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Text of lawsuit filing between Fedor & M-1 versus Affliction

By Zach Arnold | November 4, 2009

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Filed 10/28/2009

Marc S. Hines (SBN 140065) – mhines@hinessmith.com
Michelle L. Carder (SBN 174481) – mcarder@hinessmith.com
Christine M. Emanuelson (SBN 221269) – cemanuelson@hinessmith.com
Hines Smith Carder Leasure Dincel – 3080 Bristol Street, Suite 540, Costa Mesa, CA. 92626
Tel: (714) 513-1122
FAX: (714) 513-1123

Attorneys for Plantiffs, Fedor Emelianenko and M-1 Nederland b.v.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

FEDOR EMELIANENKO, an individual; M-1 NEDERLAND b.v., a Dutch Limited Liability Company (Plaintiffs) vs. AFFLICTION CLOTHING, a California business entity, form unknown; AFFLICTION ENTERTAINMENT, LLC, a California limited liability company; and DOES 1 through 50, inclusive (defendants)

CASE NO.: CV09-07865 MMM (MLGx)

PLAINTIFFS’ COMPLAINT FOR:

1. Breach of Fight Agreement
2. Breach of Implied Convenant of Good Faith and Fair Dealing – Fight Agreement
3. Breach of Consulting Agreement
4. Breach of Implied Covenant of Good Faith and Fair Dealing – Consulting Agreement
5. Breach of Letter Agreement
6. Declaratory Relief – Fight Agreement
7. Declaratory Relief – Consulting Agreement and Letter Agreement

AND DEMAND FOR JURY TRIAL

Plaintiffs, M-1 Nederland b.v. and Fedor Emelianenko allege the following against Defendants, Affliction Clothing, Affliction Entertainment, LLC, and DOES 1 through 100.

PARTIES, JURISDICTION, AND VENUE

1. Fedor Emelianenko (“Emelianenko”) is an individual who at all relevant times was a citizen and resident of the country of Russia. Emelianenko is widely considered to be the world’s best heavyweight mixed martial arts (“MMA”) fighter and is and at all relevant times was promoted by M-1 Nederland b.v. (“M-1”).

2. M-1 is and, at all relevant times was, a limited liability corporation duly organized and existing under the laws of the Netherlands and with its principal place of business in the Netherlands. M-1, generally known in the United States as M-1 Global, is an MMA bout promoter with a substantial presence in Europe and Asia. M-1 also partners with United States licensed promoters in connection with events taking place in the United States and, in addition, is in the business of promoting and managing top international MMA fighters. At all relevant times, the owners and principals of M-1 have been Vadim Finkelchtein, Apy Echteld, Joost Raimond, and Emelianenko.

3. Affliction Clothing is a business entity, form and place of formation unknown, with its principal place of business in the State of California, city of Seal Beach. At all times mentioned herein, Affliction Clothing has been in the business of promoting and sponsorsing MMA events. At all relevant times, the owners, officers, directors, and principals of Affliction Clothing have been Todd Beard, Thomas Atencio, Courtney Dubar, Eric Foss, and Clifton Chason.

4. Affliction Entertainment, LLC is a limited liability company organized and existing under the laws of the State of California and having its principal place of business in the State of California, City of Seal Beach. Affliction was converted from Affliction Promotions, Inc. and underwent a name change from Affliction Promotions, LLC to Affliction Entertainment, LLC. At all times mentioned herein, Affliction has been in the business of promoting and sponsoring MMA events. At all relevant times, the owners, officers, directors, and principals of Affliction Entertainment, LLC have been Todd Beard, Thomas Atencio, Courtney Dubar, Eric Foss, and Clifton Chason.

5. Because of the multiple name changes, conversions, and various machinations relating to the ownership and names of Affliction Clothing, Affliction Entertainment, LLC, and other Affliction entities, the Affliction entities are referred to herein collectively as “Affliction.”

6. Plaintiffs do not know the true names and capacities of Defendants, Does 1 through 50, and therefore sues these Doe Defendants by such fictitious names. Plaintiffs are informed and believe and based thereon allege each of these Doe Defendants was and is legally responsible for the damages or losses suffered by Plaintiffs. Plaintiffs will seek leave of court to amend this Complaint to allege the true names and capacities of these Doe Defendants when this information has been ascertained.

7. Plaintiffs are informed and believe and based thereon allege Defendants, and each of them are, and at all times mentioned herein were, the alter ego/sister corporation of the other such that to allow these Defendants to maintain a separateness would be to allow Defendants, and each of them, to prepetrate a fraud on Plaintiffs and the community at large.

8. Plaintiffs are informed and believe and based thereon allege, at all times mentioned herein, Defendants, and each of them, were acting on their own behalf and also as the agent, employee, representative, and/or joint venturer of each other, and at all times, except as stated herein and subject to amendment of the Complaint upon discovery of additional facts, were acting within the purpose, scope and authority of said agency, employment, representation or joint venture, and with the advance knowledge, consent, approval, and ratification of the remaining Defendants, and each of them.

