MMA Universe

A Reuters report states that the US Government shut down 16 web sites related to the illegal streaming of live sports. The sites provided links to pirated sites where viewers could watch sports including NBA, NFL, WWE and TNA pro wrestling for free.

The sweep of illegal sites is in preparation for Super Bowl Sunday. Who watches the Super Bowl via illegal streaming? The article reports that Tom Brady actually used an illegal web site last year in Costa Rica to watch the Packers-Steelers Super Bowl.

The feds arrested a Michigan man who was charged with one count of criminal copyright infringement. Its alleged that he ran several of the pirate sites receiving $13,000 from online merchants who advertised with him. The man was caught as a federal agent posed as a WWE representative seeking to buy a domain from the man.

Payout Perspective:

The crackdown on illegal sites should appease the WWE and the UFC in its constant effort to curb piracy. The article provides some interesting insight on the business behind illegal streaming. The ad revenue seems small considering the risk one may take for running such a site.

Earlier today, Josh Gross from ESPN.com broke the news that the Federal Trade Commission has closed a non-public investigation into the UFC’s purchase of Strikeforce as of last week.

ESPN reports:

Documents published on the FTC website dated January 25, confirm the FTC’s Bureau of Competition conducted an investigation to determine whether the $34 million acquisition of Explosion Entertainment, LLC, by UFC’s parent company, Zuffa LLC, violated Section 7 of the Clayton Act or Section 5 of the Federal Trade Commission Act.
…
In closing letters issued to counsel for Zuffa and Explosion Entertainment, FTC secretary Donald S. Clark stated, “Upon further review of this matter, it now appears that no further action is warranted by the Commission at this time. Accordingly, the investigation has been closed.”

The full letter from the FTC is below (H/T: FightOpinion.com):

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Office of the Secretary

January 25, 2012

Stephen Axinn, Esq.
Axinn Veltrop, and Harkrider LLP
1330 Connecticut Ave., NW
Washington, DC 20036

Re: Acquisition of Explosion Entertainment, LLC (Strikeforce) by Zuffa, LLC (UFC)
FTC File No. 111 0136

Dear Mr. Axinn:

The Federal Trade Commission’s Bureau of Competition has been conducting a nonpublic investigation to determine whether Zuffa, LLC’s acquisition of Explosion Entertainment, LLC may violate Section 7 of the Clayton Act or Section 5 of the Federal Trade Commission Act.

Upon further review of this matter, it now appears that no further action is warranted by the Commission at this time. Accordingly, the investigation has been closed. This action is not to be construed as a determination that a violation may not have occurred, just as the pendency of an investigation should not be construed as a determination that a violation has occurred. The Commission reserves the right to take such further action as the public interest may require.

By direction of the Commission.

Donald S. Clark
Secretary

The New York District Attorney and Attorney General filed separate motions to dismiss two claims in Zuffa’s lawsuit in New York City. While the lawsuits seek to dismiss only a portion of the UFC complaint, it appears that the defendants are leaving open a motion to dismiss the entire complaint in total at a later date.

Courtesy of the Fight Lawyer, the two motions are below:

Attorney General’s Motion to Dismiss(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); })();

District Attorney’s Motion to Dismiss(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); })();

Payout Perspective:

The crux of both arguments appear to be that despite Zuffa’s claims, the fact remains that New York had a rational basis for enacting the ban at the time it was drafted. And based on this, the statute was not vague and overbroad as it relates to the due process and equal protection claims. They cite to case law which supports the theory that despite changes over the years that may, arguably, antiquate a statute’s purpose, under a rational basis review of a law, so long as there was a rational purpose for it at the time of its introduction it is valid.

Both motions argue that the proper forum for Zuffa’s claims is with the legislature and that if Zuffa wanted to enact change, it should direct its efforts to the legislature.

Via the District Attorney’s motion to dismiss:

…as a proper exercise of judicial restraint, federal courts must uphold a statute that was rational when enacted, even when post-enactment developments cast doubt on the wisdom, logic, or providence of prior legislative decisions

It also argues that legislatures are given “substantial latitude” when it comes to enacting laws under a rational basis review of the law as “imperfections and even inequality must be tolerated.”

The defendants’ motions are persuasive and could set the dominoes in line if the court grants the motion to dismiss Zuffa’s claims. As indicated in its motions, both parties contemplate a further motion to dismiss the rest of Zuffa’s claims if it is successful with this motion.

The Fight Lawyer reports on the latest from the Zuffa lawsuit in New York. Notably, the New York AG and the New York DA will file a motion to dismiss on the issues of due process and equal protection but the First Amendment issue will not be contested in the motion.

On January 5, 2012 a status conference was held:

Minute Entry for proceedings held before Judge Kimba M. Wood: Status Conference held on 1/5/2012.  Defendants will submit a limited motion to dismiss addressing only the issue of whether due process and equal protection analysis requires the Court to determine whether there was a rational basis for the law at issue only at the time it was passed, or whether the Court must determine whether there is a rational basis for the law at present (in other words, whether the Court should take into account a change in factual circumstances that makes the law no longer rational, even if it had a rational basis at the time of passage). Defendants’ motion is due 1/27/12. Plaintiffs’ reply is due 2/17/12.Defendants’ response is due 3/2/12. (js) Modified on 1/9/2012 (tro). (Entered: 01/06/2012)

Payout Perspective:

It will be interesting to see the arguments in the motion. The minute entry appears a little confusing upon first read considering the court will consider whether a law can become constitutionally irrational. But, it appears that the Court will decide whether the MMA Ban is rational now based on the current state of MMA or whether it was rational when the law was introduced in 1997.  A breakdown of the due process and equal protection claims are 3, 4 and 5 in the lawsuit addressed here.

As the Fight Lawyer commented in his post, its a limited motion and there is no mention of the First Amendment claim.

One has to wonder whether the defendants believed that Zufffa’s First Amendment claim would survive a motion to dismiss at this point or whether its strategy is to prevail on its limited motion first prior to addressing the other claims in the lawsuit.

The lawsuit filed by Golden Glory against Alistair Overeem in Clark County, Nevada last week included the Golden Glory-Overeem contract.

As The Fight Lawyer points out, this lawsuit is not the same as Overeem’s lawsuit filed in Los Angeles in November. A summary of that lawsuit is here. However, both lawsuits relate to the contract dispute the UFC Heavyweight had with his former gym.

The contract attached to the Nevada lawsuit is interesting insight into the terms and conditions Knockout Investments (KOI) and Golden Glory (GG) had with Overeem. An initial impression is that it was not drafted by an attorney and has certain clauses which seem one-sided and unenforceable. Yet, we presume that Overeem signed the contract with knowledge of its terms.

