there was actual wrongdoing, the fact remains that an investigation into the company led to nothing.  However, if the UFC intends to utilize this issue in some way, I would not look to the FTC as willful helpers.

As for procedural hurdles, the plaintiffs are in need of fighters to join the class.  Tito Ortiz identified that he was contacted about the lawsuit but chose not to participate.  There are only names being floated around but no other fighters have officially stepped up.  At a certain point, the plaintiffs will need to go to the court to certify the class which the UFC lawyers will likely oppose.  If the court denies the class, the likely result would have the three named fighters bring these claims on their own.  With 5 reputable firms involved in this lawsuit on behalf of plaintiffs, one would assume they have a notion of fighters that are willing tot join the lawsuit.

The UFC has stated it would “vigorously defend” its business practices.  This will likely take the shape of a motion to dismiss the lawsuit from the outset.  Essentially, the UFC will deny the claims made in the lawsuit offering its own perspective on plaintiffs’ claims.  If nothing else, the motion to dismiss is the first strategy in avoiding any type of substantive discovery.  What the UFC does not want to happen is a discovery process (which we anticipate would be long and drawn out) which might reveal documents that could be damaging for the case and from a PR perspective.

The UFC might also seek to transfer the venue to the district court in Nevada.  While Le lives in San Jose.  Quarry and Fitch live in Oregon and Nevada respectively.  Although the UFC has held events in the San Jose area, the standard form contracts the fighters signed probably indicate that the jurisdiction for any dispute is in Nevada, where the UFC offices are located.  The UFC might argue that plaintiffs are “forum shopping,” essentially finding a location with a sympathetic jury.  California, especially Northern California, is more open to plaintiffs’ cases.  Although I do not know the landscape of Nevada juries, it’s likely they are more conservative.  With one of the plaintiffs a Nevada resident, the UFC might argue that the venue of the case be transferred to Nevada.

Payout Perspective:

Entering the first quarter of 2015, one might think there is looming pressure for the business to turn around.  With three big PPV shows (notice the $5 increase for UFC 182?) in the first quarter, the announcement of the Reebok deal, the CM Punk signing and now the Rampage Jackson deal one would think that the company is hoping S&P will raise its financial outlook and steady its credit rating.  It would not be out of the realm of possibility for S&P to downgrade its status if Zuffa business does not get better.

The news of the lawsuit will not help Zuffa’s financial outlook since you can expect its legal budget to increase due to this.  A potential Bellator battle could be on the horizon as well since the UFC signed Rampage Jackson despite Scott Coker’s claim he is still under contract.  With a newsworthy December, we can expect more happenings in the first part of 2015.

Citing Bellator breach, Rampage Jackson rejoins UFC

December 21, 2014

On Saturday night’s UFC Fight Night 58 broadcast, Jon Anik announced that the UFC had re-signed Quinton “Rampage” Jackson.  The news comes with controversy as Bellator President Scott Coker stated that Jackson is under exclusive contract with the Viacom-owned company.

The signing of Jackson will likely be the start of a legal battle between the UFC and Bellator.

In a Fox Sports interview, Jackson indicated that he had terminated his contract with Bellator because they did not meet their contractual commitments.

Payout Perspective:

The signing comes as a surprise considering the mutual distaste Rampage and Dana White had for each other when he last fought in the UFC in January 2013.  It’s clear that based on Coker’s tweet, Jackson’s departure was not granted by Bellator.  And, the UFC did not clear with Bellator Jackson’s representation that he terminated his contract due to Bellator’s alleged breach.  It appears that the UFC is going with the strategy of plausible deniability.  It signed Jackson based on the representation that his contract was void due to the alleged breach by Bellator.  This can only lead to a lawsuit for breach of contract (filed by Bellator against Jackson) and tortious interference with a contract (against the UFC).

Jackson was mentioned in the plaintiffs’ antitrust lawsuit against the UFC in regard to the UFC’s desire to obtain exclusive sponsorships with companies.  The lawsuit mentioned the UFC blocked Rampage’s exclusive deals with Round 5 and Reebok.  Yet, the UFC forged its own exclusive deals with each.

Machida tops list of performance bonus winners for UFC Fight Night 58

December 20, 2014

The bonuses for UFC Fight Night 58 included Lyoto Machida, Renan Barao, Vitor Miranda and  Erick Silva.  There were no Fight of the Night bonuses given.

The bonuses were announced post-event.  Each received the standard $50,000.  Machida earned his bonus with his main event win over C.B. Dolloway.  Machida stopped Dolloway with a liver kick that doubled him over and then Machida finished him off.

