MMA Fighting - Emergency Reaction: UFC Settles Class-Action Lawsuit For $335 Million

Episode Date: March 20, 2024

In this breaking news podcast, MMA Fighting's Steven Marrocco talks to John Nash about the $335 million settlement in the antitrust lawsuit against the UFC. Nash talks about his immediate reaction to the number, what that means for fighters going forward, whether or not the settlement will change the UFC's business practices, and more. Follow Steven Marrocco: @MMAFightingSM Follow John Nash: @heynottheface Subscribe to MMA Fighting Check out our full video catalog Like MMA Fighting on Facebook Follow on Twitter Read More: http://www.mmafighting.com Learn more about your ad choices. Visit podcastchoices.com/adchoices

Support for this show comes from the Audible Original, the downloaded two. Ghosts in the Machine. The Earth only has a few days left. Rosco Cudullian and the rest of the Phoenix colony have to re-upload their minds into the quantum computer, but a new threat has arisen that could destroy their stored consciousness forever. Listen to Oscar winner Brendan Fraser reprise his role as Rosco Cudulian in this follow-up to the Audible Original Blockbuster. The Downloaded, it's a thought-provoking sci-fi journey where identity, memory, and morality collide. Robert J. Sawyer does it again with this much-anticipated sequel that leaves you asking,

What are you willing to lose to save the ones you love? The Downloaded 2. Ghosts in the Machine. Available now, only from Audible. Why do you save and invest? Is it so you can spend hours every day glued to the stock ticker, worrying about every movement up or down? Or is it so that you can live a better, happier, more fulfilling life? Betterman wants to help people invest to live, not live to invest. With features like automated saving, global diversification, and tax-smart tools,

Betterment is full of ideas to help you reach your goals without having to babysit your investments. They help their customers invest so that they can go live their lives. Go to Betterment.com to learn more. Investing involves risk, performance not guaranteed. podcast network. I am Stephen Morocco from MMA Fighting and I'm here with John Nash, a guy whose phone like mine probably started blowing up around early mid-morning today about the news of this settlement between the fighters and the attorneys representing the UFC class action lawsuit. It's taken us 10 years to get to this point. But here we are. John.

What was your immediate reaction to it? Slow down here a second. There was a settlement in some sort of lawsuit today. Right. No. I wasn't really surprised, I guess. If you listen and we have a quick plug, I got my own podcast out now,

the Hey Not the Face podcast on the Hay Not the Face substack. We talked a little bit how a settlement seems likely now. And a big reason was that the TKO, because they're a public company, there's a lot of pressure to keep the stock price up. And with the Vince McMahon problems and all that stuff, the stock price was very suppressed from where they thought it should be. And so investors that told me they thought this would lead to a settlement. And wo and behold, there we are.

They have a settlement. What was your thought on the number, the 335? I guess I can break that I was pretty close in some of my earlier estimates. But, I mean, that's just me kind of guessing. So I can't take, I thought it'd be a little higher. I thought it'd be only because they had a credit line for, I think, $455 million. And I thought they'd basically use that credit line for the lawsuit. But I think people, I know a lot of people reacting to think it's very low and we'll get into why.

It's probably not, it's not as low as it, you know, it could have been or it shouldn't be viewed as that low. But a good example also, I would say, why this doesn't seem that low is there was a recent example of another suit, the National Association of Realtors settled an antitrust suit that they'd lost. And the plaintiffs were awarded $1.78 billion, which was untrevelled, so over $5 billion damages that they were ordered to pay. And they ended up going back and settling in a negotiating down to $416 million. So it says, you know, kind of shows you, even when large damages are there, how they can be negotiated down. And so I wasn't floored by the amount. because there was a settlement, but I do understand that it looks bad because there was so much

potential money that the fighters were asking for. Right. And you talk about like big settlements, like a lot of this has been preordained, right? This has been in the works for several months, right? So when we talk about like the negotiations for where the settlement's going to end up, this was something that was worked out well in advance. This figured it didn't come out just nowhere. Yeah, I mean, at the last result, there might have been some fluctuation what they wanted, but this, I'm sure that both sides had a number they're willing to do it and fluctuated as the trial went on longer. And you got to remember, as the case goes on longer, the plaintiffs, attorneys especially are going to want more compensation. But at the same time, they are also probably looking like we need to win because we are putting more and more money into this case.

And we have seen no money yet. So there's that kind of pressure. but yeah, it's $335 million. And the other thing, too, we got to remember, this is for both cases, but I'm sure we'll talk a little bit. It's really just, I think, personally, just for the Lee case, because there's probably not much money going to the Johnson fighters. And why is that?

