By Zach Arnold | November 13, 2016
“I’m aware of my worth.”
Conor McGregor has always prodded the bear for more money. This time around, he’s prodding Ari Emanuel instead of Lorenzo Fertitta. Who will blink?
Before you give the predictable answer, consider the business environment we’re in right now with UFC. Dana White took a huge gamble in publicly backing Donald Trump. It was obvious what the motivation was: kill any attempt of amending the Ali Act for MMA. He’ll end up with his wish — and more. If it wasn’t for the fact that Secret Service reportedly kept Trump away from MSG, we probably would have had a bizarre clash of words involving Trump, Conor, and Madonna. It would have been a rather fitting ending to the circus on Saturday night.
If there’s no Ali Act for MMA, then it becomes publicly harder to argue to the masses against fighters wanting a collective bargaining agreement to achieve minimum business standards with UFC. Rob Maysey has argued that a CBA is incompatible with the Ali Act in giving fighters leverage to fight for different promoters. He’s right. The problem is that with no Ali Act for MMA, you run into the issue of mootness. Whoever organizes fastest, wins. The race to the courthouse principle. Jeff Borris and Lucas Middlebrook are racing to get organized in order to establish a collective bargaining argument. That would likely nuke any impact from the pending anti-trust lawsuit in Las Vegas Federal court.
So what’s the best way to squash any attempt of organization? Kill the head of the snake. Give someone like Conor McGregor a minor piece of the overall pie and load it full of options to get out as quickly as possible. It was easy for Lorenzo Fertitta to use Dana White as his laser to go after fighters. Now the Vegas muscle is gone. Lorenzo didn’t have nearly the business muscle as Ari Emanuel but what Lorenzo did have was an incredible ability to work all the psychological angles. Despite being a billionaire, Lorenzo made fighters feel as if UFC was family. That emotional stigma is completely obliterated now. Fighters are showing less respect to someone they should theoretically fear more than Lorenzo but really don’t. That’s the fight business. There’s no manual or playbook to be successful in an ultrahazardous venture like this.
Expect modifications to UFC contracts regarding fighters missing weight
Donald Cerrone should have had the time of his life at MSG. Instead, he became another victim to a growing trend of fighters dealing with opponents who aren’t even making the attempt to make weight. We’re not talking a couple of pounds over the weight limit — we’re talking 8, 10, sometimes 12 pounds over limit.
The initial penalty was a 20% fine. Now some fights are getting canceled but that clearly isn’t enough of a deterrent.
I fully expect the next phase of UFC contracts under WME-IMG management to feature liquidated damages provisions for breach of contract. Missing weight is a breach of your professional duties as a fighter. While liquidated damages can only be pegged to a certain reasonable % of a fighter’s overall pay, it’s easily the next step in what will be become a legal war.
Andy Foster at the California State Athletic Commission, along with other members of the Association of Boxing Commissions, want a significant modification in the weight class structure. They want more weight classes. In theory, I agree with their assertions. The problem is that no matter how many weight classes you have, fighters are always going to push the limit regarding what weight class they want to fight at versus what weight class they really should be fighting at. Until more weight classes are added, I expect the promotions to start laying the hammer down through contractual provisions to make a much needed point.
How much longer will Mike Goldberg last with UFC?
The UFC finally made it to MSG. The company’s largest gate in history. The fighters reacted differently and understood the magnitude of the event. They got it. The energy and violence was intense. They stepped up to the plate.
Unfortunately, if you watched Mike Goldberg on the Fox Sports 1 telecast for UFC’s debut at Madison Square Garden, you would have thought it was just another UFC event. Low energy, subdued, robotic. You could have taken his commentary from any standard Fox telecast and plugged into the MSG broadcast on Saturday and it would have sounded exactly the same. The tone did not match the historical moment at hand.
Joe Rogan will be around for at least a year but it would be no surprise to see him move onto other things. I wouldn’t be surprised to see Goldberg do the same.
On their last legs
Raquel Pennington put Miesha Tate into retirement. That’s a bombshell. Yoel Romero finished Chris Weidman and now Weidman has to seriously contemplate what’s next for his career.
Dan Henderson is retired. Rashad Evans has a few fights left, at most. Georges St. Pierre is coming back… maybe. Johny Hendricks is on the rocks. Ronda Rousey was talking about the end coming soon for her career during a TV appearance.
A lot of big name fighters are suddenly at the end of their careers and it’s going to take UFC some time to really develop new star power. It will be very interesting to see WME’s strategy for building stars with Lorenzo Fertitta & Joe Silva out of the picture. WME has all the resources to go big. It will be a very interesting process to watch play out.
For the first time, Al Haymon admits he’s a boxing manager (in court) & here are his past contract details
By Zach Arnold | November 10, 2016
Quick & dirty summary:
- In a Federal court filing, Al Haymon’s attorney repeatedly admits that he’s a boxing manager and not “an advisor”
- Public record requests reveal that Haymon is a licensed manager in Nevada but not in California
- Legal admission of Haymon being a manager raises the stake for Ali Act legal issues
- A review of one of Haymon’s prior management contracts reveals consummation in California but “choice of law” provision in Nevada with mandatory arbitration
- Prior Haymon contract required five year minimum term (seven year maximum term) with automatic two year extension for any fighter in a title fight or any fighter who signed a promotional contract with a TV outlet
The financial struggles of the hedge fund backing Al Haymon have been revealed over the last year. More financial secrets will be coming out after a shareholder derivative lawsuit was filed in Kansas to try to get a judge to recover money a hedge fund allegedly put in a shell LLC for Haymon’s Premier Boxing Champions entity.
However, most of the questions regarding Al Haymon’s business practices remain unanswered mysteries. Until now. For the first time, thanks to a combination of Federal court filings & public record requests & confidential sources, it can now be revealed how Haymon’s various entities have entered into contracts with boxers and what his legal strategy has been to navigate the waters of the Muhammad Ali Act.
