affliction sj decision

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E-Filed: 06.07.11

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

FEDOR EMELIANENKO, an individual;M-1 NEDERLAND b.v., a Dutch limitedliability company,

Plaintiffs,

vs.

AFFLICTION CLOTHING, a Californiabusiness entity, form unknown;AFFLICTION ERTAINMENT, LLC, aCalifornia limited liability company; andDOES 1 through 50, inclusive,

Defendants.

))))))))))))))))

CASE NO. CV 09-07865 MMM (MLGx)

ORDER DENYING PLAINTIFF M-1’S MOTION FOR SUMMARY JUDGMENT;DENYING DEFENDANTS’ CROSS-MOTION FOR SUMMARY JUDGMENT

On October 28, 2009, plaintiffs Fedor Emelianenko and M-1 Nederland b.v. (“M-1”)

commenced this action against Affliction Clothing and Affliction Entertainment, LLC, alleging

seven claims related to the purported breach of three written agreements.1 On May 4, 2010, the

court denied defendants’ motion to dismiss the complaint.2 Plaintiffs thereafter filed a first

1Complaint for: (1) Breach of Fight Agreement; (2) Breach of Implied Covenant of GoodFaith and Fair Dealing - Fight Agreement; (3) Breach of Consulting Agreement; (4) Breach ofImplied Covenant of Good Faith and Fair Dealing - Consulting Agreement; (5) Breach of LetterAgreement; (6) Declaratory Relief - Fight Agreement; and (7) Declaratory Relief - ConsultingAgreement and Letter Agreement, Docket No. 1 (October 28, 2009).

2Order Denying Motion to Dismiss, Docket No. 41 (May 4, 2010).

Case 2:09-cv-07865-MMM-MLG Document 234 Filed 06/07/11 of 55 Page ID #:13419

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amended complaint alleging the same seven claims against Affliction Entertainment LLC fka

Affliction Promotions, Inc. (“Affliction Promotions”), Affliction Inc. dba Affliction Clothing

(“Affliction Clothing”) (collectively “Affliction”).3 On March 25, 2011, M-1 filed a motion for

partial summary judgment on its claims alleging breach of the Consulting Agreement, breach of

the covenant of good faith and fair dealing implied in the Consulting Agreement, and breach of

the Letter Agreement.4 Defendants opposed M-1’s motion and filed a cross-motion for summary

judgment on plaintiffs’ first cause of action for breach of the Fight Agreement.5

I. FACTUAL BACKGROUND

A. The Parties

Plaintiff Emelianenko is a Russian citizen who, during 2009, was considered the number

one heavyweight mixed martial arts (“MMA”) fighter in the world.6 Emelianenko is promoted

by M-1, a company formed in 2008 by Finkelchtein Beheer b.v. Finkelchtein in turn is owned

3First Amended Complaint (“FAC”), Docket No. 43 (May 5, 2010).

4Motion for Summary Judgment (“Motion”), Docket No. 159 (March 25, 2011); Statementof Uncontroverted Facts (“SUF”), Docket Nos. 169-173 (March 25, 2011); Request for JudicialNotice (“RJN”), Docket Nos. 160-61 (March 25, 2011); Compendium of Declarations (“COD”),Docket Nos. 162-68 (March 25, 2011); Compendium of Exhibits (“COE”), Docket Nos. 174-197(March 25, 2011). See also Reply, Docket No. 226 (April 11, 2011); Plaintiffs’ Statement ofGenuine Issues in Opposition to Defendants’ Motion for Partial Summary Judgment (“Pls’ SGI”),Docket No. 228 (April 11, 2011).

