Understanding the legal ramifications of UFC’s COVID-19 waiver for fighters

Photo by Mike Roach/Zuffa LLC

Zach Arnold gives his break down of the fighters’ options — or lack thereof — when trying to challenge the terms in the UFC’s COVID-19 waiver.

The following is a guest post from Zach Arnold, the founder of FightOpinion.com, and is celebrating his 25th year of covering various combat sports.

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As American sports return to action in the Coronavirus era, UFC proclaims itself as a worldwide leader on showing everyone how business gets done.

The centerpiece of this touted triumph of public policy, as covered here and here on Bloody Elbow, is a liability waiver that everyone must sign to participate at future events.

If you believe UFC, this liability waiver is a preview of coming attractions for major professional sports leagues.

The NBA, MLB, NHL, and NFL have unions and players’ associations with high-powered attorneys preparing for the upcoming legal landmine of liability waiver requests. From gag orders to assumption of risk clauses, these liability waivers will cover vast swaths of tort law that take practicing trial attorneys years, if not decades to fully understand and comprehend.

Dana White wants fighters to sign a take-it-or-leave-it catch-all coronavirus waiver that gives a paycheck (or gift of access) in exchange for a complete forfeiture of legal protections.

The waiver is valuable for UFC because it hangs over the parties who sign the agreement like a Sword of Damocles. It’s lawfare by creating a contract to circumvent the legal system. The freedom to sign a contract is also the freedom to sign away your rights. Signing away your ability to tell the truth is also a matter of public policy.

It’s lawfare by creating a contract to circumvent the legal system

What happens when a party, who signs a liability waiver, experiences something they consider to be morally and ethically hazardous? These are the kinds of situations being war-gamed by athletes in unions across the country in collective bargaining sessions.

With UFC, there is no collective bargaining. Either you sign the waiver and make a living or you don’t sign the waiver and face the consequences.

It’s important to grasp what legal rights are being forfeited by fighters, spectators, and media members who sign the waiver.

When contract disputes arise because of conflicts in formation, jurisdiction, and enforceability involving state laws, Federal laws, and matters of Constitutional questions, a judge can be a neutral arbiter of determining legal rights for the parties involved.

It’s a pity that you forfeit all those legal rights when you sign UFC’s coronavirus waiver.

Photo by Josh Hedges/Zuffa LLC/Zuffa LLC via Getty Images

Arbitration

The standard UFC fighter contract has typically been centered around Nevada state law and its state court system.

The UFC coronavirus waiver completely circumvents the American court system. The waiver is built upon Nevada state law but its forum happens to be arbitration in Las Vegas, Nevada with JAMS. The arbitration clause reportedly has no carve outs for injunctive or declaratory relief.

“But I’ll go to court and a judge will understand that I had to sign this take-it-or-leave-it contract if I wanted to make a living.”

The waiver requests you sign away your legal rights to challenge enforceability by designating that question to, you guessed it, a three-arbitrator panel. Any court challenge will result in UFC filing a motion to compel arbitration and a judge having no choice but to punt the dispute to the contractually-stipulated arbitration panel.

Three important US Supreme Court cases in the last 15 years cemented current American arbitration policy.

A. In 2006, Buckeye Check Cashing, Inc. v. Cardegna established that an arbitrator is the person who determines whether a contract is valid — unless the arbitration clause itself in a contract is illegal.

B. In 2010, Rent-A-Center, West, Inc. v. Jackson established that you must challenge both the substantive and procedurable unconscionability of a contract including its arbitration provision or else you forfeit your right to have the dispute resolved in court.

But what if the arbitration clause states that only an arbitrator can determine arbitrability?

C. In 2019, Henry Schein v. Archer and White Sales established that there is no “wholly groundless” exception to the Federal Arbitration Act regarding a contract stipulating that an arbitrator is responsible for determining whether or not an arbitration clause is enforceable.

Apply this case law to UFC’s arbitration clause.

“Any dispute or disagreement between the parties hereto arising out of or in connection with any term or provision of this Agreement, the subject matter hereof, or the interpretation or enforcement hereof, the applicability of this Section 10 to such dispute or disagreement, or the organization or internal affairs of the Company (in each case, a “Dispute”) shall be submitted to final and binding arbitration in Las Vegas, Nevada, administered by Judicial Arbitration & Mediation Services (“JAMS”), or its successor, in accordance with the rules and procedures of JAMS then in effect.”

Once you sign UFC’s waiver, you have automatically forfeited your right to go to court. JAMS emphasizes this in their comprehensive rule book on arbitration:

(b) Jurisdictional and arbitrability disputes, including disputes over the formation, existence, validity, interpretation or scope of the agreement under which Arbitration is sought, and who are proper Parties to the Arbitration, shall be submitted to and ruled on by the Arbitrator. The Arbitrator has the authority to determine jurisdiction and arbitrability issues as a preliminary matter.

