Analysis: Inside Zuffa’s Legal Win Over Shamrock

By Tracey Lesetar Feb 25, 2010
Ken Shamrock was handed a significant legal setback earlier this month after a Nevada state court judge entered judgment against him and in favor of the UFC’s parent company, Zuffa, LLC.

Shamrock, one of the UFC’s first Hall of Fame inductees, had sued Zuffa for an alleged breach of a promotional rights contract that he and Zuffa had agreed to while setting up his final rematch with Tito Ortiz on Oct. 10, 2006 (“Shamrock-Ortiz III”).

Shamrock lost that fight by way of TKO, and he announced his retirement just moments after the bout concluded. But approximately eight months later, Shamrock made a play to come back for another fight based on the terms of the contract, which sparked a showdown between Shamrock and Zuffa that lasted for the better part of two years and went to trial Feb. 9-10.

The parties to the suit agreed that the contract called for Zuffa to promote Shamrock-Ortiz III and clearly contemplated that Shamrock would retire immediately following the fight. But the year-long contract also included provisions that left the door open for Shamrock to come out of retirement, at which point he could potentially pick up one more fight in the UFC.

In fact, after reviewing evidence and testimony from UFC President Dana White, Ken Shamrock and others, Judge Susan H. Johnson found that this “comeback” provision was inserted at Zuffa’s behest, not Shamrock’s. According to Zuffa, this comeback language was only a contingency plan in the event that Shamrock-Ortiz III ended in a controversial stoppage, a draw, an “unexpected win by Shamrock” or if there was an unexpected decision by Shamrock not to retire.

To further aid her interpretation of the contract, the judge reviewed evidence consisting of communications among UFC Chief Operating Officer Kirk Hendrick, White and Shamrock’s agent/attorney Rodney Donahoo. The judge concluded that the “comeback” provision’s purpose was to guarantee that if Shamrock were to come out of retirement to fight one more time, it would be for the UFC -- and the UFC only. Shamrock claimed that this part of the agreement obligated Zuffa to give him one more fight when he came out of retirement. Zuffa, on the other hand, essentially argued that the clause committed Shamrock to fight one more time if and when Zuffa consented to it, but that it was under no contractual obligation to give him a fight if it didn’t want to.

The judge decided in favor of Zuffa for three key reasons. First, the judge agreed with Zuffa that the contract language committed Shamrock to the UFC for one more bout, but that Zuffa had no parallel obligation to accept and promote such a fight.

The second reason the judge decided in favor of Zuffa was based on her interpretation of the hotly contested meaning of the word “or” as used in the contract. According to the contract, if Shamrock retired after Shamrock-Ortiz III -- which was clearly his intention -- Zuffa had three options. It could: (1) treat the one-year term of the contract as suspended during his retirement, (2) declare that Zuffa had no further obligations to promote Shamrock, “or” (3) give notice to Shamrock that Zuffa was “accelerating,” or terminating, the contract.

When Shamrock’s agent told Zuffa in June 2007 that he was contemplating a return to the Octagon and would be demanding his last fight per the contract, Zuffa immediately asserted that it considered the contract “suspended” during Shamrock’s retirement (under the first provision). Later that same month, Zuffa told Shamrock that it was terminating the contract (under the third provision). Shamrock’s attorney argued that because Zuffa first chose to treat the contract as suspended during Shamrock’s eight-month retirement, it could not also elect to terminate it at a later date. In essence, he claimed that the word “or” in this provision of the contract meant that Zuffa was entitled to choose any of the three options, but only one, and by electing the first option, it was barred from later choosing the third option. After looking at the evidence to determine what the parties intended by inserting the word “or,” the judge concluded the word “or” meant “and” in this context. Zuffa was therefore entitled to both suspend and terminate the agreement, and did not breach the contract by exercising both options.

As a third and alternative basis for deciding in favor of Zuffa, the judge reasoned that even if she found Zuffa had breached the contract, Shamrock waived his right to challenge it by failing to provide timely notice and an opportunity for Zuffa to fix the breach, which was required under the agreement.

Shamrock’s attorney could not be reached for comment on whether Shamrock would be appealing the decision to a Nevada appellate court. Further thickening the plot, in a UFC news release last week, Zuffa’s attorneys pointed out that all contracts between the UFC and its fighters, including Shamrock’s, contain a “clear and unambiguous” attorney fees clause, which would commit any fighter disputing his contract in court to paying Zuffa’s legal fees should Zuffa prevail. Accordingly, Zuffa intends to go after Shamrock for attorney fees from this lawsuit, even if the company has to go back to court in order to do it.

This article was co-authored by “J.R.” Riddell. Tracey Lesetar and “J.R.” Riddell are attorneys and practicing members of the California State Bar. This article does not provide legal advice, and any opinions expressed in this article are solely those of the authors and do not reflect the views of their law firm, Orrick, Herrington & Sutcliffe LLP. Riddell can be reached at jriddell@sherdog.com and Lesetar can be reached tlesetar@sherdog.com.
<h2>Fight Finder</h2>
Around The Web