9. The amount in controversy exceeeds $75,000.00 and this Court has jurisdiction pursuant to 28 U.S.C. S1332(a)(2).

GENERAL ALLEGATIONS
Affliction is Banned from the UFC and Decides to Become an MMA Event Promoter in Competition with the UFC

10. Affliction is a popular clothing brand which has attained international recognition and prominence through various celebrity and MMA fighter endorsements. Prior to January of 2008, Affliction sponsored Ultimate Fighting Championship (“UFC”) events and gained most of its notoriety as a result of UFC fighters — especially UFC World Heavyweight Champion Randy Couture — wearing and endorsing Affliction branded clothing on televised and/or pay-per-view (“PPV”) events.

11. However, in October of 2007, Randy Couture resigned from the UFC, citing as his reason renumeration discontent. The UFC responded in early January, 2008 by suing its heavyweight champion in a Las Vegas court. When the UFC learned Affliction was positioning itself in favor of Couture in this widely-publicized MMA imbroglio, the UFC terminated its relationship with Affliction as a UFC sponsor. The UFC then banned all fighters from wearing or endorsing any Affliction gear at any UFC event or at any time during the terms of their contracts. Not to be deterred, and with the avowed objective of “crushing” the UFC, Affliction decided to enter the MMA event promotion business.

Affliction Signs Emelianenko to a Fight Agreement and Enters into a Consulting Agreement with M-1

12. In its quest to be the world’s premier MMA event promoter, Affliction naturally sought Emelianenko, the best and most renowned non-UFC heavyweight fighter with whom Affliction already had a clothing sponsorship deal. The parties commenced negotiations in early 2008 and, on April 14, 2008, Affliction Promotions, Inc., which Plaintiffs are informed, believe, and based thereon allege now is known as Affliction Entertainment, LLC, signed Emelianenko to a three-bout Fight Agreement. On or about October 20, 2009, Plaintiffs, in writing, sought Affliction’s stipulation to disclose the terms of the Fight Agreement in the context of litigation between the parties due to confidentiality restrictions contained in the Fight Agreement. Affliction did not respond. As a result, Plaintiffs plead only those terms essential to put Affliction on notice of the claims against it and those terms already a matter of public knowledge.

13. Pursuant to the Fight Agreement, the parties agreed, inter alia, Emelianenko would fight a minimum of three (3) bouts. The partial purse for each fight — which was in addition to the substantial payment Emelianenko receives from M-1 pursuant to the terms of a separate agreement — was to be $300,000 plus travel and accommodation expenses. The total amount Emelianenko was to receive per fight as a result of the Fight Agreement, i.e. the amount he receives from M-1 plus the $300,000.00 per bout amount owed by affliction, will be disclosed, subject to protective orders, at the time of trial.

14. Affliction and Emelianenko also agreed, during the term of the Fight Agreement, which would not terminate or expire until completion of the third bout, Affliction would be the sole and exclusive co-promoter of all MMA contests involving Emelianenko in the United States. Emelianenko also agreed Affliction would have exclusive world-wide promotional rights to the three bouts covered by the Fight Agreement, except for Russia and Asia, for which Emelianenko reserved all broadcast and promotion rights. The Fight Agreement also provides Emelianenko shall not engage in or conduct negotiations to engage in any MMA match in the United States other than the bouts covered by the Fight Agreement during the term of the agreement, which ended no earlier than completion of a third bout. Affliction, on the other hand, agreed to use commercially reasonable best efforts to arrange for each bout and to use good faith efforts to find a fighter for each bout.

15. Pursuant to Paragraphs 6 and 11 of the Fight Agreement, Affliction and Emelianenko agreed Affliction would have all exclusive worldwide promotion rights in and to the bouts covered by the Fight Agreement with the exception of certain reserved promotion rights giving Emelianenko the exclusive right to distribute and exploit the bouts subject to the Fight Agreement in certain venues.

16. At the time it entered into the Fight Agreement with Emelianenko, Affliction knew Emelianenko would rely upon Affliction’s promise to co-promote three bouts and would therefore forgo other opportunities in order to compete in the all three bouts required by the Fight Agreement and to abide the restrictions of the Fight Agreement. As a result of Affliction’s promises, Emelianenko did forgo other opportunities to compete in bouts both in and outside of the United States during the time of the fight agreement.

17. On the same date Affliction signed Emelianenko, Affliction also entered into a Consulting Agreement with M-1. On or about October 20, 2009, Plaintiffs, in writing, sought Affliction’s stipulation to disclose the terms of the Consulting Agreement in the context of litigation between the parties due to confidentiality restrictions contained in the Consulting Agreement. Affliction did not respond. As a result, Plaintiffs plead only those terms essentially to put Affliction on notice of the claims against it and those terms already a matter of public knowledge.

18. Pursuant to the Consulting Agreement, M-1 agreed to provide general consulting services to Affliction in connection with certain endeavors expressly stated in the Consulting Agreement. In exchange for these services, Afflitction agreed to pay M-1 a substantial consulting fee. According to the payment schedule set forth in the Consulting Agreement, Affliction with required to make its first payment to M-1 on execution of the Consulting Agreement. The Consulting Agreement further required Affliction to make a second payment to M-1 no latter than forty-eight (48) hours prior to the initial Emelianenko bout and the final payment no latter than forty-eight (48) hours prior to each of the second and third Emelianenko bouts, contingent upon Emelianenko’s arrival in the city of the scheduled bouts. Affliction also agreed to arrange, pay for, and provide M-1 with any and all expenses incurred in performing its duties under the Consulting Agreement and further agreed to provide M-1 with certain promotional values.

