World of Boxing and Povetkin Win Summary Judgment Motion, Awarded $4.3M in Escrow in Wilder Dispute

In an opinion that stunned the Deontay Wilder camp, Magistrate Judge Gabriel Gorenstein held that in spite of a jury verdict that Alexander Povetkin had ingested Meldonium after January 1, 2016 and though he undisputedly tested positive for Meldonium on April 27, 2016 in a VADA random test, Povetkin did not breach the Bout Agreement (BA) and thus denied Wilder's Motion for Summary Judgment on his breach of contract claim.  Further, because there was no breach of the BA, Wilder's $4.3 million escrowed purse for the aborted Wilder-Povetkin bout was returned to Povetkin's promoter World of Boxing (WOB).  Wilder presumably will appeal the decision.

BACKGROUND

Wilder was scheduled to make a mandatory defense of his WBC Heavyweight title against Povetkin in mid-2016.  The negotiations for the fight were contentious and the bout went to purse bids.  WOB won the purse bid in the amount of $7.15M.  Though the purses were decided, there still needed to be a final BA and once again the parties had trouble coming to an agreement.  One of the big points of contention was the language over whether the promoters would be required to "produce" their respective fighters for the fight.

Eventually the WBC was brought in to mediate and ultimately drafted the BA.  The final BA provided that WBC rules would govern the "event in its entirety and shall be binding on all parties . . . [i]n the event the Parties incur any dispute or controversy with respect to this contract, all parties understand and agree to be bound by the Rules and Regulations of the WBC."  The WBC's rules regarding PEDs state that "[b]oxers . . . should not take, ingest, or have administered . . . any substance . . . that may enhance or reduce the boxer's performance."  The rules leave the WBC with sole discretion to determine penalties and provide that they do not "adhere to a 'strict liability' standard in anti-doping matters."

The parties also entered into an Escrow Agreement (EA) for Wilder's purse, which is standard in international title fights.  The EA provided that the funds would be disbursed to Wilder after the fight if he submitted an affidavit stating the fight happened along with a copy of an article from www.fightnews.com.  Similarly, if the fight did not happen, WOB would get the escrow funds if they submitted an affidavit to that effect, plus an article from www.fightnews.com.  The escrow agent was forbidden from disbursing the money if either party objected to the disbursement in "good faith".  If the objection was not in "good faith" there was a liquidated damages penalty of $2.5M.

The parties agreed to VADA testing before the fight.  Povetkin's first three tests came back negative but his fourth test on April 27, 2016 came back positive at 70 nanograms per milliliter for Meldonium.  VADA informed the WBC on May 13, 2016 of the positive test and the WBC announced that they would conduct "an in-depth investigation of this matter."  Meldonium was placed on WADA's Prohibited List on January 1, 2016.  However, in a June 30, 2016 notice, WADA stated that if the concentration in a sample were found to be less than one microgram per milliliter, there would be a finding of no fault for any sample taken between January 1 and September 30, 2016.  Povetkin's sample was below one microgram per milliliter.

Wilder was in London preparing for the bout when Povetkin's positive test was made public.  Wilder's lawyer, John Wirt, emailed the WBC on May 14, stating that Wilder considered WOB and Povetkin in breach of the BA.  On May 15, the WBC announced that they were postponing the fight and would continue to investigate the case.  Wirt emailed the escrow agent on the same day and objected to any disbursement of the escrow funds.  Wilder's side considered the fight cancelled, not postponed, and stated so in the press.  Ultimately, in June 2016 both Wilder and WOB/Povetkin would file suits against each other.  Wilder sued for breach of both the BA and the EA.  WOB/Povetkin sued for breach of the BA and EA, breach of the implied covenant of good faith and fair dealing and also defamation.

The WBC allowed Wilder to make an optional defense against Chris Arreola on July 16, 2016. Wilder won but broke his arm and tore a bicep in the fight.  He was sidelined until January 2017.  On August 17, 2016, the WBC announced its ruling on Povetkin's failed drug test.  It stated it had "called the Bout off . . . until the ongoing investigation [] concluded."  The WBC ruled that it was not possible to "ascertain that Mr. Povetkin ingested Meldonium after January 1, 2016."  This ruling was presumably based on WADA's statement that samples below one microgram were "no fault" findings if collected between January 1, 2016 and September 30, 2016.

