Fight Sports Law

Originally posted on The White Bronco in May 2016

By Jason J. Cruz

Oklahoma congressman Markwayne Mullin announced that he will sponsor a bill that seeks to amend the Muhammad Ali Boxing Reform Act (“Ali Act”) to include mixed martial arts. The news could be big for the sport of MMA, its fighters and supporters. However, one might be wary of the practical effects of the Ali Act based on prior litigation.

Background on the Ali Act

Due to concerns with the exploitation and anticompetitive practices occurring in the boxing industry, the Ali Act was signed into law on May 26, 2000.  According to the legislative history, Congress was particularly concerned with the lack of checks with contracting power.  The original Ali Act was introduced by Senators John McCain and Richard Bryan.  

Its stated purpose was three-fold.  First, it was to protect the rights and welfare of boxers.  Second, it was to aid state boxing commissions with the oversight of the sport.  Finally, it was to promote honorable competition in professional boxing and enhance the overall integrity of the industry.

The Ali Act mandated major reforms in boxing including creating a “firewall” between managers and promoters, protecting boxers from coercive contracts and requiring disclosures regarding the bouts that they promote.

The federal law carries penalties including money damages, court costs and reasonable attorney’s fees and expenses.  There is also the possibility of serving “not more than 1 year” in prison.

Here are some notable cases where fighters sued under the Ali Act. In all of the below examples, the cases were resolved prior to trial.  

Andre Ward

In August 2014, Andre Ward filed a lawsuit in the U.S. District Court for the Northern District of California against his promoter, Goossen Tutor Promotions, LLC (“GTP”) and Dan Goosen.  The lawsuit was premised upon violations of the Ali Act which require promoter disclosure to the fighters.  In his Complaint, Ward alleged that GTP had not made timely disclosures per the Ali Act for any of his fights from 2004 through 2012.

Pursuant to 15 U.S.C. § 6307e(b) of the Ali Act:

A promoter shall not be entitled to receive any compensation directly or indirectly in connection with a boxing match until it provides to the boxer it promotes:

(1) the amounts of any compensation or consideration that a promoter has contracted to receive from such match;

(2) all fees, charges, and expenses that will be assessed by or through the promoter on the boxer pertaining to the event, including any portion of the boxer’s purse that the promoter will receive, and training expenses; and

(3) any reduction in a boxer’s purse contrary to a previous agreement between the promoter and the boxer or a purse bid held for the event.

The lawsuit was an extension of continued discontent between fighter and promoter.  Prior to the complaint, Ward and GTP went to arbitration twice in California.  In both arbitrations held by the California State Athletic Commission, the Commissioner, ruled in favor of GTP.

The underlying grievance centered around an Exclusive Promotional Rights Agreement (“Promotional Agreement”) signed by Ward with GTP.  The Promotional Agreement was to commence on September 8, 2012 and last three years.  The issue was whether an injury which sidelined Ward should extend the terms of the Promotional Agreement.  In the end, the State Athletic Commission agreed with GTP that it should.  

Ward, clearly not happy with the ruling, filed the lawsuit.  

It appears that the Ward-GTP battle ended in January 2015 as the parties stipulated to dismiss their case.  Soon thereafter, Ward signed with Jay Z’s Roc Nation Sports as his new promoters.  It was not until March 2016 that Ward returned to the ring.  

Joseph Agebko

Bantamweight boxer Joseph Agebko sued Don King and his promotional company under the Muhammad Ali Act in June 2012 citing that King’s promotional arm took more money than he was owed from his fights.  According to Agbeko’s complaint, which was filed in the U.S. District Court of New Jersey, there were disparities in the amount he was paid versus the amount he was charged as fees and other charges were taken from his purse. Thus, for one fight he was paid only $4,000 but was charged $21,000.  The lawsuit alleged that King deducted money from Agbeko’s pay without substantiating these deductions.  

Agebko’s claims were based on the claim that King did not disclose payouts pursuant to Section 6307e(b)(1) of the Ali Act.  In addition, he claimed that King was acting as promoter and manager, a conflict and violation of the Ali Act.