Haymon’s admission – I’m a manager
In Golden Boy’s anti-trust lawsuit against Al Haymon, GBP accused Haymon of violating the Ali Act by allegedly acting as both a manager of boxers and as a promoter (through Premier Boxing Champions). Haymon’s attorneys argued that he is not a promoter and that PBC is a “packager” that assists television networks who act as the real promoters. Take note of who owns what of the various Haymon Entities according to Haymon’s deposition in the Golden Boy lawsuit:
According to Al Haymon depo: Haymon owns Haymon Development which co-owns Haymon Holdings w/ Waddell which wholly owns Haymon Sports.
— Paul Gift (@MMAanalytics) November 10, 2016
In public, Haymon has long been noted as an “advisor” rather than a manager. Managers are legally required to do deals with state athletic commission forms.
Now, attorney Michael E. Williams for Haymon Entities is arguing in Federal court that Haymon is not a promoter because he is a manager.
This argument carries important legal significance on two fronts. Keep in mind that the court filing says Haymon Sports LLC is in charge of the management contracts. Remember this for later on in the article.
First, Haymon argues in his motion for summary judgment against Golden Boy that they do not have legal standing to sue Haymon for an Ali Act violation because the law only gives boxers or government agencies the standing to pursue civil or criminal action against offenders. Since Golden Boy is neither a boxer or a government agency, Haymon claims they can’t sue him using the Ali Act.
Second, boxing managers are required to be licensed by athletic commissions in the states in which the manager does business in. California’s Business & Professions Code 18642 explicitly states that “no person shall participate in any contest or serve in the capacity of a booking agent, manager, trainer, or second, unless he or she has been licensed for that purpose by the commission.” The Athletic Commission’s Code of Regulations specifically says “no licensee shall enter into any agreement under the jurisdiction of the commission with any unlicensed person, nor shall any licensee have any such dealings related to boxing with any person or club whose license is currently under suspension, or revoked, or whose application for a license has been denied.”
With Al Haymon doing most of his business in four states (California, Nevada, Texas, New York), we filed public records requests with all four Athletic Commissions regarding managing licenses for he and his Haymon Entities. Haymon lives in California, is involved in shows in California, and has negotiated & entered into contracts in California. According to the California State Athletic Commission, Haymon has had no California boxing manager’s license on record for the past five years.
We turned next to Nevada. Nevada explicitly states that “all contestants, promoters, managers, seconds, trainers and ring officials must be licensed by the Commission. No person may participate, directly or indirectly, in any professional contest or exhibition of unarmed combat unless the person has first procured a license from the Commission.”
After filing a records request regarding managing licenses for Haymon, we hit the jackpot.
Al Haymon’s silver state tongue
It turns out that Al Haymon has been filing for a Nevada boxing manager’s license for several years now.
With this news, we made an educational guess that Haymon getting licensed in Nevada meant that his “advisory” agreements with boxers were in fact management contracts based on Nevada law. Thanks to a confidential source who provided us with a prior copy of one of Haymon’s contracts from Al Haymon Development, our suspicions were confirmed.
The contract we saw used a “choice of law” provision to directly state that even though Haymon is negotiating and entering into a contract based in California, Nevada law takes precedence. Additionally, either party (athlete or manager) had to give 30 days notice for a breach in order to cure the breach, and that legal disputes are to be dealt with in binding arbitration with a single arbitrator from Judicial Arbitration and Mediation Services (JAMS).
The contract we saw had a minimum five year time period with an automatic two year extension if a fighter is involved in a title fight or ends up signing a promotional contract with a television network. The agreement is capped at a seven year term limit with a 10% management fee. One provision in the contract states that the selection of the promoter shall be at the discretion of the manager (Haymon).
This is very important to highlight because Haymon’s own attorney in Federal court argued that Golden Boy had unclean hands in California business dealings by using promotional contracts with duration clauses longer than five years, which is in violation of California law. Haymon’s attorney said California law on duration clauses pushed Golden Boy to build their promotional contracts on Nevada law in order to avoid the five year rule. Now we see that a prior Haymon management contract used Nevada law to do exactly the same thing with a seven year maximum duration period.
The other important legal issue to highlight is the “choice of law” provision. Haymon, a licensed boxing manager in Nevada, is supposedly unlicensed in California. He is negotiating and entering into a boxing management agreement with licensed California boxers reliant on Nevada state law. Does the California State Athletic Commission have jurisdiction over such a management contract even with the “choice of law” provision? Remember the California code of regulations section we cited (§ 392)?
“No licensee shall enter into any agreement under the jurisdiction of the commission with any unlicensed person, nor shall any licensee have any such dealings related to boxing with any person or club whose license is currently under suspension, or revoked, or whose application for a license has been denied.
In this scenario, it’s extremely unlikely to see the California State Athletic Commission go after a licensed boxer for signing a management contract in California with someone who appears to be an unlicensed manager (Al Haymon) in the state. But what if the Athletic Commission wanted to pursue action against Haymon? Since Haymon appears to not be licensed with the California State Athletic Commission, their options are limited. Unlike the Contractor’s board or the Medical board, there doesn’t appear to be any code sections giving the Athletic Commission the option for a criminal referral in a competent jurisdiction.
The closest legal option the California State Athletic Commission could possibly pursue against Al Haymon would involve a civil referral citing Business & Profession Code section 17204, which gives a right of action under California’s unfair competition law to have a board or agency send a referral to an Attorney General or District Attorney to pursue a court case. This is the same law Golden Boy is using as a cause of action against Haymon in their current Federal antitrust lawsuit.
That’s not happening any time soon.
What does Haymon’s deposition testimony mean?
Who owns what now?
In the prior AHD contract we read, there was an assignment provision that allowed Haymon to transfer his management contracts “to any other entity in which he shall have ownership interests.” Haymon Sports is, according to Haymon’s testimony, owned by the hedge fund backing PBC. AHD is owned by Haymon. AHD and Haymon Sports co-own Haymon Holdings LLC.
Al Haymon has made millions of dollars in boxing by flying under the radar and keeping a low profile. Once he made the jump into the TV arena with Premier Boxing Champions, he made himself a huge target. Once you make yourself a huge target for lawsuits, the business secrets start getting revealed. Thanks to Haymon’s own words in discovery & deposition in Federal court filings combined with public record requests and confidential sources, for the first time in Haymon’s boxing career we are starting to get a peek into how he has made his millions and the legal tactics he has used to shield himself from his competitors.