19. On May 20, 2008, Affliction and M-1 co-hosted a Los Angeles press conference with Emelianenko to announce the first MMA event held in connection with the foregoing contracts. This event, which was Affliction’s response to the UFC banning its fighters from wearing and promoting Affliction gear, took place on July 19, 2008, and was titled, “Affliction: Banned.” Affliction: Banned was a U.S. PPV-televised event hosted at the Honda Center in Anaheim in connection with a California State Athletic Commission licensed promoter. Emelianenko and former UFC Heavyweight Champion Tim Sylvia were on the main card. Emelianenko, who submitted Sylvia thirty-six seconds into the first round, convincingly won the fight. The main card was televised live on PPV and the undercards were televised live on Fox Sports. Affliction paid Emelianenko as required under the Fight Agreement for this first bout, and it also paid M-1 the consulting fees required under the Consulting Agreement.

Emelianenko Assigns Promotional Rights to M-1 and Affliction and Emelianenko Modify Provisions of the Fight Agreement Pertaining to Promotional Rights

20. Shortly after executing the Fight Agreement, for valuable consideration, Emelianenko and M-1 entered into an agreement by which Emelianenko partially assigned to M-1 all promotional rights reserved to Emelianenko by way of the Fight Agreement, including but not limited to those promotional rights set forth or reference in Paragraphs 6, 7, and 11. The rights assigned by Emelianenko to M-1 include those reserved under the modified Fight Agreement as set forth hereinbelow.

21. Prior to co-hosting the Affliction: Banned event, Affliction’s CEO, Todd Beard, admitted to M-1, and specifically Joost Raimond, Affliction did not have the intent, capability, or desire to exploit promotional opportunities outside of the United States. As a result, prior to Affliction: Banned, M-1 and Affliction orally agreed to modify Paragraphs 6, 7, and 11 of the Fight Agreement, and modified these provisions by conduct and course of performance, to reserve for Emelianenko and ultimately M-1 as the assignee all international (outside the United States) promotional rights.

22. Affliction, both expressly by oral agreement and by its conduct and course of performance of the Fight Agreement, waived, ignored, and abandoned the provisions of Paragraph 20 of the Fight Agreement requiring modification by written agreement.

23. Affliction is estopped from asserting the provisions of Paragraph 20 of the Fight Agreement requiring modification by written agreement and further is estopped from denying modification of the Fight Agreement. At the time it represented it would waive international promotional rights and allow M-1 to exploit these opportunities, Affliction intended and knew M-1 would act on Affliction’s representations and conduct by entering into agreements with third-party PPV and television providers to televise or broadcast the bouts and therefore would incur obligations and expenses under these agreements. Moreover, during the course of performance of the Fight Agreement, Affliction knew M-1 actually was entering into such agreements with third-parties and further knew M-1 was expending substantial time and funds in connection with obtaining such agreements. Despite this, Affliction never once objected or raised any dispute pertaining to the rights of M-1, as Emelianenko’s assignee, to exploit international promotional rights and opportunities.

24. Assuming Affliction required written modification or had a different understanding of the rights granted pursuant to the modification of Paragraphs 6, 7, and 11 of the Fight Agreement, Affliction had a duty to so inform M-1. At no time was M-1, or Emelianenko, aware of Affliction’s objection, assuming there was one, to M-1 exploiting international promotional rights under the modified Fight Agreement or doing so without written modification of the Fight Agreement. M-1 relied on Affliction’s representations, conduct, and silence by incurring obligations in connection with third-party agreements and by expending substantial resources to procure such agreements.

25. No additional consideration was needed for modification of the Fight Agreement. In addition to the foregoing facts establishing equitable and promissory estoppel precluding Affliction from denying modification or asserting the Fight Agreement may be modified only by written agreement, Affliction executed the oral modification agreement by accepting less than due under the unmodified Fight Agreement. At no time did Affliction exploit, pursue, or obtain benefits from the international promotional opportunities. On the contrary, Affliction intentionally relinquished such rights and sat idly by while watching M-1 pursue and enter into contracts with international third-party PPV and television providers outside of Russia and Asia. The parties therefore mutually dispensed with contractual rights and requirements by quid pro quo conduct antithetical to the written terms of the unmodified Fight Agreement.

M-1 and Affliction Execute the Letter Agreement and the Parties Perform Their Obligations in Connection with the Second Affliction Event, Affliction: Day of Reckoning

26. Following Affliction: Banned, the parties discussed and negotiated a separate, unrelated written contract by which Affliction agreed to sponsor a series of MMA events known as the “M-1 Challenge,” an international MMA team competition referred to as the World Cup of Mixed Martial Arts which was developed in connection with the parties’ effort to cultivate or “farm” new MMA fighter talent.

27. As such, effective September 27, 2008, Affliction Clothing and M-1 signed a Letter of Agreement (“Letter Agreement”). On or about October 20, 2009, Plaintiffs, in writing, sought Affliction’s stipulation to disclose the terms of the Letter Agreement in the context of litigation between the parties due to confidentiality restrictions contained in the Letter Agreement. Affliction did not respond. As a result, Plaintiffs plead only those terms essential to put Affliction on notice of the claims against it and those terms already a matter of public knowledge.

