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An amended complaint in the lawsuit brought by former WCW and (briefly) WWE performer Marcus Bagwell was filed with the United States District Court of Connecticut on 9/7. Former WWE, WCW and ECW star Scott "Raven" Levy has joined the lawsuit as a plaintiff.
Bagwell initially sued on 8/9, alleging that he is owed royalties from usage of material featuring his matches on the WWE Network. Levy had once attempted to sue WWE over the independent contractor status that professional wrestlers under contract to the company are designated as, claiming they should instead be employees, several years back, but the lawsuit was dismissed.
In the amended lawsuit, Levy and Bagwell are alleging that they are "have not received contractually owed royalty payments from World Wrestling Entertainment, Inc. (“WWE”) and/or WCW, Inc. (“WCW-WWE”) for certain content that has been sold or licensed by WWE or WCW-WWE on the World Wrestling Entertainment Network and for the nonpayment of all categories of royalties within 90 days following the end of the fiscal quarter."
Bagwell and Levy claim that they are filing as a class lawsuit on behalf of similar performers, alleging that the class is owed in the area of $5 million.
The argument that the pair are using is that the WWE Network should be providing royalties to talents, based on their contracts, with the argument being that the Network has essentially has replaced DVD royalties and that the language of the contracts at the time Bagwell and Levy were used by WWE allowed them to receive a certain percentage from DVD royalties. WWE contracts also noted that the royalties would be included on "technology yet to be created." The argument is that the streaming technology used for the network falls under that description.
The lawsuit notes that the WWE Network grossed $159.4 million in 2015, but that in the case of Levy specifically, he is only being paid royalties on material that is sold on DVD even if it also appears on the Network - using the "True Story of Wrestlemania" and "Ladies and Gentlemen, My Name is Paul Heyman" as examples. It also cites that when Levy was released by WWE, the buyout involved noted that WWE no longer owed Levy, language from that agreement noted that WWE was buying out all of their obligations from the contract, with the exception of royalties that Levy would be owed going forward as determined by his contract.
Bagwell's side of the lawsuit remains very much the same from his initial August filing. In the lawsuit, Bagwell alleged that he was under contract to WWE* from 1991 to 2001 by virtue of his contracts with World Championship Wrestling and WWE purchasing WCW in March of 2001. In the lawsuit, Bagwell notes that his WCW** deal expired four days after the then-WWF purchased the company. When he was signed by WWE to a new deal in June 2001, Bagwell was signed under the WCW brand*** and name for his new contract, which was executed by WWE's Ed Kaufman. That deal only lasted two months as he was released in August 2001 following his disastrous June 2001 Raw main event against Booker T that pretty much sealed the fate on WCW being a separate brand under WWE ownership. ECW was introduced into the storyline shortly after that with the two companies merging into "The Alliance" before the storyline concluded with the destruction of that group in November 2001.
Interesting to note that in the amended lawsuit, Bagwell is claiming that WWE and WWE's version of WCW were two separate corporations but while he was signed to the latter, he was only receiving checks and orders from WWE itself. The lawsuit notes, "The corporate veil of WWE should be pierced because WWE actively and pervasively controlled WCW-WWE and intermingled the activities of the two corporations engaged in the same enterprise, while disregarding the separate nature of the corporate entities."
Bagwell also claims that the WWE deal "merged" with aspects of his former WCW contractual terms, specifically the 1998 WCW deal that expired in March 2001. According to the filing, the WWE contract stated, "This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and all prior understandings, negotiations and agreements are merged into this Agreement. There are no other agreements, representations, or warranties not set forth herein with respect to the subject matter hereof. . ."
So, Bagwell is arguing that WWF are bound by his June 2001 WWE contract in regard to payment of royalties for PPV events and home video material. The lawsuit noted the following language from the contract that WWE has allegedly ignored. It should be noted that the language of WCW below pertains to the WWE-WCW version that existed as of the "Invasion" storyline in WWE.
