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Yesterday, the United States District Court of Connecticut officially dismissed the lawsuit brought by Marcus Bagwell and Scott "Raven" Levy against World Wrestling Entertainment over allegations that WWE owes them royalties from usage of material featuring their work in matches and segments from WCW and WWE on the WWE Network.
The lawsuit, filed in August 2016, was dismissed with prejudice, which means that neither party would be allowed to bring claims against WWE again. There is no word yet what led to the dismissal, but court filings indicated the two sides had been speaking about a potential settlement. [UPDATE: We are told there was no settlement as part of this dismissal and that the plaintiffs agreed to drop the case after being deposed by WWE attorney.]
Bagwell and Raven had alleged that WWE had breached their contracts of both Bagwell and Levy by failing to pay direct sales royalties to material that was included on the WWE Network's streaming service. WWE's contracts define material they provide royalties for as content that fall under direct sales, defined as "...including without limitation, at the arena, via mail order sales or directly on television, or via the Internet...." Levy and Raven argued that WWE Network subscriptions would fall under that description, while WWE argued that unlike a DVD, which they do provide royalties for, there is no sale of physical media with a WWE Network subscription, just a license that a subscriber rents, allowing them to view the content offered.
Levy had argued that talent should be paid for the WWE Network under the same royalty rate that they would receive contractually, from PPV and video sales. He also argued that once WWE purchased the WCW and ECW video libraries, those libraries would now fall under the promised royalty rate that he was promised contractually from WWE for direct sale of WWE events and that when he was released by WWE in 2013, the agreement to release him noted WWE had completely bought Levy out of any claims against them or any money owed "other than the obligation to pay Levy the royalties due to him pursuant to, and as determined by, the Contract."
Bagwell made similar claims in the lawsuit, alleging WWE failed to pay royalties on material on WCW and WWE content featuring Bagwell that was available on the WWE Network. Bagwell had also alleged that WWE, by selling WCW content, without paying him his royalties, had breached an agreement the parties signed when Bagwell released by WWE in 2001 after a short, uneventful run. Bagwell had also alleged that WWE had failed to pay him royalties within 90 days, was late in paying royalties and has not paid any royalties since February 2014 when the WWE Network launched. The non-payment of royalties was another alleged breach of Bagwell's contract,
The lawsuit also alleged that WWE breached its fiduciary duty to Levy and Bagwell because WWE was in a superior position when it came to knowledge of finances and money owed to the talents. Bagwell had claimed that his WWE contract allowed 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."
Bagwell has alleged that he had attempted to do exactly that in June 2016 and was initially told an audit could be done in late July or early August 2016, only to later 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 claimed that the company had forfeited any claim that Bagwell did not satisfy any of WWE's prerequisite actions contractually before he filed his lawsuit.
After the lawsuit was filed and early attempts to have it dismiss failed on WWE's part, WWE sources indicated that plans to add WWE Sunday Night Heat and WCW Thunder were both stalled, even though the complete runs of each series were prepared and ready to be added to the WWE Network's Video on Demand component. Both Levy and Bagwell were featured on those series and adding new material could add to potential damages had the courts not ruled in WWE's favor. We are told that WWE also looked into whether it was feasible to remove content featuring the two from the Network. We are told that the company took the issue so seriously, they put research into whether it was worth removing all signs of Levy and Bagwell from the Network's VOD component, despite the amount of manpower and money it would require.
Yesterday's dismissal prevents the company from having to move forward with such moves and opens up the floodgates, so to speak, for that content to be added to the WWE Network in 2018. It also closes the door, for now at least, on the issue of whether talents should be due royalties for material featured on the WWE Network.
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