28. By way of the Letter Agreement, M-1 promised to produce a certain number of live M-1 Challenge events which would result in a minimum number of one-hour television shows for the 2008 and 2009 seasons. M-1 also agreed to provide Affliction specific promotional advantages relating to the M-1 Challenge event titles, use of the Affliction logo in marketing and advertising for the M-1 Challenge events, and use of Affliction’s name and logo in print collateral materials.

29. In consideration for the foregoing, Affliction agreed to pay to M-1 a substantial fee. Pursuant to Section 4 of the Letter Agreement, Affliction agreed to pay the first installment by January 31, 2009, and the second installment by July 31, 2009.

30. In the meantime, in connection with its obligations under the Fight Agrement and the Consulting Agreement, Affliction co-promotion a second MMA event. The event, titled Affliction: Day of Reckoning, was held on January 24, 2009, at the Honda Center in Anaheim in front of a capacity crowd. Emelianenko again fought on the main card and successfully defended his title against former UFC Heavyweight champion, Andrei Arlovski. The event main card was televised on Showtime PPV with the undercard on HDNet.

31. Affliction performed its obligations under the Fight Agreement and the Consulting Agreement in connection with respect to Affliction: Day of Reckoning. Affliction also performed its obligations with respect to the first installment due under the Letter Agreement.

M-1 and Affliction Plan the Third Event Required Under Their Contracts While M-1 Works to Establish PPV and Television Deals Throughout the World

32. Following the Affliction: Day of Reckoning event, the parties began planning Affliction: Trilogy, the third event required under the Fight Agreement and the Consulting Agreement scheduled to take place on August 1, 2009, at the Honda Center in Anaheim. The main card for Affliction: Trilogy would feature Emelianenko against former UFC Heavyweight Champion Josh Barnett.

33. However, at the same time it was assisting Affliction with preparations for Affliction: Trilogy, M-1 began working with its international contacts to facilitate broadcasts of Affliction: Trilogy on PPV and television channels in numerous locations, including but not limited to Mexico, Central America, the Caribbean basin, South America, Eastern Europe, the United Kingdom, Australia, New Zealand, Japan, and Korea.

34. At all relevant times, including the time at which Affliction entered into the subject agreements and up to the present, Affliction has known of Emelianenko’s and M-1’s business relationships and presence outside the United States as well as their ability to exploit broadcast opportunities and Russia and Asia and the fact they would do so in connection with performing under the Fight Agreement. Affliction also knew, at the time it entered into the modified Fight Agreement, M-1 as Emelianenko’s partial assignee retained the right to license television and PPV providers the right to broadcast Affliction events in territories outside the United States.

35. As such, at the time it enterted into the Fight Agreement and modified Fight Agreement, Affliction knew Emelianenko or M-1 as the partial assignee would profit from PPV and television broadcast deals pertaining to each of three Affliction events required under the Fighter Agreement and the Consulting Agreement. Affliction therefore could and did foresee its failure to complete any of the three events would cause M-1 to breach agreements with PPV and television providers, to lose revenue it otherwise would have earned under agreements with these providers, and to incur expenses procuring and performing under these third party agreements.

36. As alluded to above, even prior to entering into the agreements which are the subject of this action, M-1 had been working diligently for two years to establish relationships and PPV/television presence in these locations, most significantly, Japan and Russia. MMA is a dominant sport in Japan and is a country in which Emelianenko frequently bouts and is wildly popular. In Russia, which is Emelianenko’s homeland, Emelianenko is considered a national hero. Any MMA event featuring Emelianenko on its main card and broadcast in either of these countries would draw a substantial viewing audience, and M-1 knew the Affliction: Trilogy event was going to be a blockbuster in these countries.

37. With this backdrop, on June 11, 2009, M-1 entered into a Deal Memo with Real Entertainment Inc. (“Real”) by which M-1 agreed to appoint Real as its exclusive agent for distribution of, inter alia, the Affliction: Trilogy event in various territories, including Japan, and to pay Real $20,000 per month in exchange for its service. Thereafter, Real obtained an agreement from Sky Perfect, Japan’s main provider of satellite television access, to televise Affliction: Trilogy on its PPV channel. This deal was the culmination of M-1’s painstaking two-year effort to build relationships with the Japanese, to increase Emelianenko’s popularity and following in Japan, and to bring Emelianenko to Japanese television audiences.

38. Prior to entering into the Sky Perfect agreement, on May 19, 2009, and on behalf of M-1, Blue Entertainment Sports Television, Inc. (“Best”) entered into a Programme Acquisition Deal Memo with Virgin media Television Limited (“Virgin”) by which M-1 licensed Virgin the right to televise the Affliction events (including Affliction: Trilogy) in the United Kingdom in exchange for per event licensing fees payable to M-1.

