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BANE'S LEGAL TAKE: An attorney's perspective on UFC class-action lawsuit, Bellator as "minor league", Rampage/Bellator split
Dec 29, 2014 - 10:55:32 AM BANE'S LEGAL TAKE: An attorney's perspective on UFC class-action lawsuit, Bellator as "minor league", Rampage/Bellator split

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By: Michael Bane, MMATorch Contributor

In this new regular feature on MMATorch, Chicago attorney Michael Bane will give his legal perspective on recent stories in the MMA world. In today's first take, he addresses the class action lawsuit filed against the UFC, Bellator as a "minor league," and Rampage Jackson's split from Bellator.


Scott Coker disagrees with UFC lawsuit's contention that Bellator is a minor league - - Bellator's Scott Coker says they'll be "right there" when it's time to have serious discussions with Brock Lesnar

Besides bravado and reputation, Coker actually has some very good reasons for going on the record for this. Bellator is backed by Viacom, a corporation that has significantly more value than the UFC. Coker recently stated that "There's not going to be a fighter on the planet we can't afford and have access to," when referring to courting Brock Lesnar if and when he decides to return to MMA.


Rampage Jackson releases statement regarding Bellator, cites multiple breaches of contract since Bjorn Rebney's removal - - Bellator's Scott Coker says lawyers handling Rampage Jackson situation, don't want them to comment right now

Rampage's release describes very interesting terms of contract. Assuming it is true, it essentially states any immaterial breaches (violation of contract terms that would not void the deal and release the parties) become material (thus voiding the deal) if Jackson puts Bellator on notice and the matter is not resolved in 45 days. It's not something I've regularly seen in contract negotiations, and I imagine if those really are the terms of the contract that Bellator's claim would be either they weren't put on notice or that the "disputes" that Rampage alleges to have were not the type that could trigger that clause.

All that said, five months of negotiations on an already existing deal is also a bit odd, as the terms to fight should have been pretty concretely laid out already. My guess is that Rampage ultimately became unhappy with the way he was being promoted or paid, and tried to renegotiate his deal by leveraging the threat to just not fight again for Bellator. When they didn't cave, and he still wanted to fight, he cited a provision in his contract and "terminated" the deal. Bellator is going to contend that Rampage had no grounds to terminate and that provision doesn't apply, thus restricting Rampage's fighting employment only to Bellator.


Dennis Hallman and Javier Vasquez named in new suit filed against UFC, more reportedly could be on the way

As we've seen, there have been at least three such filings so far, and there may be a few more before all the dust settles. At some point these suits will be combined into one larger suit encompassing all the plaintiffs with similar claims. In addition to some interesting points about the UFC's bad behavior, some other interesting (alleged) facts came to light that the public may or may not have been aware of.

NOTE: This column was written with only a review of the Le/Fitch/Quarry lawsuit. The two newer ones may have different facts and/or allegations, but will probably be similar enough to be combined together.

The overriding main focus in the lawsuit is the allegation that the UFC has no real competition. Because of their alpha market position they have been able to drive out of - or significantly impair - their competitors to the point where their competitors have no impact on the MMA fighting market.

In reviewing the lawsuit, there are a couple of very interesting facts that are revealed right away. If you're a numbers guy, the UFC has an estimated value right now of roughly $2 billion dollars, and was purchased for only $2 million in 2001. It had an estimated revenue of approximately $483 million dollars in the fiscal year of October 2013 through September 2014. That revenue allegedly accounted for 90% of all revenue that generated by MMA.

One quite fascinating aspect of this particular antitrust lawsuit is that it was brought by the former employees of the company, and not by a competing business that has been harmed by the (alleged) monopoly that the UFC has become. The fighters' argument is that because of the monopoly and monopsony that the UFC has become, their pay has been artificially suppressed. Basically, the fighters are saying if the UFC didn't exist (or at least wasn't a monopoly), they would be making more money.

The lawsuit goes on to state that because of the UFC's market position, they are able to keep the cost of market entry too high for competitors wishing to promote MMA. This includes increasing the prices (essentially outbidding) by locking up sponsors, venues, and fighters to a point that start up MMA promotions cannot pay the cost of competing head to head with the UFC. Perhaps one of the ironic points made in the suit is that one of the costs that the UFC has increased in order to do so is the fighter's pay itself.

The suit cites a lot of bravado by both Dana White and Lorenzo Fertitta about being the only act in town and running other promotions out of business. Indeed, White himself has taken credit for the death of Affliction, Elite XC, and a couple other such promotions. Whether or not the UFC ran them out, or they were just poorly run businesses, is the real issue, but such statements will be used against the UFC in this suit, and won't sit particularly well with a jury if this indeed goes to trial.