Al Haymon argues he’s not liable for predatory pricing because he spent 9-figures & can’t make the money back
By Zach Arnold | November 7, 2016
Attorneys representing both Al Haymon personally and the various Haymon Entities are trying to kill off Golden Boy’s anti-trust & unfair competition lawsuit. In our first article on Haymon’s motion for summary judgment, we analyze Haymon’s attempt to defend the actions of Premier Boxing Champions and the hundreds of millions of dollars he has spent.
In carefully reading the motion for summary judgment Federal court briefings filed on behalf of Al Haymon against Golden Boy, Haymon made a major concession that will impact his future business dealings in order to win the legal war with Oscar De La Hoya. We’ll focus on that concession and its legal impact in a separate article.
This article is about Haymon’s narrative of playing the role as outsider challenging the “oligopolists.”
Lead by attorney Michael E. Williams, Team Haymon’s bigger-picture argument about why Premier Boxing Champions did nothing wrong can be summed up in the following: I got the cash, I paid for TV time on networks you weren’t doing business with, so how can you say that I interfered with boxing’s business model which is reliant on HBO, Showtime, and PPV?
Al Haymon continues to argue that he’s not a promoter. He calls himself a “packager.” In the same way that he has avoided calling himself a manager by calling himself an “advisor,” Haymon has managed to build a multi-million dollar empire and huge roster of fighters. Managers and promoters are required to be licensed to do business. Athletic commissions must approve of contracts on official state documentation. But what if nobody goes after you for being an advisor or a packager?
Haymon argues that he’s made fighters wealthier because he has directed them into situations where they don’t sign long-term deals with promoters like Golden Boy with odious contracts featuring clauses such as fighters not being able to talk to a manager, consultant, or advisor to help them out without GBP’s permission or else face a substantial fine.
Haymon claims that the PBC business model was built on the concept of paying for TV time on networks like NBC, drawing a “substantial” audience, and then convincing those same networks to pay him rights fees. That plan hasn’t exactly panned out.
The legal defenses
Sherman anti-trust argument
In order for Golden Boy to prove that Haymon’s liable of violating anti-trust, Golden Boy has to show: 1) specific intent to control prices or destroy competition; 2) predatory or anti-competitive conduct directed at accomplishing that purpose; 3) a dangerous probability of achieving ‘monopoly power’; and 4) causal antitrust injury.
Haymon’s attorneys cite the case of Rebel Oil Company vs. Arco regarding a determination of a market. Haymon argues that PBC buying time on networks like NBC and CBS isn’t restricting competition because none of the other major boxing players were on those platforms. The Arco case dealt with the gasoline company offering self-serve gasoline at a lower price and Rebel claiming that Arco drove out competitors by discounting their product at a cut-rate in order to turn around, gain substantial market share, and then jack up the prices after taking over the market. The issue of predatory pricing.
Arco won the case based on the ruling that Rebel failed to show that barriers to entry prevented others from entering into that retail market and that Arco “lacked the power to charge supracompetitive prices to recoup any losses from predatory pricing.”
This is the Haymon argument in a nutshell. PBC did business on networks others weren’t. He took the risk with the hedge fund cash. Golden Boy and Top Rank could continue to do business on their traditional platforms and they could also do business with him. PBC expanded the number of TV platforms airing boxing programming.
Anti-competitive policy involving PBC having “exclusivity” with NBC
Team Haymon cites Omega Environmental Inc. vs. Gilbarco Inc case law to argue that deals involving exclusivity with distributors are not anti-competitive. In this case, PBC’s exclusivity with NBC & CBS isn’t anti-competitive because Golden Boy can still do business with HBO and on PPV. Plus, Haymon argues the TV contracts were of “short duration” with “easy terminability” options.
Team Haymon also argues that Haymon Entities has waived the exclusivity provisions in the TV agreements after Golden Boy sued, therefore resulting in no foreclosure or attempted monopolization. Arguing mootness after Golden Boy sued is a curious play here.
Haymon argues that his boxers are not obligated to sign long-term promotional agreements with Golden Boy and cites a recent Aerotec vs. Honeywell court decision regarding Aerotec failing to prove antitrust violations because Honeywell had a parts shortage which caused Aerotec’s repair business to tank. Aerotec alleged that Honeywell’s part shortage was done on purpose to kill their company. The 9th District Court of Appeals said there was no evidence to prove this assertion. Haymon’s arguing that his fighters refusing to sign contracts with Golden Boy isn’t evidence of intent of anti-competitive or unfair business practices.
Haymon’s attorneys argue that Golden Boy has unclean hands because a judge ruled that contractual extensions for Golden Boy going beyond five years in length were illegal under California law and that Golden Boy then changed its promotional contracts to be governed under Nevada law.
Offering PBC for free is not anti-competitive, it’s the opposite
Haymon cited Matsushita Electric Industrial vs. Zenith Radio Corporation, a 1986 Supreme Court decision regarding Zenith claiming that Matsushita artificially kept prices high in the Japanese market but undercut them in the United States with cut-rate pricing to obtain market share by driving out the competition. The Supreme Court ruled that offering competitive pricing is not an automatic sign of predatory pricing. Predatory pricing involves 1) below cost pricing and 2) “a reasonable expectation of recovering, in the form of later monopoly profits, more than the losses suffered.”
The argument here is that Haymon offered PBC fights for free on network television. He spent hundreds of millions of dollars in hedge fund cash by “packaging” fighters he advises to TV networks and promoters in order to make them more money than they would have by signing with Golden Boy. His attorneys argue that “without the probability of recoupment,” his product on network TV increased the welfare of consumers by giving away a product and increasing exposure for boxing and therefore it isn’t an issue of predatory pricing. Intriguing legal argument but still amazing to read, nevertheless.