5Memorandum in Opposition to Motion for Partial Summary Judgment and in Support ofDefendants’ Motion for Partial Summary Judgment (“Opp.”), Docket No. 209 (March 28, 2011);Statement of Genuine Issues (“SGI”), Docket No. 208 (March 28, 2011); Statement ofUncontroverted Facts (“Defs’ SUF”), Docket No. 207 (March 28, 2011); Declaration of RichardM. Wilner (“Wilner Decl.”), Docket No. 201 (March 28, 2011); Declaration of Todd Beard(“Beard Decl.”), Docket No. 202 (March 28, 2011); Declaration of Mark W. Huston (“HustonDecl.”), Docket No. 203 (March 28, 2011); Declaration of Thomas Atencio (“Atencio Decl.”),Docket No. 204 (March 28, 2011); Declaration of Michael Bassiri (“Bassiri Decl.”), Docket No.205 (March 28, 2011);Declaration of Bruce Binkow (“Binkow Decl.”), Docket No. 206 (March28, 2011). See also Surreply, Docket No. 230 (April 25, 2011)

6SUF, ¶¶ 4-5; SGI, ¶¶ 4-5. 2


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by Vadim Finkelchtein.7 M-1’s owners include Vadim Finkelchtein, Albert Jan Echteld,

Emelianenko, and Joost Raimond; Emelianenko has an 8.5% interest in the company.8 Affliction

Clothing is a popular clothing brand that has attained international recognition through various

celebrity and MMA fighter endorsements. Prior to January 2008, Affliction Clothing sponsored

Ultimate Fighting Championship (“UFC”) events and gained notoriety by having UFC fighters

wear and endorse Affliction clothing on broadcast and pay-per-view events.9 Affliction

Promotions was formed in 2008 to organize and promote MMA events, after Affliction Clothing

was banned from sponsoring UFC fighters due to its deteriorating relationship with UFC.10

As of March 2008, Emelianenko had an oral agreement with M-1 that obligated him to

fight for M-1 for a two-year period in exchange for $2 million per bout, as well as a $1.5 million

signing bonus.11 The parties reduced the oral contract to a written promotional agreement

effective May 1, 2008.12

B. Negotiation of and Entry Into Fight Agreement and Consulting Agreement

In early 2008, Todd Beard, a founder of Affliction Clothing, told Finkelchtein that

Affliction Clothing had lost its sponsorship relationship with the UFC and that he and his business

partners were going to form an MMA promotion company, Affliction Promotions, that they hoped

would become the world’s largest MMA event promoter.13 Beard told Finkelchtein that Affliction

Promotions was interested in entering into a contract with Emelianenko, but could only afford to

7SUF, ¶ 1; SGI, ¶ 1.

8SUF, ¶¶ 2, 6; SGI, ¶¶ 2, 6.

9Beard Decl., ¶ 3.

10SUF, ¶¶ 14-16; SGI, ¶¶ 14-16. See also Beard Decl., ¶ 4.

11SUF, ¶ 34; SGI, ¶ 34. See also COD, Exh. A (Declaration of Joost Raimond (“RaimondDecl.”)), ¶ 3.

12SUF, ¶ 34; SGI, ¶ 34. See also COE, Exh. 1 (Promotional Agreement).

13SUF, ¶¶ 36-37; SGI, ¶¶ 36-37. 3


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pay him $1.5 million per fight.14 Although M-1 was “not interested in just ‘selling’ Fedor,”15

because it was sought opportunities to increase its presence as an MMA promoter, M-1 asked

Affliction Promotions to provide a written proposal.16

In late March and early April 2008, Raimond and other members of the M-1 management

team began to consider the possibility of developing a co-promotion relationship with Affliction

Promotions, “which would [have] allow[ed] M-1 to expand its footprint into the United States and

14SUF, ¶ 38; SGI, ¶ 38.