If the liability waiver is truly a UFC triumph of American public policy backed by The White House, then let the light of judicial scrutiny shine on the waiver. Why choose to implement arbitration instead of allowing a formal legal review in Nevada state court?

Fighting the waiver in arbitration

Let’s say you receive a nastygram from UFC stating that arbitration has been executed.

Once you sign UFC’s waiver, you have automatically forfeited your right to go to court

You’re panicking. You can’t afford, at minimum, a $25,000 retainer for an attorney who can practice in Nevada and has no conflict-of-interest issues in town. It’s not simple hiring a successfully active litigator in Las Vegas who hasn’t done business with UFC or with someone associated with the company.

Worse, you don’t know exactly what kind of fight you are about to engage in.

The arbitration waiver claims Nevada state law and jurisdiction. However, there’s substantive law and then there is procedural law. This is a critical point of distinction. Courts routinely state that arbitration is not considered a legal proceeding, therefore your state and Federal civil procedural legal rights to dispose a dispute have been eliminated.

Once UFC executes arbitration, you have to fight. Arbitrator awards are largely considered binding and irreversible unless a court determines that the award was based on fraud or conflict-of-interest. If you don’t fight UFC in arbitration and they obtain a large cash award, the game is over.

Strategy for fighting in arbitration

Defending yourself against UFC’s liability waiver involves attacking the waiver’s procedural unconscionability and substantive unconscionability.

Procedural unconscionability deals with how the agreement was conceived and executed. Examples of procedural unconscionability include: disparity in bargaining power to create adhesiveness, economic duress (a take-it-or-leave-it situation), confusion over what is being legally bargained, or criminal behavior such as fraud and extortion (unclean hands). See: DR Horton, Inc. v. Green

There are two parts to procedural unconscionability: oppression and surprise.

The most important arbitration strategy is to try to invalidate the agreement as a whole by arguing procedural unconscionability.

Substantive unconscionability deals with the legal issues created by provisions in an agreement. State law, Federal law, and Constitutional questions.

Under Nevada law, unconscionability is determined on a sliding scale. The stronger your case is on procedural unconscionability, the greater your chances are for invalidating the contract. If the scale is weighted more on substantive unconscionability, the contract may still survive but parts could be stricken. It’s why UFC has a severability clause in the waiver.

Photo by Chris Unger/Zuffa LLC/Zuffa LLC via Getty Images

Why the distinction between state substantive law and civil procedure matters

A defendant in the American court system has a slew of affirmative defenses and procedural options to mitigate or terminate lawsuits.

One of the strongest procedural tools for defendants in Nevada is the state’s anti-SLAPP statute. Strategic Lawsuits Against Public Participation. Anti-SLAPP was created in response to courts being flooded with frivolous tort suits involving causes of action like defamation, invasion of privacy, and interference with prospective advantage.

Anti-SLAPP law is based on substantive immunity but hinged on state civil procedure as a motion to strike. As famed First Amendment attorney Marc Randazza spelled out in a 2016 Amicus brief for the state’s landmark Shapiro v. Welt case:

“The legislature also took this opportunity to clarify that the Anti-SLAPP statute creates a substantive immunity from suit, not just immunity from liability, drawing inspiration from Metabolic Research, Inc. v. Ferrell, 693 F.3d 795, 797 (June 18, 2012) (finding that California’s Anti-SLAPP statute provides immunity from suit, rather than immunity from liability).”

All of the procedural benefits one receives in the Nevada court system are gone when you’re in mandatory arbitration. Arbitration isn’t a legal forum. Arbitration has its own rules on discovery, dismissals, attorney fees, and briefs. Arbitrators can apply their own interpretation of state law and the appeals process is extremely limited.

Let’s demonstrate how much of a loss it is to have your procedural rights stripped from you as a defendant against UFC in arbitration.

The hypothetical

When the first-reported UFC coronavirus waiver was given to fighters, it contained an odious non-disparagement clause. We’ve since learned that this has been removed from some waivers for parties to sign.

For the sake of argument, we will use the reported non-disparagement clause for our hypothetical as an example of what kind of complex legal issues it created and how arbitration impacted key contractual defenses. It is the perfect demonstration of court protections for defendants.

In our hypothetical, UFC requests Fighter X to sign the first version of their coronavirus waiver or else they will not allowed to fight at UFC 249. Fighter X is currently under a standard UFC fighter contract.

Under economic duress, Fighter X signs the waiver but doesn’t fully understand the legal requirements in the various waiver clauses.

The waiver contains no arbitration provision.

Fighter X is at a weigh-in and doesn’t see hand sanitizer available for usage. Fighter X records video of no hand sanitizer at the weigh-in and posts it on social media. Fighter X lodges a formal complaint with a state athletic commission but never hears back from the commission. Both communication avenues are public forums dealing with an issue Fighter X considers of public interest.