Here are some interesting tidbits from the Nevada lawsuit:

- The 2007 contract with Overeem was set for 5 years. KOI/GG would receive 30% of essentially everything made by the fighter.

- In paragraph 34 of the Complaint, it states that Overeem receives $2.00 per view for views over $500,000 in the United States, Canada and online. Later in the Complaint, it claims that Lorenzo Fertitta told Overeem that the $1 million signing bonus was Overeem’s and that KOI/GG was “ripping him off.”

- The terms of the UFC contract also includes a $1 million “signing bonus” paid over the first 3 fights of Overeem’s contract. Overeem’s contract guarantees the first 3 fights and could “potentially” cover 8 fights. Here, it appears that the UFC has the option to pick up the additional 5 fights.

- In addition to the UFC-Zuffa contract, the Complaint indicates that there is a separate Merchandise Rights Agreement. No known value was stated although its believed to be in excess of $100,000.

- Overeem made $50,000 from sponsorships from his June 2011 fight with Fabricio Werdum. Of which, KOI/GG demand 30% or $11,000. In addition, Overeem did not pay KOI/GG its cut of Overeem’s fight purse for the Strikeforce fight. Basically, Overeem was paid for his June Strikeforce fight and withheld payment to KOI/GG because he believed that his then managers owed him money.

- Article 10 of the contract includes a monetary penalty for violation of the contract. A $10,000 penalty plus a $5,000 per day penalty for each day the contract is in violation. It also states that the fine “can’t be lowered by any legal authority.”

Here is a further explanation of the Nevada lawsuit from F4WOnline (subscription required):

Knock Out Investments claimed that due to Overeem’s existing five-year contract with them that was signed in 2007, they are entitled to 30%. 30% of [Overeem’s] pay between all the money he got for UFC 141 is $684,000, so they are fighting for a huge chunk of change. They also alleged Overeem never paid them their 30% from the 6/18 fight with Fabricio Werdum. Overeem had already, in November, filed suit against Knock Out Investments, claiming they owed him $151,000 prior to the Werdum fight based on fights he already had, and asked for a court order stating that due to that, his contract should be null and void. Prior to the Werdum fight, almost all of Overeem’s fight money, whether it was from Japan or previously with Strikeforce, was sent to Knock Out Investments and then after they got paid and took their cut, they paid their fighters. Zuffa, after purchasing Strikeforce, refused to continue that practice, stating that they were going to pay fighters and not management teams. At one point Zuffa even fired all of the Golden Glory fighters, including Overeem, because Golden Glory made the demand that they wanted the money to be paid to them. After firing a number of fighters, Overeem included, Golden Glory relented and agreed to let Zuffa pay the fighters. By that time Overeem had been fired and removed from the Strikeforce tournament, and at the time nobody knew the future of Strikeforce and Overeem would have been far more valuable on the UFC side.

“The reality is that a fighter is paid within 24 hours of the bout,” wrote Knock Out Investments attorney Roderick Lindblom. “Given past failure to pay management and training fees, there is serious concern on my client’s part that Mr. Overeem will simply walkaway with the money.”

An explanation of what occurred regarding the failure to recoup UFC 141’s payment is here. Essentially, a surety bond needed for garnishment after the order was issued was never secured.
Payout Perspective:

One has to wonder why Overeem agreed to some of the terms of the contract and whether he had his own legal counsel look over the contract. Notably, Overeem was granted a $1 million signing bonuses (spread over the course of 3 UFC fights) after he was released from Strikeforce. What interests most people with the terms of Overeem’s Zuffa-UFC contract is the PPV points he received for UFC 141. Its rare that the general public get to see the portion fighters receive for PPVs. One might assume that Brock Lesnar received more of a portion of the PPV revenue due to his status with the company.

MMA Junkie reports that Alistair Overeem’s fight purse for his win at UFC 141 was paid to Overeem although initial reports had Golden Glory’s lawyers obtaining an order to garnish his wages.

The problem was that a bond required to execute the garnishment order was not deposited. Thus, the order to withhold a portion of Overeem’s pay was not binding.

Keith Kizer confirmed that the Nevada State Athletic Commission did not withhold the pay.

Via MMA Junkie:

A UFC official confirmed that a $200,000 bond required to execute the order was not deposited prior to the event.

The order requested a check totaling $241,285.49 be cut from UFC parent company Zuffa to Golden Glory’s corporate parent, Knockout Investments. The money included Overeem’s show and win purses, performance bonuses and proceeds from the event’s pay-per-view broadcast.

The day before the court order, Golden Glory filed suit alleging heavyweight did not pay a 30 percent commission owed to the team for a fight in June against Fabricio Werdum. In his suit, Overeem claimed the team owed him $151,000 in back pay and asked a judge to determine whether his contract is enforceable.

Knockout Investiments (KOI) and Golden Glory representatives indicated that they would continue with this strategy:

“Seeking the initial writ was merely the first step in a long-term litigation strategy that KOI and Golden Glory will prosecute in Nevada. The writ of attachment remedy remains fully available to my clients and will be sought as to Mr. Overeem’s future pay-per-view payout, which we expect will be more lucrative than his initial fight purse.”

Overeem earns a portion of all pay-per-view revenue, including $2 per PPV purchase “for all revenues received by UFC-Zuffa for telecast of the Lesnar fight in the U.S., Canada or over the Internet in excess of $500,000,” according to an Overeem contract made public by the legal proceedings.

“Rest assured, now that we have had the opportunity to troubleshoot complex international hurdles – and without a long holiday weekend to contend with – future writs of attachment will be utilized to ensure that Mr. Overeem makes good on the commissions owed to my clients and his Golden Glory training team, who helped him achieve the success he now enjoys,” Lindblom stated.

Payout Perspective:

The writ of attachment and request to garnish Overeem’s wages is an indication of how heated this lawsuit will get. Of course, the failure to follow procedure in garnishment is a glaring error. It was inferred from by KOI and GG reps that there was trouble with legal procedure due to the Christmas and New Year’s holiday as well as the “international hurdles.” We are not Nevada attorneys so we are not privy to the type of proceeding that was initiated and the type of order issued by the judge. But as an example, in my jurisdiction a bond is needed in these type of proceedings in the event that the attachment is wrongful. The reason being is that in an attachment hearing (to garnish someone’s wages) there only need be a showing that the claims have “probable validity” and have “probable cause.” Thus, the threshhold to prove something could still be in doubt. In Nevada, KOI and GG had to put up a surety bond of $200,000 to garnish a portion of Overeem’s $385K fight purse. For whatever reason, it did not do so.

