Wilder v. World of Boxing LLC

• Decision Date: 19 April 2018
• Docket Number: 16 Civ. 4423 (ALC) (GWG)
• Citation: 310 F.Supp.3d 426
• Parties: Deontay WILDER, et al., Plaintiffs, v. WORLD OF BOXING LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

310 F.Supp.3d 426

Deontay WILDER, et al., Plaintiffs,

v.WORLD OF BOXING LLC, et al., Defendants.

16 Civ. 4423 (ALC) (GWG)

United States District Court, S.D. New York.

Signed April 19, 2018

Ali R Jaffery, George William Allison Bartholomew, Peter B. Schalk, Judd Burstein, Judd Burstein, P.C., New York, NY, for Plaintiffs.

Tanya Eleni Kalivas, Kent A. Yalowitz, Arnold & Porter Kaye Scholer LLP (NYC), New York, NY, for Defendants.

OPINION AND ORDER

GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE

This case consists of two consolidated actions relating to a heavyweight championship boxing match that was supposed to occur on May 21, 2016, but that never took place. Heavyweight boxing champion Deontay Wilder and DiBella Entertainment, Inc. ("DBE") claim that boxer Alexander Povetkin, who tested positive for a banned substance right before the match was to take place, and World of Boxing LLC ("WOB"), breached two contracts relating to that match and seek a declaratory judgment that they are owed money pursuant to an escrow agreement covering the prize money for the bout. WOB, Povetkin, and Andrey Ryabinskiy (collectively the "WOB Parties") assert that Wilder, DBE, and Lou DiBella (collectively the "Wilder Parties") breached these agreements and seek to have the escrowed money returned to them. All parties now move for summary judgment.¹ For the reasons set forth below, both sides' motions are granted in part and denied in part.

I. BACKGROUND

A. Facts

The following facts are undisputed unless otherwise noted.

1. The Parties and the Bout

The World Boxing Council ("WBC") is one of four major organizations that sanctions professional boxing matches. See Deposition of Deontay Wilder, dated Dec. 7, 2016 (annexed as Ex. 67 to Yalowitz Decl.) ("Wilder Dep."), at 14:10–14. At the time the parties entered into the contracts, Wilder was the WBC World Heavyweight Champion. See Declaration of Lou DiBella, dated Oct. 31, 2017 (annexed as Ex. 6 to Schalk Decl.) ("DiBella Decl."), at ¶ 4; WBC Championship Bout Agreement, dated Apr. 11, 2016 (annexed as Ex. 1 to Yalowitz Decl.) ("Bout Agreement"), at 1. Wilder had a management team that included Shelly Finkel, Jay Deas, and Al Haymon. See DiBella Decl. ¶ 1. Wilder's fights were often promoted by DBE, a promotional company whose founder and president was Lou DiBella. See DiBella Decl. ¶¶ 1, 6–7.

The WBC has issued Rules and Regulations governing the promotion of championship bouts. These rules give WBC discretion to designate a "mandatory challenger," against whom a WBC champion is required to defend his title. See Rules & Regulations of the WBC, updated Nov. 2015 (annexed as Ex. 7 to the Schalk Decl.) ("WBC R. & Regs."), at §§ 3.4, 3.7. These rules also provide that "[a]fter the WBC orders a bout, there shall be a period of thirty (30) days for the parties to negotiate, finalize, execute, and file a contract for the bout." Id. § 2.8. If no agreement is reached in that period, the rules permit the WBC to institute a "purse offer" procedure by which promoters bid at an auction for the right to promote the bout. Id. §§ 2.5–2.16. Out of the winning bid, 10% must then be set aside as a bonus for the bout's winner, and in a championship bout, 70% of the remaining 90% must be paid to the champion, and 30% of the remaining 90% to the challenger. See id. § 2.17. The promoter winning the purse offer must "within seven (7) days [after winning the purse offer] present championship bout contracts, either on WBC's form or in a form deemed acceptable by the WBC in its sole discretion, to each boxer or the boxer's representative to be signed and delivered to the WBC within twenty-one (21) calendar days after the purse offer ceremony." Id. § 2.21.

In early 2016, a heavyweight boxer named Alexander Povetkin was the mandatory challenger to Wilder's heavyweight title. DiBella Decl. ¶ 4. WOB, which is controlled by Alexander Ryabinskiy, promotes Povetkin's fights. See id. ¶¶ 4–5. Accordingly, WOB and DBE discussed making a contract under which they would jointly promote the Wilder–Povetkin bout (hereinafter the "Bout"). Id. ¶ 4. The parties could not reach an agreement. Id. ¶¶ 4–5. The right to promote the Bout was therefore the subject of a purse offer, following which WOB emerged as the winning bidder with a bid of $7.15 million. Id. ¶ 5; Bout Agreement § 4.

2. The Bout Agreement

Following the purse bid, more negotiations occurred in an effort to reach agreement on a bout contract. See DiBella Decl. ¶ 9. Although DBE was not the promoter of the Bout, DBE assisted Wilder's management team in negotiating with WOB and Povetkin. Id. During these negotiations, Wilder's management team also brought in an attorney named John Wirt to negotiate on their behalf. See id. ¶¶ 1, 10, 13.