The 1993 Supreme Court case involving cigarette manufacturers Liggett and Brown & Williamson is cited. Liggett made generic cigarettes and Brown & Williamson countered by making their own generic cigarettes at below-cost pricing with volume rebates. A rebate war broke out between the two companies before a generic cigarette was even sold. Liggett claimed the price rebates from Brown & Williamson were discriminatory in order to manipulate the margins on both the generic and retail branded smokes. On appeal, Brown & Williamson won because a judge said Liggett couldn’t prove a causal link for damages between the price rebates and Liggett’s alleged economic injury.
Given Team Haymon’s classification of Golden Boy as part of a boxing oligopoly, their arguments about losing money not equaling predatory pricing makes for a very interesting court argument and a likely scenario that Haymon will be able to strike some portions of Golden Boy’s anti-trust & unfair competition court complaint.
The most audacious Al Haymon court argument yet: the TV networks are the promoters, don’t look at me
By Zach Arnold | November 1, 2016
The anti-trust court war in Los Angeles between Golden Boy and Al Haymon has gotten nasty in a hurry.
There have been depositions involving Al Haymon, Eric Gomez (Oscar’s matchmaker), Bob Diaz, Bernard Hopkins, and Oscar De La Hoya.
Last week, we noted that Haymon’s attorneys were moving for summary judgment in the case. Summary judgment is an attempt to ask the judge in the case, after discovery & deposition, to make a determination as to whether or not the case should go to trial. Factual questions go to a jury. Legal questions go to the judge. That hearing will take place on November 28th.
The last week has seen a crazy amount of motions & court filings ranging from Golden Boy filing a motion to strike Haymon’s designation of expert witnesses to Haymon’s side filing a motion for sanctions against Golden Boy’s attorneys.
Al Haymon’s two main legal arguments
First argument: the TV networks are the promoters
Haymon’s attorneys grilled Oscar De La Hoya over the role of HBO in helping produce boxing events. DLH called HBO a producer because they help with the television broadcasts. Haymon’s attorney asked if HBO is helping as a producer, how can you not call them the promoter?
The counter to this argument was illuminated by Golden Boy during deposition of Haymon regarding his “advisory” contracts with fighters. According to the deposition, Haymon admitted that changes were made to agreements in September 2015 regarding “promotional agreements” and that provisions were rescinded regarding restrictions. Haymon reaffirmed his position that he simply steers fighters into promotional agreements but that it’s up to the fighters to make the decision.
Court filing: “Defendants have never sought to enforce and have agreed to waive the contractual provision that allows them to select the boxer’s promoter.”
Haymon also waived PBC TV exclusivity with all the major broadcast networks and his commissions for his fighters in PBC fights.
This is hugely important to focus on. Haymon must convince a Federal judge that he’s not a promoter because he could face important legal issues regarding the Ali Act if a judge rules that Haymon is a promoter and not a middleman. This legal determination means everything!
Second argument: GB is using the same restrictive tactics they accuse me of
This court filing argues Haymon’s claim as to why his fighters can’t fight for Golden Boy:
In fact, in what is clearly designed to prevent a boxer from retaining a manager such as Haymon Sports that may fully protect the boxer’s interests, during the Covered Period, GBP has added language in its promotional agreements that its boxers will not “retain, hire, consult with, include, or involve any person or entity as a manager, advisor, consultant or any type of representative … not previously disclosed to Promoter … without first obtaining the express written consent and approval of Promoter” and a violation of this provision results in liquidated damages against the boxer. Thus, there exist ample alternative market-based explanations for why Haymon Sports-managed boxers would not want to sign GBP’s standard promotional agreements.
Haymon’s legal argument boils down to fighting with fire: you can’t say I’m restrictive in telling guys where to fight when your promotional agreements don’t allow fighters to get new representation without your permission. Unclean hands.
The battle of “experts” becomes a circus
Kerry Davis in his words:
“First, Mr. Shaw is incorrect in broadly asserting that boxing promoters take significant financial risk. While some promoters are willing and able to take financial risks, the business model pursued by many promoters is to first secure television license fees and sometimes site fees that cover most or all of their expenses in promoting a fight card. In this respect, many of these companies operate more as “packagers” than as actual promoters.”
The number of boxing promoters who have spectacularly failed is voluminous. There is a proverbial graveyard full of them. Ask athletic commissions how many promoters come and go, especially in California. The risk associated with making money as a fight promoter is ultrahazardous. Why do you think, historically speaking, old time promoters were stable? They were stable because of organized crime laundering money. The underlying fundamentals of risk have always been tremendous in promoting fight sports. It’s one of the most risky business endeavors you could possibly undertake.
Al Haymon is the perfect example of this. He’s burned through tens of millions, if not hundreds of millions of dollars in hedge fund cash and has floundered. His entire business model with PBC would look so much different if he relied upon the standard pay TV business model that Golden Boy & Bob Arum have been navigating. After losing tons of cash, Haymon’s business model is starting to shift into what a “normal” high-end promoter model looks like in the modern era rather than his audacious attempt to flood every broadcast channel with prepaid programming.
“Third, Mr. Shaw is incorrect in asserting that it is the exclusive province of the boxing promoter to deal with television networks in connection with televised boxing events. While I was at HBO, several prominent managers dealt directly with HBO on behalf of their star fighters. Mr. Haymon, who also dealt directly with HBO, was not at all unusual. Negotiating with a television network on behalf of a boxer does not make one a promoter.”
If Al Haymon is not a promoter, then HBO is a promoter. And promoters are required to be licensed in each state with athletic commission and abide by the provisions in the Ali Act.
“Fourth, Mr. Shaw is incorrect in asserting that the PBC series and its creators somehow have an unfair advantage over existing industry stakeholders like HBO, Showtime, Top Rank, and Golden Boy, or that the PBC series’ business model is somehow bad for the boxing industry. The PBC series certainly has made the boxing business more competitive, which may be uncomfortable for those who were content with existing arrangements. But if Haymon Sports succeeds in growing the audience for professional boxing by broadcasting fights on network television, broadly speaking that should help, not hurt, other industry players.”
Kerry Davis’ argument is undermined by the fact that Haymon’s side supposedly waived exclusivity clauses. If PBC contracts had exclusivity clauses, that would automatically stifle competition for other promoters.
