Quick Intro to The Legal Pitch:
The Legal Pitch is a new sports-law based blog, finding the 'middle-ground' between legal and sporting stories to offer the best articles for its readers.
The Legal Pitch was founded by Adam Smith (Edward Bramley Law Society football captain) and two fellow Sheffield Law students, Fin Piper and Nathan Davies after a year of playing football together at university. We wanted to take our 'love of the game' further by offering a blog that would cover both our personal and academic interests. From research, we found a 'gap' in the market for legal articles that also covered the sporting story in a journalistic sense, in order to provide pieces that would suit people from both sporting and legal backgrounds.
As per our website, we hope to provide a platform showcasing the intellectual diversity of law and how captivating and rewarding it can be, especially when it revolves around an area of personal interest. By centering on sport, The Legal Pitch aims to simultaneously act as a gateway for those considering or intrigued about studying law, as well as provide some insight for current law students in a sector that is often bypassed by law schools.
We are currently accepting article contributions and would love to hear readers’ thoughts on our blog/new pieces people would like to contribute on. You can access all of our article over at www.thelegalpitch.co.uk, and read our piece on Canelo Alvarez’s boxing contract below, written by Adam Smith, and supported by trainee solicitor of Irwin Mitchell, Danny Brunt.
A Knockout Blow: Canelo Alvarez Sues DAZN
Canelo Alvarez is arguably the biggest boxing star of the 21st century, and his contractual deal with broadcaster DAZN places him at the very top, financially. However, Alvarez has recently filed a lawsuit against DAZN and his promoters, Golden Boy, claiming all remaining money in his contract that has yet to be paid (around $280m of a $365m deal) for intentional and negligent breach of contract. In this article, founder, Adam Smith, and trainee solicitor of Irwin Mitchell, Danny Brunt, discuss all legal elements of the ‘Canelo Contract’ and how the dispute may ‘play-out’.
Santos Saul Alvaraz Barragan, commonly known as Canelo Alvarez, is one of the biggest names in world boxing, carrying a ‘stellar’ record of 53 wins, 2 draws and 1 loss. As of 2019, he was named the world’s best professional boxer (pound-for-pound) by BoxRec and The Ring, after defeating Sergio Kovalev to win the WBO light-heavyweight championship, making Alvarez a four-weight world champion, and cementing his name into boxing fame.
Back in 2018, the Mexican signed the most lucrative deal in sports history with streaming service DAZN. The contract outlined a $365 million, 11-fight deal, which would see Canelo earn up to $35m per fight, superseding the largest sporting contract held by baseball hitter Giancarlo Stanton at $325m.
Just two years later, Canelo Alvarez is suing DAZN and his promotor, Oscar De La Hoya of Golden Boy Promotions (GBP), for charges including breach of contract, loss of damages and intentional/negligent interference with Canelo’s contract. So, what went wrong? This article will discuss the ‘Canelo Contract’, the legal dispute and filed lawsuit, and offer a legal opinion as to whether Alvarez and his lawyers have any chance of winning the court case.
DAZN and Golden Boy:
The defendants in said case are DAZN and Golden Boy Promotions (represented by Oscar De La Hoya). DAZN is a broadcasting company, formed in 2015, streaming live, and on-demand sporting events, charging one-off and monthly subscriptions for the biggest sporting events. DAZN’s net worth is predicted at around £3 billion, having turned this over in 4 years through streaming fights such as GGG v Canelo, Joshua v Ruiz and football including last years’ Champions League final of Liverpool vs Tottenham. In terms of boxing, DAZN are ‘big-time’, holding a two-year deal, with a possible 6-year extension, with Sky Sports Box Office. This contract will turn-over a massive £1billion in revenue by streaming 16 major boxing events in the UK, and the same amount in the US. The steadfast growth of DAZN had enabled multi-million pound deals, such as the ‘Canelo Contract’, resulting in increased sponsorship, membership, and viewership. Thus, their $365m deal with Alvarez would certainly have produced sizable profits due to the audience attracted by the boxer’s social following, producing over one million subscriptions for the Kovalev bout.
Golden Boy Promotions, as per their website, are a boxing and MMA promotion firm based in Los Angeles, founded in 2002, headed by chairman Oscar De La Hoya. De La Hoya, a previous six division, eight-time world champion, seemingly attracts most of the attention to GBP’s fighters, with his charismatic domina and prolific fighting record proving hard to ignore.