15COD, Exh. B (Declaration of Vadim Finkelchtein (“Finkelchtein Decl.”)), ¶ 8. Defendants object that Finkelchtein’s statement is irrelevant under Rule 402 of the Federal Rulesof Evidence, constitutes improper opinion under Rule 701, and is inadmissible hearsay under Rule802. Because Finkelchtein is not testifying regarding an out-of-court statement, defendants’hearsay objection is overruled. Defendants have made similar hearsay objections to severalportions of Finkelchtein’s declaration and other witnesses’ declarations. The court overrules theseobjections to the extent that the portions of the declarations cited do not reference out-of-courtstatements. Defendants appear to have a misconception regarding the state-of-mind exception tothe hearsay rule. They repeatedly assert that the “[s]tate-of-mind exception does not permit thewitness to relate any of the declarant’s statements as to why he held the particular state of mind.” (See, e.g., SGI, ¶ 74 (citing United States v. Fontenot, 14 F.3d 1364, 1371 (9th Cir. 1994)). While Fontenot is relevant in assessing the state-of-mind exception, neither it nor that exceptionprevents a declarant from testifying to his state of mind at a particular moment if no out-of-courtstatement is discussed. In paragraph 8 of Finkelchtein’s declaration, for example, Finkelchteinmerely states that he was not interested in entering into a particular kind of agreement and explainswhy. He does not discuss an out-of-court statement that he or anyone else made. There is thusno hearsay and no need to consider the applicability of the state-of-mind exception.

The court also overrules defendants’ relevance objection because, to the extent parolevidence is admissible, the fact that Finkelchtein sought a co-promotional agreement may assistthe court in interpreting the contracts at issue. Finally, the court overrules defendants’ Rule 701objection. Rule 701 provides that “[i]f [a] witness is not testifying as an expert, the witness’testimony in the form of opinions or inferences is limited to those opinions or inferences whichare (a) rationally based on the perception of the witness, (b) helpful to a clear understanding ofthe witness’ testimony or the determination of a fact in issue, and (c) not based on scientific,technical, or other specialized knowledge within the scope of Rule 702.” To the extentFinkelchtein’s statement can be considered an “opinion,” it is “rationally based on the perceptionof the witness.” There is no witness in a better position than Finkelchtein to testify to his businessgoals in promoting Emelianenko. More fundamentally, Finkelchtein’s interest, or lack thereof,in a particular contractual offer, however, is not opinion testimony covered by Rule 701.

16SUF, ¶ 40; SGI, ¶ 40. Raimond Decl., ¶ 4. 4


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further globally expand M-1’s and a co-promotion’s brand recognition.”17 It discussed such an

idea with Affliction when Tom Atencio, Affliction Promotions’ vice president, traveled to St.

Petersburg in late March or early April 2008, to meet with members of M-1’s management team.18

After the St. Petersburg meetings, Finkelchtein delegated contract negotiations to Echteld,

Raimond, and Dennis Spencer, a consultant from Blue Entertainment Sports Television (“BEST”).

M-1 had retained BEST to provide advice regarding television and broadcast opportunities,

promotion, and contract negotiations.19

Affliction Promotions’ initial offer of a fight agreement required that Emelianenko fight

in three bouts with a $1.5 million purse per bout.20 On March 27, 2008, after M-1 received this

proposal, Echteld made a counter-proposal, which contemplated that Emelianenko would receive

$1.5 million per bout, but also provided that he and M-1 would have the exclusive right to

distribute and exploit the bouts in Russia and Asia and to retain any revenues from such

distribution and exploitation.21 The revised agreement Echteld sent on March 27, 2008, did not

propose that M-1 would provide consulting or promotional services.22

M-1 tasked BEST’s Spencer to negotiate and draft a final agreement between the parties.23

Spencer began to work on a revised version of a Fight Agreement around April 5, 2008, on a

flight home from a meeting with Affliction Promotions in St. Petersburg. He started to work with

M-1 on what would become a Consulting Agreement the following week.24 On April 5, 2008,

17Raimond Decl., ¶ 6.

18SUF, ¶ 44; SGI, ¶ 44.

19SUF, ¶ 46; SGI, ¶ 46.

20SUF, ¶ 49; SGI, ¶ 49.

21SUF, ¶ 53; SGI, ¶ 53. See also COE, Exh. 130 (Draft Fight Agreement) at 713-716.

22SUF, ¶ 54; SGI, ¶ 54.

