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MLW VS. WWE LAWSUIT MOVING FORWARD, FULL DETAILS

All signs are that the U.S. District Court, California Northern District (San Jose) will be allowing Major League Wrestling's lawsuit against World Wrestling Entertainment to proceed as they issued a Case Management Order yesterday.  The 19-page lawsuit filed by MLW this past January alleged intentional interference with contractual relations, intentional interference with prospective economic relations, a violation of the Sherman Antitrust act and more, including allegations that WWE interference caused the cancelation of a signed MLW deal with FOX-owned streaming platform Tubi and prevented ViceTV from coming to terms with MLW, each preventing MLW from acquiring revenue that would have come from those deals.

Judge Edward J. Davila ruled yesterday there would be a conference to set a trial date on 9/7/23 at 11 AM that morning in San Jose, CA.

Davila also set forth that all amended pleadings (i.e. an updated version of the lawsuit) would be due by 2/13/23.  The two sides would then go into discovery, where they uncover whatever material they need to argue their side of the lawsuit, which would need to be completed by 9/29/23.    The two sides would have to file their reports with the court by 10/26/23 and any rebuttals by the end of November 2023.  The two sides would have to file their Expert Reports (i.e. those each side would bring on to express and argue an opinion that would help that side, aka expert testimony) by 12/26/23, with that period ending by the end of January 2024.

On 12/7, in a motion filed with the court prior to yesterday's declaration, MLW outlined the following materials they were seeking in discovery:

"Plaintiff anticipates taking discovery with respect to its claims, including, among other information: (1) the relevant antitrust market; (2) documents related to VICE, Tubi and FITE; (3) WWE’s employment agreements, event venue agreements and distribution agreements; (4) WWE’s poaching of talent from MLW, AEW and other competitors; (5) WWE’s interference with booking arenas; (6) the  impact of WWE’s conduct on entry into the market for broadcasting of professional wrestling programming and related consumer harm; (7) documents related to Jerry S. McDevitt’s appearance in the Dark Side of the Ring program; and (8) damages. Defendant anticipates taking discovery with respect to its defenses in the case, including but not limited to, Plaintiff’s attempts to obtain broadcasting rights from the hundreds if not thousands of other potential buyers, Plaintiff’s efforts to start its own streaming service (which it acknowledges that WWE and Impact have started), and Plaintiff’s recent successes in obtaining broadcast agreement(s), such as its agreement with Pro Wrestling TV, which demonstrate the frivolous nature of its antitrust claims. The Parties are not proposing to conduct discovery in phases or to limit discovery to particular issues."

WWE last filed a motion attempting to dismiss this past May with their 28-page response to MLW arguing that MLW had failed to allege a plausible claim against WWE, has not provided any direct or circumstantial evidence of WWE having "Monopoly Power", has not plausibly allege exclusionary conduct on WWE's part, their claim of WWE having Intentional interference with Contracts is "implausible and unsupported with factual allegations" and that their claims lack standing to bring a Unfair Competition Law (UCL) Claim in the State of California.

On MLW's claim of a monopolization by WWE, WWE argued:

"First, MLW’s monopolization claim(s) remain unviable. MLW has not and cannot plead the core elements of a monopolization claim: (1) a relevant product market, (2) monopoly power, (3) anticompetitive conduct, and (4) antitrust injury. Confronted with WWE’s motion to dismiss and the deficiencies of its own Complaint, MLW now tries to reframe its Complaint through its opposition (Opp.), asserting that WWE’s exclusive contracts with Fox and NBCUniversal foreclose MLW from the “market” by cutting off its access to key distributors or purchasers. However, MLW’s complaint is silent on (1) WWE’s use of exclusive contracts, (2) whether these exclusive contracts substantially foreclose the proposed market, or (3) the existence of “key” networks, cable, and streaming services that control access to this proposed marketplace.

Second, MLW’s various state law claims should be dismissed for lack of diversity and/or supplemental jurisdiction. Even if this Court could continue to exercise jurisdiction, MLW fails to respond to WWE’s arguments in its moving brief. The intentional interference claims are not plausibly pled, and MLW has no standing to bring a UCL claim."

WWE also argued that MLW's Market Definition of what professional wrestling is "remains factually unsupported", pointing out that for their claim to stand up in court, MLW cannot just state that "a product market exists;  MLW must allege facts that “justify any proposed market by defining it with reference to the rule of reasonable interchangeability and cross-elasticity of demand.”