It is interesting to note, Golden Boy believes they are still not involved in any legal proceedings with Canelo after his filed lawsuit; De La Hoya stated his ‘beef is with DAZN, not us’.
Contract/Lawsuit in Layman's Terms:
The ‘Canelo Contract’, signed in 2018, made Alvarez the highest paid sportsman at that time. The money per fight deal was to be paid via Golden Boy Promotions and fed through to Canelo Alvarez. There have been reports that GBP chairman and CEO, Oscar De La Hoya personally acted as the guarantor to the contract, ensuring all payments would be made to the Mexican via DAZN. This is where some issues may lie as to personal liability; does Oscar De La Hoya hold personal liability for the failed contract, or do DAZN and GBP hold joint liability, if a breach of contract is proven?
The contract has some speculative terms, that without accurate sight of it, prove difficult to comment on. However, based on Canelo’s lawsuit and subsequent comments made by DAZN/GBP, the contract may include the following: (including terms aforementioned).
Alvarez states his right to choose opponents, supported by Golden Boy, exclusively from DAZN.
The contract supposedly states specific opponents Alvarez would have to face in order to return $35m per fight. This, according to Canelo’s representatives, does not include Genady Golovkin for a trilogy. However, DAZN claim that their part of the contract was subject to a third middleweight title fight between GGG and Canelo Alvarez, in order to drive in subscriptions and sponsorships.
According to DAZN, GBP negotiated this term into the contract, which would see their fighter face Golovkin. As a result, there seemed tension in 2019/20 between DAZN and GBP, as Alvarez fought Fielding, Jacobs and Kovalev; according to Canelo, these fights were perfectly legitimate due to his ability to choose opponents.
Following the COVID-19 pandemic, all boxing events ceased for around 4 months, resulting in a loss of profits across the industry. With no fights occurring, Alvarez was not paid his $35m guarantee, kickstarting the legal dispute.
During the pandemic, contractual disputes operate under a different premise; with financial losses for all parties, specific terms may not be able to be met, and lawsuits formed during coronavirus may be less likely to produce monetary remedies.
As a result, in good faith, Canelo (under the guidance of Oscar De La Hoya) agreed to accept payments under the $35m region, despite Alvarez being in world-class shape, and ready to fight any opponent, which, under the ‘Canelo Contract’ would allow for a minimum payment of this fee.
This is where the dispute (and lawsuit) arises; DAZN failed to promise Alvarez any broadcasting (and thus the Mexican could not fight) or pay the license fee Alvarez was entitled to under normal conditions. As per S.54 of the filed lawsuit, DAZN offered to pay Alvarez and Golden Boy a reduced cash fee, as well as issuing stock in the UK-based business in advance of a potential IPO. The suit alleges this offer amounted to ‘substantially less’ than Alvarez’s guarantee. It is also important to note that GPB failed to secure any fights for their world champion, prior to the coronavirus pandemic, at the guarantee of $35m.
The lawsuit was originally filed in early September, and was dismissed by DAZN and GBP; however, Canelo’s representatives re-filed the lawsuit just days ago, on the 28th September, which will likely see the case go to court.
Dispute - Lawsuit explored:
Canelo’s main reason for the suing of DAZN and GBP, is for loss of damages (up to $280m) for not providing any bouts for the Mexican. Canelo’s lawsuit can be summarised as followed:
Suing for loss of damages up to $280m due to breach of contract.
Suing for breach of fiduciary duty, good faith and fair dealing.
Suing for negligent and intentional interference with the Canelo Contract, leading to fraudulent behaviour.
Alvarez finalises by commenting on his desire to break free of the three-way contract between himself, DAZN and GBP.
This following section will explore the above elements to the lawsuit, where legal opinions as to the outcome of the contract will be offered.
Alvarez’s main claim is that DAZN were unable to pay his license fee and refused to accept the lower offer of around $30m, which would have saved the firm around $40m in fees. He is claiming the full $280m as outstanding payments, via breach of contract on the part of DAZN and GBP, as according to his representatives, Alvarez has completed all terms of his contract (complete performance in legal terms), due to partaking in all DAZN sponsorship shoots, social media presence, attending DAZN specific events such as Ruiz vs Joshua 2. Alvarez has also completed 3 of his 11 fights, winning all and retaining the WBO title. Thus, Alvarez claims that his performances have warranted all remaining payments as DAZN have breached their contract by failing to pay this license fee and prevented the broadcasting of any further Canelo fights.