23SUF, ¶ 56; SGI, ¶ 56.

24SUF, ¶ 60; SGI, ¶ 60. 5


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Spencer sent Affliction a redline draft of the Fight Agreement; this iteration of the contract

continued to provide that Emelianenko would receive $1.5 million per bout.25

M-1 was interested in pursuing an agreement with Affliction Promotions to facilitate its

ultimate goal of establishing a co-promotion relationship with a well-known brand that would

increase its exposure as an MMA promoter. At his deposition, Finkelchtein stated that M-1

“[was] not selling Fedor[;] [it] just wanted to do co-promoting.” As a result, Finkelchtein stated,

M-1 “offered to [promote the bouts] together [with Affliction Promotions] but Affliction did not

agree.”26 After Affliction rejected M-1’s proposal that the companies co-promote the fights, M-1

gave greater consideration to Affliction’s “offer . . . to pay [$1.5 million] for Fedor’s

participation. . . .” M-1 expected that it would pay “the rest,” i.e., $500,000, and that it would

“get the rights on [its] territories and have money coming in from that.”27

On April 14, 2008, the parties executed two agreements: (1) a Fight Agreement between

Affliction Promotions and Emelianenko; and (2) a Consulting Agreement between Affliction

Promotions and M-1.28 Provisions of the Fight Agreement relevant to this action address: (1) the

term of the agreement;29 (2) the fact that purse for each bout was to be $300,000;30 (4) bout

25SUF, ¶ 62; SGI, ¶ 62.

26COE, Exh. 387 (Deposition of Vadim Finkelchtein (“Finkelchtein Depo.”)) at 34:7-9. See also Beard Decl., ¶ 7 (stating that Affliction “was not interested in co-promoting” ).

27Finkelchtein Depo. at 34 9-14.

28SUF, ¶¶ 75-76; SGI, ¶¶ 75-76. See also COE, Exh. 2 (Consulting Agreement); id., Exh.3 (Fight Agreement).

29See Fight Agreement, ¶ 1 (“Term. Commencing upon Fighter’s execution of thisAgreement and continuing until the earlier of: (i) March 31, 2009; or (ii) conclusion of the lastBout (as more specifically defined below) in which Fighter is obligated to participate which is aminimum of three (3) Bouts, unless the term of the promotion agreement or any extension theretois terminated sooner or extended further pursuant to this Agreement or pursuant to a separatewriting executed by [Affliction Promotions (‘AP’)] and agreed to by Fighter. AP acknowledgesand agrees that Fighter is currently scheduled to participate in a match on or around December31, 2008 in Japan. As a result, AP agrees to schedule all Bouts no less than 60 days prior to theJapan Event to allow for Fighter to prepare and compete in the Japan Bout. Furthermore, in the

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arrangements;31 (5) Emelianenko’s sponsors and partners:32 (6) the rights reserved to

Emelianenko;33 (7) cancellation or postponement of the agreement;34 and (8) negotiation of a new

event that [a bout with Randy Couture] takes place during the Term, the parties agree that theTerm shall be extended for four (4) additional consecutive months”).

30Id., ¶ 3 (“Purse. The Purse shall be Three Hundred Thousand Dollars ($300,000) foreach Bout hereunder. The purse shall be due immediately following each Bout and sent via wiretransfer as per instructions which shall be provided to AP. In the event the purse is paid by theappropriate governing or regulatory body, such shall be paid pursuant to its disbursementguidelines”).

31Id., ¶ 8 (“Bout Arrangements. During the Term, AP shall use commercially reasonable best efforts to arrange Bouts for Fighter and shall use good faith efforts to provide Fighter withan opponent for each Bout. The opponent for each Bout hereunder shall be selected by AP,subject to Fighter’s approval (which approval shall not be unreasonably withheld.) . . . AP shallselect at its discretion, the site for each Bout hereunder”).