Well, because the UFC introduced a class action waiver. And so every fighter that signed that class action waiver since they introduced it, they are not, they can't be in a class action. So they theoretically, they wouldn't be allowed to collect damages for this case. They'd be removed from the pool of fighters. They can collect damages. So that would take. And if you just look at the math, they introduced it, I don't know, sometimes the last couple of years.

So it wouldn't be all the fighters in Johnson. But there were a lot of fighters that fought earlier in 2017, 18, 19, hung around and then signed contracts later. All their previous fights would be eliminated. So you can probably estimate at least half the fighters, if not three quarters, that high are not, wouldn't be eligible to be part of the class action. Wouldn't be class members be part of the settlement. Therefore, as a smaller class, their chances get significantly less good. Yeah, the amount of money that they can be awarded gets lower.

Especially depends on the bigger names, fighters, you know, because the bigger portions of the revenue are now are taken out. And the other thing you remember, too, is even in the league class, there's 1,214 fighters eligible to the league class. but that includes all fighters that fought in that period. Well, there's some fighters aren't eligible, and those fighters are the ones that are not Americans to aren't residents of the U.S. and didn't fight in the U.S.

So if you fought outside the U.S. and were not a U.S. citizen or a U.S. resident, you are not eligible to be member of the class action. So that 1215 probably drops to under a thousand. Right. And that's honestly the feedback I've been talking to fighters all morning. Most of them are curious, just like, do I, do I qualify, basically. So how do you think this thing is ultimately going to be divided up? Well, they, Eric Kramer, the lead attorney suggested during one of the hearings, or actually

might have been during a Twitter conversation with Paul Giff, that it's going to be proportional, proportionate to what the fighter earned during the class period. So if a fighter, if the total, some total, the fighters was 600 million earned during that class period, and that's before we deduct the fighters that aren't even, you know, that, that, that aren't eligible anymore. And he made throw up $600,000. Well, that's 0.1% of the total revenue, right? So whatever the damages are, $335 million, he'd get 0.1% of that. And so he would get $335,000 in damages.

So that's before the attorneys get to it. That's before the attorney fees, yeah. So you got to deduct the attorney fees. My understanding they're using the Lodestar method where they pile up all their costs, and then the judge will, he will apply a multi-term. multiplier based on how they did. And usually the multiplier is like 1.5, 1.25, up to 2. So it's hard.

Generally, on average, looking it up at the average percent is about 20 percent. The Lodestar method pays up, but it can fluctuate wildly. But let's say if it's 20 percent, then they're getting what a manager agent would have got for the fighters. They just have to pay another manager agent. But it's possible. It could be higher. It's possibly lower. But I doubt it'd be lower considering what the cost must have been for this case.

far. The economic experts and models and all that are not cheap. Not cheap. Yeah. Given the size of the settlement, given some of the numbers that were actually thrown about in the earlier parts of this case, the number, the range that sticks in my head and a lot of people's heads was between, what, 800 and 800 million and 1.6 billion, right? Yeah. So we hear those numbers initially. And then today we get were that they have settled for $335 million. What do you make of that as an expression of the plaintiffs, the strength of the plaintiff's case, you know, relative to, you know, what they'd be encountering in court? Like, basically, what do you think that says about how, how strong the case was, how strong

both sides thought their case was? Well, I mean, it's, you would suggest that the plaintiffs didn't think they have a 100% slam-dunk, but no one does. These cases are very risky going to jury. It is, you know, if you talk to people in the antitrust world and antitrust attorneys, you notice their text, they're tweeting and sending messages, congratulations. They think that's in a tremendous amount of money that the plaintiffs won. We, the fans, they'll look at it and say, that is just a small percentage of what we think

the fighters should have got paid, so that's terrible. So when you have emotional connection to the fighters, it understandably, you're like, you know, I think the fighters deserve a lot more. when you're on the other side, when you're an attorney that just does this for a living, those guys think this was a tremendous victory. But I understand, I mean, you look at $811 million to $1.6 billion, this is a fraction of that. And I think it also, what makes it especially bad as a settlement, even though we kind of throw in numbers in the hundreds of millions before that a settlement would be that size,

is it's taken nine years. And so you'd assume there'd be some sort of interest added on to that month, right? because we've had to wait so long. And this includes the Johnson class. And so it feels extra small because you include that Johnson class in this, even if there's not many fighters eligible. So it's very understandable why fans think it's a poultry number. If this number had been announced four years ago in 2019, right,

when we had the first hearing, I think a lot of people would think of as a tremendous success for the Lee class, but add four or five more years now and a whole other class of fighters. and it suddenly does not look that or sound that impressive. But on top of that, we have the injunctive relief question, right? That's still very much at issue in how this thing ultimately gets resolved, right? I mean, they kicked the can down the road a couple months ago. You reported on this when they basically said,

we're not going to deal with injunctive relief with the Lee class, which is 2010 to 2017. We're going to kick that over the Johnson class. Now we have this settlement, what's going to happen with injunctive relief? And will this ultimately change any of the UFC's business practices? Do you have any sense of that? I can only guess. We don't know yet.

