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Round one goes to defending boxing manager in tying, monopoly fight

Although antitrust claims against a manager of top professional boxers for stifling the business activities of legitimate boxing promoters were inadequately alleged, complaining promoter Top Rank Inc. lives to fight another day. The federal district court in Los Angeles will allow Top Rank to file amended antitrust claims against professional boxing manager Alan Haymon and his companies. However, claims against defending asset management and investment advisory firms that offered “funding, business expertise, and operational supervision” to Haymon and his companies were dismissed with prejudice (Top Rank, Inc. v. Haymon, October 16, 2015, Walter, J.).

In July, Top Rank filed its complaint, alleging that Haymon engaged in an unlawful “tie out” and a conspiracy to restrain trade in violation of Section 1 of the Sherman Act, as well as attempted monopolization in violation of Section 2. Violations of the California Unfair Practices Act and California Unfair Competition Law also were pursued.

At the outset, the court determined that Top Rank did not satisfy common pleading requirements. In addition to impermissibly relying on group pleading, Top Rank failed to allege injury to itself to maintain standing. The plaintiff did not identify a single bout that it attempted to promote but was precluded from promoting by Haymon, a single venue from which it was blocked, or a single network that refused to broadcast a fight promoted by Top Rank, the court noted.

For purposes of a motion to dismiss, the court accepted the plaintiff’s two proposed relevant markets: (1) the market for the management of “Championship-Caliber Boxers” in the United States; and (2) the market for the promotion of Championship-Caliber Boxers in the United States. However, Top Rank failed to adequately allege that Haymon and his companies possessed market power or economic power in either of these relevant markets, in the court’s view. There was no support for the allegations concerning the management market, and Top Rank’s allegations with respect to the promotion market were “even weaker, more speculative, and virtually non-existent.”

“Tie out” arrangements. Turning to the sufficiency of the individual claims, the court first rejected Top Rank’s allegations of unlawful “tying” or “tie out” arrangements. Top Rank contended that Haymon conditioned the provision of management services on a boxer’s agreement to not contract with legitimate boxing promoters without Haymon’s consent. Although “carefully and creatively worded,” Top Rank’s allegations did not identify a tying of the sale of two distinct services. While “consent” clauses, such as those at issue, might practically function as unlawful tying arrangements, Top Rank did not provide factual allegations demonstrating that the consent clause functioned, in practice, as a tying arrangement. The court explained that if Top Rank can, in good faith, allege facts showing that Haymon never consented to allowing his boxers to sign with “legitimate promoters,” then Top Rank may be able to state a viable tying claim.

The court also dismissed as inadequately pleaded a conspiracy claim. In addition to the failings of the common pleading requirements, it was noted that Top Rank did not allege a conspiracy between the Haymon defendants and the defending asset management and investment firms.

Attempted monopolization. Top Rank also failed to adequately allege that the Haymon defendants “orchestrated a predatory and anticompetitive scheme to leverage Haymon’s monopoly power in the market for management of Championship-Caliber Boxers, in an attempt to monopolize the market for promotion of Championship-Caliber Boxers.” Because the plaintiff did not allege any facts regarding the Haymon defendants’ economic power in the promotion market, it failed to allege that there was a dangerous probability of monopolization of that market. Monopoly claims against the advisory firms were dismissed with prejudice because these defendants were not competitors in the relevant market.

Intraenterprise conspiracy. The court rejected conspiracy claims against the advisory firms. The agreements between the firms and the Haymon defendants were entirely consistent with rational, legal business behavior. Even if the advisory firms agreed to participate in the Haymon defendants’ alleged anticompetitive scheme, their conduct had to be viewed as that of a single enterprise, according to the court. Although legally distinct entities, the advisory firms and the Haydon defendants shared a complete unity of economic interest in the venture’s success and had no alleged separate interest, at least as it related to the relevant management and promotion markets, the court held.

Sales below cost. The advisory firms also were entitled to dismissal of claims that they sold “boxing broadcast rights” at less than the cost and/or gave away that product to television broadcasters, as a “loss leader” in violation of the California Unfair Practices Act. Top Rank’s allegations regarding this conduct solely related to the Haymon defendants, and not the defending advisory firms.

California Unfair Competition Law claims. Top Rank failed to allege a claim against the advisory firms under California’s Unfair Competition Law (UCL), premised on violations of the Sherman Act or other laws. Sherman Act and California Unfair Practices Act had already been rejected. The court went on to explain that Top Rank failed to allege that the advisory firms committed a predicate violation of the Muhammad Ali Boxing Reform Act, which prohibits, in relevant part, a manager from having a direct or indirect financial interest in the promotion of a boxer. The firms never acted as boxing managers or promoters, the court explained. Top Rank did not oppose the advisory firms’ motion to dismiss claims based on the “unfair” or “fraudulent” prongs of the UCL.

Supplemental jurisdiction. The court deferred ruling on Haymon’s motion to dismiss Top Rank’s claims under the California Unfair Practices Act and the California Unfair Competition Law, as well as a claim for tortious interference with prospective economic advantage, until after the plaintiff has an opportunity to amend it complaint. The court explained that it would likely decline to exercise supplemental jurisdiction over Top Rank’s state law claims if the plaintiff failed to allege a viable federal claim for relief under the Sherman Act.

The case is No. 2:15-cv-04961-JFW-MRW.

Attorneys: Daniel M. Petrocelli (O’Melveny and Myers LLP) for Top Rank, Inc. Howard Weitzman (Kinsella Weitzman Iser Kump and Aldisert LLP) and Barry H. Berke (Kramer Levin Naftalis and Frankel LLP) for Alan Haymon. Barry H. Berke (Kramer Levin Naftalis and Frankel LLP) and Howard Weitzman (Kinsella Weitzman Iser Kump and Aldisert LLP) for Haymon Boxing LLC, Haymon Sports LLC, and Haymon Holdings, LLC. Russell F. Sauer (Latham & Watkins) for Waddell and Reed Financial Inc., Media Group Holdings, LLC, Waddell & Reed Investment Management Co., and Ivy Investment Management Co. Jeremiah Tracy Reynolds (Latham & Watkins) for Alan Haymon Development, Inc.

Companies: Top Rank, Inc.; Haymon Boxing LLC; Haymon Sports LLC; Haymon Holdings, LLC; Waddell and Reed Financial Inc.; Media Group Holdings, LLC; Alan Haymon Development, Inc.; Waddell & Reed Investment Management Co.; Ivy Investment Management Co.