Payout Perspective:

The 4 Performance of the Night bonuses meant that there was not a Fight of the Night on the card.  It could be that there was no particular fight worthy on the card or the UFC decided to award four fighters in four different fights for their performances on Saturday night’s card.  The 4 POTN bonuses seemed appropriate since there were several individual performances that stood out but not one fight that you might consider the best for the night.

UFC to TSN in Canada?

December 19, 2014

MMA Fighting’s Dave Meltzer reports that TSN appears to have retained UFC programming in Canada.  The inference of the deal was made as January network scheduling for TSN came out including UFC programming.

For those not in Canada, TSN is the U.S. version of ESPN down to similar logos.  TSN is owned by Bell Media with a small share held by ESPN.

Negotiations for the UFC television rights in Canada had gone quite the last couple weeks although rumors had TSN as the front runner.

Meltzer indicated that UFC popularity has fallen off due to the loss of GSP and the inundation of UFC events.

The television rights were previously held by Rogers Sportsnet in Canada.   Sportsnet signed a 4 year deal with the UFC in 2011.  However, this year Sportsnet signed deals with the NHL (a monster 12-year, $5.2 billion deal) and WWE which likely meant that it would not re-up with the UFC.

No official announcement was made by the UFC or TSN.

Payout Perspective:

The anticipated deal with TSN was made more likely after the Sportsnet-NHL deal.  Previously, TSN had the rights to the NHL and with Sportsnet taking control of the broadcast and multimedia rights of the nation’s most popular sport, TSN has a big void to fill.  The UFC has pledged 4 or 5 events in Canada in 2015 and we will see if the new network will bring back interest in the UFC.

UFC on Fox 13 ratings adjusted to 2.8M, peak at 3.8M

December 18, 2014

UFC on Fox 13 this past Saturday peaked with 3.8 million viewers during the Junior dos Santos-Stipe Miocic fight.  The overall rating for the 2 and a half hour show, which was adjusted from the overnight rating, was 2.8 million viewers.

It was first in network programming in key demos including men 18-34 (1.2M), men 18-49 (1.4M) and adults 18-34 (1.1M). UFC on Fox 13 drew a 2.27M viewer overnight ratings.

The UFC on Fox 13 Prelims on FS1 Saturday which preceded the network fights drew an average of 654,000 viewers for a 0.58 rating.  The prelims were up 7% from last December’s similarly situated UFC on Fox prelim card which drew 613,000 viewers.

Payout Perspective:

The ratings are identical with last December’s ratings.  This UFC on Fox is usually aided by the NFL boost as the event is promoted on NFL on Fox Football broadcasts.  In contrast to this year’s Heavyweight main event, December 2013 saw Demetrious Johnson defending his Flyweight title against Joseph Benavidez.  UFC on Fox 13 did well in the key demos which should make Fox execs happy.

UFC 181 estimated between 375K-400K PPV buys

December 18, 2014

MMA Fighting reports that UFC 181 held on December 6th drew between 375,000-400,000.  In addition, Dave Meltzer in his latest Wrestling Observer (subscription recommended) revealed the PPV numbers from UFC 178-180.

UFC PPV estimates UFC 178-181 and its respective main events

UFC 181:  ~375K-400K (Hendricks-Lawler/Pettis-Melendez)

UFC 180:  ~185K-200K (Werdum-Hunt)

UFC 179:  ~160K-200K (Aldo-Mendes)

UFC 178:  205K (Mighty Mouse-Cariaso)

UFC 181 was the highest output in terms of PPV buys since July’s UFC 175.  It had a strong card which included two title fights:  Hendricks-Lawler and Pettis-Melendez.  The other notable PPV number was UFC 180 which suffered from multiple issues including the injury to Cain Velasquez which changed the main event and the fact Bellator had a show on Spike TV.

Payout Perspective:

To show how far UFC PPVs have dropped in 2014, UFC 181 was the second largest PPV buy this year coming in second to UFC 175 (540,000).  UFC 181 is likely the most-watched PPV since UFC 175 as this card was also available in movie theatres.  Certainly, one would have thought this card could have done more but in a year where UFC PPVs have been off, this was a good (not great) result.  These numbers might also temper expectations for January 3rd’s UFC 182 between Jones-Cormier.

CM Punk does ESPN “car wash”

December 18, 2014

Phil “CM Punk” Brooks participated in the ESPN “car wash” yesterday at the network’s campus in Connecticut.  The whirlwind of interviews on the various ESPN shows detailing his signing with the UFC should hype up an anticipated debut sometime in 2015.

For his part, Punk (who has the rights to the name CM Punk) has not provided any details on when he will debut, where he will train or what weight class he will compete in.  He touched on why he wanted to fight and the differences between WWE and UFC.