Wilder appealed the WBC's ruling and the WBC then stated that if Wilder prevailed at trial, the WBC would afford Povetkin the opportunity to show that the trial's result was not based on a finding that he ingested Meldonium after January 1, 2016.

On December 23, 2016, Judge Gorenstein ordered that the trial be limited to one issue - whether Povetkin ingested Meldonium on or after January 1, 2016.  In February 2017, the trial was held and after hearing expert testimony from both sides, the jury found that Povetkin had ingested Meldonium after January 1, 2016.  Povetkin/WOB filed a motion for Judgment as a Matter of Law but the motion was denied on April 26, 2017.

In the meantime, Povetkin had a bout for the interim WBC title scheduled for December 17, 2016.  The bout was postponed, once again due to a positive drug test, this time for Ostarine.  The WBC then issued a new ruling on March 2, 2017, suspending Povetkin indefinitely in acknowledgement of both the jury's verdict and his positive test for Ostarine.

Povetkin appealed the WBC's ruling and on November 7, 2017.  Once again the WBC flip-flopped and stated that "notwithstanding the specific finding of the jury in the New York Litigation, the WBC continues to adhere to its ruling of August 17, 2016 that it is not possible to ascertain that Mr. Povetkin ingested Meldonium after January 1, 2016."  The WBC amended Povetkin's indefinite suspension to a one year suspension from the date of his positive test for Ostarine. 

Both Wilder and Povetkin/WOB filed summary judgment motions after the conclusion of trial in this case in late 2017.

DECISION

The Court addressed the breach of contract claim against Povetkin first.  The Court immediately acknowledged that the jury trial conclusively determined that Povetkin ingested Meldonium after January 1, 2016.  It also acknowledged that Povetkin tested positive on April 27, 2016 during VADA's testing.  The Court then dropped the bomb that neither of these events constituted a breach of the BA.

The Court, in essence, held that because the parties submitted to the whims of the WBC's anti-doping rules, which leave penalties solely in the discretion of the WBC, any decision the WBC made was dispositive.  The WBC's final decision on November 7, 2017 that, in spite of the jury verdict to the contrary and Judge Carter's affirmation of that verdict, it was not possible to determine whether Povetkin ingested Meldonium after January 1, 2016, doomed Wilder's breach of contract claim.  The Court cited the WBC's rules of not applying a strict liability standard and their discretion to determine whether a boxer was responsible for violating its anti-doping policy. 

The Court rejected Wilder's argument that the WBC did not have discretion to decide whether Povetkin violated the BA because the SDNY Court was the forum designated for dispute resolution.  The Court held that the forum selection clause did not address any issue of contract interpretation and the parties ceded substantial control over performance of the BA to the WBC. 

The Court also rejected Wilder's argument that the Court had stated in a previous hearing that the WBC did not retain discretion to decide if Povetkin violated the anti-doping provisions of the BA.  At the aforementioned hearing, The Court had rejected WOB's argument that submitting the ingestion question to the jury would amount to an "advisory opinion".  The Court reasoned then that ingestion was an "issue in the case" and that the jury's verdict would be "binding".  The Court now held that though Wilder asserted that a verdict of ingestion proved a breach of contract, the Court now rejected this argument following the briefing in the case.

Thus, the Court granted Povetkin and WOB's motion for summary judgment on Wilder's breach of contract claim.

The Court then examined Wilder's breach of contract claim against WOB and also found no breach.  Though WOB was contractually obligated by the BA to promote the bout and provide Povetkin's services, both of which they failed to do, the Court reasoned that the BA gave the WBC "complete power over the Bout's staging."  The Court cited the BA's provisions that gave the WBC the ability to withdraw sanction of the bout and its authority to cancel or change the date of the bout as evidence of control.  The Court stated that the WBC's postponement of the bout on May 15 after Povetkin's positive test superseded WOB's obligation to promote the bout on May 21.  

The Court then distinguished a very similar case that it had decided just four years ago, World of Boxing LLC v. King.  In that case, Guillermo Jones tested positive for a PED on the eve of a WBA Cruiserweight title bout.  WOB was the promoter of Denis Lebedev, Jones' opponent for the match.  WOB sued Jones' promoter, Don King, on the very same grounds Wilder sued WOB, breach of contract for failing to produce the fighter due to a positive drug test.  The Court in King, found that King had breached the bout agreement because the WBA rules, which were incorporated by the bout agreement, required suspension from the ratings of any boxer who tested positive and because Jones had previously tested positive for PEDs, it was foreseeable he'd do so.

