What the Ronda Rousey Arbitration Can Teach MMA Managers and Team Takedown

UPDATE April 7, 2014 – The Full CSAC Arbitration Decision is now available and can be found here: CSAC Ronda Rousey Aribtration Decision

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The California State Athletic Commission’s arbitration powers made headlines this week with Andy Foster releasing UFC champion Ronda Rousey from provisions of her contract with Fight Tribe Management that relate to “professional fighting services“. Although the arbitration decision is not publicly available Sherdog.com reports as follows:

According to the CSAC decision obtained by Sherdog.com, the regulatory body ruled that Rousey is free of the mixed martial arts portion of her contract. However, designated arbitrator and CSAC Executive Director Andy Foster did not rule on the commercial aspect of the contract, which he instead deferred to the Superior Court of California.

“The agreement is hereby found to be invalid and unenforceable as it relates to Rousey’s professional fighting services and Harvey’s professional fighting management services, only; the Commission makes no findings as to the other parts of the agreement that are not directly relating to MMA fighting and defers these matters to the California Superior Court,” the CSAC decision read. “Rousey and Harvey are released from their fighter-manager agreement dated May 15, 2012, and the California State Athletic Commission orders any and all purses, which may have been partially or wholly withheld to be released to Rousey.”

The reason? The Management contract did not comply with s. 221 of California’s regulations which require as follows:

§ 221. Provisions Of Contract.

(a) The original contract entered into between managers and boxers and promoters and boxers shall be placed on file with the commission at the time it is approved pursuant to Rule 222. Except as provided below, a contract becomes null and void if at any time during its term the manager or promoter, after notice from the commission, is not licensed by the commission. If a manager or promoter is not licensed because the license has been revoked or suspended for 60 calendar days or more by the commission, all contracts with the manager or promoter shall become void on the 30th day after the date of the order of revocation or suspension unless a court of competent jurisdiction, upon notice to the commission, issues an order staying the commission’s order within the 30-day period. If a manager or promoter is not licensed because the license has been suspended by the commission for less than 60 calendar days, all contracts with the manager or promoter are voidable by the boxer if written notice is given by the boxer to the manager or promoter and to the commission within the period of license suspension.

(b) No manager or group of managers shall be allowed to participate in more than 33 1/3 percent of the gross ring earnings of the boxer. No assignment of any part or parts of the boxer’s or manager’s interest in a contract, filed and approved by the commission, shall be permitted without the approval and consent of the commission. The consent to assign shall not be granted unless a copy of the proposed assignment is submitted to the commission for its approval. No manager may negotiate or sign for matches for a boxer not under contract to him. Any boxer not having a contract with a licensed manager shall sign for his own contests and receipt for his full purse. All disputes between the parties to the contract, including the validity of the contract, shall be arbitrated pursuant to the provisions of the contract.

Following this decision Darin Harvey of Fight Tribe Management tweeted as follows:

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Darin’s comments, although blunt, are worth noting for any fighters and managers who have contractual relationships that extend beyond state lines. The laws relating to fight management contracts vary from State to State and the lessons learned from a dispute can be costly.

One organization that ought to take notice of the CSAC decision is Team Takedown. Johny Hendrick’s financial relationship with Team Takedown recently came to light with the management company taking on a significant financial burden with the hope of future financial gain. In short, Team Takedown pays significant overhead for their fighters and in return take 50% of fighter earnings.

This business model is likely not a profitable one unless a fighter reaches the pinnacle of the sport. From there earnings can be significant and the investment can pay off. The risk of the relationship souring once big money is at stake is a real one. Team Takedown has apparently considered this and hope their contract can protect them if their relationship with Hendrick’s ever goes south following a big payday. MMAJunkie reports as follows:

In MMA it’s still tough to tell whether such a model is sustainable. A 50 percent split in exchange for weekly paychecks and all living expenses paid might sound like a great idea to a fighter who’s just starting out, but what about once he’s become the champ, as Hendricks has? Will he still think he’s getting a good deal, or will he be tempted to look for another, more immediately profitable arrangement?

It’s something Ehrhardt has considered, he said, but not something he spends a lot of time fretting over. For one thing, he said, he has a contract with Hendricks

If Hendricks and Team Takedown ever have a falling out following a big fight purse in California the contract will offer little protection. The lesson? Managers and fighters must be familiar with and comply with the regulatory laws in all jurisdictions in which they do business otherwise risk undoing the certainty of their contractual arrangements.

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