32Id., ¶ 10 (“Fighter’s Sponsors/Partners. AP shall include Fighter’s sponsors and partnersin promotional activities during any Bout, provided that inclusion of Fighter’s sponsors andpartners does not present a conflict with sponsors and partners of AP, sponsors and partners ofthe Bout, or any broadcast entity. Subject to the foregoing possible limitations, AP will use incommercially reasonable best effort to display the M-l Global logo on the mat. However, if APis unable to display such logo on the mat, it agrees that the M-l Global logo shall be displayed ina location as agreed by Fighter where it shall receive prominent television exposure during thebroadcast of the Events . . .”).

33Id., ¶ 11 (“Reserved Rights. AP grants Fighter the exclusive right to distribute andexploit the Bouts, including the right to stream a live webcast of each Bout (so long as suchstreaming is gee-blocked in Russia and Asia), as well as any undercards, pre-fights, etc. relatedto the Bout ([these] together with the Bouts shall be defined as the ‘Events’), in the territories ofRussia and ‘Asia’ (as defined below) (the ‘Reserved Rights’) and the right to exclusively retainany and all revenues derived from its sale, license or other exploitation of the ReservedRights. . .”).

34Id., ¶ 14 (“Cancellation/Postponement. In the event that: (a) Fighter fails or is unable toperform any obligation hereunder due to any illness, injury or disability; due to an order of theCommission or other legal or regulatory entity; or as a result of any breach or non-performancehereunder; or (b) any Bout scheduled under this Agreement is postponed for any reason providedin the immediately preceding clause (a) or in the applicable Bout Agreement, or due to an eventof force majeure, disaster, labor action or other reason beyond AP’s reasonable control, thenwithout prejudice to any other remedies, AP shall have the right to extend the Term for the periodof such disability, suspension, breach/non-performance or postponement . . . . Fighter shall have

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promotional agreement upon expiration of the contract.35

The Consulting Agreement between M-1 and Affliction Promotions contained a preamble

referencing the Fight Agreement and noting that

“AP and Fedor Emelianenko (‘Fedor’) have entered into that separate Agreement

dated April 14, 2008 (the ‘Fedor Agreement’), . . . with respect to Fedor’s

agreement to participate in a minimum of three (3) Bouts. . . ; [¶] AP wishes that

M-1 provide certain herein defined promotional and consulting-related services in

connection with the Bouts and the development of MMA around the world; [¶]

[and] M-1 desires to provide certain promotional and consulting services to AP in

connection with the Bouts and the development of MMA around the world.”36

Like the Fight Agreement, the Consulting Agreement contains several provisions relevant to this

action that address: (1) the term of the agreement;37 (2) M-1’s provision of general consulting

the right to terminate this Agreement if: (a) AP fails to arrange a Bout within thirty (30) days ofexecution of this Agreement; (b) AP engages in any activity or conduct which is illegal, whichviolates any applicable law or Commission or other governmental, regulatory or sanctioning bodyrule or regulation, or which subjects Fighter or AP to public ridicule, scorn, contempt orembarrassment; or (c) AP is in breach of the terms of this Agreement.”).

35Id., ¶ 18 (“First Negotiation/First Refusal. Upon expiration, the parties will negotiate exclusively in good faith for a period of at least 30 days regarding a new promotional agreementbetween Fighter and AP. In the event AP and Fighter fail to reach an agreement within such 30-day period, AP shall present Fighter with their final offer (the ‘Offer’), which Contractor shallhave ten (10) business days to accept or reject. In the event Fighter rejects the Offer, Fighter shallbe free to negotiate and enter into agreements with any third party.”).

36Consulting Agreement at 33.

37Id., ¶ 1 (“Term. Commencing upon M-1’s execution of this Agreement and continuinguntil the earlier of: (i) March 31, 2009; or (ii) conclusion of the final Fedor Bout which is aminimum of three (3) Bouts, unless the term of this Agreement is terminated sooner or extendedfurther pursuant to this Agreement or pursuant to a separate writing executed by AP and agreedto by M-1”).

