MMA Universe

Sherdog.com reports that Affliction and M-1 Global have settled its two year old lawsuit. The federal lawsuit, filed in Los Angeles, California, was set to go to trial this October.

Fedor Emilianenko and M-1 Global’s attorneys filed a Notice of Settlement in late August informing the Court that the parties involved in the lawsuit had come to an agreement. The papers filed noted the settlement and requested to vacate all pre-trial deadlines and the October trial date.

As you might recall, this lawsuit stemmed from the failed Affliction PPV, “Trilogy.” More background info is here.

Also, J.R. Riddell of Sherdog.com provides a synopsis:

 [Fedor and M-1 Global's] complaint alleged that after Josh Barnett refused licensure by the California State Athletic Commission because of a reported positive stroids test, Affliction breached its contract by refusing to promote the third and final fight called for under their “Fight Agreement.” They claimed Affliction did not undertake “all reasonable efforts” to find a fighter to replace Barnett…

One of the claims made by M-1 was that Affliction was trying to repair its relationship with the UFC and no longer wanted to promote its third PPV.

The lawsuit saw key figures in MMA deposed including UFC head Dana White, at the time Strikeforce head Scott Coker, Affliction’s Tom Attencio and Fedor.

This past June, the Court denied the parties’ motions for summary judgment (requests to dismiss the case on a party’s behalf). At the time, the Court advised the parties that they mediate the case in order to settle the matter short of trial. However, the parties did not settle. But, as with most heavily litigated cases where the result may be in doubt, the parties carved out a settlement short of the trial date.

While the Notice of Settlement filed with the court gave the parties the opportunity to reopen the case within 30 days of the notice, it is unlikely that would happen. In most instances, the parties leave this window in the event a party fails to hold up its end of the settlement (e.g., pay the negotiated settlement). More important to the litigants and their clients, the court deadlines were vacated meaning that further legal work (and legal fees) are avoided.

The Affliction vs M-1/Fedor Litigation has provided some great insight on the behind-the-scenes dealings throughout the lifespan of the Affliction/M-1 partnership, which includes the cancellation of the Trilogy event and a last minute deal between Affliction and the UFC.

On June 7, 2011, a 55-page decision document was released, depicting in great detail as to what lead Affliction into dropping its MMA promotional aspirations and concurrently signing a deal with the UFC to get back in their good graces after being banned by the promotion in 2008.

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Here are some of the tidbits disclosed in the decision:

- As of March 2008, Fedor had an oral agreement with M-1 that “obliged him to fight for M-1 for a two-year period in exchange for $2 million per bout, as well as a $1.5 million signing bonus”.  Fedor also has an 8.5% interest in the company.

- In early 2008, Affliction’s Todd Beard informed M-1 that they were going to form an MMA promotion company after their relationship with the UFC had deteriorated.

- On April 14, 2008, Affliction and M-1 agreed that Fedor Emelianenko would be paid a $300k purse which was reported pay, and received an additional $1.2M consulting fee via M-1 Global, which totaled to a $1.5M purse after re-negotiating an earlier contract which did not include the Consulting Agreement (which was set up after considering some financials regarding taxes).

- Vadim Finkelstein invested $1 Million to open Affliction stores in Russia to make Affliction happy in order to form an Affliction/M-1 Global business, which they were also hoping to team up with Japanese promotion DREAM to run some co-promotional events in Japan, but Affliction was worried about the costs of such venture.

- On December 8, 2008, M-1 and Affliction clothing agreed on a $1 Million sponsorship deal that would heavily feature Affliction on the M-1 Challenge broadcasts for the 2008 and 2009 seasons.

- M-1 contends that each M-1 Challenge event costs around $250K US Dollars, which includes expenses such as venues, visa fees, travel expenses, stage, refs, and production. Affliction paid the first installment of $500K, never paid the rest ($500K). Affliction claims contract calls for 30 “unique” one-hour episodes of M-1 Challenge and only 27 were provided.

