WBO Diverts Lawsuit Alleging Ali Act Violations Into Arbitration

Update July, 2020 – Earlier this month the First Circuit Court of Appeal overturned this result finding the WBO’s arbitrator selection clause is invalid and remanded the case back to the District Court who are to determine whether the invalid arbitrator selection clause is severable from the remainder of the mandatory arbitration provisions.

On the important issue of whether claims under the Muhammed Ali Boxing Reform Act can be contracted away from the courts and into private arbitration the Court held that this could be achieved.  In reaching this conclusion the following reasons were provided:

The Supreme Court has explained that there is no categorical bar to the arbitration of federal-statutory claims….The Court has observed that “all statutory claims may not be appropriate for arbitration,” as Congress retains the power to“preclude a waiver of a judicial forum for” a given statutory claim. Id.Trout bears the burden to show that Congress evidenced an intent to preclude such a waiver under MABRA — and thus to preclude the arbitration of his claim under it — either expressly or impliedly through its “text . . . , its legislative history, o ran ‘inherent conflict’ between arbitration and the [statute’s]underlying purposes.” Id. (quoting Shearson/Am. Express, Inc. v.McMahon, 48U.S. 220, 227 (1987)). He has not met that burden.Trout points to the statute’s text, which provides that“[a]ny boxer who suffers economic injury as a result of a violation of any provision of this chapter may bring an action in the appropriate Federal or State court and recover the damages suffered, court costs, and reasonable attorneys fees and expenses.” 15 U.S.C. § 6309(d) (emphasis added). He interprets this language to vest “[j]urisdiction for private claims under”MABRA exclusively in “state court or federal court.”But, under Gilmer, Trout must point to text in MABRAthat “explicitly precludes arbitration,” not merely text that creates a cause of action. 500 U.S. at 26 (“[W]e have held enforceable arbitration agreements relating to claims arising under the Sherman Act, . . . § 10(b) of the Securities Exchange Act of 1934, . . . the civil provisions of [RICO], . . . and§ 12(2) of the Securities Act of 1933.”).

 The text in MABRA to which Trout points does merely the latter. Nor does Trout identify anything about arbitration that, in and of itself, creates an irreconcilable conflict with MABRA’s purposes. Thus, this aspect of his challenge fails.

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Late last month reasons for judgement were published by the US District Court for the District of Puerto Rico (h/t MMAPayout) upholding an arbitration clause diverting a lawsuit alleging violations of the Muhammad Ali Boxing Reform Act from court and into private arbitration.

In the recent case (Trout v. WBO) the Plaintiff was a professional boxer in good standing with the World Boxing Organization.  He alleged that they “abruptly and inexplicably dropped him from the WBO’s top four junior-middleweight rankings, effectively cutting off his eligibility to fight for the vacant junior middleweight title“.   Trout sued the WBO alleging breaches of the Ali Act, breach of contract, and fraudulent and negligent torts.  Among other protections, the Ali Act requires sanctioning organizations such as the WBO to keep and adhere to “guidelines for objective and consistent written criteria for the ratings of professional boxers“.

The WBO sought to remove the claim from the judiciary and have it adjudicated via private arbitration.  They relied on a clause in their regulations noting that “All WBO participants acknowledge and agree that the mandatory resort to the WBO Appeals Regulation is the sole and exclusive remedy for any claim, appeal or contest that arises from any right or status that is or could be subject to these Regulations or which results or could result from or relate to the interpretation or application of these Regulations“.

The Plaintiff argued this clause could not apply to over-ride a lawsuit based on allegations of the statutory breach of the Ali Act.  District Judge Delgado-Hernandez disagreed and ordered the case be resolved via arbitration.  In doing so the Court provided the following reasons:

Plaintiff maintains that he has the statutory right to sue in state or federal court for violations to the Muhammed Ali Boxing Reform Act, 15 U.S.C § 6309(d), and that the Grievance Committee lacks jurisdiction to hear claims under the statute because it “only has jurisdiction to entertain claims pertaining to its own regulations.” (Docket No. 40, pp. 13-14). However, contractually required arbitration satisfies the statutory prescription of civil liability in court. See, CompuCredit Corp. v. Greenwood, 565 U.S. 95, 101 (2012)(so recognizing). On this formulation, by agreeing to arbitrate a statutory claim a party does not forgo the substantive rights afforded by the statute, as it only submits to their resolution in an arbitral, rather than a judicial, forum. See, Mitsubishi Motors v. Soler Chrysler-Plymouth, 473 U.S. 614, 628 (1985) (so holding). So long as the prospective litigant effectively may vindicate its statutory cause of action in the arbitral forum, “the statute will continue to serve both its remedial and deterrent function.” Id. at 637; CompuCredit Corp., 565 U.S. at 101 (noting that “contractually required arbitration of claims satisfies the statutory prescription of civil liability in court”).

Similarly, as noted above, insofar as plaintiff alleges that the WBO violated the Muhammed Ali Boxing Reform Act by breaching its Regulations, the claims under the Act are also within the scope of the arbitration clause. For that reason, plaintiff will still be in a position to exercise his rights and submit its claims under the Muhammed Ali Boxing Reform Act if his claims are sent to arbitration before the Grievance Committee. And because his claims under the Act are inexorably intertwined to the WBO’s alleged breach of the Regulations, they too are within the scope of the arbitration clause.


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