Alvarez also states GBP have been unable to follow through the guaranteed payments, and claims De La Hoya is personally liable for breach of the contract. The Mexican’s lawyers state Alvarez accommodated for DAZN’s inability to pay his license fee, and subsequently gave GBP four weeks to make arrangements for additional fights, and/or to commit to a payment plan; Golden Boy failed to present any plan thereafter. Alvarez therefore claims loss of damages including ‘denied guaranteed payments, gate revenue, and opportunities for ancillary revenue associated with bouts, including sponsorship and apparel sales’.
Alvarez is suing both DAZN and GBP for breach of fiduciary duty, good faith and fair dealing. With regards to good faith, the Mexican’s representatives claim Alvarez repeatedly stated he would listen to offers below his guaranteed fee as a result of the pandemic; it is claimed that despite repeated promises some sort of alternative offer was imminent, DAZN failed to make such a proposal to either GBP or Alvarez. The same can be said for proposed opponents: DAZN refused to confirm the broadcasting of Canelo’s fights (September 2020) or to pay the license fee of $35m once again. As aforementioned, DAZN offered a heavily reduced fee and stock in a UK-based business as IPO, which, according to the lawsuit, was ‘substantially less’ than the boxer’s guarantee.
Canelo claims breach of fiduciary duty against GBP, for purportedly issuing a clause into his contract with DAZN, stating a fight versus Genady Golovkin would be necessary; Alvarez believes his contract allows him to mutually select his own opponents, without the influence of DAZN. A fiduciary duty is a relationship between one party to another, with one being responsible for the other. In this case, GBP are obliged to act in the best interests of Canelo Alvarez as his promotor, and must discuss all additional clauses and terms in his contract with the Mexican, prior to its acceptance; GBP will have breached their duty by adding this additional term into the contract without Canelo’s knowledge. A breach of this duty would result in GBP (possibly De La Hoya) paying all damages caused to Alvarez as well as any punitive damages. If this is the case, that De La Hoya has inserted this term, he may be personally liable to both DAZN and Canelo, as the streaming company would be in their rights to believe this was an express term to the contract, and thus they entered it with intention to be bound by a Canelo v GGG fight.
Alvarez’s lawsuit finalises with his claim that both DAZN and GBP have interfered both intentionally and negligently with the Canelo Contract. In terms of intentional interference, Canelo’s lawyers draw on their previous point, stating as DAZN refused to pay the license fee (which was not supported with a payment by Oscar De La Hoya), the main aim of the contract was disrupted. Thus, the claim is that both defendant’s were a substantial factor in causing harm to the world champion boxer. This is supported by s78 of the lawsuit; DAZN ‘engaged in willful, malicious, intentional, oppressive and despicable conduct, and acted with willful and conscious disregard for the rights, welfare, and safety of Alvarez, thereby justifying the award of punitive and exemplary damages in an amount to be determined at trial’. All charges directed at DAZN have also been aimed at Golden Boy Promotions, and thus the lawsuit will apply jointly to both defending parties. In terms of negligent interference, Alvarez’s lawyers use the same wording as above, stating at the very least, both DAZN and GBP were a negligent factor in causing harm to Canelo.
Alvarez therefore wants out of the three-way contract, and if his claims are successful, he will have every right to walk away from it with remuneration of finances.
However, without sight of the full Canelo Contract, it is difficult to comment on the outcome of this claim. Canelo’s lawyers are attempting to compensate the Mexican with the full financial impact of the contract, which may prove difficult. A contract requires complete performance in order to be fulfilled; despite Alvarez doing all in his power to meet the necessary terms with DAZN (promoting the company etc), he has only completed around ¼ of his fights, not warranting the $280m remaining, as the contract would have no doubt had a specific term stating, completing all 11 fights would be an obligation. However, due to the severity of Alvarez’s claims, and the ‘spotlight’ being placed on Oscar De La Hoya, a guarantee to the contract would have to ensure all payments are made. If the CEO of Golden Boy has been made a personal guarantor to the contract, it is his fiduciary responsibility to ensure these payments are made, and all elements of the contract are met unequivocally. De La Hoya may therefore be responsible for unmade payments, potentially sending this court case into a spiral. Such cases are not solved overnight, and this one may take a while to finalise, unless some sort of settlement payment is made to Canelo.
