Eddie Alvarez, Bellator sue each other over contract dispute
The battle for former MMA lightweight champion Eddie Alvarez's services has become a litigious affair, as borne out by two lawsuits SI.com has obtained.
On Dec. 31, Bellator Fighting Championships filed a federal lawsuit with the U.S. District Court of New Jersey against its former champion, claiming the fighter's rejection of a new contract is in breach with the terms set forth in Alvarez's previous agreement.
Alvarez, a 28-year-old Philadelphia native and father of three, entered free agency last November after Bellator waived an exclusive 90-day renegotiation period with the fighter so he could field an offer solely from the Ultimate Fighting Championship. Alvarez (24-3) has been a cornerstone star during his 42 months with Bellator and has fought nine times for the burgeoning promotion.
According to Bellator's complaint, obtained by SI.com, Alvarez's original Bellator contract included a 14-day matching period in which the Viacom-owned promotion could review an offer made by the rival promotion and match it to keep Alvarez in its fold. Bellator believes it has matched the UFC's offer.
However, on Jan.4, Alvarez's legal representation filed a separate suit in Bergen County Superior Court, also obtained by SI.com, stating that Bellator hadn't matched the offer made by UFC owners Zuffa LLC, thus concluding their contractual relationship, and asked for a declaratory ruling as such.
Both lawsuits are also asking for injunctive relief in the matter, respectively to either prevent or clear the way for Alvarez to sign the UFC's contract offer, which promises the fighter a bout by the end of March 2013.
Alvarez's UFC offer, which was provided within Bellator's complaint as an exhibit, states that the world's leading promotion offered the lightweight fighter an eight-fight contract, with purse and win-bonus pay beginning at $70,000 each, with $5,000 incremental increases for each if Alvarez were to win the bouts. According to the exhibit, Alvarez's pay for his eighth and final bout of the contract would be $105,000 with an $105,000 win bonus --- granted he'd won his seven previous bouts.
Zuffa's offer also included its "intention" that Alvarez's first bout for the promotion be for the UFC lightweight title, to occur before the end of March 2013. The UFC offer also stipulated that this first championship bout, as well as any subsequent bouts in which Alvarez defended the UFC title, could entitle him to additional pay-per-view revenue, "as long as such applicable event is broadly distributed" as a pay-per-view.
Alvarez's tiered pay-per-view cut of profits would start with $1.00 for each buy over 200,000 all the way up to $2.50 for each buy over 600,000.
The contract also included guarantees to Alvarez, including one bout on Fox Network Television and a minimum three appearances as an "on-air" commentator for other UFC-branded events he was not an athletic participant in.
In an addendum letter entitled "Signing Bonus," Zuffa also offered Alvarez a $250,000 additional payment, to be distributed by check in the following increments: $85,000 following the completion of Alvarez's first two UFC bouts "less all permissible or required deductions," and another $80,000 (less the aforementioned fees) once he'd completed his third fight with the promotion. The letter stated that these additional payments would be doled out after Alvarez signed Zuffa's "Promotional and Ancillary Rights Agreement," and had completed unspecified "promotional and sponsorship opportunities to be performed."
Bellator's matching-period contract, which was received by Alvarez on Dec. 13, was nearly identical to Zuffa's offer with a few key differences. Firstly, Bellator's offer also included three additional perks beyond Zuffa's offer in a second addendum letter. They included a Spike TV behind-the-scenes special on Alvarez, in which he'd be compensated $25,000; a season-two coaching position on Bellator's reality TV show (with the caveat that he must win back the Bellator title first) carrying a $100,000 payday; and a one-time, guest-host stint during Spike's "Road to the Championship" series.
Other than these added incentives, the Zuffa and Bellator contract offers mostly mirror one another, and for good reason. Bellator deliberately took Zuffa's contract and red-lined it, substituting its own name in for Zuffa's, so the aforementioned terms, and their verbiage, remained unaltered. (This red-lined version was included in Bellator's lawsuit exhibits.)
However, whereas Zuffa offered Alvarez the one fight on Fox Network Television, Bellator offered that fight on Spike TV in its place, which is one of the sticking points between the two parties' interpretation of Bellator's matching offer.
In Alvarez's response via email to Bellator's offer, dated Dec. 16 and sent by his legal representation, they contended that Bellator failed to match Zuffa's offer on this point and a couple others.
"...Bellator purports that to match a Fox TV event with a Spike TV event (which is not a match because Fox TV is a free major national broadcast network, while Spike TV is a for-charge basic cable network with a fraction of the viewership, exposure, ratings and share of Fox TV)," wrote Alvarez's Los Angeles-based contract attorney Neal Tabachnick.
In addition, the email questioned Bellator CEO Bjorn Rebney's intentions to promote a pay-per-view event -- a platform the nearly four-year-old company has yet to delve into --- citing a public statement Rebney made during a Dec. 11 media conference call that the promotion currently had no "definitive plans" to execute a pay-per-view. The email also contends that Rebney told Alvarez, as recently as Dec. 13, that promoting Alvarez's proposed championship bout on pay-per-view was merely "possible." Rebney didn't deny these conversations, and believes that stance still matches Zuffa's offer to Alvarez "word for word."