39. On June 19, 2009, in exchange for a flat fee, M-1 directly entered into a Program License Agreement with HBO Ole Acquisitions, LLC (“Ole”) by which M-1 granted Ole the exclusive right to televise Trilogy in Mexico, Central America (including without limitation Belize, Costa Rica, El Salvador, Guatemala, Hondruas, Nicaragua, and Panama), South America (including without limitation Argentina, Bolivia, Brazil, Chile, Columbia, Ecuador, French Guyana, Guyana, Paraguay, Peru, Suriname, Uruguay, and Venezuela), and the Caribbean basin (excluding Puerto Rico and the U.S. Virgin Islands but including without limitation Anguila, Antigua and Barbuda, Aruba, the Bahamas, Barbados, Bermuda, the British Virgin Islands, the Cayman Islands, Cuba, Dominica, Dominician Republic, Grenada, Guadeloupe, Haiti, Jamaica, Martinique, Montserrat, the Netherlands Antilles, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad, Tobaso and the Turks and Caicos Islands.)

40. On June 22, 2009, on behalf of M-1, Best entered into a Memorandum of Agreement with Sky Network Television Limited (“Sky”) by which M-1 licensed Sky the right to broadcast Affliction: Trilogy on its PPV and Near Video Demand channels in New Zealand in exchange for 50% of the gross revenues from the production.

41. Similarly, M-1 entered into an agreement with Best to obtain licensing agreements in various territories. On June 30, 2009, and on M-1’s behalf, Best entered into a Term Sheet with Main Event Television to broadcast Affliction: Trilogy on its PPV channel throughout Australia in exchange for paying M-1 10% of the gross income from the production.

42. In Russia, however, in addition to obtaining agreements to televise Affliction: Trilogy on premium channels, M-1 achieved an unprecedented agreement with “Channel One” — which had never before broadcast any MMA event — to televise Affliction: Trilogy throughout Russia. The channel, which is majority owned and controlled by the Russian government, has a 35% rating is the most prosperous Russian mainstream television channel. The Channel One agreement opened to M-1 the ability to attract major sponsors and the opportunity to bring Emelianenko prime-time and mainstream to every television in every home in Russia. The Channel One Affliction: Trilogy deal was the culmination of many years of hard work by both M-1 and Emelianenko to bring MMA into the Russian mainstream and resulted from M-1’s careful cultivation of significant business relationships.

43. M-1 entered into additional PPV/broadcast agreements to be disclosed and proven at trial.

44. In the meantime and concurrently, as stated above, M-1 performed its obligations under the Consulting Agreement and worked with Affliction to plan Affliction: Trilogy. The parties established and approved a show budget and marketing and advertising budgets, signed the Honda Center lease, developed the look and feel of the show, established ticket prices and venue scaling, executed agreements with broadcast partners, identified and assigned video pieces, scheduled and wrote press releases, built poster art and a web site for the show, obtained bill board space in prominent locations including Times Square, developed the advanced pre-sale strategy, executed the hotel contract, obtained featured fighters and, through Golden Boy Promotions, entered into Bout Agreements, established sponsorship prices and selling strategies, and coordinated fighter travel, medicals, licensing, and housing.

Affliction Cancels Trilogy and Breaches the Fight Agreement and Consulting Agreement

45. Affliction: Trilogy was, no doubt, a highly anticipated event. The event and identity of the fighters officially was announced on May 29, 2009, with the main card bouts to be broadcast live on Showtime and undercards live on HDNet. National promotion of the event began shortly thereafter on June 3, 2009, when Emelianenko and Vadim Finkelchtein appeared in New York along with Mark Cuban, Donald Trump, Josh Barnett, and Thomas Atencio at a press conference promoting Affliction: Trilogy. On June 5, 2009, at the request of Thomas Atencio, Emelianenko traveled to Kansas City to allow photographs and provide autographs at Buckle, the nation’s largest retailer of Affliction clothing.

46. On June 6, 2009, Emelianenko appeared with Josh Barnett on Showtime to promote the event. M-1, Affliction, Golden Boy Promotions, and Roy Engelbrecht conducted the production meeting on June 16, 2009, and, as of July 22, 2009, the planning and production of Affliction: Trilogy appeared to M-1 and Emelianenko to be on track.

47. However, on July 22, 2009, M-1 and Affliction learned Josh Barnett tested positive for steroids and was denied his California State Athletic Association license. M-1 and Emelianenko immediately began discussions with Affliction about signing a suitable replacement fighter. The parties identified Vitor Belfort, a former UFC Light Heavyweight Champion, and Brett Rogers, a talented fighter who competes under the Strikeforce banner and who had just defeated former UFC Heavyweight Champion Andrei Arlovski during the prior month.

48. Initially, Strikeforce and Showtime, which broadcasts Strikeforce events, were unwilling to release Brett Rogers to fight Emelianenko in an Affliction event. However, after negotiations, Affliction stated it was willing to sponsor Strikeforce/Showtime shows in the future and M-1 agreed to grant Strikeforce the right to co-promote a rematch with Brett Rogers, as well as providing other options pertaining to Emelianenko. As a result, Strikeforce agreed to release Brett Rogers to fight Emelianenko in the Affliction: Trilogy event. In addition, Emelianenko informed Affliction he was willing to fight several others, including the undefeated Bobby Lashley.

49. Yet, unbeknownst to M-1 and Emelianenko, Affliction was, at this very same time, also pursuing a contrary purpose by diligently working to repair its relationship with the UFC. Affliction — speaking out both sides of its mouth — was actively involved in discussions with the UFC regarding a renewed sponsorship deal between Affliction and the UFC at the same time Affliction purportedly was negotiating to obtain a replacement fighter for Affliction: Trilogy. Of course, the resurrection of a sponsorship agreement between the UFC and Affliction would require Affliction to depart the MMA event promoting business and therefore breach its agreements with M-1 and Emelianenko.

