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« | Home | »

Playing with fire? Zuffa sues DSE

By Zach Arnold | February 5, 2008

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Update: A source who has read the summary of the lawsuit filing sends this (case no: 08 A 556504):

Plaintiff purchased certain assets of defendant’s business under the Pride, Pride Fighting Championship and Bushido brand names. Because plaintiffs are involved in the gaming industry, defendants were required to cooperate with and submit to background checks and drug tests to ensure compliance with the regulatory requirements of plaintiff’s gaming license. Defendants failed to cooperate with, submit to or pass such background checks, defrauding plaintiffs into entering the agreement for “millions upon millions of dollars.”

The judge assigned to the case is Mark R. Denton and the lawsuit was filed on the 1st. PFC worldwide’s attorney in the case is Daniel Polsenberg. If anyone can access the 29-page court filing, please let me know.

Update II: From Sherdog:

A source close to DSE told Sherdog.com on Tuesday that Sakakibara was preparing his own suit against the Fertittas for breach of contract stemming from the decision to shut Pride down last October.

Fightlinker sums up the mess UFC is in right now.

A strange news item today from Dave Meltzer claims that PRIDE FC Worldwide, the company UFC set up for the PRIDE asset sale transaction, is going to sue Dream Stage Entertainment for fraud in relation to the PRIDE asset sale agreement.

Why is it a curious move? Because the lawsuit, if true, would likely justify the notion (in my opinion) that UFC’s due diligence on the PRIDE asset sale deal was inefficient in finding out what was real and what wasn’t. At the time the deal was made, it was extremely questionable on several levels.

The biggest conundrum that Zuffa faced with their deal with DSE (and may face now in civil court) is the yakuza angle. Everyone in the MMA business knew about the Shukan Gendai yakuza angle and understood that the scandal put DSE in the precarious position that it was in before the asset sale was made. I always questioned why Zuffa pulled the trigger on the deal, considering that it put the gaming license of the Fertittas in a tenuous position with the Nevada Gaming Commission (they don’t like any deals with organized crime).

In order for Zuffa to claim that DSE defrauded them on the asset sale, it would basically be admitting that Zuffa’s due diligence didn’t foresee some of the apparent problems in the evaluation of the PRIDE’s assets. For example, it was long-rumored that DSE didn’t own 100% of the rights to their video footage (Fuji TV produced a lot of the big shows), which may be a possible reason as to why we haven’t seen UFC extensively use PRIDE’s video library.

Zuffa’s reported lawsuit against DSE opens up a major can of worms for a lot of parties and some of the surprises may not be good for UFC in court. Besides the Nevada Gaming Commission having some interest in the lawsuit, you can bet that Ed Fishman will be interested in the proceedings. Additionally, I would expect that some fighters who did not get paid by DSE before PRIDE shut down might consider filing an attachment (lien) on whatever earnings Zuffa gets in the civil suit (think: Miro Mijatovic’s lien attachment on the Seiya Kawamata lawsuit against Nippon TV.)

If the civil suit (through deposition and discovery) reveals deep yakuza relations in DSE (affirming Shukan Gendai’s claims), then it’s going to put Zuffa in quite an interesting PR situation.

Topics: MMA, Media, PRIDE, UFC, Zach Arnold | 23 Comments » | Permalink | Trackback |

23 Responses to “Playing with fire? Zuffa sues DSE”

  1. white ninja says:

    Sakakibara committing fraud??? I’m shocked :) Pride as an organisation and an event was a fraud, why would their business dealings be any different

    As Ed Fishman found out, a US civil case is a good way to get things out in the open. but dse and sakakibara are in japan which makes things a bit more complex

    anyway, DSE is dead – so any law suit against them is meaningless (other than for PR purposes). sakakibara is still alive though. maybe Dana has his eyes on sakakibara’s yellow lamborghini, or his shares in the okinawan soccer team :) (i’d take the car)

    most of the money paid by zuffa went into the hands of the yakuza a long time ago, so good luck getting that back

  2. Jonathan says:

    Who or what is there left to sue exactly?