The other interesting fact out of this story is the amount of money Overeem makes. MMAPayout is in the process of trying to obtain a copy of the contract and will report on our findings once we receive it.

The Culinary Workers Union Local 226 became one of the biggest opponents of the UFC in 2011. It has helped opposed the legalization of professional MMA in New York state and has requested that the Federal Trade Commission investigate Zuffa for possible antitrust investigations.

In late August, the union sent a letter to the FTC requesting that it look into Zuffa’s acquisition of several of its competitors:

The letter goes on to point out that since 2001, Zuffa has acquired four of its key rivals (Pride Fighting Championship, World Extreme Cagefighting, the World Fighting Alliance, and most recently Strikeforce earlier this year.  They also state that through some independent research performed in 2008, Zuffa controls 80-90% of the mixed martial arts market.

Specifically, the letter points out that Zuffa has preserved and strengthened its dominance in the market through their unwillingness to co-promote events as well as anti-competitive contractual restraints placed on their contracted fighters.

As most know, the union’s beef with Zuffa stems from the Fertittas ownership of its Stations Casino. A failed attempt to unionize the workers at the Stations Casinos is the reason why there is staunch opposition to the legalization of MMA in New York. Lobbying efforts by the Culinary Workers have stifled efforts for passage of legislation allowing the UFC in New York.

USA Today reported in October that the union contacted Anheuser-Busch to boycott the UFC for “a history of tolerating homophobic conduct.” In addition, the Union has done the following to get its message across:

• Backing anti-MMA legislators in New York.

• Calling on the Federal Trade Commission to investigate UFC parent company Zuffa, which the union accuses of using monopolistic tactics to thwart competition from other promoters of mixed martial arts.

• Launching a website designed to highlight White’s use of vulgar language.

It will be interesting to see how much more the Culinary Workers will go to lobby against the UFC. The recent Zuffa lawsuit is a way around the union and lobbyists opposing MMA. So far, nothing is being reported about an FTC investigation of Zuffa and we will see if 2012 gives us any findings from the FTC about Zuffa and the claimed anti-competitive practices.

For years, the UFC tried to lobby and legislate and now its time to litigate. Prior to its lawsuit, it presented an economic impact study, educated the concerned that MMA is safe and brought its top fighters to the state to rally supporters. Facing a roadblock, Zuffa decided to file suit against the state Attorney General and District Attorney of New York.

The crux of the lawsuit argues that MMA should receive First Amendment protection and that the New York MMA Professional Ban on the sport is unconstitutional. At this point, the defendants have until January to file its Answer to the Complaint.

Only speculation, but its likely that New York will attempt to dismiss Zuffa’s lawsuit. If this occurs, what would Zuffa do next? We should see in 2012.

Defense counsel for New York has made its appearance and were granted extra time to file its answer to the Zuffa’s lawsuit. The court will allow attorneys for the New York Attorney General and the New York County District Attorney until January 11, 2012 to respond.

As for the Zuffa’s Complaint, MMA Payout takes a comprehensive look at each cause of action.As many of you recall, Zuffa filed suit against the state of New York citing its ban on MMA is unconstitutional. We have taken a look at the complaint and break down Zuffa, et al.’s claims.

The thresh hold issue for Zuffa’s first and most noteworthy claim in this lawsuit is whether MMA deserves First Amendment protection. In its Complaint, Zuffa goes into detail as to why it believes MMA should be protected speech. Essentially stressing the “arts” in Mixed Martial Arts.

Via the Wall Street Journal:

While the arts are protected, no court has ever directly confronted the question of whether athletes have a First Amendment right to be seen in action, said Barry Friedman, a professor at New York University School of Law who is representing the plaintiffs.

In response to this novel argument, the Zuffa Complaint offers this:

“MMA fighters participate in live events for the same reason that an actor plays a crowded hall, a figure skater skates in front of thousands of live fans, a ballerina dances at Lincoln Center, and a band plays in a packed auditorium: because they want todemonstrate their skills before a live and appreciative audience, and interact with that audience during the event. (from paragraph 123 of the Complaint)

“Live professional MMA is not just a sporting event; it is also entertainment and theatre. (from paragraph 124 of the Complaint)

However, opponents will counter that allowing a professional athletic sport First Amendment protection will open the floodgates of litigation for other sports to file suit on these grounds. The implication is that the protection is unfounded and the result of allowing MMA this protection would cause a glut in the judicial system.

Friedman counters this argument as he states in the WSJ article that MMA should be distinguished from other sports as he compares martial arts to dancing.

Breakdown of Zuffa’s Causes of Action:

1. The Live Professional MMA Ban violates the First Amendment

In this claim, Zuffa argues that the Live Professional MMA Ban (“MMA Ban”) is a content-based restriction based on the perceived violent message. (paragraph 238). Zuffa points to the legislative history of the MMA Ban as reason to argue that the purpose of the ban was due to the violent content of MMA. (paragraph 240). Hence, Zuffa concludes that New York misperceives the proper message of MMA. (paragraph 242)

Here, Zuffa argues that since MMA is public entertainment, it is thereby protected by the First Amendment.

Assuming that the court agrees with Zuffa and that it should be protected under the First Amendment, we look to how a Court would analyze the MMA ban. Courts require that governmental regulation of speech protected under the First Amendment be “content neutral.” A “content neutral” law is one that applies to all speech regardless of its message.

According to Erwin Chemerinsky’s treatise on Constitutional Law (something that all law students are familiar with), the requirement that the government be content-neutral in its regulation of speech means that the government must be both viewpoint neutral and subject matter neutral. Viewpoint neutral means that the government cannot regulate speech based on the ideology of the message. For instance, a law cannot regulate against a political ideology but not regulate its opposing view. Subject matter neutral means that the government cannot regulate speech based on the topic of the speech. Thus, a law cannot inhibit one particular subject.

In these interpretations, the government is allowed to regulate speech if there is a legitimate state interest. Its plausible that New York argues that the ban was necessary due to the violent nature of the sport and the safety issues related to MMA.

2.  The MMA Ban is Overbroad and violates the First Amendment

In this claim, Zuffa argues that the MMA Ban is so broad that it regulates certain things that it cannot, by law, regulate. “A law is unconstitutionally overbroad if it regulates substantially more speech than the Constitution allows to be regulated and a person to whom the law constitutionally can be applied can argue that it would be unconstitutional as applied to others.”  (Chemerinsky)

Zuffa examines the language in the MMA Ban law and indicates how the law was drafted makes things such as attending a “UFC viewing party” or litigating this lawsuit illegal. Zuffa also cites other examples where the law can be construed broadly to make legal conduct and speech illegal.