WWE argued, "MLW’s product market definition consists of a conclusory statement that the relevant market is the “national market for the sale of broadcasting 
rights for professional wrestling programs to networks, cable and streaming services.” MLW states the outline of a proposed market, but that is not enough."  WWE claimed that MLW argued that a previous legal case MLW was using to support their own claims (Facebook vs. Reveal Chat Holdco LLC), but now MLW was trying to pivot, allegedly because it wouldn't help their case.  WWE is effectively trying to argue that MLW chose their path and can't now change it.

"In its Opposition, MLW cites Reveal Chat to argue that dismissal is inappropriate if any factual issues surrounding market definition exist. However, 
in Reveal Chat there were allegations in the complaint that created an issue of fact, whereas MLW’s Complaint is void of any factual support for its market. Reveal Chat is not on point, and MLW’s attempt to distinguish its own conclusory statements from those in Colonial Medical and Reilly likewise fall flat.

Likely recognizing this deficiency, MLW improperly inserts new, unpled factual assertions in its Opposition. MLW now argues that the sale of scripted professional wrestling broadcast rights must be a distinct product market because professional wrestling is a “sport”. MLW further argues that scripted professional wrestling “attracts a unique audience that limits the number of economic substitutes.”

As a preliminary matter, the Court should disregard these freshly articulated “facts.” The Complaint did not as much as hint at either assertion. MLW has already charted its course in the Complaint and may not use its Opposition to change tack."

MLW’s attempt to cast professional wrestling as a “sport” is not only clearly outside the four corners of its own Complaint; it is also wholly inaccurate. First, plaintiffs that define a relevant market around sports and sport leagues do so by alleging facts demonstrating that the sport product has no adequate substitutes through references to cross-elasticity of demand. See, e.g., Complaint. ¶¶ 55-62, Le v. Zuffa, LLC, No. 2:15-cv-01045-RFB-BNW, Doc. 1 (N.D. Ca. Dec. 16, 2014) (plaintiff alleged, with factual support, that professional wrestling, boxing, kickboxing, and other forms of entertainment are not substitutes for mixed martial arts).

Second, and more importantly, MLW fails to allege facts to support its assertion that scripted professional wrestling is a sport because no such facts exist. Professional wrestling is a scripted drama, not a sport. It has as much in common with an actual sport as the Rocky films have with actual boxing.

Indeed, based on the facts alleged in the Complaint alone, the market dynamics of professional wrestling are fundamentally different from those of a sport. For example, the US has only one professional basketball league, the NBA. Although the NBA generates tremendous revenues, no other league even attempts to compete. Here, MLW alleges that multiple companies, such as WWE, MLW, AEW, and Impact Wrestling, all compete to sell broadcast rights to the same group of purchasers. This dynamic is consistent with the sale of general entertainment programming, not sports programming.

WWE also argued that MLW failed to show that WWE has a monopoly on the professional wrestling industry.  After citing a case involving the manufacturing of false teeth where one could conceivably argue a company has a monopoly on that market, WWE argued:

"There is no allegation, nor could there be, that all networks, cable, and streaming services derive 83%, 8.3%, or 0.83% of their revenue from WWE content. NBCUniversal and Fox, combined, only purchase three WWE television programs out of the presumably hundreds (if not thousands) of programs that their networks air per week. Critically, it is never alleged that, if the WWE were to withhold its product, the television networks would stop broadcasting or “go dark.” Instead, and logically, they would fill that “dark time” with alternative programming over whose production WWE has no control. The notion that WWE has monopoly power over some of the largest companies on earth is an economic absurdity, is not supported by allegations in the Complaint, and could never be supported by good faith allegations."

WWE also argued that while MLW had failed to prove factually that WWE controls 85% of the pro wrestling industry as they have alleged, MLW also pointed out WWE's ratings success, stating, "Nowhere does MLW attempt to explain how a potential measure of market share for television networks is in any way applicable to the WWE. Accordingly, MLW’s use of Ratings as a proxy for market share remains untethered to its alleged marketplace."

WWE also claimed that "MLW fails to plead facts demonstrating how an alleged market share of 85% allows WWE to dictate prices to networks, cable, and streaming services or to control what programming they purchase. Without such allegations, the claim is deficient."

WWE also claimed:

"MLW incorrectly argues that costs to compete are a barrier to entry.   MLW failed to allege what these various costs are or how they are relevant to a company’s ability to sell broadcast rights. As has become routine, MLW again attempts to introduce new, unpled facts, this time by attaching WWE’s 2021 10-K to its Opposition. MLW in no way included or referenced this document in its Complaint (as it could have done), and the Court should strike its improper introduction. However, even this improper document provides MLW no safe harbor, as MLW has not alleged facts demonstrating that WWE’s costs reflect “additional long-run costs” that a nascent competitor must pay to enter this supposed market.  Moreover, one of the primary ways a new competitor takes market share is by developing cheaper, more efficient cost structures. MLW alleges that it generates “cutting-edge professional wrestling content” and competes with WWE, presumably with far fewer expenses – surely its costs better represent those faced by a new, innovative competitor than do WWE’s. Perhaps most importantly, MLW alleges that other competitors have successfully entered the market. MLW cannot now distance itself from its own allegations of successful entry. Specifically, the Complaint alleged that MLW and AEW both entered the market and produced programming that networks, cable, and streaming services could purchase.