It is important to note that much (and perhaps all) of the conduct related to the monopoly allegations aren't necessarily illegal. If viewed through the eyes of anything other than this lawsuit, they would just be things that businesses would do to try to protect their own interests and ultimately become profitable. That said, it is desirable to be successful, self-sustaining, and profitable in a capitalistic economy. It is not desirable (for everyone but the UFC) for a monopoly to exist, as the industry has no motivation to innovate or provide quality for the consumer, and price-fixing destroys the free market that is so central to capitalism in the United States.

One of the more damning aspects of the allegations in the suit is the "counter-programming" that the UFC (supposedly) intentionally engaged in. Counter-programming was described as holding and/or airing an MMA event at the same time one of the UFC's competitors was doing the same. Logically, if the UFC wanted to maximize their viewership, they would not do such a thing, as their viewership and attendance could only decrease, even if nominally, due to a similar event being held at the same time. The inferred motivation is that the UFC would be intentionally undertaking a damaging behavior to their own bottom line in order to inflict a more damaging wound on their competition. The UFC can absorb such losses far easier than their competition, due to their size and financial resources.

Many fans have often wondered how close to becoming a mainstream staple like the "big 4" (NFL, NBA, MLB, NHL) the sport of MMA is. The suit does compare MMA, and the UFC in particular, to those sports, at least as far as talent compensation goes. While the average "big 4" sport gives roughly 50% of all revenues to their athletes, the UFC clocks in at roughly 20%. Whether or not this comparison is apt is a point of debate, though. The UFC has a value of $2 billion dollars, or roughly half a billion less than the New York Yankees. Although the NFL is made up of 32 separate team entities, the combined value of those teams is roughly $45 billion dollars, with the Dallas Cowboys alone out-valuing the entire UFC organization.

A more relative comparison might be to that of other combat sports, such as boxing. Indeed, the suit does make the comparison. Like any lawsuit though, they cite the beneficial facts, while failing to mention those that argue against their position. The lawsuit compares the UFC fighter pay to that of Floyd Mayweather, Jr. and Manny Pacquiao, highly-compensated exceptions in their field, while failing to discuss the much larger pool of fighters that are paid orders-of-magnitude less. Regardless, this pay isn't particularly relevant to the monopoly arguments. Rather, it is more of a prejudicial allegation that makes the UFC look bad to a juror.

It is, however, relevant to what may end up being a separate lawsuit from the antitrust litigation altogether. The most troubling claims in this suit are the ones dealing with how the fighters are treated. In particular, the suit alleges that the UFC has used its dominant position to take unfair control of their employees' ancillary rights in perpetuity, i.e. forever. The UFC is essentially saying that they control the fighter's MMA identity forever, and the fighter cannot profit off of it, even after they cease to be an employee of the UFC. If this seems intuitively unfair, it's understandable. I suspect that this will ultimately be separated from the main antitrust portion of the lawsuit and become a different suit altogether.

The lawsuit itself gives some detrimental facts to the plaintiffs in their allegations. One of the statements made was that fighters had turned down higher paying jobs outside of the UFC. The reasoning was that by leaving the UFC, even for more money, they may ultimately hurt their ability to make money in the future due to supposed retaliation or blackballing by the UFC. Ultimately, the fact they could make more elsewhere hurts their argument that the UFC controls fighter salaries. The reason this was included is likely because it was going to come out anyway. By virtue of the plaintiff's stating it themselves, they potentially weaken the impact such a fact would have. They are able to get out in front of it, and put their own spin on the reasons that it was happening.

Far and away the most damaging thing to the monopoly allegations facing the UFC is the existence of Bellator. Bellator currently has the backing of Viacom, a company with tens of billions of dollars in resources. While the immediate suit has referred to all the UFC competitors as the "minor leagues," Scott Coker himself has gone on record stating that Bellator is not such a thing, and that they can financially be in play for whomever they want as far as fighting talent is concerned. Case in point: Gilbert Melendez was able to secure a satisfactory offer from Bellator that he was willing to leave the UFC for. While the UFC ultimately matched, the fact that Melendez was able to leverage a competitor's offer into higher pay may ultimately be enough to defeat the monopoly allegations altogether.

While the fighters are alleging their pay is hurt due to the UFC's competition not being able to fairly compete in the market, the fact that said competition may not think that could ultimately tip the scales in the UFC's favor. The alleged abusive treatment of their own employees, particularly as it relates to ancillary rights, is likely an entirely different issue. That may be one one which the plaintiffs ultimately prevail.

Michael Bane is an attorney and MMA enthusiast working out of Chicago, Illinois.