- M-1 claims that Affliction had growing concern, noting that Affliction’s Beard probably that the UFC was ready to sign with Fedor on any terms M-1 wanted, but M-1 held back trying to grow a “competitive promotion” with Affliction, using Fedor as the “trump card”.

- On May 13, 2009, the Trilogy event set for August 1st was presented, with Fedor fighting Josh Barnett.

- On July 9, 2009, Affliction began discussions with the UFC regarding a potential sponsorship deal.

- M-1 used their personal contacts to broadcast the Trilogy event on national TV in Russia, Channel One.

- On July 13, 2009, Affliction’s Bassiri met with UFC’s Lawrence Epstein, UFC’s general counsel, and discussed the possibility that the UFC would assume responsibility of the Trilogy event and postpone the event to September 19, 2009 in Dallas. Affliction wanted to leave the MMA promotion business and re-establish a relationship with the UFC.  … MMAPayout: If you recall, this is around the time Zuffa insider’s were prematurely announcing a Fedor vs Lesnar main-event in Dallas for September, since part of the deal involved Affliction’s belief that they had a good enough relationship with Fedor that either he would follow them to the UFC, or would honor the one fight that was left in their contract. No one in Affliction informed M-1 of the meetings they were having with the UFC.

- After M-1 found out that Josh Barnett failed a drug test on July 21, 2009 from the CSAC, both parties started looking for a suitable replacement for the Trilogy event on August 1st.  Affliction’s Tom Atencio presented M-1 with Brett Rogers, Roy Nelson, and Alistair Overeem as possible opponents for the Trilogy main event.

- Tom Atencio offered Brett Rogers $500k to fight Fedor on July 22, 2009, but Strikeforce – who Rogers was currently signed with – refused.  Strikeforce eventually gave Rogers permission to Rogers to be able to take the fight on July 23, but by that day, Affliction canceled the Trilogy event and on that same day announced a deal with the UFC.

- The agreement between Affliction and the UFC  is detailed as follows:

“Paragraph 1 of the UFC/Affliction agreement provided: “[E]xcept for any rights that [Affliction] has with respect to Fedor Emelianenko (‘Fedor’) and conditioned upon [Affliction] . . . assign[ing] the agreements between [Affliction] and the [Affliction] Fighters to the UFC, the UFC agrees to assume [Affliction]’s responsibility for payment of the entire purse of the Affliction Trilogy Event which [Affliction] represents is not in excess of $741,000 purse and $370,000 win bonus. . . .”  Paragraph 2 stated that “[w]ith respect to Fedor, in the event the UFC is able to come to an agreement with Fedor on terms and conditions satisfactory to the UFC, the UFC shall assume responsibility for payments of Fedor’s purse for the Affliction Trilogy event or cause Fedor to release [Affliction] from its agreement with Fedor.”  Paragraph 6 required that Affliction Promotions cancel the Trilogy event.”

- On July 23, 2009, M-1 didn’t know about the cancellation of the event until after it arrived to Los Angeles with 30 fans from Russia.  Fedor was studying some footage on Vitor Belfort and Brett Rogers on the flight to LAX. … MMAPayout: On June 22, Atencio accused Dana White of tampering and trying to sign Vitor Belfort to a UFC contract to face Anderson Silva. White appeared on a TUF 9 Finale promo on Spike TV making the reference.

On June 7, 2011, Judge Margaret M. Morrow denied the parties cross-motions for summary judgment in the Affliction v. M-1/Fedor litigation. I have previously posted about the litigation — most recently here.

The 55 page decision is a VERY interesting read especially with respect to the facts surrounding the “Trilogy” non-event — in particular the discussions and ultimate agreement between Affliction and the UFC.

Below are some of the interesting points — note the chronology.