3. The MMA Ban is Vague on the face of the law and violates the Due Process Clause

“A law is unconstitutionally vague if a reasonable person cannot tell what speech is prohibited and what is permitted. Unduly vague laws violate due process whether or not speech is regulated.” (Chemerensky)

Zuffa points to terms in the MMA Ban which it argues are vague. Zuffa recites relevant portions of the law in paragraph 260 of the Complaint

Section 2 of the Ban states that “[n]o combative sport shall be conducted, held or given within the state of New York.” N.Y. Unconsol. Law § 8905-a(2). Both criminal penalties and civil liability are imposed upon “a person who knowingly advances or profits from a combative sport activity.” § 8905-a(3)

Key terms, “combative sport activity” and “professional match or exhibition” which triggers the analysis for the ban are not defined in a way which would provides definitive guidelines.

Zuffa argues that the practice of martial arts at martial arts schools in New York may or may not be affected by the MMA Ban (paragraph 262). Zuffa concludes that there is confusion in the law regarding exemptions for martial arts schools and/or clubs.

In addition, while the triggering provision in the law appears to be whether an MMA match is a “professional match or exhibition,” the ban appears to restrict amateur fights. (paragraph 268).

4. The MMA Ban is Unconstitutional as it violates the Equal Protection rights of the Plaintiffs under the 14th Amendment

Similar to the first three causes of action, Zuffa argues that New York does not have a rational basis for its blanket ban of professional mixed martial arts in the state. It states that New York does not articulate the reasons for the ban. While safety and messages of violence may be interpreted as the reasons for the law, Zuffa contends that these reasons fall flat since other forms of martial arts are legal in New York and studies show that MMA is a safe sport. In addition, Zuffa argues that there is no rational reason that it bans MMA even though there are other violent forms of speech (i.e., video games, violent movies and music lyrics) that are not regulated.

5. The MMA Ban is Unconstitutional as it violates the Due Process Clause

This cause of action relates to the right that the Due Process Clause in the Constitution prohibits the government from “intruding on liberty without rational reason.” Here, Zuffa argues once again that the MMA Ban is vague and overbroad and does not address the purpose for the law.

6.  The MMA Ban Unconstitutionally restricts interstate commerce

This cause of action relates to what lawyers term the “dormant commerce clause.” State and local laws cannot place an undue burden on interstate commerce. Zuffa argues that the MMA Ban stifles interstate commerce on three fronts.

First, since the MMA Ban is only a ban on professional MMA and not amateur MMA, New York may have MMA training, gyms and exhibitions but New York bars out-of-state businesses from promoting professional events.

Second, the language of the law is so broad that “numerous interstate products and services” required for a live professional MMA event are barred from New York. Here, the argument is that the law does not address the perceived purpose of the law, which is to ban the “violent message of MMA” and improve fighter safety. Zuffa argues that there are no benefits to the ban and states that the ban has forced individuals to turn to “underground” MMA. It also indicates that if the perception of violence was at issue, New York could have found an alternative to a complete ban on MMA. The Complaint suggest it could have an age limit for attendance in live events.

Finally, Zuffa argues that the MMA Ban could have an “extraterritorial effect” on interstate commerce as the vagueness of the statute and uncertain enforcement may leave advertisers and merchandisers to limit its exposure in the New York market. As an extension, it could burden advertisers and merchandisers in neighboring states.

7.  2001 Liquor Law is Unconstitutional as applied to plaintiffs

This cause of action relates to Zuffa’s claims related to the MMA ban as the 2001 Liquor Law prohibits the sale of liquor at both professional and amateur MMA events. It follows that if the MMA ban is unconstitutional, the provision of the 2001 Liquor Law would be unconstitutional as well.

It will be interesting to see if counsel for New York attempts to dismiss Zuffa’s Complaint. The lawsuit attempts to break new ground in the area of First Amendment protection and with that, we may see a motion to dismiss this case before it gets anywhere.

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The information in this post is opinion only. 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 article, 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 to send me e-mail containing confidential or sensitive information.

Zuffa, LLC sued New York state on Tuesday for its ban of mixed martial arts in its state citing it as unconstitutional under First Amendment grounds. Zuffa, along with several notable UFC stars, are named plaintiffs in this lawsuit.

The Complaint is over 100 pages in length and the Causes of Action begin on page 84 after an extensive facts section.

Via the Wall Street Journal:

Zuffa LLC, which owns the UFC, filed a lawsuit Tuesday in U.S. district court against New York Attorney General Eric Schneiderman and Manhattan District Attorney Cyrus Vance Jr. seeking a declaration that the ban violates the First Amendment.

While the arts are protected, no court has ever directly confronted the question of whether athletes have a First Amendment right to be seen in action, said Barry Friedman, a professor at New York University School of Law who is representing the plaintiffs.

A key to Zuffa’s argument is showing that New York’s ban suppresses the content rather than it looking to the safety of the sport. (Via NY Times):

“The linchpin is convincing the court that the ban is aimed at the content of the entertainment as opposed to the safety of the fighters,” said Tom Kelley, a partner at Levine Sullivan Koch & Schulz. “Attempts to regulate entertainment based on its violent message have been largely unsuccessful.”

Lawyers interviewed in the NY Times article point to a recent Supreme Court ruling which struck down a California law banning certain video games the law deemed violent on First Amendment grounds. Zuffa attempts to make similar arguments regarding the governmental ban on MMA.

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Payout Perspective:

We will definitely have more on this lawsuit as we read through and analyze the causes of action in this 100 plus page Complaint. This is an interesting way to work around the New York ban. The causes of action are unique in how they argue the right for MMA in New York. If nothing else, the lawsuit could contribute to law in the area of freedom of speech and First Amendment rights.

TMZ first reported that UFC heavyweight Alistair Overeem has sued his ex-management group, Golden Glory. According to TMZ, the lawsuit requests that the court break his contract with Golden Glory. Since the filing, Golden Glory has fired back at Overeem.

First the lawsuit.

Via the Fight Lawyer:

Overeem is suing “Knockout Investments, B.V., Golden Glory, Golden Glory California, Bas Boon” and a bunch of “Does.”  According to the complaint, KOI is the legal entity that manages Overeem and allegedly KOI performs its management function through its affiliate, Golden Glory.

According to the allegations in the complaint, Overeem’s contract with KOI and GG was signed in July 2007 and is for a 5-year term.  The agreement has an automatic renewal provision (for another five-years) unless either party does not want to renew and then any such notice must be served six months before renewal.

The agreement provides that KOI and GG were to provide a number of services–Overeem alleges that some of these terms are ambiguous and unenforceable (e.g., “acting as a ‘confidential agent,’” ”looking for personal sponsors,” and ”making publicity”) in a personal services contract.

