Former Pride Owners Sue Zuffa Holding Companies, Fertittas
Adam Swift Apr 7, 2008
When Zuffa purchased Pride in March 2007, the MMA world immediately
began anticipating the epic battles that would follow. However, the
"Super Bowl of MMA" never materialized, and Zuffa ultimately
abandoned the Pride brand in October.
Now, one year later, the acquisition appears set to provide the fireworks it initially promised -- only in the court room instead of the cage.
Nobuyuki Sakakibara, Ubon, and Dream Stage Holdings sued Pride FC
Worldwide, both the Nevada and Japanese corporate entities, as well
as Lorenzo and Frank Fertitta individually on April 2 in U.S.
District Court in Las Vegas.
The suit is apparently the only response forthcoming to a Nevada state court action instituted Feb. 1 by Pride FC Worldwide against the former owners of Pride. Neither Sakakibara nor Ubon has entered an appearance in that case, while Dream Stage Holdings, a Nevada Corporation, recently filed a motion to dismiss because it is not a party to any of the agreements that are the subject of the complaint.
The suit filed by the former owners of Pride in federal court, under diversity jurisdiction, seeks damages for breach of the asset purchase and consulting agreements that were part of the Pride transaction, as well as fraudulent and negligent misrepresentation and breach of the covenant of good faith and fair dealing.
The complaint alleges that Pride was sold to the owners of the UFC with the promise that the Pride brand would be maintained as a "global top-level brand." This promise allegedly resulted in the former owners' decision to sell to the Fertittas despite more lucrative financial offers from other suitors.
According to the complaint, Sakakibara also met with another "company which promotes martial arts related events, an operator of another sports-related business and investors in the entertainment industry, and received various offers to purchase Pride or to enter into business partnerships with plaintiffs."
However, the suit alleges that the defendants had no intention of fulfilling that promise.
"In fact, based on comments made by defendants' representative and defendants' conduct, plaintiffs believe that defendants acquired Pride to destroy it, thereby eliminating the biggest competition they had in the industry," the complaint states.
The complaint also says Sakakibara never approached the Fertittas about purchasing Pride. Instead he was "was unilaterally and continually approached by the Fertittas. The Fertittas on multiple occasions made offers for the purchase of Pride and continually expressed a strong commitment to acquire the Pride brand."
Following these offers, Sakakibara first began negotiations with the Fertittas on Oct. 22, 2006. The complaint alleges that Lorenzo Fertitta told Sakakibara that "for the sound growth of the entire mixed martial arts industry over the course of the next 20 to 30 years, it was essential for both Pride and UFC to have the same owner who would manage and maintain these two brands from a position akin to a commissioner so that appropriate order and rules could be created to protect fighters and maintain and expand the market."
Instead, the complaint says the Fertittas' real motivation in acquiring Pride was to destroy its biggest competitor, obtain access to fighters under contract to Pride and acquire the Pride videotape library and other intellectual property.
The complaint cites comments made in Japan by Jamie Pollock, Zuffa's Pride representative, and subsequent statements made by UFC President Dana White. It also alleges that the UFC signed several fighters "who symbolized Pride" to contracts with the UFC without the plaintiff's knowledge.
The suit notes that since acquiring Pride, the defendants have not attempted to hold a single Pride event and fired all of the company's employees in October 2007. The complaint references these actions as proof of the defendants' breach of their promise to maintain Pride as a global MMA brand.
Also addressed in the complaint are the background checks that form the core of the dispute. Under Section 5.3 of the asset purchase agreement, Sakakibara agreed to submit to and pass a "reasonably necessary" background check. According the complaint, though, the Nevada Gaming Commission Rules did not require Sakakibara to submit to or pass a background check. Therefore the background check was not "reasonably necessary" and therefore not required under the terms of the agreement.
The complaint alleges that if a "reasonably necessary" background check were required, it was with the Nevada State Athletic Commission because the agreements pertained only to mixed martial arts events, not gaming enterprises. Sakakibara submitted to and passed a background check with NSAC as part of its licensing procedure.
Ubon is a joint stock corporation incorporated in Japan and owned in full by Sakakibara. Dream Stage Holdings is a joint stock corporation under the laws of Japan and is the parent company and owner of Dream Stage Entertainment. Sakakibara owns more than 95 percent of DSH.