Here, the Court reasoned that the BA gave the WBC discretion to determine if a doping violation occurred and to make decisions about whether the bout would be held on the date in the BA.  For those reasons, the Court found that WOB did not breach the BA and granted WOB's summary judgment on Wilder's breach of contract claim.

The Court dismissed Povetkin and WOB's breach of contract claims against Wilder because of lack of causation.  The Court found that any damages suffered were attributable to Povetkin's positive test and the WBC's postponement of the bout and failure to reschedule it.  Because the WBC unequivocally stated that Povetkin's positive test was their reason for postponing the bout, any action by Wilder was secondary to the that.  Thus, the Court granted Wilder's motion for summary judgment on Povetkin and WOB's claim for breach of contract.

The Court granted Wilder's summary judgment motion on Povetkin and WOB's breach of the implied covenant of good faith and fair dealing for similar reasons.  The Court found that nothing in the record supported an inference that the bout was postponed or canceled due to any action by Wilder. 

The Court then addressed the escrow fund claims as both parties sought summary judgment to take possession of the $4,369,365 in escrow that was supposed to be Wilder's purse.  The Court ruled that WOB was entitled to the escrow funds because Wilder had not proven a breach of the BA, which was his reason for objecting to the return of the funds to WOB post-bout cancellation.  The EA provided that if the bout did not take place, the escrow would be sent back to WOB.  Thus, the Court awarded the $4,369,365 in escrow to WOB.

The Court also denied WOB's claim for liquidated damages under the EA.  The Court found that WOB failed to carry its burden of proving that Wilder's objections to release of the escrow back to WOB were not made in good faith.  The Court found that the EA did not make any limitations on the grounds that an objection could be made, only that it must be made in good faith. 

The Court had previously stayed WOB's defamation claims and did not opine on them here.

TAKEAWAYS

This was a case that appeared to be mishandled by many of the entities involved including WADA, the WBC and the Court for the Southern District of New York.  

WADA issued two modifications to the placing of Meldonium on the Prohibited List that ultimately changed the outcome of the case.  They moved the goalposts on what was considered a "no fault" test from: 1) no threshold for a violation to more than one microgram per milliliter; and 2) absolved positives from samples taken between January 1, 2016 to September 30, 2016.  This wrecked havoc on this case.

The WBC's indecisiveness and constant bending to the whims of each party also created complete uncertainty in this case.  The fact that they ignored a jury verdict that Povetkin ingested Meldonium and maintained that they could not "ascertain whether Povetkin ingested Meldonium" seems like an injustice to Wilder.

The SDNY Court seemingly bungled by ordering a limited trial on a single issue in what was a fairly complex case and then blatantly ignoring the verdict and ruling there was no breach of contract.  Why have a trial on ingestion if it didn't pertain to breach of the contract, which was the crux of the case?

This case exposes the fractured nature of the sport of boxing, especially in regards to the consistency of its anti-doping regulations.  In 2014, the SDNY held a promoter responsible for breach of contract because he couldn't produce his fighter due to a positive for a PED on the eve of a title bout.  Part of the reason was because the WBA rules provided for an automatic suspension of a fighter who tested positive.  In 2018, the SDNY held that a promoter was not in breach of contract even though his fighter also could not be produced for the bout due to a positive PED sample.  The reason being the WBC drafted the BA and incorporated its rules which do not adhere to a "strict liability" policy in regards to positive PED tests and give them great discretion in deciding penalties.

Boxing's anti-doping situation is clouded by different sanctioning bodies, different standards, and different results even with similar sets of facts.  Imagine if GGG were to sue Canelo for breach of contract over his positive test.  Which rules would apply for a unified champion - WBA, WBC or IBF?  They all apply different standards in regards to anti-doping policy.

It would be nice if the major promoters got together and formed a boxing league and set out a clear and uniform set of anti-doping rules, similar to the UFC's use of USADA.  This would bring some clarity to what is currently a messy state of inconsistency.

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