Under the agreement, Overeem alleges that KOI and GG are entitled to 35% of Overeem’s pre-tax income.  Overeem alleges that under the contract the same 35% is due “for any deals ‘within one year after this contract has expired and/or were prepared during the duration of this agreement.’”  Overeem claims the management agreement also includes a provision that fines Overeem $10,000 for any breach of the agreement and a $5,000 per-day penalty for each day the violation continues.

Overeem asserts two claims–one for breach of contract seeking “an amount in excess of $151,000″ and a judicial declaration concerning the parties’ respective rights under the management contract.  Essentially, he wants the court to declare that KOI and GG are not entitled to his UFC money.  Overeem also seeks an accounting.

A few thoughts — and I am doing this quickly.  The liquidated damages clause — i.e., the 10k penalty and 5k a day add on as the violation continues– is not, in my view, by any stretch of the imagination enforceable. That said, there is no allegation that I saw that KOI or GG are seeking to enforce that provision.  So it may be a moot point.

Turning to the crux of the complaint.  Overeem lists a bunch of “failures” on the part of KOI and GG — chiefly, failures to pay, including money from FEG, Dream/K-1s parent, but he really alleges nothing specific, e.g., an amount.  He also claims he was not “properly informed” and alleges that KOI and GG failed to “protect [his] interests.”  Overeem also alleges that he believes KOI and GG received some undisclosed bonus arising from Overeem’s signing with the UFC–nothing more.

While certainly some of the provisions in the agreement could have been written more eloquently, whatever services Golden Glory provided, it seems pretty clear based on my read of the complaint (which is biased for Overeem) it is entitled to 35% of his pre-tax income and it also seems pretty clear that they have a trailing commission for a year even after the contract has expired.  Some of the allegations arguably make KOI and GG look bad, e.g., allegedly managing him in jurisdictions where KOI and GG were not licensed and allegedly pushing him to fight when injured.  But not sure that gets him around the 35% or somehow renders the management contract a nullity.

In any event, I read this quickly but sounds like Golden Glory has a nice little claim for the UFC 141 income, which would presumably include sponsorship money as well.

All of this said, let’s see how the story unfolds as there may be more out there.

Now the response by Golden Glory.

Via MMA Weekly:

“We are currently in receipt of a copy of Mr. Overeem’s lawsuit and our clients are assessing all available defenses and counterclaims,” read the statement from Golden Glory’s legal counsel at The Law Offices of Roderick J. Lindblom, APC.

“This lawsuit is a preemptive action on the part of Mr. Overeem and his counsel in response to KOI’s recent notification to Mr. Overeem of numerous violations by him of his management agreement with KOI, including but not limited to his failure to pay commissions for past fights and endorsement deals secured by KOI and Golden Glory.”

Payout Perspective:

The lawsuit makes one think about Dana White’s previous statements about Golden Glory business practices when Zuffa unloaded the Golden Glory stable. The lawsuit is in its infancy stages and we will have more as time goes on.

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.

TMZ first reported that UFC heavyweight Alistair Overeem has sued his ex-management group, Golden Glory. According to TMZ, the lawsuit requests that the court break his contract with Golden Glory. Since the filing, Golden Glory has fired back at Overeem.

First the lawsuit.

Via the Fight Lawyer:

Overeem is suing “Knockout Investments, B.V., Golden Glory, Golden Glory California, Bas Boon” and a bunch of “Does.”  According to the complaint, KOI is the legal entity that manages Overeem and allegedly KOI performs its management function through its affiliate, Golden Glory.

According to the allegations in the complaint, Overeem’s contract with KOI and GG was signed in July 2007 and is for a 5-year term.  The agreement has an automatic renewal provision (for another five-years) unless either party does not want to renew and then any such notice must be served six months before renewal.

The agreement provides that KOI and GG were to provide a number of services–Overeem alleges that some of these terms are ambiguous and unenforceable (e.g., “acting as a ‘confidential agent,’” ”looking for personal sponsors,” and ”making publicity”) in a personal services contract.

Under the agreement, Overeem alleges that KOI and GG are entitled to 35% of Overeem’s pre-tax income.  Overeem alleges that under the contract the same 35% is due “for any deals ‘within one year after this contract has expired and/or were prepared during the duration of this agreement.’”  Overeem claims the management agreement also includes a provision that fines Overeem $10,000 for any breach of the agreement and a $5,000 per-day penalty for each day the violation continues.

Overeem asserts two claims–one for breach of contract seeking “an amount in excess of $151,000″ and a judicial declaration concerning the parties’ respective rights under the management contract.  Essentially, he wants the court to declare that KOI and GG are not entitled to his UFC money.  Overeem also seeks an accounting.

A few thoughts — and I am doing this quickly.  The liquidated damages clause — i.e., the 10k penalty and 5k a day add on as the violation continues– is not, in my view, by any stretch of the imagination enforceable. That said, there is no allegation that I saw that KOI or GG are seeking to enforce that provision.  So it may be a moot point.

Turning to the crux of the complaint.  Overeem lists a bunch of “failures” on the part of KOI and GG — chiefly, failures to pay, including money from FEG, Dream/K-1s parent, but he really alleges nothing specific, e.g., an amount.  He also claims he was not “properly informed” and alleges that KOI and GG failed to “protect [his] interests.”  Overeem also alleges that he believes KOI and GG received some undisclosed bonus arising from Overeem’s signing with the UFC–nothing more.

While certainly some of the provisions in the agreement could have been written more eloquently, whatever services Golden Glory provided, it seems pretty clear based on my read of the complaint (which is biased for Overeem) it is entitled to 35% of his pre-tax income and it also seems pretty clear that they have a trailing commission for a year even after the contract has expired.  Some of the allegations arguably make KOI and GG look bad, e.g., allegedly managing him in jurisdictions where KOI and GG were not licensed and allegedly pushing him to fight when injured.  But not sure that gets him around the 35% or somehow renders the management contract a nullity.

In any event, I read this quickly but sounds like Golden Glory has a nice little claim for the UFC 141 income, which would presumably include sponsorship money as well.

All of this said, let’s see how the story unfolds as there may be more out there.

Now the response by Golden Glory.

Via MMA Weekly:

“We are currently in receipt of a copy of Mr. Overeem’s lawsuit and our clients are assessing all available defenses and counterclaims,” read the statement from Golden Glory’s legal counsel at The Law Offices of Roderick J. Lindblom, APC.

“This lawsuit is a preemptive action on the part of Mr. Overeem and his counsel in response to KOI’s recent notification to Mr. Overeem of numerous violations by him of his management agreement with KOI, including but not limited to his failure to pay commissions for past fights and endorsement deals secured by KOI and Golden Glory.”