In a motion to dismiss Agebko’s First Amended Complaint filed on November 8, 2012, King’s lawyers claimed that Agbeko’s claims under the Ali Act were baseless.  Attached to their motion, King’s lawyers included disclosures purportedly received by the fighter.  

The motion makes a key distinction when interpreting the disclosure section of the Act.  First, it notes that the Ali Act requires promoters “disclose only amounts they are ‘contracted to receive’ from a given boxing match.”  It argues that it does not require promoters “disclose the actual dollar revenue they ultimately receive.”  It further notes that the Act does not “require a promoter to supplement his disclosures.”

The lawsuit did not go far after King’s motion to dismiss was filed as Agebko’s attorneys voluntarily dismissed their lawsuit on November 12, 2012.

One might only assume that either the parties settled prior to the need to file an opposition to King’s motion and/or Agebko voluntarily dismissed the lawsuit without settlement to avoid further litigation costs.

Bermane Stiverne

Bermane Stiverne sued King and his promotional company in November 2013 in the Southern District of New York.  He sued under the Ali Act for allegedly being coerced into signing contracts which made King his exclusive promoter.  He requested that the court void the promotional agreement he signed with King. Stiverne’s contention was that signing with King was a precondition to obtaining a fight with another boxer promoted by the same promoter.  This would be in violation of Section 6307b(a)(1)(B) of the Ali Act.  At the time, Stiverne was the World Boxing Council’s (“WBC”) No. 1 contender and sought a big payday with a fight with the heavyweight champion, Vitali Klitschko.  Stiverne’s attorneys sought a preliminary injunction to prevent King from interfering with the opportunity for Stiverne’s manager to negotiate the title fight.  

The Court denied the preliminary injunction request.

Stiverne’s lawsuit was met by King’s attorneys with a Motion to Dismiss his lawsuit and counterclaims citing breach of contract and tortious interference with a contract.

Stiverne’s case was voluntarily dismissed by Stiverne and according to reports he settled the case with King.  

Mikey Garcia

In May 2014, Garcia sued his promoter Top Rank Boxing under the Ali Act in federal court in Los Angeles. The case was subsequently moved to Nevada where Top Rank filed a partial summary judgment seeking to dismiss a number of claims including the Ali Act violation.

Garcia claimed that Top Rank engaged in managerial conduct after signing a 2009 promotional agreement.  This would be in direct contradiction to the firewall, section 6308 of the Ali Act, that was established which prevents this conflict of interest.  In addition, Garcia alleged he was not provided disclosures for his fights pursuant to the Act.  

Top Rank filed a Motion to Dismiss Garcia’s lawsuit citing the claims as without merit.  The promotion denied allegations that it served as manager and promoter.  It also provided evidence that it gave Garcia the requisite disclosures required of promoters under the Ali Act.  Top Rank made the distinction that the Ali Act does not require disclosure in connection with offering a bout, but only with an actual, scheduled fight.  

The case has settled with the parties agreeing to dismiss the lawsuit. As a result, Top Rank released Garcia from his contract earlier this year.  

Jeff Lacy

The only court opinion to date which sided with a fighter was the case of boxer Jeff Lacy in his lawsuit against promoter Main Events Productions (see Main Events Prod., LLC v. Lacy, 358 F. Supp. 2d 391 (D.N.J. 2004)) The violations of the Ali Act relate to Lacy not receiving disclosures pursuant to section 6307e.  In a motion for summary judgment, Top Rank argued that the disclosures went to Lacy’s manager. Premised upon agency law, Top Rank claimed that the delivery of the disclosures to the manager was sufficient. However, the court, reading the Ali Act’s plain language and legislative intent indicated that disclosing the payouts by a promoter from the event must be sent directly to the boxer.  The court denied Top Rank’s summary judgment motion.

In addition to the court denying Top Rank’s motion, it also denied its Motion for Reconsideration related to the aforementioned motion.

Although the parties settled prior to trial, one might infer from the ruling that Lacy was able to obtain a favorable outcome from the lawsuit.

