Reaction to UFC class-action lawsuit certification: What happened, and what’s next?

It finally happened.

More than eight years – 3,158 days to be exact – after a handful of former UFC fighters filed a class-action lawsuit against the UFC in California, a federal judge in Nevada has formally certified them as a class, clearing the way for a trial to decide whether the UFC conceived and carried out an illegal scheme to create a monopsony among fight promoters and lower the pay of its athletes.

This past Saturday, Judge Richard Boulware filed an 80-page ruling explaining his decision to certify the “bout” class of the lawsuit, which potentially includes over 1,200 fighters who fought in the UFC between December 16, 2010 and June 30, 2017.

What did the judge have to say about the UFC’s business practices? What does the decision tell the MMA world about the fighter’s chances in court? What happens next from here? MMA Fighting’s Steven Marrocco and Jed Meshew weigh in.

What did this past Wednesday’s ruling mean?

Meshew: Given that once upon a time I was a lawyer, I suppose I’ll kick things off, Steven.

This is big.

Like, really big. Arguably the biggest thing to happen in the sport since Royce Gracie invented grappling. This has a very real chance to change everything about the business.

For those who aren’t sadists and don’t want to read through the 80 pages of dense legal jargon, here’s the gist: the anti-trust lawsuit just cleared its biggest hurdle by certifying bout class, essentially green-lighting a lawsuit that would single-handedly ruin all of my WME-IMG stock if it goes to trial and the UFC loses. And Judge Boulware’s scathing condemnation of the UFC’s business practices (and at times its legal defenses to those practices) strongly suggests the UFC deserves to lose!

What does that mean exactly? For the moment, nothing. But soon, it means everything. We’ll get into some of the particulars in a moment, but big picture, we’re talking a billion dollars from the UFC to fighters, and the end of the UFC’s current contract model.

So like I said, this is big.

Marrocco: Eighty pages of legal jargon is nothing, Jed – try pulling up the case filings on the federal court docket. We’re talking about dozens upon dozens of filings over the course of nine years. Zuffa’s defense attorneys fought tooth and nail to get this thrown out of court, spending millions upon millions in legal fees, before it even sniffed class certification, so the fact that (finally) it has been certified should give you a sense of how strong the plaintiff’s arguments are, and how momentous this is for this business.

Truth is, this is an old issue applied to a new industry (or sub-industry). Multi-fight options, otherwise known as multi-fight deals that tie a fighter to a promotion for a certain period, were ruled anti-competitive by a federal judge in the 1950s, when the International Boxing Club wrapped up a bunch of champions and locked down Madison Square Garden to impede rivals (Boulware even tips his hat to the scandal in a footnote). Don King was a king of multi-fight options, wrapping up such a large number of champions that anti-trust concerns were the talk of boxing in the 80s and 90s. The argument was the same: is that fair to the fighters, and is that fair to other promoters? Is it ultimately fair to the fans?

For a long time, the UFC made it to where a fighter could, in effect, be kept under contract in perpetuity if certain conditions were in place. If they turned down fights, if they were injured, if they balked on a new contract, a four-fight deal could turn into a lifetime contract. That’s terrible for anyone in the work place, but it’s absolutely devastating to fighters with a limited window to maximize their value. It’s devastating for rival fight promoters who want to compete with Zuffa.

This was bound to go to court eventually.

So yes, there’s no other way to look at this other than it is very big. A lot of people doubted the strength of the fighters’ case. That’s no surprise given the UFC’s 10,000-pound gorilla status. There should be no further doubt, however, after this written ruling. The lawsuit already has changed the industry (see: Francis Ngannou and free agency). The question is how much more change is in store.

What did Judge Boulware’s opinion say about the UFC’s business practices?

Meshew: Slightly dated reference at this point, but do you remember all the interactions between King Joffrey and Tywin Lannister in Game of Thrones? That’s basically what happened here, only with Judge Boulware being substantially more direct about things than Tywin was. He doesn’t come out and tell the UFC directly that it’s stupid and cruel and screwed, but boy does he heavily imply it.

I don’t know how deep we want to dive here, given that the bulk of the decision is Boulware dissecting the UFC’s business practices and the arguments for and against their legality, but there are two lines that stuck out to me as the most salient.

