Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Judge rejects proposed settlement of UFC litigation, pins trial date, (Aug 1, 2024)

By Peter Reap, J.D., LL.M.

A proposed agreement between fighters and the owner of the UFC would have provided $335 million and other relief to the fighters.

In two related antitrust class actions brought by professional mixed martial arts (MMA) fighters against Zuffa, LLC, the owners and operators of the highly popular Ultimate Fighting Championship (UFC), a judge in the federal district court in Las Vegas has rejected a Motion for Preliminary Approval of a settlement agreement that would have provided two components of relief to the plaintiffs: (i) $335 million in cash, and (ii) important prospective relief in the form of locking in certain contract and business practice changes that Zuffa initiated. The proposed settlement, detailed in a Memorandum of Law filed by the plaintiffs, was rejected by Judge Richard Boulware in a docket-entry minute order on July 30, 2024, with a promise of a separate written order elaborating the court’s reasoning to be forthcoming. In the same entry, the court placed the upcoming trial in Le v. Zuffa back onto the court’s “trial stack,” with a tentative trial date of October 28, 2024. The two class actions, combined for purposes of proposing their settlement, are (Le v. Zuffa, LLC, No. 2:15-cv-01045-RFB-BNW (D. Nev.)) (the Le Action) and (Johnson v. Zuffa, LLC, No. 2:21-cv-1189 (D. Nev.)) (the Johnson Action).

Professional MMA fighters brought an antitrust action against Zuffa, doing business as the UFC. Five similar, separate actions filed in the federal district court in San Jose, California, were transferred to the Las Vegas federal court in 2015 and dealt with together, with the Le Action designated the lead case.

The MMA fighters alleged that the UFC had foreclosed competition and maintained monopoly power in the market for live Elite Professional MMA bouts (the relevant output market) and also maintained monopsony power in the market for live Elite Professional MMA fighter services (the relevant input market). The fighters in 2016 survived a pre-pandemic motion to dismiss filed by Zuffa under Fed. R. Civ. P 12(b)(6).

After a lengthy pandemic hiatus, the fighters in the Le Action moved for class certification. The plaintiffs sought to certify two classes: 1) a class of all persons who competed in at least one live professional UFC -promoted MMA bout in the U.S. from December 16, 2010, to June 30, 2017 (the class period) (Bout class); 2) a class of each UFC fighter whose identity UFC allegedly exploited with respect to UFC licensed merchandise or promotional materials in the U.S. for the same period (Identity class).

Applying predominance analysis, the court determined in 2023 that the fighters in the Le Action demonstrated sufficient predominance, commonality, and the other class certification requirements for partial certification of one of their two proposed classes. The court granted certification of the fighters’ proposed “Bout” class of MMA fighters with respect to antitrust damages, but not for the purpose of granting the fighters injunctive relief, because the fighters failed to brief a Fed. R. Civ. P. 23(b)(3) basis for class certification for injunctive purposes. The court also declined to certify the proposed “Identity” class of fighters whose identities UFC allegedly exploited because questions about expropriation or exploitation of the class members were too varied.

In January 2024, the court denied a renewed motion for summary judgment in the Le Action. It stated that the evidence that the court was now required to review in order to rule on the renewed motion was merely duplicative of that previously considered, and, the standard at class certification was in fact higher than for summary judgement.

Proposed settlement details. In May of 2024, the plaintiffs in both the Le Action and the Zuffa action filed their motion for preliminary approval of a settlement agreement. The settlement would have provided $335 million in cash, and “a significant percentage of damages sought by Plaintiffs and will provide compensation to the members of the Settlement Classes in the form of a substantial percentage of the amount of money these fighters earned during their UFC fighting careers.” The plaintiffs argued that the $335 million recovery was an excellent result because it provided a swift and significant payment to the Settlement Classes against the delay, costs, and risks of a trial (and post-trial litigation) in the Le Action and the lengthy litigation for the Johnson Action, which was in the early discovery stage.

The plaintiffs asserted that, based on their evaluation of Zuffa’s data, there are approximately 2,145 fighters who are members of the Settlement Classes. The UFC paid a total of approximately $996 million in Event Compensation to those members of the Settlement Classes who did not execute arbitration and/or class waiver provisions in their UFC contracts (spanning the class periods of both Actions): $538.2 million to the Le Class and $457.9 million to the Johnson Settlement Class. Viewed solely on the cash component, without considering the substantial prospective relief, the settlement is a significant percentage (33%) of the Event Compensation paid to UFC fighters, as well as a large share of the damages computed by Dr. Singer in the Le Action. The cash settlement was and outstanding result, the plaintiffs argued.

Moreover, according to the plaintiffs, the prospective relief provided by the settlement would have preserved, for a period of five years after final approval, six important business practice changes that Zuffa made after the filing of the Le case in 2015 and before filing of the Johnson Action in 2021:

1. Any Exclusive Negotiating Period contained in Zuffa’s Promotional and Ancillary Rights Agreements will not exceed 30 days;

2. Any Right to Match Period following the expiration of an Exclusive Negotiating Period contained in Zuffa’s Promotional and Ancillary Rights Agreements will not exceed four months;

3. Zuffa will limit any extension of the Term of its Promotional and Ancillary Rights Agreements in the event a fighter turns down a bout with an opponent Zuffa designates to the longer of the length of time sufficient to find a new opponent or for six months;

4. Zuffa will change its practice on how the “Retirement Clause” operates to place a maximum of four years to the suspension of the Term of the Promotional and Ancillary Rights Agreement while a fighter is retired or disabled, or otherwise allow for earlier termination of the Promotional and Ancillary Rights Agreement;

5. Zuffa agrees that UFC fighters retain the right to use their own identities, including, for example, the sale of the fighters’ names, images, voices and likenesses by third parties of Merchandise; and

6. Zuffa agrees to provide fighters up to three still images of the fighter, the licensing of which will be governed by a license application to and approval by Getty Images.

Rejection of settlement, next steps. As noted, an opinion detailing the court’s reasoning for rejecting the proposed settlement is expected soon. Trial is tentatively scheduled to begin October 28, 2024.

Attorneys: Benjamin D. Brown (Cohen Milstein Sellers & Toll PLLC) for Cung Le, Nathan Quarry and Jon Fitch. Aaron T. Chiu (Latham & Watkins LLP) for Zuffa LLC. Brooke Danielle Jenkins (O'Melveny & Myers LLP) for Top Rank Inc.

Companies: Zuffa LLC; Top Rank Inc.

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