Conclusion

On Thursday of last week, the parties in the UFC Antitrust Lawsuit filed supplemental briefing per the court’s invitation.  The filings represent what amounts to the closing salvo in support or opposition of class certification in the lawsuit.

The briefs highlight the expert testimony elicited by the parties through the evidentiary hearings that occurred in late August and mid-September.

In essence, there are four elements to determine class certification.

But, in my opinion, the case for class certification boils down to two things:

Whether Plaintiffs’ methodology of regression is a valid way to determine that there was an anticompetive scheme by Zuffa in which it restrained and/or suppressed fighter earnings through the use of exclusive contracts and shutting down rival promotions.

Whether Zuffa’s business practices were in fact anticompetitive. As Zuffa asserts, they may be dominant in the relevant market, but that doesn’t mean it violates antitrust laws.

Supplemental Brief - Plaint... by Jason Cruz on Scribd

Supplement Brief - Zuffa by Jason Cruz on Scribd

Plaintiffs highlight their briefing by maintaining the antitrust theory that Zuffa’s monopsony power in the relevant input market for MMA Fighter Services through acquisitions, exclusive contracts and coercion was an anticompetitive scheme which shut down rivals and impaired the market for fighter services. As a result, this reduced fighter pay below competitive levels. Additionally, Zuffa’s tactics as alleged by Plaintiffs harmed competition for promoting live MMA events “because by shuttering rivals and locking-up a must-have input (i.e., fighters), it was the only place for “major league” MMA.”

The four threshold elements in proving the need for a certification of a class action lawsuit are typicality, commonality, numerosity and adequacy.

Here, Plaintiffs argue that despite Zuffa’s claim that coercion to re-sign with the promotion by individual fighters give rise to individual claims due to the fact specific nature of each does not give special significance to the fighters’ claim. Plaintiffs assert that it is the overall effect of Zuffa’s scheme is common of all potential class members. They argue that the commonality of class member claims is based on Dr. Singer’s ‘standard impact regression model’ which assessed pay for each Class member. Second, Plaintiffs showed Zuffa maintained a pay structure, “such that any general suppression of Fighter compensation it achieved through its Scheme would have had a widespread effect across the Class.” Plaintiffs argue that it’s the commonality threshold of the class action elements that Zuffa has issues.

As for the ‘wage share’ versus ‘wage level’ debate which has been the forefront of the battle of the experts, Plaintiffs claim that they only need to show that ‘wage share’ is a “plausible or reliable method and that it is common.”

They also include argument in support of Dr. Singer’s methodology of Foreclosure Share which measures the percentage of Fighters subject to Zuffa’s Exclusive Contracts in his relevant markets and submarkets. The most notable criticism by Zuffa was the alleged weighting of the share of a relevant market based on assessing Zuffa and non-Zuffa fighter pools in the Foreclosure Share analysis. But Plaintiffs cite the fact that Dr. Topel conceded that better ranked fighters generate more revenues and thus are more valuable to a promotion than other fighters and weighting is necessary. Also, they cite to case law which states that weighting is standard in antitrust economics.

Plaintiffs claim that Dr. Topel offered ‘an entirely new argument at the hearing,’ citing that Dr. Singer’s variables in his impact regression undermined his results.

Finally, Plaintiffs defended Dr. Zimbalist’s “yardstick method” when assessing damages in his expert report. As you may recall, Dr. Zimbalist’s expert report was criticized by Zuffa for its use of team sports leagues such as the NFL, NBA, NHL as well as Top Rank Boxing when assessing the level of damages available to Plaintiffs.

Conversely, defendants argue that if there was a purported monopsony, it was a legal monopsony. Zuffa argued that Dr. Toepel’s rebuttal to Dr. Singer’s regression method was that a “regression measuring an effect on fighter share could not distinguish a competitive market from one with competitive restraints because a rise in revenue in either would decrease fighter share.” Therefore, Dr. Singer’s methodology and conclusion regarding foreclosure share is rendered useless according to Dr. Toepel. Zuffa argued that its expert Roger Blair confirmed Dr. Toepel’s conclusion citing that in a competitive market you can get “two very different wage shares or revenue shares.”