But based on the comments, the MMAFA was congratulated to the fighters and said they're happy. And just based on, you know, no inside information, but just based on the reaction of the people involved, I assume, I have to kind of assume that there's some sort of contractual changes in the settlement and we will get those revealed if the judge approves the settlement in, you know, 40 to 60 days and then we'll find out. But even if there are changes, you can assume that the UFC agreed to changes that probably appear much more only cosmetic. I mean, I would say what would be a potential yards to look at what these changes might be is what they did in 2017. UFC already introduced changes in 2017 to split the first Lee class from the Johnson class.

And those changes were the five-year sunset than Ingano used and, you know, a limit to how many times you can extend a tolling provision for turning down a fight and a few other things, which were great for fighters, but not, they didn't really change the industry. They weren't industry changers, you know, because not only Angano took advantage of that five-year period. And none of the other fighters really did or left. So it's not, it was not a change that's going to completely overturn the industry. So if there were contractual changes included in the settlement, and we don't know for sure, but I'm kind of guessing there might be some.

At best, they're probably along those lines. But also, I mean, didn't they put back or reverse a lot of the changes that they implemented in 2017? and what are we supposed to ultimately take from that? Yeah, well, is it? Because they introduced the class action waiver, right? Yeah. Because they did that, the same time they're introducing that class action waiver and arbitration clause,

they started changing all those provisions they added so that that five-year sunset is no longer a high five years. There's a lot of loopholes for the UFC to extend it past that. So my guess would be maybe, and this is just a guess. No one right, no one take this as like, this is what's going to happen. but my guess would be like maybe they're demanding as part of the agreement is you have to go back to that original sunset. You can't make it worse. I could see a change like that in the contracts. But yeah, because the UFC, I mean, one reason these damages probably are not as high as some people think is the UFC had no threat from future lawsuits because everybody assigned a class action waiver.

And the threat of injunctive relief was so far down the road. they couldn't really use that as a cudgel. So when you lose the major tools, massive damages and in the future and force contractual changes, when you take those off the table, it takes away a lot of your leverage. Defenders in cybersecurity are always there when we need them. They should get a parade every time they block a novel threat and have streets, sandwiches, and babies named in their honor. But most of all, they deserve AI cybersecurity that can stop novel threats,

before they become breaches across email, clouds, networks, and more. DarkTrace is the cybersecurity defenders deserve and the one they need to defend beyond. Visit darktrace.com forward slash defenders for more information. Support for this show comes from the Audible Original, the Downloaded 2, Ghosts in the Machine. The Earth only has a few days left. Roscoe Cadulian and the rest of the Phoenix Colony have to re-upload. their minds into the quantum computer, but a new threat has arisen that could destroy their stored consciousness forever. Listen to Oscar winner Brendan Fraser reprised his role as Rosco Cudulian

in this follow-up to the Audible Original Blockbuster, The Downloaded. It's a thought-provoking sci-fi journey where identity, memory, and morality collide. Robert J. Sawyer does it again with this much-anticipated sequel that leaves you asking, what are you willing to lose to save the you love. The downloaded two ghosts in the machine available now, only from Audible. So what are some of your, I mean, you've been following this more closely than anybody for the last 10 years. What are some of your takeaways and some of your questions about where things go from here? Well, I guess the first one is the judge approve it. What are the other components of it? I mean, it is, it's not as big as I'm sure a lot of people wanted, but it is a benefit that the

fighters, based on the $335 million, depending on how much goes to Johnson and how much for Lee class, it's, you know, let's say almost all goes to the Lee class, then that's 50% of the amount of money those fighters earned during the UFC career during that time. So that's a 50% pay raise. That's, it's not, it's not nothing. That's a sizable amount of money and it's a nice check for fighters that haven't fought for a while and might need the money. So that's a positive. If there's some contractual changes, that's a positive. It's not the game changer. I guess going forward is, you know, what's the general reaction outside the UFC?