Payout Perspective:

The lawsuit makes one think about Dana White’s previous statements about Golden Glory business practices when Zuffa unloaded the Golden Glory stable. The lawsuit is in its infancy stages and we will have more as time goes on.

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.

Some interesting movement in the Chapter 11 Bankruptcy case of sport drink manufacturer Xyience. Last week, Forbes reported that Fertitta Enterprises was sanctioned by the Bankruptcy Court in Nevada for failing to provide certain information previously requested by the Bankruptcy trustee.

The sanctions stem from Fertitta Enterprises’ failure to provide e-mails from its chief financial officer which claim that it orchestrated the funding for Xyience during its bankruptcy proceedings. In addition to the sanctions, a motion for summary judgment has been filed by the trustee seeking an order that the Fertittas pay back over $945,000 and that Zyen, LLC does not have a security interest in Xyience assets.

Zyen, LLC loaned $12 million to Xyience in December 2007. The loan was secured by all assets of Xyience. Zyen, LLC was controlled by the Fertittas. The trustee alleges that this is a “loan to own” scheme. It occurs when a distressed entity must borrow money which it cannot repay and default is assured. The loan is secured by the assets of the entity so the lender will be able to foreclose and end up owning it.

Via The Las Vegas Review Journal:

…Chicago-based trustee David Herzog contends that the $12 million that Fertitta entities loaned Xyience in 2007 as it faltered financially came with such heavy-handed terms that it scared off potential buyers. As such, he (the trustee) will try to recoup damages that could lead to “potentially significant recoveries,” as described in court papers, at a trial now scheduled to start next spring.

Via Forbes.com:

In an Oct. 28 order, U.S. Bankruptcy Judge Lloyd King held that William Bullard, the chief financial officer of Fertitta Enterprises and a manager of Xyience, failed to comply with discovery requests for documents related to the company’s bankruptcy.

In addition to Bullard’s role with Fertitta Enterprises and Xyience, he is CEO of the Gordon Biersch Brewery/Restaurant chain. It is on the Gordon Biersch computer system where e-mails were found related to the Xyience bankruptcy.

More from Forbes.com:

The bankruptcy trustee lawyer, which oversaw the disposition of the 2008 Xyience bankruptcy, accused executives from Fertitta Enterprises of lying about the existence of e-mails which would have detailed how Fertitta Enterprises took control of Xyience with a $12 million loan.

Those documents include an e-mail to Lorenzo Fertitta one day before his firm lent the $12 million to Xyience, disclosing a potential $150 million buyout offer from Cott Corp. The buyout could have allowed Xyience to repay investors, who instead lost everything when the company defaulted and the Fertittas seized its assets.

In addition, the day that the Fertittas lent Xyience $12 million, it paid their Zuffa Marketing $4.5 million and paid another $1 million to Fertitta Enterprises.

The bankruptcy trustee filed a summary judgment motion seeking an order on two of the causes of action in its case against Fertita Enterprises and Zyen, LLC. The trustee is seeking an order which asks the court to order Fertitta Enterprises to pay the trustee in excess of $945,000 as a result of the alleged “loan to own” scheme. In addition, the trustee seeks to avoid the security interest granted Zyen, LLC in the transaction with Xyience. Thus, the trustee would not have to repay Zyen, LLC first if it receives money to distribute to creditors. A hearing on the motion for summary judgment will be heard on December 9th.

We will continue to monitor the case as it develops and report on any other court filings.

Since the initial bankruptcy, Xyience’s assets were purchased in a Chapter 11 proceeding and is one of the UFC sponsors. The current Xyience company has no relation to the bankruptcy proceedings.

Last week we reported that Bellator had sued Arizona promotion Desert Rage Full Contact Fighting claiming the Arizona-based promotion interfered with contracted Bellator fighters for its upcoming event in Yuma on October 22nd as Desert Rage was set to hold its own event nearby on the same date.

The most recent movement in the case has Desert Rage filing a jurisdictional challenge to Bellator’s lawsuit. As a company in Illinois, Bellator filed its claim in Illinois. However, Desert Rage has opposed the filing and is requesting that the lawsuit either be dismissed or transferred to the district court in Yuma, Arizona. The hearing date to determine the jurisdiction issue will be held in December which is interesting considering that its well after the October 22nd events of both companies.

In its motion, Desert Rage includes the affidavit of Chance Farrar, the individual Bellator alleges to be the central person to have had contact with Bellator contracted fighters and had knowledge of its contracts as Farrar worked with Bellator this past spring.  In his affidavit Farrar claims not having a contract with Bellator and worked as a “fight coordinator” for Bellator’s April 2011 event in Yuma. Notably, he states, “I did not have any written contract with Bellator in relation to this (April 2011) event.” He also states that Desert Rage had planned its October 22nd event in July which would trump Bellator as it claimed it started planning for its event in August.

Based on the affidavit, its interesting that Bellator did not have Farrar sign a non-disclosure, non-compete agreement prior to having him work with the company. Obviously this is Monday-morning quarterbacking and perhaps Bellator did not have a reason to suspect this could happen. But, as a fight promotion, planning is everything. Its interesting that some sort of instinctive relief  (a request from the court to stop a party from doing something) was not requested by either party as both promotions are set to hold its events this Saturday. The hearing date for the motion is set well after the events and the effect of that would make the lawsuit about money. Or, just a moot point.

DISCLAIMER

The information in this post is opinion only. 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 article, 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 to send me e-mail containing confidential or sensitive information.

MMA Fighting reports that Bellator has filed a lawsuit against Arizona promotion Desert Rage Full Contact Fighting (“Desert Rage”) claiming the local Arizona promotion interfered with its upcoming show October 22nd in Yuma, Arizona.

The lawsuit filed in the US District Court in Illinois (where Bellator’s principal place of business is located) states that Chance Farrar was paid to assist with Bellator’s April card in Yuma, Arizona. The Complaint filed by Bellator claims Farrar was given access to Bellator fight contracts as well as pertinent information related to negotiating with fighters. It also claims Farrar knew the terms of fighter contracts and knew the length and conditions of the contracts.

The Complaint goes on to allege that Bellator did not enlist Desert Rage to secure fighters for its upcoming event October 22nd in Yuma, Arizona. It began the process of finding fighters in August 2011. Bellator discovered that Desert Rage would be holding an event that same night in Winterhaven, California–9 miles from the site in Yuma where Bellator would hold Bellator 55. It also learned that the local promotion offered more money to fighters under contract with Bellator. A cease and desist letter (attached to the Complaint as Exhibit A) was sent to Desert Rage requesting that it not contact fighters under Bellator contract. In addition, Bellator claims that Desert Rage officials told fighters and others in the MMA industry that Bellator had cancelled its event on October 22nd. As a result of these claims, Bellator believes that ticket sales would be impacted.