As set forth in the Court’s decision, at a “July 13, 2009 meeting, Bassiri and Lawrence Epstein, UFC’s general counsel, discussed the possibility that UFC would assume responsibility for the Trilogy show and postpone it to September 19, 2009, in Dallas. Bassiri told Epstein that Affliction Promotions wanted to leave the MMA promotion business and re-establish its relationship with the UFC.”

According to the decision, “[o]n July 21, 2009, M-1 learned from Affliction that the California State Athletic Commission would not renew Josh Barnett’s license because he had tested positive for the use of steroids.”

Then, “[o]n July 22, 2009, Atencio offered [Brett] Rogers $500,000 to replace Barnett as Emelianenko’s opponent at the August 1, 2009 Trilogy event,” but “Strikeforce, with whom Rogers then had a promotional contract, was not willing to release him from his contract to fight in the Trilogy event, however.”

“[O]n July 23, 2009, Strikeforce released Rogers to fight in the event. By that time, however, Affliction Promotions had decided to cancel Trilogy. At 4:00 p.m. that day, Affliction concluded a deal with UFC.”

As set forth in the decision, that agreement provided, in part, as follows:

Paragraph 1 of the UFC/Affliction agreement provided: “[E]xcept for any rights that [Affliction] has with respect to Fedor Emelianenko (‘Fedor’) and conditioned upon [Affliction] . . . assign[ing] the agreements between [Affliction] and the [Affliction] Fighters to the UFC, the UFC agrees to assume [Affliction]’s responsibility for payment of the entire purse of the Affliction Trilogy Event which [Affliction] represents is not in excess of $741,000 purse and $370,000 win bonus. . . .” Paragraph 2 stated that “[w]ith respect to Fedor, in the event the UFC is able to come to an agreement with Fedor on terms and conditions satisfactory to the UFC, the UFC shall assume responsibility for payments of Fedor’s purse for the Affliction Trilogy event or cause Fedor to release [Affliction] from its agreement with Fedor.” Paragraph
6 required that Affliction Promotions cancel the Trilogy event.

According to the decision, “[p]rior to the time M-1 learned of the cancellation, it had put Emelianenko on his scheduled flight to Los Angeles, and given him footage of both Rogers and Vitor Belfort so that he could study the fighters while in flight. Emelianenko did not learn that Trilogy had been cancelled until he arrived at Los Angeles International Airport with thirty fans from Russia.”

Here is the decision:
Affliction SJ Decision(function() { var scribd = document.createElement("script"); scribd.type = "text/javascript"; scribd.async = true; scribd.src = "http://www.scribd.com/javascripts/embed_code/inject.js"; var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(scribd, s); })();

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Fight Lawyer

Justin Klein is an attorney at Satterlee Stephens Burke & Burke LLP in New York City where he concentrates his practice in commercial litigation and represents clients in the fight industry. He regularly addresses current legal issues that pertain to combat sports, including efforts to legalize MMA in New York, at his Fight Lawyer website. He is a licensed boxing manager with the New York State Athletic Commission as well as the founder and Chairman of the Board of the New York Mixed Martial Arts Initiative, a non-profit organization that gives inner city youth the opportunity to experience the emotional and physical benefits of martial arts training. Justin lives in New York City where he trains in jiu jitsu and boxing.

DISCLAIMER

The information in this post and on my site consists of my opinion only, i.e., it is not the opinion of my employer or anybody else. In addition, and because this is my opinion, it is not intended to be (and is not) legal advice or an advertisement for legal services. This post provides general information only. Although I encourage interested parties to contact me on the subjects discussed in the articles, the reader should not consider information on this site to be an invitation for an attorney-client relationship. I disclaim all liability in respect to actions taken or not taken based on any contents of this post. Any e-mail sent to me will not create an attorney-client relationship, and you should not use this site or my site to send me e-mail containing confidential or sensitive information.

