UFC WW Lyman Good flagged by USADA

October 25, 2016

UFC welterweight Lyman Good was flagged by USADA for a potential anti-doping violation.  The UFC announced the news on Monday and the former Bellator champion will be taken off of the UFC 205 card as a result of the potential violation.

Good, a native of New York, will not be able to face Belal Muhammad in his home state.  The UFC will be seeking a new opponent for Muhammad.

The UFC issued its standard statement part of which reads:

The UFC organization was notified today that the U.S. Anti-Doping Agency (USADA) has informed Lyman Good of a potential Anti-Doping violation stemming from an out-of-competition sample collected on October 14, 2016.  USADA has provisionally suspended Good based on the potential anti-doping violation.

Lyman won his first, and only, fight in the UFC, a 2nd round KO over Andrew Craig in July 2015.  He was 9-3 in Bellator and was the Welterweight Champion in 2009.

Payout Perspective:

Bad news for the former Bellator champ as he does not get to perform in front of his home fans.

Jon Jones’ lawyer prepares for Oct. 31 arbitration

October 25, 2016

Jon Jones’ arbitration hearing is coming up next Monday and the former UFC light heavyweight champion’s lawyer, Howard Jacobs spoke about the upcoming case.

Jacobs, a noted anti-doping lawyer, indicated to Luke Thomas on his SiriusXM show that the products that were found in Jones’ system were a result of a contaminated product.  Per Jacobs, he states that USADA testing confirmed what Jacobs’ investigation found which reveals that the product is contaminated with Hydroxy-clomiphene, an anti-estrogenic agent, as well as the Letrozole metabolite, an aromatase inhibitor.  Both of the substances were found in Jones USADA tests.  The supplement/product that Jones took was not identified in the interview.

Under USADA rules, clomiphene and letrozole are “specified substances” under the World Anti-Doping Agency Code (“WADA”).  Per the WADA Code, “there is a greater likelihood that these (specified) substances could be susceptible to a credible non-doping explanation.”  The WADA Code recognizes that it is possible for a prohibited substance to enter an athlete’s body inadvertently, “and therefore allow a tribunal more flexibility when making a sanctioning decision.

Jacobs states that under the USADA rules, you may argue that taking the specified substances you are not at fault if you take a supplement or product that contaminated but you may argue that you’re not “significantly at fault,” which allows for the ability to argue a reduced sanction.

Jones could face up to a one-year suspension per the UFC anti-doping policy guidelines.

Payout Perspective:

Under Article 3.1 of the UFC Anti-Doping Policy, USADA shall have the burden of establishing that an Anti-Doping Policy Violation (ADVP) has occurred.  USADA must establish that an ADVP has occurred to “the comfortable satisfaction of the hearing panel bearing in mind the seriousness of the allegation which is made.”  The standard of proof is “greater than a mere balance of probability but less than proof beyond a reasonable doubt.”  It would seem that the legal standard is between “clear and convincing” and “more likely than not.”  Jones may have a rebuttable presumption or establish specified facts or circumstances if USADA establishes its burden.  Jones’ burden would be “by a balance of probability” per 3.1.  It would appear the standard that would be more likely than not.

Based on Jacobs’ view, it would seem that USADA knows that the product taken by Jones was likely contaminated and he apparently has the evidence.  It would seem that USADA might meet its burden in proving that Jones took the substance but Jacobs could establish that the product taken was done inadvertently.  As a result, Jacobs would be asking that Jones be given a more lenient sentence.  We shall see if that will happen on Monday.  Of course, the parties could settle the issue prior to the hearing.

Over a year later, Judge Boulware publishes opinion in Zuffa’s Motion to Dismiss

October 24, 2016

Judge Richard Boulware has filed his Order on Zuffa’s Motion to Dismiss Plaintiffs’ Amended Complaint in the antitrust lawsuit venued in Nevada.  The hearing was on September 25, 2015.  The order was finally entered on October 19, 2016.

Talk about a backlog of work for a federal judge.  But, from my understanding, this is typical for federal courts.

As we know, the judge denied Zuffa’s Motion to Dismiss although the written order was signed and dated over a year later by Judge Boulware.

The opinion denying the Motion to Dismiss is below:

Order on Zuffa’s Motion to Dismiss by JASONCRUZ206 on Scribd

Some notable issues in the Order.

Zuffa had the burden to prove that the Plaintiffs had no case since they brought the motion.  Under the Federal Rules of Civil Procedure, a court may dismiss a complaint as a matter of law (1) for lack of a cognizable legal theory or (2) insufficient facts under a cognizable claim.  The standard under Federal Rule 12(b)(6), it may dismiss a complaint for failing to state a claim upon which relief can be granted.

The court looked at the main arguments set forth by Zuffa in its opinion.

  1. Strong Competition v. Antitrust Violation

This argument was quickly dismissed by the court.  Essentially Zuffa argued that its business practices are examples of “strong competition” whereas Plaintiffs argue that Zuffa’s conduct “has foreclosed competition and thereby enhanced and maintained the UFC’s monopoly power in the Relevant Output Market and monopsony power in the Relevant Input Market.”  For purposes of meeting the threshold to satisfy a motion to dismiss, the Court sided with Plaintiffs.

