Arbitration clauses in UFC contracts
How does the UFC limit future court challenges against its active business practices? Arbitration.
Arbitration of big business disputes isn’t as warm and fuzzy as The Peoples Court. It’s not as cheap as regular litigation for defendants, either. You’re at the mercy of an arbitrator, likely a retired judge, whose final award cannot be challenged in a state court unless you can prove fraud or massive error in enforcement of applicable laws.
Arbitration isn’t state or federal court. It’s a different animal.
Arbitration clauses in UFC fighter contracts, using Nevada state choice of law and forum, is a predictable response in addressing potential damage from the antitrust lawsuits in Judge Boulware’s Las Vegas Federal courtroom. If you can’t win in court, then change the battlefield.
Limiting prospective damage from an adverse settlement or trial ruling
The fallout from the class action certification by Judge Boulware was razor-sharp.
UFC attorneys understand the potential for a large settlement or trial loss. Going to trial presents the risk of a jury maximizing damages awarded to the plaintiffs. They can’t control what may or may not happen.
The bigger question is what happens after the conclusion of the antitrust lawsuit(s).
It’s a very difficult question to answer because there are no good answers.
‘Please, Judge Boulware, kill any and all arbitration clauses in UFC contracts’
John Nash recently interviewed Rob Maysey, one of the attorneys representing the plaintiffs suing UFC in Federal Court. It’s an 80-minute interview that I would highly encourage everyone to listen to.
For the first time in a public interview, Mr. Maysey was put on the spot about how to address arbitration clauses in newer UFC fighter agreements. UFC started inserting both arbitration and class action waivers in 2019.
Call it smart business. Call it poison pills. Whatever you want to call it, you can also call it a landmine that Mr. Maysey is well aware of and conflicted in addressing head-on.
“Our two main plantiffs that we filed the Johnson case with, Kajan Johnson and CB Dollaway, their contracts came previously before changes. They didn’t fight after, so we’re confident we still would have a class going forward.
“Now we, I believe, are going to have to litigate the enforceability of those waivers and those arbitration provisions because they were inserted at a time when there was pending antitrust suits alleging monopsony power. In fact, we’ve not only alleged it, I believe we’ve established they’re exercising monopsony power and to just jam these completely one-sided clauses into fighters’ contracts during a time when there’s already the pendency of a lawsuit that addresses exactly these practices seems to us to be grossly unfair. To your point, if they did establish those clauses sort of blanket-wide, class wide starting in 2019… it appears to me our class is going to be small. It’s not going to be nonexistent because our two named reps don’t have those clauses in their deals but if 85% of the class does, I mean obviously that impacts the feasibility of such a suit and I believe we’re going to have to litigate the enforceability of those clauses.”
Translation: Please, Judge Boulware, kill any and all arbitration clauses in UFC contracts under the perspective of antitrust violations.
Why arbitration is the be-all, end-all game for fighter protections
As long as arbitration is a viable option for UFC in future fighter contracts, Endeavor can limit the scope from the fallout of antitrust litigation. More importantly, arbitration would also mitigate fallout from any sort of future legislative amendment to the Ali Act.
What’s the value of adding a Private Right of Action for MMA fighters in the Ali Act if UFC is able to kick all disputes out of court and into hometown arbitration instead?
Amending the Ali Act to give MMA fighters the right to sue is the proper thing to do but will it end up being an effective tool if every promoter utilizes arbitration clauses?
In our Bloody Elbow Substack audio interview, Mr. Maysey directly blames former US President Donald Trump for spiking Congressional amendment of the Ali Act. That may or may not be true. What was true, however, is the fact that a key Trump appointee – Justice Brett Kavanaugh – helped turbo-charge enforcement of arbitration clauses in contracts with big businesses. UFC immediately took advantage of this development.
In 2019, Justice Kavanaugh and SCOTUS (Supreme Court) published a one-sided opinion regarding arbitration clauses in contracts. As long as the arbitration clauses are not unconscionable or unenforceable, arbitration can be the default venue for contractual disputes.
This SCOTUS ruling on the Federal Arbitration Act created intense state and Federal fallout. Nevada, which has robust arbitration structure under its Uniform Arbitration Act of 2000, responded to Justice Kavanaugh’s opinion by revisiting their “specific authorization” provision that was meant to eliminate ambiguity by both parties in an agreement in regards to a meeting of the minds for an arbitration clause. Ironically, the issue of “specific authorization” was raised by an appellate case at the Nevada Supreme Court involving the MMA World Series of Fighting. Remember them?
It’s up to Judge Boulware
Piercing arbitration clauses in contracts is difficult. As long as UFC can utilize arbitration, whatever measure of success produced from current antitrust litigation and future amendment of the Ali Act amendment is going to be tempered.
Realizing what a Pandora’s Box Justice Kavanaugh’s 2019 arbitration opinion opened, Justice Elena Kagan attempted to pare back arbitration clause supremacy in two separate 2022 SCOTUS opinions. If two parties agree to arbitration clauses in a contract but choose to sue in court, you can’t invoke arbitration after the fact. Her second opinion stated that just because a contract has an arbitration clause doesn’t mean that the parties in an agreement can ignore applicable state and Federal laws.
Despite the court’s attempt to mitigate Justice Kavanaugh’s 2019 opinion, there is a key and troubling question for the current Plaintiffs in the UFC antitrust lawsuit: how do you pierce arbitration clauses in UFC fighter contracts? Without major intervention from Judge Boulware, the plaintiffs are back to square one. To attack arbitration clauses, you have to either attack enforceability or argue unconscionability.
An arbitration clause is enforceable as long as both parties a) agree to arbitration, b) agree to waive their rights to sue in state court, and c) agree to a waiver of a jury trial. A clause is unenforceable if you can attack any of those elements.
An arbitration clause is unconscionable based on at least one of three elements: a) adhesiveness (a wide gap between the parties in bargaining power), b) the element of surprise, and c) signing an agreement under duress.
Ironically, a September 2022 bulletin by leading arbitration body JAMS (Judicial Arbitration and Mediation Services) and retired Judge Jackson Lucky articulated a road map on addressing unenforceability and unconscionability in agreements with arbitration clauses.
The two major problems in attacking UFC arbitration clauses?
First, contract law wildly varies from state to state. Nevada contract law is extremely friendly for businesses who utilize arbitration.
Second, most arbitrators are general jack-of-all-trades practitioners. You rarely find antitrust arbitration specialists.
Heck, you rarely find antitrust specialists in the Federal court system. That’s why the power of discovery and deposition makes the Federal court system an important counterbalance against big business. Arbitration is a whole different system with its own set of rules for discovery and timelines.
This is why the plaintiffs in the current antitrust litigation need Judge Boulware to strike down UFC arbitration clauses.
It’s up to Judge Boulware to determine the fate of how UFC conducts future business. Should he rule adversely against UFC utilizing arbitration clauses, expect that decision to immediate be petitioned to SCOTUS. Would the High Court have the fortitude to address the fruits of their prior handiwork?
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