MMA lifestyle apparel brand Affliction Clothing is set to open a 5,000 square foot retail location at its world headquarters in Seal Beach, California. According to a press release, the SoCal location is holding a grand opening June 4th.

This will be the 10th Affliction Clothing store.

Via Affliction’s press release:

Consistent with Affliction’s attention to quality and design, the store will exemplify the Affliction esthetic, offering custom made fixtures with signature rivet detail, unique display pieces, such as a custom Rat Rod car and memorabilia autographed by Affliction’s loyal celebrity following.

Payout Perspective:

The opening of Affliction’s largest store indicates that the MMA apparel industry is growing. In this week’s Sports Business Journal (subscription required but more on this later) there is a featured article about the growth and expansion of the UFC. One of the areas that was cited as needing work was the lifestyle component of the UFC brand. While there can be a debate as to where the design and concepts for clothing should go, Affliction has defined its style and based on its growth, it is hitting the mark with its demographic.

Before they enter the octagon at UFC 124, pay attention to the walk out of Georges St. Pierre and Josh Koscheck as they will be wearing t-shirts of their respective sponsors: Affliction and Dethrone.

The GSP shirt is touted as a limited edition Affliction shirt with only 500 made. With a price point of $57.99, its more than buying the PPV (if you purchase the PPV on DirecTV HD – $54.95).

Josh Koscheck’s  Dethrone “walkout t-shirt” is not a limited edition, but comes in all black and all red (pictured) and has a “Kos” logo. Koscheck’s shirt is “reasonably” priced at $27.99.

Payout Perspective:

Similar to replica jerseys in team sports, for fight fans, t-shirts are a practical way to support your favorite fighter. Although many people do not like the huge designs, depictions of destruction, skulls or devils, I expect many fans wearing Affliction and Dethrone gear at the fight on Saturday. As for the two shirts above, I think the price point for GSP’s t-shirt is too expensive for an average MMA fan. Even a $28 Koscheck shirt seems a bit high, but is much more manageable on the wallet.

It would be a nice coup for Dethrone if it could claim to have the UFC Heavyweight Champ and the UFC Welterweight Champ. Possible slogan: “The brand of champions”?

*Note: I realize GSP may be wearing his gi during the walkout, but he should have his shirt on at the end of the match.

Here’s a look at the Affliction advertisement featuring Georges St-Pierre that appears on the back page of GQ’s February edition of the magazine.

Payout Perspective:

Brock Lesnar may be the biggest draw in the sport right now, but if St-Pierre continues to increase his profile with high-level sponsorships, magazine covers, and television appearances, it won’t be long before he becomes the biggest attraction MMA has to offer. He’s not a heavyweight, sure, but he’s one hell of a fighter and his appeal goes also transcends that mainstream divide – he has serious cross-over potential.

J.R. Riddell of Sherdog.com reports that Affliction’s motion to dismiss M-1’s claims of breach of contract have been denied by a federal judge in Los Angeles.

On Monday, Affliction’s legal team urged the judge to dismiss a number of Emelianenko and M-1’s breach of contract claims, arguing that two of the three agreements at issue in the suit had expired well in advance of the “Trilogy” show. Emelianenko and M-1 Global’s legal team countered that the contracts had not expired, pointing to evidence that Affliction actively co-promoted the event with M-1, which in their view suggests that Affliction was acting as if the contracts remained in effect.

Bassiri, Affliction’s counsel, said that the judge denied the motion because at this early stage of litigation, she was legally required to accept Emelianenko’s allegations as true. The judge did not, however, make any binding decisions regarding whether or not Emelianenko’s claims were factually accurate.

Payout Perspective:

MMAPayout.com was the first to break word of the impending suit back in October and followed up with some detailed analysis of the situation which can be found below. Essentially the Fedor and M-1 camp filed a breach of contract suit against Affliction Entertainment and other unnamed parties citing failure to perform certain contractually obligated services.

