Major changes to UFC contracts add more restrictions, waiver to prevent class action lawsuits

There have been significant changes in UFC contracts.

This article was originally posted to Bloody Elbow on February 10, 2023.

The UFC has recently made several changes to their promotional agreements, which could have a major impact in how the sport operates moving forward.

As seen on the several new UFC contracts obtained by Bloody Elbow, sweeping changes have been made that are both restrictive and concerning for fighters. The biggest change is the addition of an arbitration agreement and class action waiver. These have the potential to impact the current antitrust lawsuit and reverse some of the contractual gains that fighters have seen made over the last few years.

Previous improvements to UFC contracts

To provide better context on these newest changes, it’s worth discussing improvements to UFC contracts in recent years, thought to be in response to the antitrust lawsuit filed against them.

Last year, Bloody Elbow’s John S. Nash was the first to report on changes the UFC had made to their contracts. These changes included the additions of a “sunset clause” that put a five year maximum contract length, limitations to the amount of time a contract could be extended for turning down fights, removal of the exclusive negotiating period, and a shortened two-year window after the contract ended where UFC retained image rights.

The UFC introduced these changes to their contracts sometime in 2017, a date that now divides the two current lawsuits facing them. The class period for Le v Zuffa covers December 16, 2010 through June 30, 2017, while a second lawsuit filed in 2021 covers every fighter that had a match in the UFC between July 1, 2017 and today.

These changes might end up forcing the two classes to be split, and potentially mitigating damages against the UFC, with their Defense claiming that fighters in both groups are fighting under different contracts and market conditions.

Fighters have benefited from these changes, most noticeably Francis Ngannou, who took advantage of the new “sunset” clause to exit the promotion while UFC champion, which would have been unimaginable just a few years ago. Other fighters, like Paulo Costa, now seem to be following the same path as Ngannou, while it seems very probable that others have used the threat of waiting out their contract in order to attain a better deal.

As reported by Nash on his podcast, the UFC recently made additional changes that threaten to make it much more difficult for future fighters to do the same.

Chief amongst these are three additional pages inserted into Section XXV: Choice of Law and Dispute Resolution, mainly relating to an arbitration agreement.

Arbitration

If fighters have any disagreements with the UFC over anything in their promotional agreements, instead of taking them to court, they are now required to have the dispute arbitrated.

Where parties hereto seek the resolution of any issues relating to or arising out of this Agreement, the Bout Agreement, and or any interaction or relationship between ZUFFA and Fighter, both expressly consent to arbitration, instead of court procedures, to resolve Covered Claims (as defined below.)

Arbitration is the process by which a neutral third party makes a binding decision relating to a dispute. The Federal Arbitration Act (9 U.S.C. Sections 1 et seq.) shall govern this agreement to arbitrate, as well as applicable state arbitration law only to the extent it is not preempted by the Federal Arbitration Act. This agreement to arbitrate is in consideration of Fighter’s contract with ZUFFA. Both ZUFFA and Fighter understand that by using arbitration to resolve disputes they are giving up any right that they may have to a judge or jury trial with regard to all claims subject to this agreement to arbitrate.

Unless either party requests three arbitrators, the arbitration shall be before a single neutral arbitrator and administered by the Judicial Arbitration and Mediation Service (*JAMS) in Clark County, Nevada. Except as provided in this Agreement, the JAMS Comprehensive Arbitration Rules & Procedures effective as of the commencement of the arbitration (“JAMS Rules”) shall govern the arbitration proceedings.

On the surface this doesn’t seem like that big of change. To begin with, very few fighters have ever sued the UFC. Adding arbitration would not take away a fighter’s right to dispute something in the agreement. It would, however, likely tilt the playing field even more heavily into the UFC’s favor.

Arbitration significantly protects the UFC better than actual legal proceedings

Arbitration, unlike the lawsuits in the courts, are private. There is no public record detailing what is being disputed, or any disclosure of filings or exhibits. Fighters and media will all be kept in the dark about the developments, which only helps the UFC’s cause, especially in the long run.

There’s also no precedent that gets set when it comes to arbitration, and changes won’t get applied to all the other fighters in the roster. In principle, even if one fighter gets an advantageous result from arbitration, others who also want to challenge the same issue will have to argue and try to get the same ruling, without the favorable conditions that a legal precedent would’ve provided.

Waiver to protect UFC from collective action and lawsuits

In addition to the arbitration, section XXV includes a class action waiver:

“Waiver of Class, Collective, and Representative Actions. To the maximum extent permitted by applicable law, the parties agree that no claims may be initiated or maintained on a class action, collective action, or representative action basis either in court or arbitration. This means that neither party may serve or participate as a class, collective, or representative action representative or member in any proceeding as to Covered Claims either in court or in arbitration.”

“Claims Not Covered. The claims which are not covered by this agreement to arbitrate are, to the extent applicable: claims that are not subject to mandatory binding pre-dispute arbitration pursuant to applicable federal or state law, including claims brought pursuant to the California Private Attorneys General Act, and claims currently pending in the lawsuit entitled Le v. Zuffa, LLC, Case No. 15-cv-01045 in the District of Nevada.”