Further, the Complaint alleged that AEW, within a year of entering, sold its broadcast rights for tens of millions of dollars and captured an average 2020 rating of 0.344 compared to WWE Raw’s 0.5075 in the key 18-to-49 demographic.   MLW’s own Complaint thus depicts a market with aggressive players vying for market share and finding successes. These allegations alone undercut MLW’s conclusory allegations of monopoly power."

WWE also argued that in the lawsuit, MLW did not "alleged exclusive contracts", citing that, "MLW argues, again without a modicum of support in its Complaint, that WWE has exclusive contracts with NBCUniversal and Fox, and that these contracts prevent MLW or other wrestling promotions from selling broadcast rights to two of the yet-to-be-alleged number of networks, cable, and streaming services. This reframing of the Complaint completely fails. The Complaint itself contains no allegation about WWE’s use of exclusive contracts or de facto exclusive contracts with NBCUniversal or Fox. Further, MLW failed to allege that these exclusive contracts resulted in substantial foreclosure or foreclosure from “key” purchasers of broadcast rights. Indeed, the words “substantial”, “foreclosure”, or “key” fail to appear at any point in MLW’s Complaint."

WWE then argued that "MLW never alleged any facts supporting that Fox, NBCUniversal, VICE, or Tubi are necessary purchasers of broadcast rights. Nor did MLW allege that only a limited number of networks, cable, or streaming services will purchase professional wrestling. Opp. at 4. To the contrary, MLW alleged that all networks, cable, and streaming services are potential purchasers of this product.  In fact, MLW alleged that the other two competitors in this purported market, AEW and Impact Wrestling, have successfully sold their broadcast rights. MLW has not alleged that WWE in any way substantially foreclosed it or any competitor from selling its broadcast rights to those purchasers."

WWE also argued that MLW had not "plausibly alleged other exclusionary conduct", citing: 

"Perhaps acknowledging that it did not plead unlawful exclusive contracts or exclusive dealing, MLW now contends that it really meant to allege a “broad anticompetitive scheme” by WWE. This is a distraction, and MLW’s Complaint again offers no support for this argument.  MLW asserts that WWE “encourage[ed] wrestlers to breach their contracts with MLW and divulge confidential and proprietary information about MLW’s business;” that it “lock[ed] up key inputs needed to compete, such as wrestler talent and arena facilities;” and that it “decreas[ed] competitors’ ticket sales and brand recognition.”

 But MLW never alleged who these wrestlers were, how their contracts were breached, what confidential information was disclosed, or which wrestlers or arenas were “locked up.” Still worse, MLW never articulates how any of these actions would violate the antitrust laws. For example, stripped of labels, MLW simply asserts that WWE and MLW compete to hire talent. 

These conclusory allegations do not provide the framework for a monopolization claim. Simply put, MLW has not pled how these actions relate to the purported relevant market, here the sale of national broadcast rights to networks, cable, and streaming services. Without more, we are all left wondering how hiring wrestlers, booking arenas for live events, and selling tickets to fans are somehow relevant to the sale of national broadcast rights to networks, cable, and streaming services."

WWE also argued that MLW failed to plead an "Antitrust Injury" in their lawsuit, arguing:

"The Complaint is entirely devoid of any factual allegations demonstrating harm to competition rather than alleged harm to MLW. MLW does not allege that any network, cable, or streaming service paid inflated, supracompetitive prices for scripted professional wrestling broadcast rights. Nor does it allege that WWE prevents competitors from increasing their own output of scripted professional wrestling or prevents networks, cable, and streaming services from producing their own scripted wrestling program. To the contrary, as WWE explained (and which MLW does not appear to contest), the Complaint alleges that WWE, AEW, Impact Wrestling, and MLW all continue to produce content, the broadcast rights to which are available for networks, cable, and streaming services to purchase.

Moreover, nothing in the Complaint suggests that these companies cannot produce even more content if the demand exists. Without actual allegations of reduced output and supracompetitive prices, antitrust injury is not properly pled, and the claim must be dismissed."

WWE also argued that MLW's claims of "Intentional Interference with Contract Claim is Implausible and Unsupported with Factual Allegations", specifically bringing up the claims that Stephanie McMahon caused the company to lose their deal with FOX-owned Tubi after a conversation with an executive there.  