Although the complaint itself is quite complex, it actually can be easily summarized in lay terms.  Fedor had a three-fight contract with Affliction, and fought two of the three fights, and agreed to fight Josh Barnett to close the contract.  Barnett failed a steroids test, Affliction had discussions with prospective replacements for Barnett (e.g., Vitor Belfort and Brett Rogers) but ultimately reached an agreement with UFC that would permit Affliction to once again sponsor UFC fighters so long as it agreed to exit the promotion game.

All contracts have what is called an implied covenant of good faith, and Fedor argues that Affliction, instead of satisfying its obligation of booking a third fight for Fedor by finding a suitable replacement for Barnett, chose the path of least resistance by returning to UFC and cancelling the third show altogether, leaving the contracts with Fedor unsatisfied.

The substantive issues in the lawsuit are interesting: in contract law there is what’s known as the excuse of impossibility, and here the argument would be that Barnett’s failing the steroids test rendered impossible the satisfaction of Affliction’s obligations on the Fedor contracts, with Fedor arguing that Barnett’s negative drug test was used as a mere pretext to allow Affliction to exit the promotion end of MMA and stiff Fedor.

But then we come to Affliction’s motion to dismiss, which throws a monkey wrench into the entire substantive analysis.  You see, Fedor argues that Affliction breached its contracts by cancelling Affliction: Trilogy and reaching agreement with UFC in July 2009.

Affliction’s motion to dismiss, however, points to the language of the contracts, which calls for termination of the agreements on either (i) March 31, 2009; or (ii) the conclusion of the third fight, with the contracts specifically stating that they terminate upon the earlier of the two dates.  Since there was no third fight, the earlier date was March 31, 2009, and Affliction argues in its motion to dismiss that it cannot be alleged to have breached a contract in July 2009 that had expired four months earlier.

Although this is an attractive argument, there are many complexities to the suit, including issues of equity (i.e., fairness) in which Fedor could conceivably recover foreseeable damages suffered by his reasonably relying upon promises made by Affliction, so I do not expect this motion to dismiss to entirely end the matter.

Moreover, the language Afflcition points to in its motion to dismiss has wriggle room that could be favorable to Fedor: the contract cancels on the earlier of the two dates “unless the term of the promotion agreement or any extension thereto is . . . extended further pursuant to this Agreement or pursuant to a separate writing . . . .”  I would expect some — perhaps very creative — arguments from Fedor that indeed the contract term had extended either through explicit writing, oral agreement, or even something known in contract law as course of conduct of the parties.

MMAPayout previously discussed the basic facts surrounding the Emelianenko v. Affliction litigation and has now learned that Affliction filed what is known in federal court as a Rule 12(b)(6) motion to dismiss the case on the ground that Emelianenko and M-1 (hereinafter Fedor) have failed to state a claim upon which relief can be granted, basically arguing that even if the court looks at all the facts in the light most favorable to the plaintiffs, Fedor has still not made a legitimate case. 

Affliction’s motion to dismiss in essence argues that the lawsuit is frivolous.   In the words of Affliction’s Tom Atencio: 

“Affliction landed a serious blow to the Fedor and M-1 lawsuit by filing a motion to dismiss in federal court in response to the Russians’ complaint only eight days after being served. . . . The counter by Affliction goes to show Affliction does not intend to rollover and be extorted by the Russian visitors and how frivolous and meritless Affliction considers the allegations of their complaint.”

Before examining the nature of Affliction’s motion to dismiss the lawsuit, it’s worth providing a basic analysis of Fedor’s allegations.

Although the complaint itself is quite complex, it actually can be easily summarized in lay terms.  Fedor had a three-fight contract with Affliction, and fought two of the three fights, and agreed to fight Josh Barnett to close the contract.  Barnett failed a steroids test, Affliction had discussions with prospective replacements for Barnett (e.g., Vitor Belfort and Brett Rogers) but ultimately reached an agreement with UFC that would permit Affliction to once again sponsor UFC fighters so long as it agreed to exit the promotion game.

