clock menu more-arrow no yes

Filed under:

UFC loses two motions in antitrust lawsuit, full discovery to begin

New, 101 comments

It’s been quite an eventful week in the antitrust lawsuit against the UFC. The company lost two key motions and thus begins the 16-month process of fact and expert discovery. Paul Gift has the details.

Alex Trautwig/Getty Images

The group of 11 current and former fighters suing the UFC for antitrust violations and anticompetitive business conduct cleared a major hurdle this past week. Last Friday, Nevada District Court Judge Richard Boulware denied the UFC's motion to dismiss in a surprise bench ruling. I was in attendance and, while the quick ruling was unexpected, the outcome wasn't, as it was clear by the end of the hearing that the UFC had no chance of winning.

In the meantime, the fighters' leverage got an additional bump yesterday when Bloody Elbow's John Nash broke the news that Magistrate Judge Peggy Leen ruled the UFC could not prevent plaintiffs attorney Rob Maysey from viewing its most highly confidential and sensitive business and financial information. In addition to being an attorney of record in this case, Maysey is the founder of the Mixed Martial Arts Fighters Association (MMAFA).

The UFC tried to exclude Mr. Maysey on the grounds that he's a competitor (or, at minimum, is adverse to the UFC) and "discovery would become a back door" for him to gain access to highly confidential information. The fighters argued that Mr. Maysey is not a member of the MMAFA, nor is he a competitor. According to the fighters, "...advocacy on behalf of a fighters' organization adverse to an employer is not the same as competition against that employer in the marketplace." The fighters won the argument. I didn't attend the hearing and without an official written ruling, we don't yet know the exact reason for their victory.

John Nash was able to obtain a brief statement from Mr. Maysey: "Zuffa's attempt to deny plaintiffs and plaintiffs' counsel of choice full participation in this case was denied. I look forward to doing my job and we will continue to vigorously advocate for our clients. With that goal in mind we have assembled a team of amongst the best attorneys in the United States."

What's next?

Expect fact discovery to ramp up immediately with expert discovery to follow. Fact discovery is a 12-month period of time in which both sides will respond to interrogatory questions, documents will be produced, and depositions will be taken.

Since antitrust cases are a merger of law and economics, expert discovery is a critical component where each side's economic expert witnesses will write reports, oppositions, and rebuttals, and then be deposed under oath. Having a monopoly is not illegal in the United States, so expert discovery is needed to determine if the three key factors for antitrust liability all hold true: (1) Does the UFC have monopoly power? (2) Did the UFC acquire or maintain such power through exclusionary conduct? (3) Did the UFC cause antitrust injury?

According to a previously filed case management statement, the entire process should take around 16 months. Dana White and Lorenzo Fertitta will certainly be deposed and have to truthfully answer questions under oath. As previously reported by Bloody Elbow, there's an extensive initial list of UFC employees and other MMA figures who could easily find themselves in a deposition room in the next 12 months.

UFC Employees

Dana White, Lorenzo J. Fertitta, Frank J. Fertitta, Peter Dropick, Jackie Poriadjian, Craig Borsari, Ike Lawrence Epstein, Kirk Hendrick, Ken Berger, John Mulkey, Joseph Silva, Sean Shelby, Edward Muncey, Marc Ratner, Michael Mersch, Tracy Long, Sonja McKinney, Reed Harris, David Safer, Mike Mossholder, Link McCluan, Shanda Maloney, Michael Pine, Steven Gray, Ryan Richeal, Doug Hartling, Marshall Zelaznik, Joe Carr, Garry Cook, David Allen, Michael Britt

Other Key Players

Scott Coker, Rich Chou, Bjorn Rebney, Frank Shamrock, Mike Afromowitz, Fedor Emelianenko, Oscar De la Hoya, Pride executives, Randy Couture, Mark Cuban, Ed Soares, Jeff Aronson, Lex McMahon, Shannon Knapp, Julie Kedzie, Ray Sefo, Ali Abdel-Aziz, Kevin Kay, Ben Askren, Bob Arum, Lou Dibella, Ken Hershman, Bob Meyrowitz, Monte Cox, Rose Gracie, Terry Trebilcock, Vadim Finkelchtein, Turi Altavilla and more.

We've also learned more about the discovery process in the past week. The parties are still arguing over how broad the UFC's document production should be. It was originally slated to take place in two phases and is unknown at the moment if the phases will be consolidated since the motion to dismiss has been denied. Regardless of the phasing, here's what the UFC has committed to so far.

Organizational Charts

The UFC has produced two 2015 organizational charts. Plaintiffs were not satisfied with this and have proposed that the UFC identify all individuals "who may have potentially relevant information." Upon review of this information, plaintiffs and the UFC will negotiate "...to identify an agreed number of custodians whose documents and information should be searched for production."

In other words, whose documents and e-mails should be searched? We know at least nine people are targeted at the moment, and this number could expand.