Payout Perspective:

I have not seen all of the Punk interviews from yesterday but I assume that ESPN was told to stay away from any questions related to the fighter lawsuit filed against the UFC on Tuesday.  It would have been interesting considering a lot of the complaints he had about the WWE mirror issues experienced by fighters in the UFC.  The “car wash” treatment is big for an individual with no fights under his belt, yet enters the UFC with a lot of mainstream publicity.  We will see how visible Punk will be for the UFC in 2015.

TUF 20 Episode 12 Live + 3 viewership up to 752,000

December 17, 2014

MMA Payout has learned from a Nielsen source that TUF 20 Episode 12 drew an additional 244,000 viewers for a total of 752,000 viewers for the regular season finale.

The increase in the 12th episode of 244,000 viewers brings the average increase in viewers from DVR watching to 275,000. The Live +3 ratings for TUF 20 drew a season average of 788,000 viewers. The live rating for the season was 513,000 viewers.

TUF 20 Episode 12 DVR

Increase in viewers Ep 12

Payout Perspective:

The average boost in viewership of 275,000 viewers is slightly lower than TUF 19’s Live + 3 average of 278,000, but better than TUF 18’s Live + 3 of 250,000 viewers.  It was not the most exciting season although when originally revealed there was a lot of  hope for a new women’s division and the coaches for the show.  Yet, Pettis and Melendez were not over the top personalities that a viewer would tune in to watch.  The TUF franchise is still getting viewers although not at the same clip as we’ve previously been accustomed to on Spike.  We’ll see what, if anything, the UFC does its next go round with TUF.

Le, Quarry and Fitch file lawsuit against Zuffa

December 16, 2014

Attorneys for plaintiffs on behalf of Cung Le, Nate Quarry and Jon Fitch have filed a lawsuit in U.S. District Court in Northern California in San Jose, California on their behalf.  A press conference held Tuesday afternoon announced the lawsuit which was filed earlier in the day which may add more plaintiffs to the lawsuit.

Three plaintiffs’ firms with significant experience in antitrust and class action litigation are the attorneys of record with two others assisting as well.  At this point, the UFC has issued a brief statement indicating its aware of the lawsuit but has not been served with it or had a chance to review it.

Cung Le, et al. v. Zuffa, LLC is the 63 page Complaint that maps out the claims of a UFC monopoly and monopsony which is in violation of Section 2 of the Sherman Antitrust Act according to the Plaintiffs.

Below is a portion of the press release from the announcement today:

The lawsuit filed by fighters Cung Le, Nathan Quarry and Jon Fitch, who seek to represent a class of similarly situated current and former UFC professional combatants, alleges that the plaintiffs are victims of the UFC’s illegal scheme to eliminate its competition in the sport of MMA and suppress compensation for UFC Fighters from bouts and fighter identities and likenesses.

According to plaintiffs’ counsel Benjamin Brown, of Cohen Milstein Sellers & Toll PLLC, “The UFC was built on the battered bodies of MMA fighters who have left their blood and sweat in the Octagon.  Those fighters are entitled to the benefits of a competitive market for their talents.”

The lawsuit targets defendants Zuffa LLC, the Las Vegas-based company that conducts business as the UFC. Zuffa is primarily owned by billionaires Lorenzo and Frank Fertitta, along with the UFC’s front-man, President Dana White.  White has publicly boasted about the success of the UFC’s alleged illegal scheme, allegedly claiming that “there is no competition” because “I am the grim reaper[.]”

The lawsuit claims that the UFC’s alleged anti-competitive acts, in particular its actions over a period of years,have made and maintainedthe UFC asthe onlyoption for MMA fighters who want to earn a viable living in the profession.

“All UFC Fighters are paid a mere fraction of what they would make in a competitive market,” said Brown.“Rather than earning paydays comparable to boxers – a sport with many natural parallels –MMA fighters go substantially under-compensated despite the punishing nature of their profession.”

Above all, the lawsuit alleges thatthe UFC prevents fighters from working with other MMA promoters, mounting self-promotional efforts of their own or signing with outside sponsors – monopolistic practices that suppress fighters’ incomes.

According to named plaintiff Cung Le, of San Jose, Calif., an internationally acclaimed MMA combatant, “Because  of the UFC’s coercive practices, competitive market forces have been strangled, future earnings power of the athletes is stripped away, and purses to the fighters are artificially depressed.”

The lawsuit alleges that the UFC has pursued an aggressive strategy of depriving key inputs to potential rival promoters or merging with them to maintain its monopoly position.  The complaint alleges “exclusionary scheme” to impair and foreclose competition, whereby the UFC deprives potential competitors in the fight promotion market access to elite MMA fighters, premium live event venues and sponsors.