WWE stated, "MLW alleges inadequate facts about WWE’s purported interference with the Tubi contract to plead intentional interference. MLW failed to allege who at Tubi spoke to Ms. McMahon, what Ms. McMahon said to force Tubi to terminate its contract with MLW, or how frequently Ms. McMahon spoke to unnamed individuals at Tubi. As WWE noted previously, MLW also alleged that it received a letter terminating its contract with Tubi but it failed to plead the 
letter’s contents or the grounds for termination."

WWE also argued that a previous legal precedent that MLW cited as an example of a similar "tortious interference case", (New Box Sols., LLC v. Davis),. a situation where the plaintiffs involved had their contracts canceled so a third-party could then get the same services from the defendants, who had previously worked with the plaintiffs. 

WWE then argued that MLW cannot use the case as proof of similar action by WWE, arguing MLW "did not allege that Tubi switched from MLW to WWE or that WWE obtained any beneficial commercial relationship with Tubi. The “call” in New Box was Legendary Pictures’ call to the plaintiff to cancel its contracts, which had zero connection to the conduct by defendants constituting intentional interference with contract.  New Box similarly does not support MLW’s argument that it can avoid pleading the contents of the termination letter. There, the court held that the plaintiff did not need to plead the exact terms of the contract with which defendants purportedly interfered.  The termination letter, by contrast, is vital to understand the facts surrounding the termination and the plausibility of MLW’s version of events."

So, WWE argued that WHAT Tubi told MLW as to WHY their deal was being terminated is needed to understand the complete situation and that unless that termination letter is related to WWE, there's no direct link that can be proven legally.  They also argued that since Tubi didn't drop the MLW deal to instead pick up WWE programming (as there is none on that streaming service), therefore MLW cannot use the legal precedent they are trying to use as the foundation of their allegations against WWE in relation to the Tubi situation.

WWE also pointed out, "According to MLW, WWE has only two contracts to sell broadcast rights, and breaching the Fox contract would have exposed WWE to losing as much as (again, according to MLW) half its yearly revenue. That is entirely implausible, and MLW could plead no facts to make that fanciful allegation plausible."

In again arguing the allegations that WWE killed MLW's negotiations with Vice for potential MLW programming, WWE argued that, "MLW failed to allege that WWE even knew of the negotiations with VICE, which would be akin to the counterclaim-defendant not knowing that Jefferson Starship was on tour."

WWE also argued:

"Actual disruption of the prospective economic advantage is another threshold element that MLW fails to allege, and which MLW does not address in its Opposition.  Based on the Complaint, VICE aired a first-run episode of MLW content, thus showing (i) that negotiations continued for months after the supposed call between a WWE employee and VICE executive, and (ii) that they were not remotely disrupted by WWE. 

Finally, MLW does not allege causation and misunderstands WWE’s argument on this point. WWE is not suggesting that one potential cause for the supposed disruption of the VICE  negotiations (the single communication with WWE) should be disregarded for another (MLW’s reportedly disappointing viewership). Rather, WWE argues that MLW must allege more facts to plausibly suggest that a call from a WWE employee in June is what caused VICE to terminate its 
negotiations with MLW many months later, not any number of other intervening events."

So, WWE argued there had been no proof from MLW that WWE event knew they were negotiating with Vice, that Vice still aired new MLW programming after the alleged call from a WWE executive and that since that programming aired months after the alleged call, WWE could not be responsible for Vice not moving forward with additional MLW programming - and that MLW has done nothing to argue otherwise thus far.

WWE also cited that just because there is an "allegation that a Tubi executive was located in California" is not enough to support MLW's Unfair Competition Law claim in the lawsuit.

This past May, WWE also asked the court to prevent MLW from being able to adjust and update their lawsuit, citing, "MLW requests leave to amend its Complaint if dismissed. The Court should not grant this request. Even if MLW could tailor its allegations to address the Complaint’s many current deficiencies, MLW can never plausibly plead that WWE has market power over networks, cable, and streaming services, some of the wealthiest and largest corporations on earth, all with the means and ability to produce their own professional wrestling content or buy it from the myriad or other content creators. Accordingly, any amendment to the federal antitrust claim is futile and, as explained, the Court lacks subject matter jurisdiction over the remaining state law claims."

As the case moves forward, MLW airs on BeIn Sport and is streaming on new upstart service Pro Wrestling TV.  The promotion is currently trying to land new additional TV deals as well.

The legal process is moving forward, but it will be a long journey that stretches at least into 2024, unless the two sides come to some sort of settlement that ends the litigation.

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