Bellator has sued Desert Rage and Chance Farrar for 1) Intentional Interference with Contractual Relations; 2) Interference with Prospective Advantage; 3) Negligent Interference with Prospective Advantage; 4) Deceptive Practices under Illinois state law. and 5) Common Law Unfair Competition.

Bellator is requesting an order from the court which would stop Desert Rage from holding an event on the same night as Bellator 55 and from holding an event “within 50 miles of Yuma,” until after October 25th. It also is requesting that the court order Desert Rage and Farrar to not communicate with any fighters that are under exclusive contract of Bellator or are negotiating with Bellator. Bellator is also requesting actual damages of over $75,000, exemplary/punitive damages and attorney fees and costs.
CM_ECF LIVE, Ver 4.2 – U.S. District Court, Northern Illinois-CM_ECF LIVE, Ver 4.2 – U.S//

Interesting notes in the Complaint:

- Bellator claims its production costs for Bellator 55 exceed $500,000
- Bellator is seen on television weekly by 250,000 viewers nationwide
- Farrar admits to receiving Bellator’s cease and desist letter although he personally denied telling anyone that Bellator’s card was cancelled.

As of this writing Desert Rage and/or Chance Farrar had not filed an Answer (response) to the Complaint.

H/t: The Fight Lawyer

Payout Perspective:

It does not appear that a non-disclosure agreement was signed by Farrar when he helped Bellator in April. But, it appears from the Complaint that Farrar was privy to Bellator fighter contracts and information related to fighter contracts. Whether or not the information Farrar received from working with Bellator was used by Desert Rage or himself will be important to this lawsuit. Certainly, Bellator is arguing that this information was used in recruiting fighters for Desert Rage’s card. More damaging to Desert Rage and Farrar is the claim that the Arizona promotion told fighters that the Bellator card was cancelled. It will be interesting to see how the court rules in this case.

DISCLAIMER

The information in this post is opinion only. 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 article, 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 to send me e-mail containing confidential or sensitive information.

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.

Yesterday, the Culinary Workers Union Local 226 sent a letter to the Federal Trade Commission requesting that a formal investigation into whether business practices by Zuffa LLC, the corporate owner of the Ultimate Fighting Championship (UFC), violate U.S. antitrust laws.

The letter goes on to point out that since 2001, Zuffa has acquired four of its key rivals (Pride Fighting Championship, World Extreme Cagefighting, the World Fighting Alliance, and most recently Strikeforce earlier this year.  They also state that through some independent research performed in 2008, Zuffa controls 80-90% of the mixed martial arts market.

Specifically, the letter points out that Zuffa has preserved and strengthened its dominance in the market through their unwillingness to co-promote events as well as anti-competitive contractual restraints placed on their contracted fighters.

a) “Automatic renewal” contract provisions such as the “champion’s clause,” which extends the contract of an athlete who becomes a champion. Such clauses effectively prevent some athletes who sign contracts with Zuffa from becoming free agents and negotiating for higher pay.
…
b) Exclusive negotiation and “right to match” clauses that lock athletes into negotiating with Zuffa for a period after their contracts have expired. These clauses diminish the ability and incentive of smaller promotions to bid for top mixed martial arts athletes.
…
c) Merchandise and ancillary rights agreements that require athletes to forfeit their image and likeness rights “in perpetuity,” or forever. These far-reaching agreements deprive athletes of the freedom to make money from their own success and further bind them to Zuffa indefinitely.

Regarding the contractual restraints placed on the fighters by Zuffa, the letter states the following:

As a result of Zuffa’s contractual restraints, athletes who compete in the UFC are denied the freedom of movement available to athletes in other professional sports.  These restraints artificially prevent athletes from offering their services in a competitive market and from receiving a competitive market value for their services.
…
These contractual restraints can have the effect of forcing some athletes under contract with the UFC to negotiate with one buyer, depriving them of nay real bargaining power and depressing pay below competitive levels. The Mixed Martial Arts Fighters Association estimates that professional mixed martial arts athletes received just 5.7% of total gate and pay-per-view revenues at five UFC events in 2009, while athletes who compete in other pro sports organizations receive 50% or more of revenues.
…
In addition to impeding athlete mobility, these restraints have the potential to harm consumers by reducing the quality and supply of professional mixed-martial arts events. Indeed, Zuffa’s practice of requiring athletes to sign contracts that may automatically renew, or that allow Zuffa to match offers made by competing promoters once they expire, diminishes the incentive for other firms to enter the market and bid for professional athletes.  As a result, the market for mixed martial arts is artificially reduced, to the detriment of consumers and athletes.

The letter then goes on to point out court rulings that deem restraints on athlete movement as being anti-competitve.  The NFL’s “Rozelle rule”, which states that a team signing a free agent had to compensate the players previous team, is pointed out since the court held that this rule, by “imposing restraint virtually unlimited in time and extent”, was a violation of the Sherman Antitrust Act.

Professional sports leagues have sought to justify restraints on athlete mobility by arguing that such restraints are necessary to maintain a competitive balance among teams, and thereby maintain spectator interest. In some cases, courts have agreed. In American Needle v. the National Football League, the U.S. Supreme Court ruled that competitive balance is “unquestionably an interest that may well justify a variety of collective decisions made by the teams.”
…
However, Zuffa does not operate as a professional league, and thus cannot justify its restrictive behavior as being necessary to preserve a competitive balance in mixed martial arts. Zuffa is a private limited liability partnership that promotes and produces professional mixed martial arts events for the benefit of its owners. The anticompetitive restrictions it imposes on athlete mobility serve no legitimate business justification beyond stifling competition and increasing Zuffa’s already dominant position in the market.

In addition to these contractual practices, Zuffa has refused to promote mixed martial arts events with rival promotional firms.  After Zuffa acquired Strikeforce, UFC president Dana White said the two companies would continue operating as separate entities. ‘Even when we own them, we don’t co-promote’, White said.  In 2009, Zuffa’s negotiations with Russian heavyweight Fedor Emelianenko collapsed, in part, because of Zuffa’s refusal to co-promote an event with another firm, M-1 Global.

The issues between the Fertittas, owners of Stations Casinos and Zuffa/UFC, have been well documented as of late. Back in 2008, MMAPayout’s Robert Joyner wrote a piece titled “Labor Politics at the Heart of MMA’s Impasse in New York”, which went on to detail the issues Zuffa has ad with the Culinary Union, claiming it as a big reason why the UFC has not been sanctioned in New York.