On PPVs: "WCW shall allocate 5% of the Net Receipts paid to WCW with respect to the direct sale by WCW of WCW Pay-Per-Views to a talent royalty pool. Thereafter, WCW shall pro-rate payment to Plaintiff and all other talent appearing in such WCW Pay-Per-Views in the same proportion as was the compensation paid to Plaintiff for his appearances in the pay-per-views to the total amount paid to all talent for their appearances on the pay-per-views."
On Home Videos: "The WCW Video Product is a compilation or derivative work of multiple individual WCW Pay-Per-Views in their entirety, such as a collection of videos, e.g., a WrestleMania box set, payment to Plaintiff shall be calculated as follows: 5% of the Net Receipts paid to WCW shall comprise the talent royalty pool, which shall first be pro-rated based on the number of individual videos in the compilation, and then the payment to Plaintiff for each video shall be consistent with the royalty payment to the Plaintiff at the time each individual video was first released."
Noting that net receipts would be the gross amount received by WWE, Bagwell is calling into question money allegedly owed to him because the WWE Network, which streams those old WCW PPV events, grossed $154.9 million in the final quarter of 2015. Bagwell is also claiming he is owed money from the Network revenue because of language in his 2001 WWE contract that reads, "“video cassettes, videodiscs, CD ROM, or other technology, including technology not yet created.” Again, the argument is that the streaming technology used for the network falls under that description.
The lawsuit claims that when WWE released Bagwell in August 2001, language from that agreement noted that WWE was buying out all of their obligations from the contract, with the exception of royalties that Bagwell would be owed going forward as determined by his contract.
The language in the release also noted that Bagwell could not bring legal action against WWE as long as they maintained the terms of his Release agreement. Bagwell is now suing because he alleges WWE has now allegedly breached the agreement by not paying him royalties. Bagwell submitted a first quarter 2016 Royalty Statement sent to him by WWE showing that he was owed no royalties despite the WCW material being featured in the WWE Network's VOD section.
What is interesting is that Bagwell acknowledges that under his 1998 WCW deal, he was owed no royalties for PPVs or videotapes. However, he is claiming he is now owed for that material as the WWE contract changed the language regarding that material. It also noted that he has received royalties for "NWO: Back in Black" on DVD, but not for the same material streaming via the WWE Network.
Bagwell and Levy also allege that WWE failed to pay him within 90 days of the end of a financial quarter on numerous occasions. In the case of Bagwell, he even alleges he received royalties for the WWE Vengeance 2002 PPV, an event he did not appear on during a time period he was not even under contract to WWE.
The lawsuit also acknowledges that WWE has successfully defended itself against similar claims from the Eddie Gilbert estate, former AWA star Doug "Somers" Somerson and former Global Wrestling Federation performer Stevie Ray (not to be confused with the WCW performer who used the same name) but states that those talents had no contractual right to sue WWE. Bagwell is arguing that due to the alleged breach of contract, he has that right, noting his lawsuit, "is not preempted by the Copyright Act because WWE owns the right to WCW copyrighted works featuring Plaintiff’s intellectual property, subject to royalty payment obligations for the sale of those copyrighted works (WCW Video Products of PPVs and Non PPVs)."
The lawsuit also claims that Bagwell's WWE contract allows for him to have his own independent certified accountant audit WWE-WCW's books, citing, "for the purpose of verifying the accuracy thereof, during WCW’s normal business hours and upon reasonable notice. Such audit shall be conducted in a manner that will not unreasonably interfere with WCW’s normal business operations. Wrestler shall not audit WCW’s books and records more than twice during any calendar year and no such audit shall be conducted later than one (1) year after the last statement of royalties is given, delivered or sent to Wrestler. Each audit is limited to seven (7) days in duration. Statements of royalties may be changed from time to time to reflect year-end adjustments, to correct clerical errors and for similar purposes."
According to the lawsuit, Bagwell attempted this in June 2016 and was initially told an audit could be done in late July or early August 2016, only to instead be informed by WWE's counsel, K&L Gates, that there would be no audit, as Bagwell's accountant, "asserted a pretextual and invalid audit request to attempt to stealthily obtain that information (WWE network royalty audit)" and that since Bagwell is not paid WWE Network royalties, "there is nothing to audit."