But what if the TV networks are legally considered to be promoters? Accepting that legal argument would nuke the exclusivity argument because each TV network would be viewed as their own promoter while classifying Haymon/PBC as “packagers” selling a fighter service to the networks. Look at the legal definition of “promoter” in California’s Business & Professions Code:
18622. The words “club” and “promoter” are synonymous, may be used interchangeably, and mean a corporation, partnership, association, individual, or other organization which conducts, holds, or gives a boxing or martial arts contest, match, or exhibition.
This legal argument completely flips the script on classifying Haymon as a promoter because he’s arguing that it’s the networks who are making the money, giving the OK on which fights to book, and producing the events at the arenas. He’s supplying the fighters but it’s the TV networks who are really running the show as promoters.
On the other hand, Haymon has a huge number of fighters in his stable under the PBC umbrella and some big names have been woefully inactive when they could have, theoretically speaking, been fighting big name opponents associated with other promoters.
Which leads us to argument two. Haymon argues you can’t accuse him of restrictive, anti-competitive tactics when Golden Boy has fighters signing contracts barring fighters from consulting or hiring representation without their permission.
If Haymon can convince a Federal judge that TV networks are the real promoters, the legal consequences could be enormous regarding athletic commissions, the Ali Act, and contracts. TV networks would find themselves in an entirely different legal position of responsibility.
If Al Haymon is legally arguing that he’s not a promoter, doesn’t that legally make him a manager? Maybe? Managers are supposed to be licensed with various athletic commissions. It’s our opinion that Haymon would gladly take this concession in exchange for getting a judge to legally shift the burden of “promoter” away from PBC and onto the laps of the TV networks for the sake of this anti-trust and unfair competition lawsuit filed by Golden Boy.
There are other legal issues brewing for Al Haymon’s PBC
The real legal action remains in Kansas with the shareholder derivative lawsuit against the hedge fund financing Haymon. If that lawsuit survives the motion to dismiss on November 10th, then the war begins with discovery and deposition on information regarding the financing of Al Haymon. That is the nuclear bomb.
By Zach Arnold | October 30, 2016
The cliff notes:
- Mark Hunt has hired San Diego attorney Christina Denning to either negotiate UFC contractual changes regarding doping or file a lawsuit
- Denning is talking a big game publicly about suing UFC using RICO (racketeering)
- Both state and federal RICO statutes require certain related causes of action in a demonstrated pattern under the guise of an illegal scheme
- Nevada’s racketeering statute requires two acts in the course of five years, while federal RICO allows a 10 year window
- RICO has been watered down over the years in terms of its flexibility as a cause of action but still requires a significant bar to climb in civil pleadings
- Denning is threatening to file suit against UFC and Brock Lesnar for causes of action which appear to involve concealment, misrepresentation, unjust enrichment and/or obtaining money by false pretenses (fraud).
Most big game attorneys don’t tell the press what they’re about to do against a major corporation. They do it first and then talk behind the scenes.
Mark Hunt hired an California attorney who specializes in construction & business litigation. But California law is very different than Nevada law and Nevada law is different than Federal law. Especially when it comes to racketeering.
Read the Federal statute on RICO for yourself. In order to file a lawsuit invoking RICO, you have to file at least two causes of action that are on the specified list of COAs available.
Different states have their own version of a racketeering statute. California’s law is called the Control of Profits from Organized Crime Act. Criminal application of that statute allows for confiscation of any ill-gotten gains. It’s list of COAs largely mirrors the federal RICO statute. Nevada is a different story. That state’s racketeering statute includes a larger list of available causes of action to invoke RICO.
Fraudulent Concealment: Mark Hunt’s attorney is investigating and alleging that UFC had intentionally let Brock Lesnar fight Mark Hunt at UFC 200 while using steroids in order to make money while Lorenzo Fertitta was selling UFC to Ari Emanuel/WME. Hunt’s attorney alludes to UFC giving Lesnar a pass on a four-month USADA testing window before signing to fight at UFC 200. This is viewed as a hook to demonstrate intent as to why UFC may have not expedited pre-fight USADA drug testing results that revealed a positive test result for Lesnar and that this concealment (omission) of fact from Hunt was used to obtain his services to make millions of dollars.
To prove concealment in Nevada, you have to demonstrate the following:
1) the defendant (UFC) concealed a material fact, 2) the defendant had a duty to disclose this fact, 3) the defendant intentionally concealed the fact to defraud the plaintiff, 4) the plaintiff didn’t know about the fact and would have acted differently given knowledge of the fact, and 5) plaintiff sustained damages as a result of hiding the fact in question.
In order for Hunt to prove fraudulent concealment, he would have to prove that UFC intentionally knew that Lesnar was using steroids and that they were hiding this from Hunt so he couldn’t back out of the UFC 200 fight. It’s one thing to try to demonstrate UFC’s consciousness of guilt regarding the four-month waiver but it’s entirely a different ballgame to prove that UFC intentionally delayed USADA test results showing Lesnar failed a steroid test before the fight.
Negligent or intentional misrepresentation: If you’re going to argue concealment, then you’re arguing intent. Which means intentional misrepresentation is the more likely cause of action. The problem is that the bar is much higher to meet the standard of proving intentional misrepresentation than it is to prove negligent misrepresentation.
In Nevada, the elements for a claim of negligent misrepresentation are: 1) a business or employer 2) supplied false information to the plaintiff in a business transaction 3) which the plaintiff detrimentally relied upon 4) creating liability for the defendant for damages suffered by plaintiff 5) due to a breach of duty to exercise reasonable care or judgment.
(California’s statute is clearer: defendant represented a fact to plaintiff as true but wasn’t and may have honestly believed it was true at the time but had no reasonable grounds to believe in the claim made while intending for the plaintiff to detrimentally rely upon the assertion which caused damages.)
In order for Hunt to prove negligent misrepresentation, he would have to demonstrate that UFC (or USADA by proxy) gave false information regarding Brock Lesnar’s doping before the UFC 200 fight took place and that he was damaged as a result of the false information. He would have to prove that UFC reasonably should have known that Lesnar had failed a drug test or was going to fail a drug test — and this is where the four-month USADA waiver could come into play.
