A Look at Zuffa's Legal Victory Over Ken Shamrock

Bloody Elbow obtained a copy of the decision in Ken Shamrock Inc. vs. Zuffa, and it is a very important decision for all fighters and their attorneys to read.  It is the first time (to my knowledge) a Nevada court has issued a ruling on a dispute arising out of the language in the UFC promotional agreement, and the court gave the UFC everything it wanted and more.  

The Facts:

 On July 8, 2006 Ken Shamrock and Tito Ortiz had a rematch that ended early in the first round (notably, the decision confirms the event did 775,000 buys, a fairly decisive blow to boxing fans that claim UFC numbers are made up).  A number of fans were upset with the stoppage, and Dana White started speaking publicly about doing a third fight.  Shortly after those statements, Shamrock's agent (Donohoo) contacted the UFC about negotiating a new deal.  Dana White met with Ken Shamrock in Los Angeles, and negotiated a deal that would include a third fight on free TV.  Both a one-fight and a two-fight deal were negotiated.  Eventually the parties settled on a two-fight deal, with the following recital in the contract:

G.  Fighter has determined the first Bout will be his final, after which he will retire, but has agreed to one additional Bout with Zuffa in the event Fighter should elect not to retire, or to come out of retirement to fight again.

The contract also had the following term that is standard in all Zuffa promotional agreements:

10.3:  If at any time during the Term, Fighter decides to retire from mixed martial arts or other professional fighting competition, then Zuffa may, at its election, (i) suspend the Term for the period of such retirement; (ii) declare that Zuffa has satisfied its obligation to promote all future bouts to be promoted by Zuffa herunder, without any compensation due to Fighter therefore, or (iii) elect to provide fighter with a note of acceleration.

At the meeting in Los Angeles, Dana White gave Ken Shamrock a check for $1,000,000, presumably for the third fight.  According to the decision, the agreement would pay Shamrock a lower amount plus a percent of the PPV if Shamrock had another UFC fight after the third Ortiz fight.

As we all know, Ortiz beat Shamrock again, and Shamrock announced his retirement in the Octagon.  Given that announcement, Zuffa elected to suspend his contract under the clause above without notifying Shamrock of its election.  Nine months later, in June 2007, Shamrock's agent (Mr. Donohoo) contacted the UFC about Ken Shamrock's desire to compete again.  The UFC responded that they considered Shamrock retired, but if Shamrock sent written notification of his desire to fight again, Zuffa would be willing to terminate the agreement.  Donohoo claimed that because he was never informed the contract was suspended, it never was.  

Dana White contacted Donohoo 2 weeks later and told him the UFC was terminating Shamrock's contract.  Donohoo expressed his disagreement but acknowledged there wasn't much he could do about it, and sent a letter confirming the termination.  He sent that letter, which ended up being a big mistake.  Four months later, Donohoo contacted the UFC again with a letter noting that Zuffa breached the agreement.  He demanded liquidated damages.  Zuffa denied him these damages, and Shamrock filed a claim for breach of contract.

The Law:

The court gave the UFC virtually everything it wanted.  On the issue of whether Zuffa breached the contract by refusing to promote a second Ken Shamrock fight under the deal, the court ruled that there was no breach because the language quoted above says that Ken Shamrock agreed to one additional Bout with Zuffa, but makes no mention of Zuffa agreeing to promote an additional Shamrock bout.  In other words, no language in the contract suggested the promise was mutual, or that Zuffa was required to provide and promote a second fight for Shamrock.  The court interpreted the clause as an option for Zuffa.

The next issue is whether the remedies listed above in section 10.3 of the Zuffa promotional contract are limited.  The language uses the term "or," and Shamrock argued that the "or" language means that Zuffa has just one of three listed choices when a fighter retires: suspend the contract, terminate the fighter, or accelerate the contract.  Zuffa responded that it could exercise any of the options at any time during or after the retirement.  

The court sided with Zuffa, and noted precedents suggesting the conjunctions "or" and "and" may be used interchangeably when necessary to properly effect the parties' intentions.  Ultimately, the court ruled that Zuffa has the right to use all 3 of the listed remedies incase a fighter retires rather than just picking one.

The court also noted that Zuffa does not have to suspend a contract during the retirement, because the language gives Zuffa the right to suspend at any point in the term for the period of such retirement.  In other words, if a fighter retires for 6 months and then comes back, Zuffa has the right at any point going forward to elect to suspend the contract for those 6 months, even if it did not make that election during the period of retirement.

Finally, the court noted that even if there was a breach, Shamrock waived his claim by not failing to provide notice of a breach and an opportunity to cure to Zuffa under the promotional agreement.  By accepting the termination from Dana White, Shamrock's agent waived the right to bring a claim at all.

There are two interesting points to consider:

First, Ken Shamrock and the UFC still have merchandising agreements together.  They are still doing business, which complicates the issue of attorney's fees.  The only way to get attorney's fees is to get a judgment for those fees, and I expect Zuffa to get that judgment, but it's not as if Shamrock has the money to pay those fees, which are probably in the $300,000-$500,000 range.  It's possible they will get the judgment and then hold it over Shamrock's head in the course of further business with him.  Such a judgment lasts a long time and is renewable; Zuffa can hold this over his head for years, and perhaps even draw down money from his merchandising agreements to pay it off.

Second, Donohoo contacted the UFC about Ken Shamrock's desire to return to the UFC on June 11, 2007.  On June 18, 2007, Loretta Hunt reported at the Fight Network that Ken Shamrock would fight Michael Bisping at UFC 75.  The reported bout never came together.  Dana White called Donohoo one week later on June 25 to confirm Shamrock's contract had been terminated.

The decision states that Shamrock's deal would pay him a low base for a hypothetical second fight along with a percentage of PPV receipts.  The reported fight with Bisping would have taken place at UFC 75, which was on Spike TV, which means that Shamrock would have been paid a much lower amount for that fight than he was probably looking for.