50. And this is exactly what Affliction did. On July 24, 2009, M-1’s corporate legal counsel, Steven Bash, sat inside Affliction’s offices awaiting completion of the meeting at which he believed Affliction was making a final decision regarding who would fight Emelianenko in the Affliction: Trilogy event. Much to Mr. Bash’s surprise, Affliction’s principals were not meeting in regard to finding a replacement Affliction: Trilogy fighter. They were meeting with the UFC to finalize their own sponsorship deal.

51. Emelianenko and M-1, at all relevant times, believed Affliction was acting in good faith and working to sign either Vitor Belfort or Brett Rogers. Yet, as of at least July 22, 2009, Affliction was conducting negotiations with the UFC which, as a practical matter, would preclude Affliction: Trilogy from materializing. Rather than informing M-1 and Emelianenko it intended to cancel Affliction: Trilogy and breach the Fight Agreement and Consulting Agreement if it could repair its relationship with the UFC, Affliction withheld this information and continued its self-serving negotiations with the UFC until July 24, 2009, at which time Emelianenko and a party of thirty (30) already had boarded a flight from Russia to Los Angeles.

52. Affliction announced the cancellation of Affliction: Trilogy on July 24, 2009, while Emelianenko was in flight to the United States. Emelianenko did not learn of the cancellation until Mr. Bash providied this information upon Emelianenko’s arrival in Los Angeles. Shortly thereafter, Affliction announced its reunion with the UFC and its departure from MMA event promotions.

53. The reasons Affliction asserted for cancelling Affliction: Trilogy — ranging from not having time to find a suitable fighter to not having sufficient time to promote the event — were pretext. Affliction and M-1 negotiated the release of Brett Rogers just one day before Affliction announced the cancellation of Affliction: Trilogy and at the same time it made a decision to align itself with the UFC. Plaintiffs therefore allege on the basis of currently known information and belief Affliction was simultaneously pursuing two manifestly incompatible options, a sponsorship deal with the UFC and a suitable fighter to allow Affliction: Trilogy to go forward, because it wanted to keep all options open to Affliction. Plaintiff is informed, believes, and based thereon alleges Affliction intended to sign Brett Rogers to fight in Affliction: Trilogy and intended to go forward with the event if the UFC deal failed, but intended to cancel Affliction: Trilogy if the UFC deal closed.

54. Brett Rogers was ready, willing, and able to fight Emelianenko in Affliction: Trilogy, but instead of honoring its promises to Emelianenko and M-1 by signing Rogers, Affliction elected to serve its own financial interests at the expense of its partners. After conducting discovery regarding the events leading to the Affliction: Trilogy cancellation and determining what discussions and agreements took place between Affliction and the UFC, and when these discussions took place, Plaintiffs will amend this Complaint to add additional allegations, causes of action, and parties as supported by the facts discovered.

FIRST CAUSE OF ACTION

Breach of Fight Agreement
By Emelianenko and M-1 against Affliction Entertainment, LLC and Does 1-15

55. Plaintiffs refer to and incorporate herein by reference the allegations of each and every paragraph herein.

56. For valuable consideration, Defendants entered into a Fight Agreement with Emelianenko by which Defendants agreed, inter alia, to co-promote a minimum of three (3) bouts; to use commercially reasonable best efforts to arrange three (3) bouts and to provide Emelianenko with an opponent for the bouts; to pay Emelianenko the specified amount per bout; and to pay certain travel accomodation expenses.

57. As stated above, Emelianenko assigned all international promotional rights provided under the Fight Agreement and the modified Fight Agreement to M-1 and Affliction was at all times aware of the assignment and the fact M-1 was exploiting international promotional rights.

58. Defendants further entered into an agreement with Plaintiffs to modify Paragraphs 6, 7, and 11 of the Fight Agreement in order to release all international promotional rights (outside the United States) reserved under the Fight Agreement and to grant these rights to Plaintiffs. Defendants waived any right to require written modification and are estopped from requiring same or disputing modification, and no additional consideration for the modification is required, for the reasons stated within the General Allegations.

59. Plaintiffs performed all conditions and requirements under the Fight Agreement, except those excused as a matter of law.

60. Defendants breached the Fight Agreement by failing to complete the third bout under the Fight Agreement and by failing to pay bout fees and travel and accomodation expenses required under the Fight Agreement.

61. At the time the parties entered into the Fight Agreement, Defendants knew and could foresee their failure to complete three (3) bouts as required by the agreement would cause Emelianenko damages including but not limited to the direct loss of benefits providied under the Fight Agreement.

62. Defendants further knew and could foresee at the time they enterted into the Fight Agreement, and at the time they agreed to the modification of same, their failure to complete bouts required by the Fight Agreement would cause Plaintiffs the loss of endorsements and other revenue they expected to receive in connection with the international broadcast of each bout, particularly the third bout.

63. As a result of the Defendants’ breaches, Plaintiffs have been damaged in an amount, to be proven according to proof at the time of trial, and no less than $10 million.