Since WWE blocked Bagwell's attempts to audit the records as he was contractually allowed to do, he is now claiming that the company has forfeited any claim that Bagwell did not satisfy any of WWE's prerequisite actions contractually before he filed his lawsuit. The lawsuit is also stating that it is an officially filed dispute of WWE's most recent royalty statement for Bagwell, per the language in his June 2001 WWE contract.
The lawsuit is also set up a class action lawsuit for performers in a similar situation (noting a sub-class for talents who signed specific WWE deals in the past when the language in those contracts did not specifically mention the WWE Network material) , noting that exempt from the class would be those who have signed a WWE Legends deal from January 2004 on as language in those deals specifically notes that the company will not pay them royalties for "Internet subscriptions or video on demand fees." The lawsuit also requests the court prevent WWE from placing PPV and non-PPV material on the WWE Network until the class are paid royalties and that the class be paid within 90 days of the end of a financial quarter.
Bagwell and Levy have requested a trial by jury.
WWE has until 10/8 to respond.
In April 2016, well prior to this lawsuit being filed, during an interview with the Two Man Power Trip podcast, WWE's lead counsel Jerry McDevitt commented on why talents from wrestling promotions who's video libraries are now owned by WWE are not owed royalties, stating, "Let me use ECW as an example. ECW if you recall your history went into Chapter 7 bankruptcy. Whenever you go into a Chapter 7 bankruptcy what happens is your assets and your liabilities are marshalled. The bankruptcy trustee tries to sell the assets of the bankruptcy estate to generate some cash to pay off creditors who would be for example any ECW talent that are owed money from ECW and would share any money that is available which is usually not very much because when you are bankrupt you don’t get very much and when somebody goes bankrupt like ECW does it essentially wipes out all the claims of anybody that they would have against ECW for contract royalties or contract claims against ECW. The assets of the company are put up for sale free and clear of all liens and that is part of the whole bankruptcy sale. When you think about it nobody is going to buy assets that carry with it liabilities. So what you had there was this entire film library of ECW that would have been sitting somewhere in a cardboard box right now and not being displayed anywhere, and the WWE decided it would buy and pay money to buy the films and the copyrights that go with those films and obtain from the bankruptcy court a bill of sale giving the WWE in exchange for the money we paid for those the sole right, title and interest to the copyrights of those works. That is why the WWE has the legal right to display them on the Network free and clear of any claims, plain and simple."
PWInsider.com received the following statement from McDevitt shortly after the initial lawsuit was filed by Bagwell last month: "Since the first purported class action case was brought on behalf of Billy Jack Haynes almost two years ago, this pack of class action lawyers have filed by my count 14 different complaints or amended complaints. All of them have been full of patently false allegations, and none of them have gone anywhere. They haven't got a penny, and the judge is in the process of deciding whether to throw other ones out. Bagwell's lawsuit is much the same. It is based on clearly false facts, and would embarrass a first year law student because of the ignorance of basic contract law principles. Bagwell was never promised a penny by anybody for the use of WCW archival footage. Not by Turner and not by WWE, and he knows it. Like I did before with [Rene] Dupree's bad faith lawsuit, I will be demanding they withdraw this latest suit next week. If they don't, we will move to dismiss, ask for sanctions, and seek to recover counsel fees from Bagwell."
Obviously, Bagwell has not withdrawn the lawsuit, so we will continue to follow where the legal process takes all parties.
Notes:
*: While the company was known as WWF at the time, we have listed it as WWE to make it easier for readers to follow the story.
**: All mentions of WCW denote the wrestling promotion owned by Turner Broadcasting. While describing WWE's version of WCW, we have listed it as WWE-WCW to dileniate between the Turner version and the WWE owned version.
***: While Bagwell's 2001 deal with WWE was listed as under WCW, we have listed it as WWE above to make it easier for readers to follow the story. The lone exceptions is language from the lawsuit, which has not been edited by PWInsider.com.
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