Fraud (obtaining money under false pretenses) and unjust enrichment: Hunt’s attorney is alleging that UFC and drug-using fighters are obtaining money under false pretenses when those fighters in question are receiving ill-gotten gains as a result of their drug usage while the fighters who are clean but lose suffer economic damages because their contracts slash pay for future bouts after losses.
NRS 205.380 defines obtaining money under false pretenses as a person knowingly and designedly by any false pretense obtaining from any other person money with the intent to cheat or defraud the other person.
This cause of action not only sounds like potentially fertile legal ground against UFC but against Brock Lesnar. Hunt’s attorney claims that they are looking into pursuing a lawsuit against Lesnar as well as UFC.
Hold the horses on racketeering
The impact of a racketeering cause of action is simple — treble (triple) damages plus attorney fees. The problem for Mark Hunt is that the alleged causes of actions up above don’t amount to two of the specified causes of actions listed in either the Nevada statute or the Federal RICO statute.
Proving racketeering is extraordinarily difficult in a civil setting. A prominent attorney we talked with on background explained the situation this way:
“Federal courts have extensive pleading standards to even allege [RICO]. If this was added to the anti-trust [case], I could see that. But to take them on in a civil RICO, it’s only good for purposes of PR. State courts hate civil RICO. The predicate acts and racketeering activity generally require criminal behavior. You can mix civil RICO with common law causes of action. However, it can be terribly complex.”
When I asked the attorney if Mark Hunt’s attorney Christina Denning could try to use the Federal racketeering statute to try to get pendent jurisdiction in a Nevada Federal court instead of state court, the attorney confirmed that Nevada’s state racketeering law would apply and there is not exclusive federal subject matter jurisdiction for racketeering claims. Which means a lawsuit against UFC would have to take place in a state court in Las Vegas. Good luck.
The best attorneys don’t go for volume on causes of actions. They go for the path of least resistance to get the desired result. Concealment and unjust enrichment are scary enough.
By Zach Arnold | October 27, 2016
Wikileaks shows the Clinton/Emanuel connection strong as ever
UFC’s new ownership has nothing to worry about in regards to the Ali Act being amended to give MMA fighters a private right of action to sue over coercive contracts. That’s because the new owner is Ari Emanuel, brother to long-time Clintonworld henchman Rahm Emanuel. Emanuel orbited into President Obama’s first term and exited quickly to become mayor of Chicago… until Hillary figures out a path to get into the White House. Should Hillary return to Washington DC, Emanuel will be right in the thick of the action.
Which should completely kill off the impending narrative that a Democrat administration in DC will be more considerate of amending the Ali Act than a Trump administration. Except that it won’t (for various reasons).
A LIST OF WME 2016 POLITICAL DONATIONS (OPEN SECRETS)
A LIST OF UFC 2016 POLITICAL DONATIONS (OPEN SECRETS)
We already know that Trump will not amend the Ali Act to cover MMA. Hillary won’t amend it, either. It creates a scenario where fighters are going to have to find creative legal ways to combat their decreasing rights under William Morris ownership. Georges St. Pierre indicated that he’s a free agent from UFC but yet backed off publicly this week on the animosity. Highly unlikely that he’s going to put up a protracted legal fight.
Then there’s Ronda Rousey. She’s represented by William Morris. They now own the UFC. How is this going to play out? It’s very unlikely that she’s going to legally challenge WME for not having her best business interests at heart. Under the bylaws of the Nevada State Athletic Commission, there’s a very fair argument to make that Rousey’s agreement with WME is a conflict of interest given WME’s new ownership of UFC. But Nevada’s athletic commission isn’t going to rock the boat with UFC. They need and want lots of money after getting kicked off the state’s general fund and being placed into self-financing.
Any remaining hope for increasing legal rights of MMA fighters leads back to the anti-trust lawsuit in Nevada. That process could still take years in the courts. It could also get killed in a summary judgment hearing by UFC. Even if the plaintiffs survive summary judgment, the pressure will be intense by the Federal court in Las Vegas to push for a settlement.
Then there’s the effort by Lucas Middlebrook, estimable attorney, to create a union for fighters. The argument against that effort by Rob Maysey, a leader in the antitrust lawsuit, is that a union would create a scenario where fighters could not pursue antitrust legal action against UFC because of a prospective collective bargaining agreement.
Bottom line? There’s never been a worse time for UFC fighters in terms of their legal rights. The freedom to contract means the freedom to give away your freedoms. The simplest answer in combating a lack of legal rights is the path of least resistance and that means fighters choosing to fight outside of UFC.
By Zach Arnold | October 25, 2016
No matter how badly Jon Jones screws up, he seemingly manages to find a way to catch a break. Will he catch his biggest break yet?
The Nevada State Athletic Commission, a public agency, recently changed their rules & regulations to allow for third party drug testing and acceptance of such results on the provision that third party drug testing contracts are provided to the Athletic Commission to ensure legal protection. This has been known since June of 2016.
According to the estimable Erik Magraken, there is no contract on record with the Nevada State Athletic Commission for USADA’s drug testing deal with the UFC. How did he find out? He filed a records request with the Athletic Commission and they told him no such contract exists on record.
How could this be? Unless Nevada’s athletic commission invoked a “trade secrets” exception, they are obligated to disclose the USADA contract in public during a disciplinary hearing. Like a disciplinary involving Jon Jones if it gets to that stage. And that’s some leverage for Team Jon Jones in the upcoming arbitration hearing next week with USADA over his failed drug as a result of alleged consumption of contaminated supplements. USADA also has good leverage if/when it claims that Jon Jones failed to list his supplement(s) at the time of testing.
USADA applies strict liability for ingestion of contaminated substances. Nevada allows for a contaminated supplement defense to lower a potential suspension.
USADA has the power to fine and suspend Jon Jones. So does the Nevada State Athletic Commission. Nevada badly wants as much money as possible after being kicked off the state’s general budget and moved into self-financing. They also want Jon Jones to fight in Nevada as soon as possible so they can make more money. Someone will blink first here.