SECOND CAUSE OF ACTION

Breach of the Implied Covenant of Good Faith and Fair Dealing Fight Agreement

By Emelianenko and M-1 against Affliction Entertainment, LLC and Does 1-15

64. Plaintiffs refer to and incorporate herein by reference the allegations of each and every paragraph herein.

65. For valuable consideration, Defendants entered into the Fight Agreement with Emelianenko by which Defendants agreed, inter alia, to co-promote a minimum of three (3) bouts; to use commercially reasonable best efforts to arrange Bouts and provide Fighter with an opponent for the Bouts; to pay Emelianenko a certain fee per bout; and to pay certain travel and accomodation expenses.

66. As stated above, Emelianenko assigned all international promotional rights provided under the Fight Agreement and the modified Fight Agreement to M-1 and Affliction was at all times aware of the assignment and the fact M-1 was exploiting international promotional rights.

67. Defendants further entered into an agreement with Plaintiffs to modify Paragraphs 6, 7, and 11 of the Fight Agreement in order to release all international promotional rights (outside the United States) reserved under the Fight Agreement and to grant these rights to Plaintiffs. Defendants waived any right to require written modification and are estopped from requiring same or disputing modification, and no additional consideration for the modification is required, for the reasons stated within the General Allegations.

68. Plaintiffs performed all conditions and requirements under the Services Agreement, except those excused as a matter of law.

69. Defendants had a duty imposed by law not to act in a manner precluding Plaintiffs from obtaining the benefits or objectives of the Fight Agreement. Defendants’ duty requires Defendants to not unjustifiably hinder Plaintiffs’ ability to perform under the contract and to not take advantage of the failure of a condition precedent when Defendants have themselves frustrated performance or occurrence of that condition.

70. Defendants have breached the duty of good faith and fair dealing owed by frustrating and precluding the occurrence of the third bout and specifically by: (a) failing to sign Brett Rogers or to use commercially reasonable best efforts to procure one of several other fighters Emelianenko identified as suitable to fight in the Trilogy event; (b) canceling Trilogy despite suitable fighters being ready, willing, and able to fight Emelianenko in the Trilogy event; and (c) failing to complete a third event pursuant to the Fight Agreement, either by postponing and completing Trilogy or by promoting a third event.

71. At the time the parties entered into the Fight Agreement, Defendants knew and could foresee their failure to complete three (3) bouts as required by the agreement would cause Emelianenko damages including but not limited to the direct loss of benefits provided under the Fight Agreement.

72. Defendants further knew and could foresee at the time they entered into the Fight Agreement, and at the time they agreed to the modification of same, their failure to complete bouts required by the Fight Agreement would cause Plaintiffs the loss of endorsements and other revenue they expected to receive in connection with the international broadcast of each bout, particularly the third bout, and also expenses they would incur in connection with international broadcasts and promotion.

73. As a result of these breaches, Plaintiffs have been damaged in an amount, to be proven according to proof at the time of trial, and no less than $10 million.

THIRD CAUSE OF ACTION

Breach of Consulting Agreement

By M-1 against Affliction Entertainment, LLC and Does 1-15

74. Plaintiffs refer to and incorporate herein by reference the allegations of each and every paragrpah herein.

75. For valuable consideration, Defendants entered into a Consulting Agreement with M-1 by which Defendants agreed, inter alia: (a) to pay M-1 a specified fee in an amount to be proven at trial no latter than forty-eight (48) hours prior to the third bout to be completed under the Consulting Agreement; (b)to provide M-1 promotional value, including articles in event programs, incorporation of the M-1 logo in Afflicton advertising, logo recognition with advertising in connection with each of the three (3) bouts, to promote M-1 events through video announcements at the bouts, and to create and sell posters co-branded with the M-1 logo; and (c) to pay all of M-1’s costs and expenses in connection with the Consulting Agreement and incurred in the performance of the Consulting Agreement.

76. The Consulting Agreement incorporates and refers to the Fight Agreement requiring Emelianenko’s participation in a minimum of three (3) bouts.

77. M-1 performed all conditions and requirements under the Consulting Agreement, except those excused as a matter of law.

78. Defendants had a duty imposed by law not to act in a manner precluding M-1 from obtaining the benefits or objectives of the Consulting Agreement. Defendants’ duty requires Defendants to not unjustifiably hinder M-1 ability to perform under the contract and to not take advantage of the failure of a condition precedent when Defendants have themselves frustrated performance or occurrence of that condition.

79. Defendants breached the Consulting Agreement by failing to pay M-1 the specified fee forty-eight (48) hours prior to the third bout required under the Consulting Agreement and by failing to pay M-1’s expenses incurred in its performance of the Consulting Agreement.

80. As a result of the Defendants’ breaches, M-1 has been damaged in an amount, to be proven according to proof at the time of trial, and no less than $2 million.

FOURTH CAUSE OF ACTION

Breach of the Implied Covenant of Good Faith and Fair Dealing — Consulting Agreement
By M-1 against Affliction Entertainment, LLC and Does 1-15

81. Plaintiffs refer to and incorporate herein by reference the allegations of each and every paragraph herein.

82. For valuable consideration, Defendants entered into a Consulting Agreement with M-1 by which Defendants agreed, inter alia: (a) to pay M-1 a specified fee no later than forty-eight (48) hours prior to the third bout to be completed under the Consulting Agreement; (b) to provide M-1 promotional value, including articles in event programs, incorporation of the M-1 logo in Affliction advertising, logo recognition with advertising in connection with each of the three (3) bouts, to promote M-1 events through video announcements at the bouts, and to create and sell posters co-branded with the M-1 logo; and (c) to pay all of M-1’s costs and expenses in connection with the Consulting Agreement and incurred in the performance of the Consulting Agreement.