On April 11, 2016, the boxers, DBE, and WOB signed an agreement governing the Bout. See Bout Agreement. The Bout Agreement provided that WOB "shall stage the WBC World Heavyweight Championship between [Wilder] and [Povetkin] at the Palace of Sports ‘Megasport’ in Moscow, Russia on the date of May 21, 2016, scheduled for 12 rounds." Id. § 1. DBE was required to make Wilder's services available, and WOB was required to make Povetkin's services available. Id. The Bout Agreement also stated that Wilder agreed to arrive in Moscow at least seven days prior to the Bout (that is, May 14, 2016) to assist in "publicizing, advertising, and promoting" the Bout. Id. § 11.

The Bout Agreement referenced the WBC Rules and Regulations. It provided that "[t]he WBC Rules & Regulations shall govern the event in its entirety and shall be binding on all Parties." Id. § 3. The Bout Agreement further provided that "[i]n the event that the Parties incur any dispute or controversy with respect to this contract, all parties understand and agree to be bound by the Rules and Regulations of the WBC." Id. § 14. In a separate clause, the Bout Agreement stated: "[t]he WBC shall exclusively perform any and all decisions, results, and actions relating to the Bout." Id. § 3.

The WBC Rules and Regulations include provisions addressing the use of performance enhancing drugs. The rules state that "[b]oxers rated or participating in any contest sanctioned by the WBC should not take, ingest, or have administered to him any substance, medicine, or drug ... that may enhance or reduce the boxer's performance in the ring." See WBC R. & Regs. § 4.29. Under the rules, "[a] boxer who has been found to have tested positive for banned substances ... shall be subject to such penalties or treatment as the WBC may determine appropriate in its sole discretion." Id. § 4.41. Additionally, the rules provide that

since issues may arise as to whether or not: (I) a boxer's exposure to prohibited substances was intentional; (ii) such substance(s) provided the boxer with an advantage; (iii) the testing procedure was reliable; (iv) other facts should be considered; [ ] the WBC does not employ or adhere to a "strict liability" standard in anti-doping matters. In each case, the WBC may in its discretion consider all factors in making a determination regarding responsibility, relative fault, and penalties, if any.

Id. § 4.40.

The Bout Agreement itself contains the following provision relating to performance-enhancing drugs:

[t]he WBC Clean Boxing Program ("CBP") shall be the exclusive program governing all aspects of anti-doping testing in both out-of-competition random testing and testing immediately after the Bout. As required by the WBC, testing under the CBP shall be performed by independent agency, the Voluntary Anti–Doping Association ("VADA"), and all sample collection management and transportation, testing and result reporting procedures and protocols shall be exclusively conducted by VADA and its officers and agents.

Bout Agreement § 7. In turn, the CBP states that "[r]esponsibility for strict compliance and adherence to all WBC anti-doping requirements shall be the sole and exclusive responsibility of each Eligible Boxer." WBC Clean Boxing Program (CBP) Testing and Results Management Guidelines (annexed as Ex. 25 to Schalk Decl.) ("CBP"), at § III. However, the CBP also provides that, based on the same reasons provided in the Rules and Regulations, "the WBC may in its discretion consider all factors in making a determination regarding responsibility, relative fault, and penalties, if any." Id. §§ V.G–H.

3. The Escrow Agreement

With respect to Wilder's compensation, the Bout Agreement required WOB to "place in escrow no later than twenty-one (21) days prior to the bout, under terms and conditions satisfactory to the Champion and DBE, ... US$4,369,365[ ], as the gross amount earned by the Champion." See Bout Agreement § 4. Accordingly, DBE, Wilder, WOB, and The Chicago Trust Company, N.A. ("CTC"), entered into an escrow agreement on April 19, 2016, in which CTC acted as escrow agent. See Escrow Agreement, dated Apr. 19, 2016 (annexed as Ex. D to DiBella Decl.) ("Escrow Agreement"). Under the Escrow Agreement, WOB had to place $4,369,365 in escrow at least 21 days before the Bout. See id. § 1.1. The escrow agent was then to pay these funds to Wilder in two disbursements "upon receipt of an original invoice signed by Wilder, an original affidavit signed by Wilder ... stating that the Bout ... took place on May 21, 2016 and a copy of an article from www.fightnews.com, confirming that the Bout ... took place on May 21, 2016." Id. §§ 1.3(a)–(b). Conversely, the agreement further provided that the escrow agent should disburse the funds to WOB

[u]pon receipt by the Escrow Agent of an original affidavit signed by an officer of WOB, containing the signature and a seal of the notary public, stating that the Bout did not or will not take place on May 21, 2016 and a copy of an article from www.fightnews.com, reporting that the Bout between Wilder and Povetkin is cancelled or postponed and did not or will not take place on May 21, 2016.

Id. § 1.3(c).

The escrow agent was required to notify the parties of...