According to WCBS, the sole correspondence received by the Committee was from UNITE HERE, the hotel and restaurant workers’ union. The letter cited the American Medical Association’s opposition to the sport as well as the alleged concerns of policeman about teenagers emulating the sport on the streets. The union urged the committee to “fully explore” the “social cost” of sanctioning MMA in New York.
…
UNITE HERE is a powerful force in the state with 90,000 members in New York. Last year the union spent $100,000 lobbying the Albany legislature and made more than $130,000 in political contributions to the Democratic and Working Families parties. That financial commitment dwarfs the UFC’s reported $40,000 in donations to New York Democrats.
…
The union’s opposition to sanctioning is the result of its failed efforts to unionize the Fertitta’s Station Casinos in Las Vegas. The Culinary Union Local 226, the Las Vegas local of UNITE HERE, is the largest local of the union in the United States and it’s most politically potent. However, it has failed to crack into the locals casino market in the city, one dominated by Station Casinos which is the last major non-union company in Las Vegas.
…
The family owned Station Casinos has long been staunchly open shop, but its relations with UNITE HERE took a turn for the worse with the company’s purchase of a union casino in 2000. Station fired 1,000 union workers and required them to reapply for their jobs. Only 150 were rehired according to union officials.

Dana White addressed Zuffa’s concern with the Culinary Union in an interview with MMAWeekly earlier this year:

This is where the rubber meets the road. The Culinary Union has been trying for years to unionize Station Casinos, but thus far, has been thwarted. This is why White believes they are using their vast resources – the Culinary Union boasts approximately 60,000 members – to stop the Fertittas from bringing their mixed martial arts business to New York.

Zuffa announced this past week that it has settled its lawsuit with video game maker Ubisoft. The lawsuit arose out of Zuffa’s claim that Ubisoft’s “Fighter’s Uncaged” video game use of “ULTIMATE FIGHTING” in promoting its game.

The Fight Lawyer has the background here.

Via the UFC:

Zuffa and Ubisoft jointly announce the resolution of an ongoing disagreement between the companies. Ubisoft released for sale to the public a mixed martial arts video game involving street fighting entitled “Fighters Uncaged.”

On the packaging of the video game, text on the back cover invited players to “Become the ULTIMATE FIGHTING weapon!” Zuffa approached Ubisoft regarding the game and the use of “ULTIMATE FIGHTING” on the back cover.

Zuffa owns all right, title and interest in and to the federally registered “ULTIMATE FIGHTING” trademark referenced in registration numbers 2,925,669-2,941,044; 2,706,754 and 3,004,865. Zuffa and Ubisoft note that the companies have no association or business relationship of any kind.

To resolve this disagreement between Zuffa and Ubisoft, Ubisoft has ceased selling the “Fighters Uncaged” video game with the use of “ULTIMATE FIGHTING” on the back cover, and has changed the packaging of “Fighters Uncaged” such that “ULTIMATE FIGHTING” does not appear anywhere on the packaging.

Payout Perspective:

Here’s another case of the need to protect the mark of a company. As we recently saw with TapouT’s cease and desist notice, Zuffa believed that Ubisoft’s use of ULTIMATE FIGHTING infringed its trademark and needed to address the issue. Despite the need to incur legal fees, Zuffa accomplished its goal of protecting its mark by having Ubisoft change the way it sold its video game.

Authentic Brand Group (ABG) recently sent a cease and desist notice to nonprofit Tap Out Cancer for use of the “TapouT” trademark. As a result, the small nonprofit must rename itself.

According to its web site, Tap out Cancer is a nonprofit which raises awareness through the Brazilian Ji Jitsu community. It raises money “[t]hrough merchandise sales, special events, sponsorships and direct donations.” On its web site it noted that it is in not affiliated with TapouT. But, this was not enough to avoid ABG’s request.

When a vendor expressed concern about the nonprofit’s use of the “Tapout” name, the nonprofit sent an email to ABG requesting it receive its “blessing” to use the “Tapout” name. According to the nonprofit, a month and a half passed before it received a cease and desist email.

Tap Out Cancer’s web site reprinted a portion of ABG’s correspondence:

While we applaud your work with charitable causes, we unfortunately cannot grant permission for this use of our federally registered trademark. In addition to owning a stylized mark which you mention you tried to distinguish yourself from, we also own the word mark.

For your information, this use of our trademark in your business name is, in fact, and infringement of our intellectual property rights, including, without limitation our trademarks. It is not our desire to cause you any undue expense in connection with this matter in light of your organization’s goals. As such, we are willing to settle the matter with you at this stage if you can agree to: immediately cease and desist from the use of the trademark TapouT in any and all domain names, corporate names or otherwise, including by transferring the domain name to us.

(via Tap Out Cancer’s web site)

Payout Perspective:

The web site entry by the nonprofit reflects that they understand the reasons for ABG’s letter. While the timeframe took longer than expected, ABG is in its legal right to protect its trademarks. If not, more infringers would follow as the nonprofit points out. This has potential to be a public relations problem although the nonprofit used the “Tapout” name without permission. ABG’s correspondence is delicate and makes sure it is not impersonal in requesting that the nonprofit cease the use of “Tapout.”

Its a good cause, but the nonprofit should have asked ABG, or an attorney, prior to establishing the name of the nonprofit. Fortunately, it appears that there will be no further legal ramifications from this. While Tap Out Cancer indicated that it will lose money from merchandise it intended to sell, its better to take the loss now than to have to lose more money in legal fees to defend a lawsuit.

The Lincoln (Nebraska) Journal Star reports that a local bar owner is being sued by the UFC for allegedly pirating UFC 128 in March. The UFC is seeking damages of $260K plus attorney fees.

Via the Journal Star:

“It is logical to conclude that (the bar) either used an illegal satellite receiver, misrepresented their business establishment as a residence or removed an authorized receiver from one location to a different business location in order to intercept Plaintiff’s broadcast,” the complaint filed in U.S. District Court in Lincoln says.

(H/t: MMA Mania)

Payout Perspective:

There is a reason the UFC puts up a blackscreen warning with a stern voice reading it before each PPV. The UFC has been agressively enforcing its rights against PPV pirates and this lawsuit is another example. While this may seem like a case of picking on a small business owner, the bar was making money from alcohol sales from patrons coming in to watch the fight. Thus, the UFC was indirectly (or directly) helping the bar owner make money. While there is the opposing argument that the UFC’s money could be better spent in other areas rather than go after every bar with an illegal feed, the lawsuit is protecting the UFC’s business and making a  statement to others out there thinking of stealing its PPV. This will serve as a deterrent to others thinking of hosting a UFC PPV without paying the fee.