83. M-1 performed all conditions and requirements under the Consulting Agreement, except those excused as a matter of law.

84. Defendants have breached the duty of good faith and fair dealing owed to M-1 by frustrating and precluding the occurrence of the third bout and specifically by: (a) failing to sign Brett Rogers or to use commercially reasonable best efforts to procure one of several other fighters Emelianenko identified as suitable to fight in the Trilogy event; (b) canceling Trilogy despite suitable fighters being ready, willing, and able to fight Emelianenko in the Trilogy event; and (c) failing to complete a third event pursuant to the Fight Agreement, either by postponing and completing Trilogy or by promoting a third event.

85. As a result of the Defendants’ breaches, M-1 has been damaged in an amount, to be proven according to proof at the time of trial, and no less than $2 million.

FIFTH CAUSE OF ACTION

Breach of Letter Agreement
By M-1 against Affliction Clothing and Does 1-15

86. Plaintiffs refer to and incorporate herin by reference the allegations of each and every paragraph herein.

87. For valuable consideration, Defendants entered into a Consulting Agreement with M-1 by which Defendants agreed, inter alia, to pay M-1 a specified fee. Per Section 4 of the Letter of Agreement, Defendants agreed to pay the first installment by January 31, 2009, and the second installment by July 31, 2009.

88. M-1 has performed all conditions and requirements under the Consulting Agreement, except those excused as a matter of law.

89. Defendants breached the Letter Agreement by failing to pay M-1 the second installment, subject to confidentiality restrictions, in an amount to be proven at trial.

90. As a result of Defendants’ breach, M-1 has been damaged in an amount to be established according to proof at the time of trial and no less than $500,000.

SIXTH CAUSE OF ACTION
Declaratory Relief
By Emelianenko against Affliction and Does 1-10

91. Plaintiffs refer to and incorporate herein by reference the allegations of each and every paragraph herein.

92. An actual controversy has arisen and now exists between Emelianenko and Defendants concerning their respective rights and duties under the Fight Agreement and as to legal consequences resulting from facts alleged in preceding paragraphs. Emelianenko contends Defendants breached the Fight Agreement, and are liable thereunder, but nonetheless that Emelianenko is released from any further obligations under the Fight Agreement in light of Defendants’ breach. Emelianenko is informed, believes, and based thereon alleges Defendants dispute this contention.

93. Emelianenko desires a judicial determination of his rights and duties, and a declaration as to the rights and duties arising out of the Fight Agreement, including interpreting the validity of the agreements and the obligations contained therein.

94. A judicial declaration is necessary and appropriate at this time under the circumstances so Emelianenko may ascertain his rights and duties as stated above.

SIXTH CAUSE OF ACTION

Declaratory Relief
By M-1 against Affliction, Affliction Clothing, and Does 1-10

95. Plaintiffs refer to and incorporate herein by reference the allegations of each and every paragraph herein.

96. An actual controversy has arisen and now exists between M-1 and Defendants concerning their respective rights and duties under the Consulting Agreement and Letter Agreements and as to legal consequences resulting from facts alleged in preceding paragraphs. M-1 contends Defendants breached the Consulting Agreement and Letter Agreement, and are liable thereunder, but nonetheless that M-1 is released from any further obligations under the Consulting Agreement and Letter Agreement in light of Defendants’ breach. M-1 is informed, believes, and based thereon alleges Defendants dispute this contention.

97. M-1 desires a judicial determination of his rights and duties, and a declaration as to the rights and duties arising out of the Consulting Agreement and Letter Agreement, including interpreting the validity of the agreements and the obligations contained therein.

98. A judicial declaration is necessary and appropriate at this time under the circumstances so M-1 may ascertain its rights and duties as stated above.

PRAYER

based on the foregoing, Plaintiffs pray for the following judgment and relief:

a) Compensatory damages;
b) Costs of suit herein incurred on all causes of action;
c) Attorneys’ fees where and as allowed by law;
g) Interest at the highest legal rate where and as allowed by law; and
h) Such other and further relief as the Court may deem proper on all causes of action.

DATED: October 28, 2009

HINES SMITH CARDER LEASURE DINCEL

By: Marc S. Hines, Michelle L. Carder, Christine M. Emanuelson, Attorneys for Plaintiffs Fedor Emelianenko and M-1 Nederland b.v.

DEMAND FOR A JURY TRIAL

Plaintiffs demand a trial by jury.

DATED: October 28, 2009

HINES SMITH CARDER LEASURE DINCEL

By: Marc S. Hines, Michelle L. Carder, Christine M. Emanuelson, Attorneys for Plaintiffs Fedor Emelianenko and M-1 Nederland b.v.

Topics: Affliction, All Topics, M-1, Media, MMA, UFC, Zach Arnold | 51 Comments » | Permalink | Trackback |

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