Do the fighters that are part of the Johnson class that have signed these waivers? Do they start asking why aren't we not compensated like that previous class? Do we see other promotions? Now, the blueprint's been laid out for an antitrust lawsuit. There were rumors that Bjorn Rebney was going to file one before he was like, go by Bellator, does one of the other promoters decide to file an antitrust lawsuit against the UFC based on this case, claiming monopoly instead of monopsony? That's a possibility. And then there's, who knows, legal scrutiny may result from this from the publicity, but I'm not, you know,

I'm not sure there's going to be, the FTC might take a look at it. There's, you know, there's legislation, but I don't see much momentum on the legislation side. So I'll keep an eye on that, but I don't think those, none of those seem eminent. So it's, you know, it's still wait and see. What's the morning been like for you other than just, you know, having your day job, being the primary point of contact for a lot of fighters on this? What is the end of, what is an end of this story or an end of a big chapter of this story mean for you? Oh, God, a break.

I mean, I might be done with M.A. This is great. Really? Yeah, well, I mean, it's just, it's not, it's, going through the ins and out of a lawsuit and documents, and it's not really that enjoyable. It's kind of a, it's kind of a pain in the ass, tell you the truth. It's a, it's a task going through the fine prints of complaints. So it's, you know, to finally be over, it's, that's not the worst.

That's more free time. But I get, you know, I'll stick around for a while. I think there's some other, you know, other stuff might pop up that's of interest in the immediate future. I'll follow that. you know, with the substack and the podcast. But it's, it is a relief. And I saved money. I didn't buy a trip to Vegas.

Right. You had a ticket or you were thinking about buying a ticket, right? I was going to ask for time off from work. I get to collect my regular paycheck. I don't have to, you know, in a courtroom day in and day out. So that's a positive for me. But, you know, and it's a, I guess the interest, it's a major case that's over. And it's, I was here from the beginning and I'm here from the end.

And wow, great. I finished the marathon. Now, it's all about me, even though it has nothing to do with me. So forget the name plaintiffs. Forget the Kong Lee and John Fitch. They had nothing to do with it. It was all me sitting there bearing, taking, putting up with this this whole time. Well, it's amazing how many of them did rely upon your tweets, did rely upon your information.

And it's also amazing how many of them were unaware from my calls. unaware of what's going on, unaware of what their role in it is. And that's something that I think is going to play out over the next couple months. That should be the next interesting part of this, how things actually get divvied up, who's included and who isn't. Because this is, you know, this is a major victory in a sense. This is the first time that they've really been forced to pay out, you know, something like this.

This is a major court case that they lost or they were forced to settle. Yeah, it's just the fact that, I mean, in where it does, like I said, this had been 2019, we would look this as a major event, but because their revenue has just exploded since they got the S-N deal under Endeavor, the damages seem minute compared to what they were earning. So I can understand where people look at this like it's not a big win, but it's, it is that someone beat the UFC and some, I mean, getting a settlement of $335 million is getting a victory, right?

Even if it's not the grand, the huge game-changing victory, some people wanted. And on top of that, for people outside, this was fascinating because this was a very rare monopsony case. And the amount of damages awarded are extremely high in these type of cases. Very rarely do you have these type of damages awarded for workers. So from outsiders, this is a very major case. Now, for people in the industry, knowing how much money the sport generates and that these are pro athletes and people assume pro athletes should make more, again, I can understand why people, People do not think the victory was the complete victory they'd hope for.

Right. So have you gotten any calls from fighters? And what are you telling them, if anything? I get DMs and texts and stuff. And some of them are confused over who I am, I think. They're not. I don't know if they're asking about. But most of them, I'm just trying to tell them, I get listening, you know,

we have to wait to get the news. And I think you're eligible, you're not eligible, things of those nature. But I got to say, over the end, I've learned that the majority of fighters, even now less so than in the past, do not know who I am, do not follow the case. But there is probably, I guess, a score or more, a couple dozen fighters that follow the case closely. And they can DM me and ask questions, but I already know they know the answer. They follow it more closely than all the other fighters. So there's not much news I have to share with them just to point them in the direction of what happened or confirmed.

So, and it's always the, I'm not going to give their names, they always promise anonymity, but it's the type of fighter you'd expect that would follow the case. Of course. Well, thank you so much for taking the time to answer my questions. Really appreciated it. Your expertise is always appreciated. All right, that's all we have for you for today.

We will keep you updated on this when and if there are more developments. This has been Stephen Morocco of MMA fighting talking to John Nash about the UFC antitrust settlement. Keep it locked to MMA fighting for more news. Thanks very much.