According to plaintiffs’ co-counsel Michael Dell’Angelo, of Berger & Montague, P.C., “the lawsuit alleges that the UFC has engaged in an illegal scheme to eliminate competition from rival MMA promoters by systematically preventing rivals from gaining access to ingredients critical to successful MMA promotions, including by imposing extreme restrictions on UFC Fighters’ ability to fight for rivals during and after their tenure with the UFC.  The UFC also takes the rights to fighters’ names and likenesses in perpetuity.  As a result of the UFC’sscheme, we allege that UFC Fighters are paid fraction of what they would earn in a competitive marketplace.”

The lawsuit alleges that as a result of these and other anti-competitive acts, including the UFC’s acquisition of rival Strikeforce, the UFC has maintained control of more than 90 percent of the revenue derived from live MMA bouts nationwide.

The lawsuit also alleges that the UFC has retaliated against fighters who have worked with or who have announced intentions to work with rival promoters or sponsors by refusing to book their bouts and/or eliminating them from key UFC promotional activities such as advertising campaigns and video games.

“UFC’s threats are taken seriously by fighters because they know that a UFC ban will substantially diminish, if not end, their ability to earn a living at their chosen profession,” said plaintiffs’ co-counsel Joseph Saveri of Saveri Law Firm, Inc.“These MMA professionals deserve the right to take back their careers.”

In their complaint, the Plaintiffs claim that the UFC has been able to suppress compensation “to a very low percentage of the revenues generated from bouts.”  The Complaint claims that UFC fighters are paid “approximately 10-17% of total UFC revenues generated from bouts.   They claim that all fighters “have had their compensation artificially reduced due to the anticompetitive scheme challenged in this Complaint.

In addition, the Complaint challenges several clauses that Plaintiffs’ claim exist in standard UFC contracts including the “Exclusivity Clause,” the “Champions Clause,” (allowing UFC to extend a champion’s contract for as long as they are champion), the “Right to Match Clause” (recall Eddie Alvarez lawsuit), “Ancillary Rights Clause” (granting UFC exclusive and perpetual worldwide identity rights of contracted athlete) and the “Sponsorship and Endorsement Clause” (allows UFC sole discretion on approving sponsors and endorsements of fighters).

The attorneys declined comment on how much they would be asking (likely due to the fact that the actual amount of damages has yet to be quantified by an expert) in terms of monetary relief although the statute in which they are suing under allows for treble damages (three times the actual amount of proven damages)

Cung Le, et al. v. Zuffa, LLC

Payout Perspective:

The press conference did not provide a lot of granular information but one must assume that was done on purpose.  Since the Complaint was filed today, the lawsuit and everything that comes with it begins.  The process for a lawsuit, especially one that will be detailed, complex and may involve more plaintiffs will take years and lots of money to litigate.  Cohen Milstein, one of the law firms representing the plaintiffs, was selected as one of the “most feared plaintiffs’ firms for 2013 and 2014 by Law360.  Suffice it to say, the attorneys filing this Complaint and litigating this matter are very good at what they do.  The UFC will have good lawyers as well.

It will be interesting to see how many other fighters decide to join the class.  We assume that there are more that will join based on the amount of law firms that are joining together on this matter. We will see what happens if there is a groundswell of fighters that will join the lawsuit.

MMA Payout will have more info on the lawsuit in the coming days.

Reebok signs Rousey, Jones to sponsorship deals

December 16, 2014

The UFC announced that Reebok has signed Jon Jones and Ronda Rousey presumably as spokespersons for the brand.  The announcement comes on the heels of the recent announcement that Reebok would be the official global outfitter of the UFC.

The deals appear to be individual sponsorship with the brand and both will have the opportunity to provide a measure of input to the new UFC apparel as well as “a new collection of footwear and apparel specifically created for the more than 35 million people around the world who participate in combat training to stay fit,” according to the press announcement.

No financial terms were provided.

Both fighters announced their new sponsor deal on social media.

My girl @rondarousey and I are about to smash this @reebok game!! We’re about to take fitness apparel to a whole new level!

A photo posted by Jon Bones Jones (@jonnybones) on

Payout Perspective:

This is an interesting sponsorship deal considering that all UFC fighters under contract will be sporting Reebok by July. We assume that Jones and Rousey will take more active roles promoting the brand based on the information provided in the announcement. Certainly, these are two of the most high-profile fighters that Reebok could sign on the UFC roster. Currently, Jones and Rousey join Johny Hendricks and Anthony Pettis as UFC fighters with individual Reebok deals.

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