After posting video online, UFC immediately threatens a lawsuit against Fighter X for violating the old waiver’s non-disparagement clause. Fighter X is told they could lose all money as stipulated in the liquidated damages portion of the non-disparagement clause.

Photo by Mike Roach/Zuffa LLC

Arbitration versus the court system

In our hypothetical, UFC would have had to file a formal legal complaint against Fighter X in court. It would have forced UFC to cite specific Cause of Actions and defend why they created different versions of liability waivers for different fighters. The changes would have been under judicial scrutiny.

None of the old waiver’s provisions we saw specified Nevada statutes, causes of actions/doctrine, or established state case law. The waiver just stated Nevada as choice of law.

When you start researching Nevada statutes, causes of action, and Nevada Supreme Court case law, a very interesting road map is created. Do the waiver provisions match up with established state legal precedents?

Take the old non-disparagement clause for example. This homemade clause does not specify any sort of Nevada statute or doctrine. Why does this stand out? In 2009, a Nevada Supreme Court decision elaborated on the civil doctrine known as Business Disparagement and spelled out the elements needed to be proven to succeed on the merits.

Apply what you know now with the old non-disparagement clause in UFC’s first waiver:

“If the Participant is a Fighter, the Participant hereby acknowledges and agrees that in the event that the Participant breaches this Paragraph 7, the Company may revoke all or any part of any prize monies or awards won by the Participant in connection with the Activities, including, but not limited to, purses, win bonuses, other fight-related bonuses and event-based merchandise royalties.”

This was arbitrary and capricious but UFC would have argued that the old non-disparagement clause was a matter of a commercial transaction. UFC attempted to avoid proving actual economic damages in their “home made” non-disparagement clause by tying it to a liquidated damages hook based on how much the company paid the fighter.

A judge could have: a) enforced the provision, b) struck down the provision as unconscionable/a violation of public policy, or c) decided to apply elements required for the Business Disparagement COA. That’s a matter of substantive law.

Then there’s procedural law and it is less forgiving terrain for UFC.

Two recent 2020 Nevada Supreme Court cases demonstrate that Business Disparagement is ripe for challenge under Nevada’s anti-SLAPP statute. Abrams v. Sanson and VETERANS IN POLITICS INTERNATIONAL, INC. (Sanson) v. WILLICK specifically apply anti-SLAPP to Business Disparagement.

In our hypothetical, Fighter X could file an anti-SLAPP motion to strike against Business Disparagement on the following grounds: 1) their complaint to the athletic commission is protected speech; 2) their video on social media of no hand sanitizer is documented proof of truth about 3) an issue of public interest.

The non-disparagement clause not only generated enormous push back from the public, it also created a myriad of legal issues ripe for an embarrassing smackdown in the court system.

Procedural benefits one receives in the Nevada court system are gone when you’re in mandatory arbitration

This is why procedural law is critical for legal protection. If Fighter X attempted another affirmative defense, such as a state whistleblower statute, they would face a burden. Nevada’s whistleblower law only covers communication to a public official or agency. It does not protect speech in a non-agency forum like social media. (See: Wiltsie vs. Baby Grand Corp). That’s where anti-SLAPP protection comes in as a matter of both substantive and procedural law.

Now let’s revise our hypothetical to fit what current facts we know about UFC’s liability waiver.

Let’s say Fighter X signed the waiver with the arbitration clause. None of the procedural protections in Nevada’s anti-SLAPP statute would apply in arbitration.

In a best-case scenario, an arbitrator would recognize legislative intent and apply anti-SLAPP as substantive law. But you don’t know that. It’s no guarantee. Why? There is an ongoing war in the Federal court system over whether or not application of state anti-SLAPP procedural law is in conflict with the Federal Rules of Civil Procedure. If Federal judges are acting bitchy about state anti-SLAPP statutes, what makes you think application of anti-SLAPP protections are a lock in arbitration? They’re not and that’s big trouble.

Surviving arbitration

Let’s say Fighter X heroically manages to win in arbitration. You likely wouldn’t know about it unless the entire waiver is voided by an arbitrator. And if UFC loses in arbitration, there isn’t any sort of precedent being created because the dispute isn’t in the court system. If Fighter X wins, it doesn’t mean that Fighter Y will win if they’re also challenged to arbitration.

This UFC coronavirus waiver is a perfect example of why many people are clamoring to amend the Ali Act to cover MMA in order to give fighters a private right of action in Federal court to discourage such a disparity in bargaining power. UFC’s waiver is also the kind of example athletes in major professional sports are studying in order to squash like a bug if they’re faced with the same situation.

Once UFC pushes you into arbitration, you’ve forfeited your legal rights. Some kind of bargaining process in the name of public policy.

The process is the punishment.