If Nevada’s new rules & regulations on third party drug testing acceptance costs them fine money and creates legal headaches for suspensions, there will be some excellent billable hours for attorneys. Nevada’s commission is the gift that keeps on giving for attorneys.
By Zach Arnold | October 21, 2016
Tuesday’s California State Athletic Commission meeting in Los Angeles had an excruciatingly arrogant tone that rivaled the kind of palaver Nevada’s commission has been dishing out to the public for the last decade.
Over the past several months, California’s commission has been on a “branding mission” to declare themselves not only the best regulators in the United States but specifically the world’s best boxing regulators. They are openly patting themselves on the back Barry Horowitz-style.
“We are, of course, the boxing capital of the world,” according to Big John McCarthy ally and transactional attorney Martha Shen-Urquidez.
Video from Tuesday’s meeting was a painful example of what’s in store for 2017: an Athletic Commission-sanctioned boxing title and the mother of all ass-kissing campaigns to find money marks to pony up the site fee to host Canelo Alvarez vs. Gennady Golovkin in Los Angeles.
By Zach Arnold | October 17, 2016
Georges St. Pierre wasn’t booked for UFC’s next event in Toronto. Now St. Pierre says he has hired attorney James Quinn to terminate his contract with UFC for failing to meet a contractual deadline. UFC responded with a not-so-veiled threat of impending legal action.
What’s at stake in the impending legal fight?
- Declaratory judgment – UFC will likely petition Clark County court in Las Vegas to have a judge declare their contractual rights with St. Pierre in order to prevent a contract termination.
- Anticipatory breach – St. Pierre’s public declaration that he hired an attorney to terminate his contract will be used as a cause of action and grounds for either an injunction or damages should he sign a contract with Bellator.
St. Pierre would likely answer UFC’s lawsuit with his own countersuit. A likely cause of action in that countersuit would involve Breach of implied convenant of good faith and fair dealing. St. Pierre would allege that UFC acted in bad faith and did not meet contractual requirements. St. Pierre claims that new UFC ownership pulled back an offer that Lorenzo Fertitta allegedly worked on bringing the former champion back to active UFC competition.
I would also expect a fight from St. Pierre on grounds that he did not sign a new agreement regarding the Reebok sponsorship agreement. However, GSP has a problem and it’s regarding USADA. He made a declaration that the contract with UFC is terminated. If so, then he is under no obligation to continue USADA drug testing.
But there’s a problem: if he misses a USADA drug test, he will get suspended and that suspension would last through the duration of his UFC contract if a judge upholds the agreement and declares an invalid termination. If St. Pierre continues to agree to USADA drug tests, then UFC can legally use that against him as evidence that St. Pierre is acting as if he is still obligated to the UFC contract.
The court fight will begin. The question is whether or not UFC’s new owners will acquiesce on St. Pierre’s demands and make some money with him or if St. Pierre will be able to negotiate a release from the company. It’s a race to the courthouse now.
By Zach Arnold | October 14, 2016
Athletic Commission boards across the country are a bizarre mixture of business and politics. Nevada’s athletic commission board is no different. Francisco Aguilar, former Chairman, is an attorney for Andre Agassi and Steffi Graf. Anthony Marnell is a casino owner who filed for a marijuana license despite the Gaming Commission warning him to back off. Marnell got his marijuana license. And Nick Diaz became a Nevada whipping boy.
The most interesting character on the Athletic Commission, however, is long-time board member Pat Lundvall.
Pat Lundvall loves the show trial aspect of Nevada State Athletic Commission meetings. She’s been an attorney for nearly three decades. It’s a chance to flex power against those with limited power (at best) in an administrative civil hearing.
Lundvall hammered Conor McGregor over his water bottle throwing incident with Nate Diaz at the UFC pre-fight press conference before their re-match in Las Vegas. She pushed for a $150,000 fine (turned into $75,000) plus 50 hours of community service plus McGregor’s involving in filming an anti-bullying PSA (public service announcement). The Attorney General’s office had recommended a $25,000 fine and 25 hours of community service.
After the state of Nevada removed the state Athletic Commission from general funding, the AC has had to shift to self-financing & budgeting mode like every other athletic commission. The result has been an aggressive money-grabbing campaign against licensees. There has been a direct campaign to force licensees into “plea agreements” containing the word “guilty” instead of liable.
Given the Attorney General’s office recommendation of a $25,000 fine for Conor McGregor, a question had to be asked: did Conor McGregor turn down a plea deal with the AG’s office? We may now know the answer to this question: he may have not been given the chance to do so.
According to a charging document obtained by Erik Magraken, Nate Diaz has been summoned to meet the Athletic Commission. That charging document does not specify a punishment, therefore forcing Diaz to appear rather than accept a “plea agreement”:
— Erik Magraken (@erikmagraken) October 13, 2016
Facing no other options, Nate Diaz’s team is going to throw themselves to the mercy of Pat Lundvall and the Athletic Commission board. There’s also another good reason Nate Diaz shouldn’t fight Pat Lundvall: she’s representing California’s Franchise Tax Board in the state of Nevada in a famous lawsuit filed by inventor Gilbert Hyatt. Hyatt, an inventor who moved from California to Nevada to avoid paying state income tax, was audited aggressively by California’s tax collectors for alleged unpaid taxes. The state claimed he owed $7.4 million and now that amount has ballooned up to $55 million in penalties. Hyatt and California ended up going all the way to the Supreme Court. The Supreme Court said Hyatt had the right to sue the state agency in Nevada but that his damages would be capped to $50,000. The attorney representing California in that lawsuit is… Pat Lundvall.
Which brings us to the possible conflict of interest. Pat Lundvall’s client is California’s tax agency. She will be overseeing a disciplinary hearing involving Nate Diaz in Nevada. Nate Diaz’s brother, Nick, famously said after UFC 158 that he hadn’t paid his taxes and that he would probably go to jail over it. This forced Cesar Gracie to go public and say that Nick had paid $100,000 in taxes over the last two years. Jonathan Tweedale was quoted as saying that Cesar had supposedly not taken care of Nick’s tax issues.