The requirement that fighters resolve disputes through arbitration instead of going through the courts also extends to class actions lawsuits. This could have major implications for the current Johnson v Zuffa case. While there is a specific carve out for Le v. Zuffa, most likely because the Judge has already verbally announced his intention to grant class certification, Johnson v Zuffa is still in the early phases of the legal process.

A fighter that signs this agreement will not be allowed to be a class member in any class action lawsuit, including the current Johnson v Zuffa lawsuit, even if the court certifies the class and the fighter meets all the criteria to be classified as a member. If damages are awarded by a jury or settlement (Plaintiffs are asking for hundreds of millions of dollars in damages, potentially billions if trebled) fighters who signed this agreement will not be eligible for them.

Instead, if fighters shared the same dispute as found in a class action lawsuit, they would have to go to arbitration to have their individual dispute heard separately. They would also have foot the bill themselves even if they are making the same case that class action attorneys and experts — who were working on contingent — may have already made. The price of hiring such experts for something like an antitrust case would likely be prohibitive for all but a few fighters.

If damages are awarded, fighters who signed this agreement will not be eligible

The waiver would also likely apply retroactively. Fighters that competed in the UFC between July 1, 2017 and today, and was thus a potential class member in Johnson v. Zuffa, would be now be excluded from class membership if they signed this contract. This would not only impact the period covered by this new agreement but also for the period they fought under their previous agreement that did not include the waiver. This could dramatically reduce the number of class members, lowering not only the amount the UFC could potentially pay out in damages but also the potential number of fighters that would receive monetary compensation.

This waiver for class action could also lead to the UFC re-introducing some of their older, more restrictive contractual provisions. Since the intent of the those 2017 changes seems to have been to mitigate potential damages, then a waiver preventing any new member from even becoming a member of the class action lawsuit would mean those changes were no longer needed.

We already see some evidence that this may indeed be happening.

Return of controversial tolling provisions

One of the complaints in both antitrust lawsuits is the use of tolling provisions by the UFC to extend their contracts. If the promotion offers a fighter a bout and they are unable or unwilling to take it, the UFC has the ability to extend the agreement an additional six months or the amount of time required to find another opponent. Before 2017, there was no limit to the number of extensions the UFC can add this way. Contracts could therefore be in perpetuity if the fighter decided he was no longer willing to compete for the promotion.

In 2017, the UFC changed this provisions so that the maximum amount of time the UFC could extend a contract for a fighter that was unable or unwilling to compete was 18 months.

In the most recent contracts Bloody Elbow has obtained, this 18 month extension limit has been removed. The UFC has also added multiple reasons as for why opponents might not be available.

“In the event that Fighter is offered a Bout against an opponent designated by ZUFFA but does not accept that Bout because the Fighter is unable, unwilling or refuses to compete for any reason whatsoever (a “Declination”), for each such Declination, Zuffa may, at its election, extend the Term for the length of time sufficient to find a new opponent to accept the Bout or for six (6) months, whichever is longer. Such extension is necessary to provide Fighter with a suitable replacement Bout, as ZUFFA and Fighter recognize attendant difficulties including, but not limited to, that there is a limited pool of suitable opponents, suitable opponents may have pre-existing Bout obligations, and sufficient lead time must exist to adequately promote the replacement Bout.”

Due to the return of this controversial clause, now the only limit to how long a contract could be extended is the five year “sunset” provision.

Longer ‘Sunset’ clause

Another welcome change stemming from the antitrust lawsuit was the “sunset” period added to UFC contracts. Francis Ngannou was able to become a free agent thanks to this clause terminating his contract after five years.

Unfortunately for other fighters moving forward, this section has since been tweaked.

Contracts Bloody Elbow have obtained now show that the sunset period starts after the fighter’s first bout, instead of the clock starting the day the deal was signed. They’ve also added a clause stating that suspensions no longer count on this duration.

Notwithstanding the foregoing, the Agreement will not be extended pursuant to this Section IV beyond the date which is five (5) years after Fighter’s first Bout under this Agreement, provided that any period of time in which Fighter is unable or unwilling to compete because he/she has been suspended or revoked by an Athletic Commission or anti-doping agency shall not be counted towards such five (5) year maximum term length.

Compared to the previous set up, this new language could easily mean that the five-year period essentially ends up months or years longer, especially if Athletic Commission medical suspensions are included.

Is this legal?

How exactly would the UFC — a company being sued for abusing its market power by forcing one-sided contract terms — be allowed to now force contract terms that prevent them from being sued for abusing their market power?

Well, the Supreme Court of the United States upheld that this was legal in Epic Systems Corp. v. Lewis back in 2018 in a 5-4 ruling. This makes it unlikely that these new additions to UFC contracts can be challenged without new legislation.

Overall impact?

Led by Ngannou, the first wave of fighters who are just now able to take advantage of less restrictive UFC contracts, may also end up being the last to do so.

As former two-division champ Randy Couture noted on his attempt to take on the UFC and restrictive contracts during his career, “the upside to that is I got a much better deal moving forward. The downside is they closed a bunch of the loopholes in those crappy contracts and made it more difficult for other fighters moving forward.”

With waivers and arbitration now insulating the UFC from lawsuits, we should expect to see more restrictive terms in future contracts.

By asking fighters to waive and concede even more of their rights, the UFC may end up with the best of both worlds: Adding to their already overwhelming leverage and control, while also being protected from class action threats