The thrust of Zuffa’s argument was that it was its business acumen and its achievement in a competitive market drove revenue for the company. It paid fighters more than its competitors and that is why the labor supply remained robust. They argue that even if Plaintiffs disagree, the regressions do not prove whether an effect on wage share resulted from a legal monopsony of the purported anticompetitive scheme the fighters claim.

Additionally, to disprove Dr. Singer’s report, Zuffa identifies articles within it that are contrary to what Singer purported claims. Zuffa also suggests that Dr. Singer’s “foreclosure share” misinterprets the law. They point to a section where Singer explains why he selected 30-month contracts as his method of foreclosure. He cites case law but there is no case law to be found in that portion of Singer’s report. according to Zuffa. Maybe more telling is a journal relied upon by Dr. Singer that Zuffa has learned is a fraudulent academic journal. Zuffa states that it has named itself similar to a reliable academic journal to purportedly cause confusion.

My post at MMA Payout . 

My post on MMA Payout

My post on Zuffa’s quest to have a Battle of the Experts prior to two crucial hearings.  The practice, known as “hot tubbing” vets expert information. 

A Federal Court in Puerto Rico has dismissed boxer Austin Trout’s lawsuit against the World Boxing Organization for claims of violating the Muhammad Ali Boxing Reform Act. The court determined that due to the signed contact, Trout must submit to arbitration.

Trout claimed that the WBO had dropped him from the promotion’s ranking arbitrarily which affected his ability to receive a title shot.

The lawsuit landed in Federal Court in Puerto Rico after the boxing promotion moved the case to Puerto Rico where its offices are located.  Originally Trout filed the lawsuit in state court in New Mexico. The WBO moved the case to Federal Court in New Mexico and then requested the venue change to Puerto Rico which the Court granted.

The WBO claimed that Trout was bound by the terms of his WBO contract which required that he arbitrate any disputes he had with the contract.  According to the contract, the WBO would handle the arbitration and any appeal would be heard by a grievance committee put together by the promotion.

Trout argued that the lawsuit should remain in court for two reasons.  First, Trout’s attorneys argued that the WBO waived its right to arbitration as it already appeared in the case and filed procedural motions for the case to be moved to federal court and then to Puerto Rico.  Secondly, Trout argued that his claims were based upon violations of the Ali Act which should be litigated instead of arbitrated.  Furthermore, it argued that the arbitration clause was invalid because the WBO would effectively “be both a party and a judge.”

The WBO moved to compel arbitration and dismiss the lawsuit.  In siding with the WBO, the Court indicated that the WBO’s contract which included the arbitration clause was valid and related to the dispute alleged by Trout and therefore it was a valid arbitration clause.  Trout unsuccessfully argued that there was ambiguity in the contract and with contracts of adhesion, they should be found in favor of the non-drafting party. Here, Trout argued that the arbitration clause related to disputes with third parties whereas disputes directly with the promotion could be litigated.  Part of this argument was due to the WBO serving as the arbitrator in the matter.  However, the court found no ambiguity and that the contract availed the parties to arbitration on all matters.  

As to the argument that the lawsuit was litigated by the WBO and as a result, it had waived its right to arbitration, the court argued that the sole responses made by the promotion in court were procedural and not substantive.  Hence, it had not participated in litigation of the case and did not waive its right to an arbitration.

There is no indication that Trout will appeal this decision at this point.

The underlying issue in this decision is that claims under the Muhammad Ali Act could be arbitrated based on a contract signed by the parties.  This does not bode well for the possibility of the Ali Act Expansion to combat sports.  The reason being is that if the party drafting the contract (e.g., Zuffa) includes a provision that all disputes under the contract shall be resolved via arbitration, it might mute the effectiveness of the Ali Act.  While arbitration is a faster way to resolve disputes, in the Trout case, he was concerned with the ability for the WBO to be judge and a party. One might foresee an MMA promotion including in its contract its ability to choose an arbitrator.  We have already seen that the UFC Anti-Doping Policy has chosen its own vendor and arbitrator.  It would likely do the same for any case claiming a violation of the Ali Act.  Unless there is an appeal, look for this decision to rear its head in the future.