Adam Swift is the Editor of MMAPayout.com.
Now, one year later, the acquisition appears set to provide the fireworks it initially promised -- only in the court room instead of the cage.
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The suit is apparently the only response forthcoming to a Nevada state court action instituted Feb. 1 by Pride FC Worldwide against the former owners of Pride. Neither Sakakibara nor Ubon has entered an appearance in that case, while Dream Stage Holdings, a Nevada Corporation, recently filed a motion to dismiss because it is not a party to any of the agreements that are the subject of the complaint.
In an ironic twist, the motion accused Zuffa of including the DSE
Nevada Corporation in an effort to defeat diversity jurisdiction.
Zuffa is currently contesting a similar legal strategy employed by
HDNet Fights in its suit against Zuffa for declaratory judgment on
Randy Couture (Pictures)'s promotional contract.
The suit filed by the former owners of Pride in federal court, under diversity jurisdiction, seeks damages for breach of the asset purchase and consulting agreements that were part of the Pride transaction, as well as fraudulent and negligent misrepresentation and breach of the covenant of good faith and fair dealing.
The complaint alleges that Pride was sold to the owners of the UFC with the promise that the Pride brand would be maintained as a "global top-level brand." This promise allegedly resulted in the former owners' decision to sell to the Fertittas despite more lucrative financial offers from other suitors.
According to the complaint, Sakakibara also met with another "company which promotes martial arts related events, an operator of another sports-related business and investors in the entertainment industry, and received various offers to purchase Pride or to enter into business partnerships with plaintiffs."
However, the suit alleges that the defendants had no intention of fulfilling that promise.
"In fact, based on comments made by defendants' representative and defendants' conduct, plaintiffs believe that defendants acquired Pride to destroy it, thereby eliminating the biggest competition they had in the industry," the complaint states.
The complaint also says Sakakibara never approached the Fertittas about purchasing Pride. Instead he was "was unilaterally and continually approached by the Fertittas. The Fertittas on multiple occasions made offers for the purchase of Pride and continually expressed a strong commitment to acquire the Pride brand."
Following these offers, Sakakibara first began negotiations with the Fertittas on Oct. 22, 2006. The complaint alleges that Lorenzo Fertitta told Sakakibara that "for the sound growth of the entire mixed martial arts industry over the course of the next 20 to 30 years, it was essential for both Pride and UFC to have the same owner who would manage and maintain these two brands from a position akin to a commissioner so that appropriate order and rules could be created to protect fighters and maintain and expand the market."
Instead, the complaint says the Fertittas' real motivation in acquiring Pride was to destroy its biggest competitor, obtain access to fighters under contract to Pride and acquire the Pride videotape library and other intellectual property.
The complaint cites comments made in Japan by Jamie Pollock, Zuffa's Pride representative, and subsequent statements made by UFC President Dana White. It also alleges that the UFC signed several fighters "who symbolized Pride" to contracts with the UFC without the plaintiff's knowledge.
The suit notes that since acquiring Pride, the defendants have not attempted to hold a single Pride event and fired all of the company's employees in October 2007. The complaint references these actions as proof of the defendants' breach of their promise to maintain Pride as a global MMA brand.
Also addressed in the complaint are the background checks that form the core of the dispute. Under Section 5.3 of the asset purchase agreement, Sakakibara agreed to submit to and pass a "reasonably necessary" background check. According the complaint, though, the Nevada Gaming Commission Rules did not require Sakakibara to submit to or pass a background check. Therefore the background check was not "reasonably necessary" and therefore not required under the terms of the agreement.
The complaint alleges that if a "reasonably necessary" background check were required, it was with the Nevada State Athletic Commission because the agreements pertained only to mixed martial arts events, not gaming enterprises. Sakakibara submitted to and passed a background check with NSAC as part of its licensing procedure.
Ubon is a joint stock corporation incorporated in Japan and owned in full by Sakakibara. Dream Stage Holdings is a joint stock corporation under the laws of Japan and is the parent company and owner of Dream Stage Entertainment. Sakakibara owns more than 95 percent of DSH.
Adam Swift is the Editor of MMAPayout.com.