All contracts have what is called an implied covenant of good faith, and Fedor argues that Affliction, instead of satisfying its obligation of booking a third fight for Fedor by finding a suitable replacement for Barnett, chose the path of least resistance by returning to UFC and cancelling the third show altogether, leaving the contracts with Fedor unsatisfied.

The substantive issues in the lawsuit are interesting: in contract law there is what’s known as the excuse of impossibility, and here the argument would be that Barnett’s failing the steroids test rendered impossible the satisfaction of Affliction’s obligations on the Fedor contracts, with Fedor arguing that Barnett’s negative drug test was used as a mere pretext to allow Affliction to exit the promotion end of MMA and stiff Fedor.

But then we come to Affliction’s motion to dismiss, which throws a monkey wrench into the entire substantive analysis.  You see, Fedor argues that Affliction breached its contracts by cancelling Affliction: Trilogy and reaching agreement with UFC in July 2009. 

Affliction’s motion to dismiss, however, points to the language of the contracts, which calls for termination of the agreements on either (i) March 31, 2009; or (ii) the conclusion of the third fight, with the contracts specifically stating that they terminate upon the earlier of the two dates.  Since there was no third fight, the earlier date was March 31, 2009, and Affliction argues in its motion to dismiss that it cannot be alleged to have breached a contract in July 2009 that had expired four months earlier.

Although this is an attractive argument, there are many complexities to the suit, including issues of equity (i.e., fairness) in which Fedor could conceivably recover foreseeable damages suffered by his reasonably relying upon promises made by Affliction, so I do not expect this motion to dismiss to entirely end the matter.

Moreover, the language Afflcition points to in its motion to dismiss has wriggle room that could be favorable to Fedor: the contract cancels on the eariler of the two dates “unless the term of the promotion agreement or any extension thereto is . . . extended further pursuant to this Agreement or pursuant to a separate writing . . . .”  I would expect some — perhaps very creative — arguments from Fedor that indeed the contract term had extended either through explicit writing, oral agreement, or even something known in contract law as course of conduct of the parties.

Stay tuned for an examination of Fedor’s upcoming response to Affliction’s motion to dismiss Emelianenko v. Affliction.

MMAPayout.com has learned that Fedor Emelianenko and M-1 have brought suit against Affliction Clothing and Affliction Entertainment in Federal Court. The complaint alleges breach of contract and breach of the implied covenant of good faith and fair dealing as it relates to a series of agreements between Emelianenko, M-1, and Affliction.

The complaint obtained by MMAPayout.com sheds new light on the relationship between the parties. Under the terms of the agreements, Emelianenko was to receive $300,000 per bout plus travel and accommodations expenses from Affliction in addition to a “substantial” payment from M-1. In addition to its promotional agreement with Emelianenko, Affliction also entered in a consulting agreement with M-1 as well as a letter agreement concerning Affliction’s sponsorship of the M-1 Challenge.

The cancellation of Affliction: Trilogy and the circumstances surrounding it are at the heart of the allegations.  According to the complaint:

Plaintiff is informed, believes, and based thereon alleges Affliction intended to sign Brett Rogers to fight in Affliction: Trilogy and intended to go forward with the event if the UFC deal failed, but intended to cancel [the event] if the UFC deal closed.  Brett Rogers was ready, willing, and able to fight Emelianenko in [the event], but instead of honoring its promises to Emelianenko and M-1 by signing Rogers, Affliction elected to serve its own financial interests at the expense of its partners.

The complaint goes on to state that following discovery concerning the events that lead to the event’s cancellation and “determining what discussions and agreements took place between Affliction and the UFC, and when these discussions took place, Plaintiffs will amend this complaint to add additional allegations, causes of actions, and parties as supported by the facts discovered.”

Stay tuned to MMAPayout.com for further developments and more detailed analysis.