1. “Defendants fail to establish that there is in fact a separate credible factor of ‘promoter acumen.’”

There’s more to this part of it, but in essence, Judge Boulware says that from all the evidence presented, the UFC’s considerable market dominance isn’t due to superior promotional skills, but that due to its use of anti-competitive tactics to consolidate and maintain power. In short, Boulware is calling the UFC a monopsony outright, which is the core point of the lawsuit.

2. “Indeed, Zuffa matchmakers admitted that they used such brutal coercive tactics.”

There’s a scene in the Big Short where Steve Carrell’s character is moralizing about fraud, and he says that we shouldn’t do fraud, not because it’s bad or mean, but simply because it doesn’t work. Eventually, the chickens come home to roost. And while Dana White and Joe Silva and the rest have all had a great big laugh about the way they ran (and still run) the UFC, things like Joe Silva explicitly stating in emails how he’s going to screw over fighters who don’t play ball, or Dana White making a tombstone with the various MMA promotions that the UFC has killed? Those things ultimately come back to haunt you.

There’s a reason adults in business don’t behave the way Dana White and company do, and it’s not because they’re all wonderful people. It’s because at some point, the bill comes due, and right now, it is damn near impossible for the UFC to get out of this particular framing. I don’t care if you got John Keker and the spirit of Johnnie Cochrane running the show, you’re not going to convince any rational human being that the UFC wasn’t directly using their market dominance in a way to adversely effect rival promotions and its own fighters when the President and the head matchmaker freely admitted it!

Marrocco: While we’re on the topic of free admission and problematic optics, Jed, I thought it was particularly interesting that Boulware pointed out Zuffa’s contradiction in what they argued in court versus what they told potential investors prior to selling to WME/Endeavor in 2016. After a long-ass fight over discovery (the evidence to be used in the case), a lot of the fighting was about how the experts hired by the plaintiffs (fighters) and defendants (Zuffa) quantified, or measured, the promotion’s effects on fighter pay. Zuffa tried awfully hard to sell the idea that pay hadn’t been suppressed because wage levels had gone up. And it’s true, pay for first-time fighters has increased over the years. But that obscures a larger fact: that the share of revenue to the fighters went down. In other words, the more money Zuffa made, the smaller the piece of the pie fighters got.

How do we know this? Because Zuffa helpfully pointed it out in an investor presentation to potential buyers! The corporate parent put it in writing that it planned to keep the fighters’ share of its revenue at 20 percent moving forward. If you’re a media giant looking to acquire a money-making sports property, isn’t that an awfully attractive pitch? Stable margins are the backbone of profit, and Zuffa pointed to wage share as the key metric – not wage levels. Thus, an easy layup for the judge to say the defendants can’t have it both ways.

Now, I’m not going to pretend I’m an expert in multivariate regression – I prefer my variable equations simple, like Y = mX + b. But I do know that, despite an awful lot of argument over the meaning and significance of particular fighter traits that impact their value in the marketplace, Judge Boulware gave his stamp of approval to the plaintiff’s experts methodology. That means that at the very least, it’s good enough to be seen by a jury, and Zuffa’s attempt to discredit it failed.

It also appears that the anti-trust cases that held up this past week’s certification helped the fighters rather than hurt them.

What does that all mean? Well, promoters – and in general, business owners – will always argue that they are the dominant player in a market because they are simply better than their rivals and are thus reaping the rewards. They have the “special sauce” that turns fighters into stars. What’s being tested here for the first time is whether that’s actually true. Is Zuffa just really good at what they do, or is their position the result of restrictive contracts that shut out competitors and ultimately depress fighter pay?

Meshew: Well, based on the defenses they brought to this case thus far, and the almost transparent contempt Judge Boulware had for some of the UFC’s more obviously ridiculous stances, I’m leaning toward the latter. Boulware certainly seems to be, at least.

What comes next in the case?

Marrocco: Of course, an appeal. If Zuffa has expended this much effort just to get to this point, you can bet they will seek to invalidate Boulware’s ruling in a higher court. Of course, they’ll need to convince the higher court – in this case, the 9th circuit – to take the appeal, and then they’ll need to get a judge to say there was an error – or errors – in the way the ruling was decided so that the fighters should not be certified.