  3. Bill says:

    This is a short sighted post. It’s very possible there were even more skeletons in the closet than people knew, and if the pride people intentionally kept it quiet to get UFC to buy, UFC is in a great position to recover a lot of money here. Potentially, the UFC could emerge from this having killed its competition while getting a lot of it back. I’m always amused by the way every post here has a Zuffa crisis slant, as if the lawyers there haven’t thought it out as well as you have

  4. jjj says:

    hahaha, I hope UFC goes bankrupt soon. Serves them right for destroying such a wonderful organization known as Pride. UFC sucks. At least the Yakuza and DSE knew how to put on a good show. UFC shows suck.

  5. The Gaijin says:

    “I’m always amused by the way every post here has a Zuffa crisis slant, as if the lawyers there haven’t thought it out as well as you have.”

    Well it’s pretty funny considering Zach has been trumpeting the shadiness of the operations at DSE for about 2 years, not to mention the number of times he said what a rotten barrel of apples this deal was going to be for the UFC – one which he said was very questionable from outset.

    Yet only *now* have Zuffa’s lawyers got any of this figured out. In reality if they were so smart, they would have figured this out before “the money hit the mahogany”.

    I’d be interested to see what kind of due diligence went on in the first place, if things are only now about to hit the fan.

  6. xx2000xx says:

    Pride never dies???

  7. Dave2 says:

    I can’t believe the visceral hatred of PRIDE. You can hate DSE all you want but the PRIDE product was damn well entertaining. I watch both the UFC and PRIDE but PRIDE fights tend to be more exciting on average.

  8. xx2000xx says:

    I guess we can now say it. Pride never dies.

  9. Zach Arnold says:

    I watch both the UFC and PRIDE but PRIDE fights tend to be more exciting on average.

    I think it’s fair to make an argument right now that UFC’s acquisition of the PRIDE assets will have as much, if not more of a historical impact, than the WCW asset sale that WWE was involved in.

    The business has been forever changed and in some ways, negatively.

  10. stommach says:

    I have a feeling this “fraud” claim might be a common post-acquisition breach of warranties lawsuit.

    Dana White is a complete douche bag moron promoter. 1) He tried to claim that UFC fighters were always better than Pride fighters (which is proving to be false as time goes on and Pride Fighters are getting more cage experience). 2) Claims that Randy is the best fighter in the world when he actually doesn’t believe this to be true (no one seriously does. Randy’s recent success is a product of luck + Dana’s promotion). 3) Claims Fedor to be a farce (nice try. Fedor doesn’t even need to fight in the UFC. He got Nog to do it for him and just laugh at everyone). 4) Keeps on throwing these stupid Pride vs. UFC matches (I LOVE the fights themselves but I think Dana personally wants to prove that UFC was always better than Pride).

  11. Safari_Punch says:

    I knew there was something up with the video footage.

    I wonder if M-1 Global will be able to get any rights of the Fuji TV footage to include in their promotions for Fedor’s upcoming fight in Chicago? Didn’t Finklestein have a clause in Fedor’s PRIDE contract that gave him the rights to that footage – or did that only apply if they were promoting Fedor in Russia?

    It’s too bad that outside of the online media, Zuffa isn’t going to get any negative PR out of this situation with DSE.

  12. PizzaChef says:

    Zach, didn’t someone here wrote in a article on FightOpinion stated that Sakakibara scammed the UFC on purpose, and the people working at the PRIDE offices had no intention of ressurecting PRIDE under the Zuffa banner?

    Or was that a theoretical article that was posted?

    Also, didn’t Bas Boon mention in his Golden Glory forum posts something about PRIDE scamming Zuffa?