  1. Properly Defined Relevant Markets

The court looked at whether the plaintiffs properly defined a “relevant market.”  Plaintiffs identified two relevant markets: 1) live Elite Professional MMA bouts (Relevant Output Market), and…live Elite Professional MMA Fighter services (the ‘Relevant Input Market’).  Zuffa claimed that these definitions were made solely for the purpose of litigation and that they were vague and subjective.

However, the Court sides with the Plaintiffs for purposes of this motion to dismiss.  The Court noted that the validity of the ‘relevant market’ is typically a factually element and not a legal element.  Remember, here the Court is looking at whether the lawsuit can be dismissed as a matter of law.  As the court notes the market may survive an initial scrutiny under the motion to dismiss, but may not under a motion for summary judgment or at trial.  But, the Court found that the Plaintiffs’ relevant market is sufficient for “Section 2” antitrust purposes

  1. Specificity of Anticompetitive Conduct

Zuffa argued that exclusive dealing arrangements are common, procompetitive and a part of sports and entertainment, Plaintiffs failed to allege specific facts showing that the exclusive arrangements foreclosed competition in either the input or output market and the UFC has no duty to deal with competitors.

The Court did not address the last argument (dealing with competitors) as it did not construe the complaint that it had to deal with competitors.

The Court does side with Plaintiffs in finding that its allegations that exclusive dealing arrangements are a part of the anticompetitive scheme.  It also dismisses the argument that Plaintiffs’ claims are a “monopoly broth” – the term given to the use of various allegations to satisfy an antitrust scheme.

  1. Ancillary Rights and Reduced Competition

The Court looked at the rights issue related to fighters signing off on their likenesses for purposes of Zuffa using for things such as video games.  Here, the Court utilized the same analysis as it did with the exclusive dealing contracts in finding that Plaintiffs pled sufficient facts to show an anti-competitive scheme.  Once again, the Court is not ruling on the actual evidence, but whether the Complaint states a sufficient amount of facts.

Payout Perspective:

The Motion to Dismiss should not be taken as a commentary on the strengths or weaknesses of Plaintiffs’ Complaint as a whole.  It is only a ruling on whether or not the Complaint was sufficient to past standards required by the rules under 12(b)(6) of the Federal Rules of Civil Procedure.  It was Zuffa’s burden to carry in order to prove that the Complaint could not pat muster.  The Judge, weighing the evidence in light of the rules, determined that the Plaintiffs had pled a sufficient amount for the case to go forward.  If this case goes to trial, the Plaintiffs would have to prove the claims in its Complaint.  Zuffa will likely bring a Motion for Summary Judgment after the discovery stage ends.  Essentially, it is similar to the Motion to Dismiss but would argue that none of the facts would support the claims and as a result, the lawsuit should be dismissed prior to trial.  Of course, discovery is ongoing so we shall see if there are facts that have been uncovered which would strengthen either party’s case.

Lundvall’s term on NSAC coming to end

October 23, 2016

MMA Fighting reports that Pat Lundvall’s appointment on the Nevada Athletic Commission will end at the end of October.  Lundvall has served for a total of 9 years for the commission.

Lundvall, an attorney in Nevada, has been in a central figure in some of the more recent discipline hearings before the commission.  Most recently, she was a factor in the discipline hearing involving Conor McGregor.  Instead of accepting a recommendation from the state attorney general of a $25,000 fine and community service, Lundvall motioned for a $150,000 penalty which included the value of a public service announcement (PSA)which McGregor was ordered to film.

After initial reports that the fine was for $150,000, it was clarified that the amount was $75,000 and the value of the PSA was $75,000.

Lundvall was also a central commissioner in the hearing of Nick Diaz in which he was assessed a 5 year ban which was eventually reduced.

Payout Perspective:

Lundvall’s departure will be met with a sigh of relief by some within the MMA community as some of the decisions spearheaded by Lundvall seemed punitive and without much rationale behind them.  The Diaz punishment comes to mind.  Even McGregor’s punishment seemed out of ordinary and it appeared that it was done to show the commission’s muscle rather than anything else.

UFC heavyweight accepts 15 month USADA suspension

October 21, 2016

UFC heavyweight Abdul-Kerim Edilov will serve a 15-month sanction for an anti-doping policy violation after a positive drug test on January 7, 2016.

Edilov tested positive for meldonium following an out-of-competition urine test.  Per the USADA release, “USADA accepted Edilov’s explanation that the meldonium was a prescribed medication he was taking in a therapeutic dose under the care of a physician and without the intent to enhance his athletic performance.”  Despite this fact, USADA concluded that since Edilov’s use continued after the official prohibition on January 1, 2016, he required a Therapeutic Use Exemption in order to avoid violating the UFC Anti-Doping Policy.

