“Please give boxers a chance.”
This was the ending statement made by Austin Trout’s lawyer, Miguel J. Ortega Nunez, during oral argument which took place last week in federal court in Puerto Rico.
The lawsuit stems from Trout’s claims that he was due a title shot for the WBO title but was scuttled from the rankings. Trout sued and among his claims was one under the Muhammad Ali Boxing Reform Act. Nunez argued that the Ali Act should not be arbitrated. In this case, Trout argued that the arbitration rules by the WBO were unfair because it placed the WBO as its own arbiter to any dispute. The District Court in Puerto Rico moved the case to arbitration citing the WBO rules and regulations which indicated that disputes are subjected to the provisions. Trout argued that the arbitration provisions were waived by the WBO claiming that they waited too long to compel arbitration and also started to litigate by issuing written discovery.
The parties to the lawsuit had about 15 minutes to argue on behalf of their case
The appellate court of three courts grilled the lawyers over their case which had a long, winding history which took it from a state court in New Mexico, to federal court in the state to Puerto Rico where the WBO headquarters are located.
Section 35(d) of the WBO Championship Regulations was at issue (emphasis added via plaintiff’s brief:
Trout’s lawyer was grilled on the contract Trout had with the WBO regarding the jurisdiction in which he could bring the lawsuit. Moreover, he argued that the Ali Act claims should stay outside of arbitration. He also stated that the clause could not address claims of fraud.
The Court specifically asked cancel about the “waiver” issue set forth by Trout. The waiver relates to the fact that even if the arbitration was viable, the WBO waived its right to the arbitration because it acted too late to compel arbitration. Trout’s lawyer noted that when the lawsuit was filed in New Mexico state court, the WBO removed the case to federal court in New Mexico and then to Puerto Rico. During this time, they sought a motion to dismiss as well as participated (according to Trout) in discovery.
A key question probed by the Court was whether Trout new about the arbitration clause, including the rules which allow the WBO to select the arbitrator of a dispute in a contract. The argument by Trout’s counsel was that despite the fact that Trout may have known, or inferred that he knew, the contract itself was void due to the fact that it was against the Ali Act and Federal Arbitration Act.
In grappling with the issue, the Court noted three grounds for Trout’s claims:
- Contract law grounded per Puerto Rico law
- Source of problem implicit in the Ali Act
- Implicit arbitration of Federal Arbitration Act
The Court skewered the WBO lawyer, Edward Ricco, about cases concerning the arbitration provisions in contract that allows “one party to be an arbitrator.” Those cases found the clauses which allow one party to pick an arbitrator were against the Federal Arbitration Act. The WBO argued for a “wait and see” approach as they cited court opinions that sided without the inference that the party seeking to be an arbitrator and a party to the dispute could go forward. It’s more consistent with the policy of the FAA and consistent with Puerto Rican law regarding the good faith performance of a contract argued Ricco. The Court shot back asking whether those court opinions were subject to a federal statute. The WBO said no which seemed to be contra to the overarching argument since this is a federal court case.
“Does that matter some?” The Court asked in a way that suggests it was skeptical of the argument
“Here, given the express purposes of the Muhammad Ali Act, seems a little surprising that Congress would have written the Act and then thought, that the boxing associations would choose to adjudicate who should see who follows their procedures fairly,” stated the Court. This thought seemed to be the sticking point for the Court. Hypothetically, the Court posed the question that the head of the organization could appoint their “special assistant” to be the arbitrator based upon the drafting of the arbitration provision.
The Court then probed as to if the Arbitration Clause was deemed void (i.e., unlawful) and should be stricken, what would be the remedy. In the contract, the WBO included a severability clause which essentially indicates that if a clause in the contract is determined to be void/illegal, the rest of the contract (assuming the rest of it is legal) would still stand. The WBO suggested that they would allow the District Court to select the neutral arbitrator instead of the promotion to decide. The WBO indicated that if the Court believed it was necessary, negating the selector would be an appropriate remedy.
In addressing the issue of waiving the right to seek arbitration, the Court asked why the WBO didn’t seek a motion to stay discovery immediately in light of its move to arbitrate the case. The WBO replied that it’s a matter of degree of its conduct prior to moving the case for arbitration. It never did anything to suggest it was proceeding with litigating in Court. It did seek discovery because it never had clarification on the Court as to whether it was not going into arbitration.
“Your willingness to allow discovery to unfold for months and months and months….seems entirely incompatible with your motion to compel discovery,” said the Court. The WBO attorney indicated that they had brought a motion but when no ruling came down from the Court, it felt like it had to propound discovery.
“I wonder if the prolonging of this case [is happening with the hope that the case] would become moot,” questioned the Court. This would seem to tie in the reasoning regarding the actions of the WBO not to immediately seek a motion to stay discovery and compel arbitration. Instead, the WBO moved the case from state court to federal court in New Mexico and then to Puerto Rico which seems like extra steps.
Here the oral arguments here.
Payout Perspective:
The case presents some interesting overarching legal issues. It is normal for the appellate court to grill both sides on their case so it’s hard to suggest that one side may be winning or losing. But it would seem that the Court was questioning the strategy of the WBO with this case. It also was concerned with the drafting of the arbitration provision in its contract. As it relates to the Ali Act, the belief that the statute cannot be subject to arbitration was not touched upon although the Court noted that the WBO provision which allows the promoter to select the arbitrator was incompatible with the intent of the Act. While that was not directly addressed by the Court, it would seem that the belief is that choosing your own arbitrator would run contrary to the Ali Act. This is interesting considering the NFLPA’s recent collective bargaining agreement which requires a neutral arbitrator (previous the NFL heard these) with issues of player discipline but any appeal of the decision will be heard by the commissioner. Thus, the creator of the system is a party…and also the final judge in disputes.
With the uncertainty of the return of normalcy to the Courts, its hard to predict when the Court will render an opinion but MPO will keep you posted.
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