  13. PizzaChef says:

    Also I think this is interesting. In a Paul Heyman interview, he says it’s 100% true that he tried to buy Strike Force:

    http://www.thesun.co.uk/sol/homepage/sport/wrestling/heyman/article762131.ece

  14. white ninja says:

    After the Update – as Zach predicted, this could be a real problem (ie., gaming license issues)

    Any disclosures will prove that Sakakibara is indeed known to be connected (or a front man) for the Yamaguchi Gumi, which should interest the licensing bodies

    Zuffa could have saved a bunch of money if they only hired Zach to do their due diligence. Zach did a better job than all of Zuffa’s high powered attorneys put together

  15. liger05 says:

    I dont have any sympathy for Zuffa. Just by reading Zach Arnold’s articles regarding the whole DSE/Yakuza saga you could tell that Zuffa was playing a dangerous game getting involved with DSE. Once the deal was done it didnt take long to realise that Zuffa had paid money and didnt get much in return. Surely the people to blame for this is the one’s who done due diligience. How could they not have seen this coming? The money is long gone and Mr X wherever he be must be laughing.

  16. Dave says:

    “I can’t believe the visceral hatred of PRIDE. You can hate DSE all you want but the PRIDE product was damn well entertaining. I watch both the UFC and PRIDE but PRIDE fights tend to be more exciting on average.”

    How is that even the point of this? This has nothing to do with the PRIDE product (which most of us still love) and everything to do with the shady manner in which they did business.

    If anything this makes UFC look bad, as they are claiming ignorance to the way DSE did business. Really, this can’t hurt whats left of DSE, as we all knew this is how they operated. You have to believe that Zuffa did as well, they were just naive enough to think that organized crime in Japan is like organized crime in America.

  17. What a disgusting mess.

  18. samscaff says:

    I still dont see answer to this question (or maybe i’m just dumb), but who exactly is Zuffa suing?

    DSE? Meaning the guys who still produce Hustle shows? Sakakibara?

    Do we have any real idea who Zuffa paid? DSE? Sakakibara? Yakuza? A conglomerate?

  19. Zack says:

    Sometimes this site really does stand all above the rest.

  20. Halib says:

    Zuffa is pissed because they paid 60mil for basically nothing. All they got was the name PRIDE and the debts. Most of the contracts were non-exclusive or too expensive and the video library had already been re-sold to whoever wanted to buy it (like Finkelstein, who bought Fedors matches). But it was Dana “I want it” White, the great business man, who strong armed Fertittas to buy it anyway. Thats why you guys are paying 50 bucks for Bisping-Evans now.

  21. Zach Arnold says:

    Zuffa is pissed because they paid 60mil for basically nothing. All they got was the name PRIDE and the debts. Most of the contracts were non-exclusive or too expensive and the video library had already been re-sold to whoever wanted to buy it (like Finkelstein, who bought Fedors matches). But it was Dana “I want it” White, the great business man, who strong armed Fertittas to buy it anyway. Thats why you guys are paying 50 bucks for Bisping-Evans now.

    Let’s see…

    Personal service contracts that are not enforceable in third-party sales… check.

    Video library where some of the rights were supposedly disputed… check.

    Yep, I wrote about these issues before the asset sale happened. :)

  22. The Citizen says:

    UFC is stepping into more dog-doo-doo here I think.

  23. This puts the whole UFC/Xyience scandal in a new light. It appears Fertitta Enterprises might be making a trial UFC sale run by bankrupting Xyience and then selling it to the highest bidder. If they can get away with that, and if they can somehow avoid being brought up on any charges of illegal activity with that scandal, they might just do the same exact thing with the UFC.

    The whole $350 million Zuffa loan is a key indicator of their motivations. Dana White and the Fertitta brothers both got huge dividends from that transaction. I haven’t seen any indication that any of that money actually went back into the brand. If they wanted to give the organization long-term staying power, they would have invested some of those millions back into the brand. Instead they lined their own pockets, probably because they knew they’d be passing the debt on to the next owner in some form or another.

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