"In section 6.2 of the UFC's offer to Ed, [it says] they 'intend' for his [first] bout to be a world title bout and they even go lesser in their assurance as to whether it would be pay-per-view or not," said Rebney. "In that section, it's clear as day [in the verbiage] that it's not a guarantee...Nobody, whether you're a baker or shoemaker or you promote combat sports, are to be held to what somebody thinks they may or may not do. Contracts just don't work that way."
Rebney added that while other terms of the UFC offer were stated clearly, the pay-per-view section was decidedly ambiguous.
"[Zuffa] put that language in because they intended to give themselves flexibility to do with him as they chose," said Rebney. "They guaranteed substance where they guaranteed it and they left language ambiguous where they intended for it to be ambiguous and not a guarantee. We have to match what's guaranteed and we absolutely did it."
Whether Zuffa's offer guaranteed Alvarez pay-per-view bouts or not, the fighter's representatives don't believe a Bellator PPV would hold the same financial weight as the UFC's, a promotion that has promoted over 120 pay-per-views to date..
In Tabachnick's email, he stated that if Bellator were to promote a pay-per-view, "it very likely would not reach the threshold number of buys required for Eddie to receive any revenue from [the] same, making any assurance of a Bellator PPV event illusory as a match for the Zuffa LLC meaningful offer the same."
Alvarez's lawsuit doesn't rehash any of the claims made in Tabachnick's Dec. 16 email (though Alvarez's attorneys said they plan to withdraw it in a matter of days from state court and re-file it as a counterclaim to Bellator's federal complaint, possibly adding more allegations in the process.) Instead, the complaint focuses on the exact verbiage in Alvarez's original Bellator contract, denoted under Article 18 entitled "FIRST/LAST REFUSAL."
Alvarez's initial complaint hinges on how the court will interpret one 10-word phrase within that section. That passage, provided in both complaints, states that the fighter may negotiate with other promotional entities (following the initial renegotiation period), "subject to PROMOTER's right to match the terms of any agreement offered." It is Alvarez and his representation's interpretation that this provision doesn't entitle Bellator the ability to make any changes, material or otherwise, to the UFC offer and have it still be considered a match. By definition, a material change would be anything substantial that alters the contract. Alvarez's lawyers contend that this LAST REFUSAL provision could only be satisfied if no changes in terms (outside of Zuffa becoming Bellator) were made to the matching offer, and substituting "Spike TV" for "Fox Network Television" falls within that parameter.
"Match means match. Match means provision by provision, term by term," said Steve Klein, Alvarez's litigation attorney. "Term by term, they have to offer the same thing...[Fox Network Television to Spike TV] is, of course, clearly the most major change. "
Klein said the offers differ "both literally and practically," and placing Alvarez's fight on a cable network in place of network television would have monetary ramifications for their client.
"The value of the contracts are different, as is the ability to deliver under the contracts," said Klein. "Monetarily, it will mean different things to [Alvarez.] This is not a match."
Frank Smith, Alvarez's second attorney and an associate of Klein's at their Florida firm, conceded that this interpretation might raise the argument that Bellator never really had the ability to match the UFC's offer, as it isn't in partnership with Fox.
"There's an argument that if they'd really sat down to match apples to apples, it's my understanding that they have a relationship with CBS under Viacom," countered Smith. "If they would have sat down and said, 'Well, we're going to put you on CBS, I'd suggest that their argument held a little more water at the time."
Rebney interprets the definition of "match," at least in relation to this questioned Fox-Spike TV substitution, differently.
"It's a numbers game," said Rebney. "Spike's in 100 million homes and Fox is in 110 million or somewhere in that close proximity. We can ultimately match [a Fox bout's] numbers very easily by replaying Ed's fights in primetime on Spike TV. It boils down to how many people see the fight and we're completely prepared, if that became an issue, to replay Ed's fights."
Rebney said he'd already procured that commitment from Spike President Kevin Kay. However, Klein contends that Rebney's reasoning doesn't constitute a true match.
Regarding the pay-per-view argument and the questionable language in the UFC's offer, Klein and Smith don't agree with Rebney's interpretation, and that Zuffa's use of the word "intention" should be taken in good faith that Alvarez will be allotted a bout on a UFC pay-per-view.
"[Bellator's} argument has been that there's no guarantees, but that's not the argument," said Smith. "The argument is that, if Bellator wants to match the paragraph, they have to represent that they intend to do this and that claim has to have merit. How do they suggest they're going to hit [UFC} numbers?"
"We know the UFC can deliver, whereas Bellator can say they intend to do something and we don't know that they can deliver and we actually do know that they can't deliver to the extent that Zuffa can," added Klein.
If the complaints do go to trial, Alvarez's future in MMA will be decided by the court's interpretation of the dual contracts and possibly by each promotion's ability to make good on the stipulations set forth in both those documents. Until then, Alvarez sits at home with his wife and three children. The world's most desirable free agent sits and waits.
Additional reporting by SI.com's legal writer Michael McCann