"Zuffa has proposed to Plaintiffs a list of nine custodians, broken down by topic, who Zuffa believes are most knowledgeable about the subject matter of Plaintiffs' Complaints. These custodians comprise the three primary decision-makers at the company, the three other individuals primarily responsible for fighter relations, as well as the group leaders for agreements with sponsors, venues and merchandizers." (Emphasis added)

Financial Documents

The UFC has agreed to provide "detailed financial documents such as consolidated financial statements, event-by-event financial analyses, where available, showing gate receipts, Pay-Per-View revenues, and sponsorship and merchandise revenues and documents showing revenue from other sources that are not contained in the event-by event analyses. Zuffa also proposed to provide financial data sufficient to show each athlete's event and non-event related compensation in Plaintiffs' requested format, where possible, on an event-by-event and fighter-by-fighter basis."

Fighter Contract Files

"Zuffa proposed to provide to Plaintiffs copies of the hard copy Fighter Files for the named Plaintiffs and an agreed upon number of additional fighters selected by Plaintiffs. These hard copy files contain not only the agreements entered into between Zuffa and the fighter but, where applicable, also correspondence related to the contracts, including negotiations, and correspondence regarding extensions and suspensions and related information that Plaintiffs can use to test their allegation that the contracts lock fighters up "in perpetuity." These files, which include contracts and other information for, at minimum, hundreds of athletes, are extraordinarily voluminous and, given the communications regarding negotiations, contracts, and extensions, contain materials that may be privileged and will require close privilege review. Moreover, because these files contain personally identifiable information ("PII"), such as Social Security numbers, the files will need to be redacted to protect the athletes' PII. Given those considerations, which will require extensive review of the files prior to production, Zuffa has agreed to produce a representative subset of these files to Plaintiffs in Phase 1. For these and the other files for which Zuffa has offered to provide representative samples, Zuffa has offered to discuss an appropriate sampling method with Plaintiffs."

Venue Contract Files

"Zuffa has proposed to provide Plaintiffs with the contract files for an agreed-upon number of venues selected by the Plaintiffs. These contract files contain not only the agreement between Zuffa and the venue but may also contain additional information related to the contract, such as correspondence. Given the potential for privileged information in these files, which will require extensive review prior to production, Zuffa has proposed in Phase 1 to provide Plaintiffs with a representative sample of these files."

Sponsor Contract Files

"Zuffa has proposed in Phase 1 to provide Plaintiffs with the contract files for an agreed-upon number of sponsors selected by Plaintiffs. Like the venue files, these files may also contain additional information such as correspondence related to the agreement. Given the potential for privileged information in these files, which will require extensive review prior to production, Zuffa has proposed in Phase 1 to provide Plaintiffs with a representative sample of these files."

Merchandise Contract Files

"Zuffa has proposed in Phase 1 to provide Plaintiffs with a representative sample of contract files for an agreed-upon number of third-party merchandisers selected by Plaintiffs. These files are not limited to the agreements but may contain additional information related to the agreement, such as correspondence. Given the potential for privileged information in these files, which will require extensive review prior to production, Zuffa has proposed in Phase 1 to provide Plaintiffs with a representative sample of these files."

List of Television Contracts

"In Phase 1, Zuffa will provide a list of contracts it has with television distribution outlets. Zuffa will then meet and confer with Plaintiffs regarding a plan for which documents should be produced."

Third Party Analyst/Consultant Reports

"Zuffa has proposed to search for and produce third-party analyst or consultant reports responsive to this Request found in Zuffa's financial department."

FTC Strikeforce Documents

"Zuffa has proposed to produce in Phase 1 all documents produced to the Federal Trade Commission in response to the Commission's closed investigation of Zuffa's acquisition of the Strikeforce promotion, the only acquisition in the Complaints that arguably falls within the statute of limitations."

List of Litigations/Arbitrations

"Zuffa has proposed to initially provide Plaintiffs with a list of litigations and arbitrations with athletes and their representatives related to Zuffa's contracts, at which point the parties can meet and confer to refine the set of documents responsive to these Requests."

So there you have it. The UFC's ready to hand over an "extraordinarily voluminous" amount of confidential business information to the fighters, but don't expect to see any of it as a member of the general public. We'll only get to see this information if it's somehow leaked or possibly as an exhibit in a public filing or at trial.

The events of this past week have been an unwelcome development for the UFC. The case against it is progressing, Mr. Maysey has access to everything, and major antitrust lawsuits are extremely expensive. On the flip side, it was two much-needed victories for the fighters. And for those who've wanted a thorough investigation into the UFC's business practices, you've got that coming in spades.

The UFC still has two more opportunities to end the lawsuit outright before the case progresses to the trial phase: Class certification and the UFC's inevitable motion for summary judgment. Put another way, the fighters still have two more major hurdles to clear before things get really interesting. As a class-action lawsuit, if the class is not certified, the case is likely dead in the water. Summary judgment is where the UFC will ask the judge to rule that no reasonable juror would ever side with the fighters so there's no need for a trial. As the fighters clear each of these two remaining hurdles, the pressure will intensify on the UFC to settle.

So sit back, relax, and enjoy the ride. We're just getting started folks.

Bloody Elbow has led the coverage of this case and will continue to keep our readers updated as events unfold.

Paul is Bloody Elbow's analytics writer and former provider of expert witness support in antitrust cases. Follow him @MMAanalytics.