Also, there’s the question of injunctive relief, or what the plaintiffs want the defendants to stop doing to remedy the issue. That wasn’t decided in this ruling, and the parties are going to get back in court to haggle over that – if they don’t settle first. So far, the fighters’ attorneys have proven they should band together in court. As for how they want Zuffa/Endeavor to change their business practices so they prevent this from happening again, they’ve left that somewhat of an open question – perhaps by design.

Meshew: An appeal is definitely coming, if for no other reason than kicking the can down the road. Heck, half of the UFC’s defenses proffered here felt perfunctory: unlikely to succeed, but good enough to keep dragging things out. Time is always on the side of multi-billion dollar corporations in situations like this. That’s what a war chest is for, after all.

Injunctive relief is where things get really spicy, though. The decision specifically notes the possible damages that the UFC may pay from that, between $811 million and $1.4 billion depending on one of two methodologies presented, so that alone is a kick in the teeth. I tend to think that’s less likely to happen, though, as injunctive relief requires there to be an irreparable injury that can only be prevented by doing so. Cash payouts don’t generally fit that bill.

The contract, though? Those are totally fair game. One of the key concerns from the plaintiffs in this case are the restrictive contracts the UFC employs. The court could, and based on this decision probably would, rule that the UFC’s contracts merit an injunction, meaning no more long term deals and no more restrictive champion’s clauses, essentially overnight. It’s kind of hard to overstate how much that would change the UFC, basically overnight.

How does this all end?

Marrocco: For the longest time, I thought the biggest hurdle to overcome was certification. That is, once the fighters got the judge to put them all together, thus increasing the money Zuffa could lose if they lost in court, Zuffa would settle. The $5 billion in damages that’s been bandied about as a potential cost since certification is on the extreme end of things, and it seems like a pretty good incentive to negotiate with the winners. But then again, from the reporting I’ve seen from the chronically under-appreciated John Nash, it appears some of the contractual change that allowed for more free movement of talent in the marketplace – i.e. the clauses that keep fighters from leaving UFC, and their ability to take them to court – has already gone away. If that’s the case, maybe there’s a longer fight ahead over changes to the UFC’s business practices.

There’s a long history of big companies settling lawsuits and then moving on as though nothing had happened. Are the defendants brazen and deep-pocketed enough to do that? Will the fighters’ attorneys push for substantive change to the way business is done, or will they take the first reasonable settlement offer? That’s where I’m a little skeptical. It’s definitely a huge thing to take on and beat the 10,000-pound gorilla in court. But to change wholesale the way it does business, that’s another.

Meshew: I think the most logical answer here is a settlement, but I’m not so sure that’s in the cards, Steven.

Don’t get me wrong, the UFC is going to try and settle, probably several times. $5 billion in damages is a pretty severe guillotine to have hanging over your head, particularly when you are in the process of merging with the WWE in a deal that is going to drag in a whole lot of other debt. But I’m not sure how much the plaintiffs are going to be willing to back down, particularly not after this decision. I mean, why would they? Boulware all but agreed with all of their arguments. And while a $5 billion guillotine is a pretty big stick for the UFC, it’s one heck of a carrot for the plaintiffs. If I’m one of the plaintiffs at this moment, I’m not sure exactly what offer the UFC could come back with that I would accept. There is a number, but the conversation starts at $2.4 billion (the low end of damages, if this things goes all the way and the UFC loses).

More than just the money, though, is the human element of everything. The plaintiffs in this case were wronged by the UFC and are seeking redress, not just for themselves, but for all parties similarly wronged. When this whole thing started, Jon Fitch and company knew that it was a long road with absolutely no guarantee of any payout at the end, and yet they went on ahead, because at a very basic level, they’re in this for justice.

Justice isn’t taking a chunk of the money and running. It’s seeing things through to the end of the line. Is there a world where the UFC continues to drag this out for years more on end, and they ultimately lose and get nothing? Sure. But that world was much more likely a month ago. Now, the plaintiffs can see the finish line. It may be a ways off, but it’s there, and waiting for them is everything they ever wanted. I think it would need to be a pretty big concession from the UFC for them to turn their backs on that.

Plus, we’re talking about Jon Fitch here, Steven. If there’s one thing that man loves to do, it’s go to a decision.