The additional legal opinion for this piece, is given by trainee solicitor Danny Brunt, of Irwin Mitchell. Danny graduated from King's College London in 2017, with a 2.1 in BA History, completing the GDL and LPC at The University of Sheffield following this.
This case interestingly cuts through the glitz and the glamour of the eye-wateringly large contracts that we see handed to these global sporting superstars, and highlights the flip side of offering such huge multi-year contracts. What we as sports fans see on the surface, which usually consists of a staged instagram picture of a star pen in hand signing a contract, is just the tip of the iceberg when it comes to the complexities of the contract itself. The stark reality of that is plain to see here. Whilst Canelo, most likely rightly so, has received this sizable contract that will bring him significant personal wealth, it carries with it equally significant liability and risk for those footing the bill. In this case, it is DAZN and Golden Boy Promotions, and interestingly, allegedly Oscar De La Hoya personally.
We are regularly surrounded by inconceivably large sums of money in the media, whether that be Neymar’s €220 million transfer to PSG, Patrick Mahomes’ $503 million contract with the NFL, or Canelo’s $365 million contract. It seems the true cost and value of things may be lost on us with these multiple figure sums. However, if we stop to think about this, and should the lawsuit be accurate, Oscar De La Hoya may be facing a personal guarantee for the entirety of the $280 million unpaid on the contract.
How will the dispute end?
Will De La Hoya be liable? Without sight of the contracts and the evidence in support of the lawsuit it would not be possible to give a definitive answer. However, it is interesting if Oscar De La Hoya did actually decide to personally guarantee the contract. The most attractive advantage of a company is the corporate veil, and the ability to limit the company itself. This means that should anything go wrong; any personal assets and wealth are protected behind this veil. Whether this was a way to secure Canelo’s signature, gain trust in the ability of Golden Boy to deliver or the confidence of a man who had just signed boxing’s biggest superstar to a 5 year/11 fight contract, remains to be seen.
In terms of the chances of success for Canelo in his lawsuit, again unfortunately this could not be said with any certainty without having the privilege of having access to the contracts and documentation. It remains to be confirmed whether there has even been a breach of the contract. However, it appears the contracts exist as stated and as such the DAZN/Golden Boy and Golden Boy/Canelo contracts may be liable for the contracted sums. The payments appear linked to a performance, in this case Canelo fighting opponents through which both other contracting parties will make money, after paying the agreed sum in return. As such, whether Canelo would be granted the entirety of the $280 million he is claiming for may depend on the wording of the contract, as to whether this is guaranteed money or payment on the occurrence of an event (such as one of his fights being arranged). This is where the latter grounds for further claims in the lawsuit, such as the interference claims, come into play. These are not reliant on Canelo having fought to receive remuneration under the contract, but provide compensation for a loss of potential earnings that Canelo suffered whilst bouts could not be agreed and arranged.
What triggers the payment of the money at particular intervals is one particular defence for the defendants, as clearly the entirety of the money for the contract was not payable upfront, as Canelo has only received a fraction of it so far for his 3 completed fights under the contract. This would potentially limit the recovery of the total sum Canelo is claiming. There is also the potential for clauses such as a force majeure clause to be present in the contract, which may allow for the contract to be terminated should the wording sufficiently provide for a Covid-19 event. There may also be the argument raised that the contract has been frustrated, but the fact that that bouts have been held by boxing promoters and the UFC shows that organising, promoting and broadcasting a fight would not be impossible, and so nor would the performance of the contract.
It will be interesting to see how the matter develops going forward. Remedies such as specific performance are difficult to obtain, as would be damages for the entirety of the lawsuit. It may be the case that an agreement can be reached before this reaches court and amasses considerable legal fees. It was stated that the alternative offer to the sums contained in the contract was too low, so it may be the case that these are improved in order to settle the matter and allow Canelo to fight under the Golden Boy banner on a DAZN broadcast. Canelo’s request for declaratory relief shows his intention not to waste the prime years of his career waiting for the resolution of the lawsuit, whether that be with Golden Boy and DAZN or not. It will be no surprise to see him back in the ring sooner rather than later, regardless of any continuing legal proceedings.
2nd Year LLB