If the California Franchise Tax Board has audited either brother in the past ten years, that should raise a warning flag over Pat Lundvall’s ability to give a fair and impartial hearing to Nate Diaz given who her legal client is. Nate Diaz, unfortunately, has no choice but to tread lightly and roll over when he faces the Nevada State Athletic Commission for punishment over the water bottle throwing incident.
Conor McGregor’s (empty) threat to not fight in Nevada exposes how vulnerable Athletic Commission is
By Zach Arnold | October 12, 2016
Dana White is playing the public role of “peacemaker” with Conor McGregor threatening to not fight again in the state of Nevada after getting fined
$150,000 $75,000 for the water bottle incident with Nate Diaz.
White made it clear, during an interview with Jason Whitlock on Fox Sports 1, that he wanted Conor McGregor to fight again in Nevada. It’s where UFC is headquartered and where they get rights fees from casinos for big events.
McGregor’s threat to not fight again in Nevada may be hollow but it underscores the new reality facing the increasingly abusive Nevada State Athletic Commission. After the state of Nevada yanked the Athletic Commission from general funding, the Athletic Commission has been forced into self-financing and budgeting. The response to this new reality by the Athletic Commission has been to brazenly transform itself into a money-grabbing asset forfeiture operation with a mentality of criminal authority it does not possess.
For every action, there is a reaction. The reaction to behavior of the Nevada State Athletic Commission has created the following openings:
- An opportunity for an attorney to make a full-time living in a niche field of suing the Nevada State Athletic Commission for arbitrary and capricious rulings, thus creating an avenue to win attorney fees for each petition for judicial review
- The threat of big name fighters no longer fighting in Nevada in order to head to other no-income tax states like Texas or Florida
The Nevada State Athletic Commission has no one to blame but itself. Instead of fully processing the new realities of self-financing, the Athletic Commission went into Sheriff Joe Arpaio mode. Someone should explain the concept of capital flight to the board members. The UFC has new owners who have a world to conquer. Floyd Mayweather is retired. Al Haymon is dealing with major legal & financial issues. There simply aren’t as many guaranteed mega-money fights for Las Vegas as there used to be.
Fighters choose to fight in Las Vegas because it’s the entertainment capital of America and has no state income tax. Fighters aren’t choosing to fight in Nevada because of the regulatory quality of today’s Athletic Commission. It’s not as easy to conduct business in the state of Nevada today as it was during Marc Ratner’s tenure. Fighters have more options now. Fighters can go to South Beach or Orlando if they want to fight in a state with entertainment options and no state income tax. There’s Jerry World in Dallas. Options are no longer limited.
Without political and business pressure from the UFC, the Nevada State Athletic Commission would be financially on the rocks. The Nevada State Athletic Commission needs the UFC and its fighters for self-financing their operations. Instead of understanding how vulnerable their position is, the Athletic Commission has gone all-in as regulators with powers they do not truly possess. They can ask their next door neighbor in California what happens when major fighters don’t want to come to your state.
By Zach Arnold | October 11, 2016
Wow, look at the new 'judicial' look of the NSAC pic.twitter.com/7VKkjVf9uF
— Erik Magraken (@erikmagraken) October 10, 2016
“Conor McGregor was fined $150,000 and sentenced to 150 hours of community sentence.”
This was the text message viewers watching Comcast Sportsnet saw Monday night in the United States. If you didn’t know the details of the water bottle fiasco involving Conor McGregor and who was punishing him, you would have been under the impression that he was being hauled in a court room for a criminal hearing.
The Nevada State Athletic Commission is an administrative civil body. It is not a criminal court. However, that is no longer the image the public agency wants to portray to the public. The Athletic Commission is visually and administratively acting as a tribunal with authority for criminal punishment. Last Spring, we documented the significant changes that the Athletic Commission made to its rules and regulations. A major symbolic change that nobody picked up on was the fact that the Athletic Commission changed the wording in their rules and regulations to remove text stating that they are a civil body. It was a red flag for intent and motive of what was coming in the future.
When the Nevada State Athletic Commission brought Bob Bennett on board as its new Executive Director, it promised significant changes were coming for drug testing and administrative procedure. Those changes were implemented. The war on doping was ramping up. What the Athletic Commission didn’t count on was the state of Nevada cutting off general funding to finance the Athletic Commission. The Nevada State Athletic Commission, generating millions of dollars a year for the state’s general fund, now found itself put into a situation of self-financing in order to pay their own bills. They got hit with years of back-dated claims from the state’s Attorney General office in legal bills.
The end result is that the Nevada State Athletic Commission, once considered a gold standard in athletic commissions, has resorted to extortionary money-grabbing tactics against fighters in order to pay administrative bills that the taxpayers in the state of Nevada used to pay for.
By Zach Arnold | October 8, 2016
America’s Federal Reserve and Goldman Sachs have long had a revolving-door relationship. That relationship is now getting tested by Janet Yellen and the Obama Administration in regards to banks pitching high-leveraged business propositions.
Bloomberg News reported on Thursday that Federal Reserve supervisors have sent Goldman Sachs a warning letter regarding promises they supposedly made to prospective buyers for the UFC.
- Goldman Sachs allegedly marketed UFC as a business property that could generate nearly $300 million USD in yearly EBITDA. However, the current EBITDA for UFC is reportedly less than half – $142 million EBITDA.
- Reportedly in August, there were buyers interested in buying high-yield UFC debt. $1.8 billion dollars in UFC debt was purchased.
These figures have allegedly alarmed Federal regulators because of the net debt to EBITDA ratio. Using these figures, UFC would have a ratio of 12 — which would be alarming. Bloomberg reports that numerical adjustments lowered UFC’s ratio to 6.
This information comes at a time where word is spreading about new UFC ownership wanting to create multiple television deals with different cable & broadcast networks when the Fox Sports deal expires in 2019. Exclusivity of UFC’s product has kept Fox Sports 1 afloat as a fledgling cable sports channel. Without UFC programming, FS1 struggles to attract programs that draw 6-figure ratings. UFC is the network’s lifeline.
The financial pressure for UFC’s new venture capital owners to maximize profits is high. The financial pressure for Fox Sports to keep FS1 going is meaningful. Big changes could be coming for both parties in two years.