The suspension is retroactive from the date of the failed test of January 7, 2016.

Payout Perspective:

Edilov’s suspension is interesting when you consider meldonium is relatively new on the WADA prohibited list and there are issues with its detection and use.  Notably, UFC lightweight Islam Makhachev was cleared of any fault or negligence in connection with a test that showed meldonium in his system.  However, the key is that Makhachev appears to have ceased use prior to January 2016.

UFC Canada office hit hard with layoffs

October 19, 2016

The UFC has cut more positions within the company as Ariel Helwani of MMA Fighting reports that many within the UFC Canada office including Tom Wright, the executive vice president and general manager for operations in Canada, Australia and New Zealand were dismissed this morning.

80% of the department in the UFC office in Toronto were let go.  The layoffs follow up news that the UFC reduced its work force company-wide including Garry Cook, Marshall Zelaznik and UFC Asia chief Ken Berger.

The company, which was purchased by WME-IMG for $4 billion in July, is downsizing which seems to include a lot from satellite offices outside of its home base of Las Vegas.

It is not known whether more cuts will come.

Payout Perspective:

The reduction in many of its overseas offices might infer that either the UFC will focus its operations in Las Vegas or that there will be less focus on international expansion and conducting events abroad.  The latter suggestion would seem to go against the prior regime’s thought of global expansion as a way to increase its fan base and revenues.  While there still may be international cards in the future, it would seem the focus by the new owners would be on domestic events and focusing on producing big PPV shows stateside.

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.

UFC cuts significant number of its own work force

October 18, 2016

ESPN’s Brett Okamoto reports that there were “significant layoffs” at the UFC.  The layoffs were expected per the tweet.

MMA Fighting adds that multiple sources have indicated that 60-80 employees would be let go.  The report indicates that the UFC had employed “approximately 350 people” prior to the work force reduction.  The layoffs are not just taking place at UFC’s Las Vegas headquarters but across the company’s overseas offices as well.  The layoffs also include high-ranking executives according to MMA Fighting sources.

The news comes just 3 months after the UFC was sold to WME-IMG for $4 billion.  In recent weeks, longtime UFC matchmaker Joe Silva announced that he would leave the company and PR executive Dave Sholler left for a job with the NBA’s Philadelphia 76ers.

Payout Perspective:

While the UFC broke ground on a 180,000 sqare-foot Las Vegas campus late last year which might have inferred expansion, the layoffs were likely to happen with the transition in leadership.  With the change, it seems as though there is an effort to streamline the company and cut costs.  We will see how deep the cuts will be and whether the losses will affect events and/or the fighters.

UFC states GSP still under contract

October 18, 2016

The UFC has responded to claims that Georges St-Pierre is a free agent.  Not surprisingly, the UFC denies claims that GSP is free from his contractual obligations from the UFC.

On The MMA Hour on Monday, GSP declared that he was a free agent per his attorney.  His claim was that the UFC did not provide GSP with a fight and as a result his contract was terminated.

In a prepared statement, the UFC responded later in the day:

“Georges St-Pierre remains under an existing agreement with Zuffa, LLC as his promoter.  Zuffa intends to honor its agreement with St.-Pierre and reserves its rights under the law to have St.-Pierre do the same.

Payout Perspective:

It looks like we may be heading to a legal dispute over GSP’s contract.  The declaration of a terminated contract by GSP was reminiscent to Rampage Jackson’s claim that he was free from Bellator’s contract due to not fulfilling certain things within the contract.  As you recall, a lawsuit occurred and was subsequently settled.  You can bet that the UFC would oppose GSP from fighting in another organization if it boils down to it.  GSP’s lawyers seem confident that there was breach of the contract, and/or an unmet requirement within the contract which allowed for the termination.  We will see if the parties can come to a resolution prior to litigation.

WSJ article notes UFC sale as example of questionable buyout-loan strategy

October 17, 2016

The Wall Street Journal reports on the UFC sale and how the structure of the deal is being seen as too liberal with adjustments to earnings which enables more borrowing for transactions.

The Federal Reserve had warned Goldman Sachs (Deutsche Bank AG is also a lender) the entity that marketed the debt to investors, of the abuse in inflating the earnings before interest, taxes, depreciation and amortization.  The EBITDA for the UFC was pegged at $170 million but then was estimated up to $300 million when presented to debt investors helping finance the sale.  The higher EBITDA allowed WME borrow $1.8 billion for the deal without running afoul of the guidelines which prevent borrowing for more than 6x a company’s EBITDA.

According to the article, $48 million in expected “future step up payments to television contracts and other licensing agreements,” helped bring the EBITDA up to $300 million.

Payout Perspective:

The UFC deal is an example brought to light by the WSJ article.  The story also writes about the acquisition of event-management software firm Cvent and IT firm SolarWinds as other examples in which EBITDA climbed.  The issue that banks and regulators are concerned with is that the forecasted EBITDA may not be a realistic estimate.  Nevertheless, debt investors were bullish with the UFC debt despite the caution.

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