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services to AP;38 (3) the fact that M-1 would receive $1.2 million for each of Emelianenko’s

bouts;39 and (4) force majeure.40

The parties dispute the nature of the Consulting Agreement. Finkelchtein asserts he

“signed the Consulting Agreement with the understanding that this was the vehicle by which M-1

would co-promote bouts with AP by providing consultation in areas in which [M-1] had particular

expertise, especially international promotion, international broadcasting, and fighter scouting.”41

38Id., ¶ 2 (“M-1’s Services (‘Services’). M-l shall provide general consulting services toAP in connection with the Fedor Agreement and AP’s overall footprint globally, including, butnot limited to, consulting services in the following areas (the “Consulting Services”):(I) International (ex US) (ii) International (ex US) Bout-Consulting; (iii) International (ex US)television; (iv) Fighter scouting; (v) Location scouting for future Bouts recommendations;(vi) Television-related opportunities; (vii) International (ex US) sponsorships; (viii) Bout tourism(i.e. assisting in sending fans to the US to attend Events)”).

39Id., ¶ 3 (“Compensation. For its undertakings and efforts hereunder, AP agrees tocompensate M-I as follows: a. As compensation for the Consulting Services, AP shall pay M-1a consulting fee in the amount of One Million Two Hundred Thousand U.S. Dollars (USD$l,200,000) for each of the Fedor Bouts, for a cumulative fee of Three Million Six HundredThousand U.S. Dollars ($3,600,000) (the ‘Consulting Fee’), as well as reimbursement of expensesas set forth in Section 5 below. The Consulting Fee shall be due according to the followingschedule: USD $500,000 shall be due immediately upon execution of this Agreement; USD$700,000 shall be due no later than forty eight hours (48) prior to the initial Fedor Bout andcontingent upon arrival of Fedor to the city of the then scheduled Bout; USD $1,200,000 shall bedue no later than forty eight hours (48) prior to each of the second (2nd) and third (3rd) FedorBouts and contingent upon arrival of Fedor to the city of the then scheduled Bout; . . .”). See alsoid., ¶ 4 (“Costs and Expenses. AP shall be responsible for all costs and expenses in connectionwith this Agreement. In this regard, AP shall arrange, pay for and provide M-1 with any and allexpenses incurred in the performance of its duties under this Agreement”).

40Id., ¶ 7 (“Force Majeure. In the event the performance of either party hereunder ishindered or prevented, in whole or in part, because of an act of God, inevitable accident, fire,labor dispute, riot or civil commotion, act of public enemy, war or terror, epidemic, governmentalact, regulation or rule, or any other reason beyond the control of the parties, neither party shallbe liable to the other for any loss, expense or damage incurred by reason of such hindrance orprevention, provided that the non-performing party notifies the other party as soon as possible ofthe hindrance or prevention. In no event shall any Force Majeure condition excuse AP’sobligation pursuant to Section 4 above”).

41Finkelchtein Decl., ¶ 11.9


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Spencer contends that

“[n]one of the requirements in Paragraph 2 of the Consulting Agreement[, which

sets forth the consulting services M-1 was to provide,] were included in any draft

of the Fight Agreement . . . [because] I drafted the Consulting Agreement with a

different purpose from that expressed by the Fight Agreement. The Fight

Agreement is an industry standard agreement between a fighter (Fedor

Emelianenko) and a promotional company (AP) by which the fighter agrees to fight

and the promoter agrees to promote bouts at which the fighter will fight in exchange

for a purse. . . . I drafted the Consulting Agreement to provide M-1 with the

opportunity to perform services in the role as co-promoter of the fights . . . and

because [M-1 and I] did not believe AP had the knowledge or ability to perform the

categories of work set forth in Paragraph 2.”42

Spencer also asserts that “[he] . . . believed the Consulting Agreement was the platform for

building a MMA co-promotion relationship which would encompass the three fights . . . and, it

was [M-1’s] hope, a co-branded team which would continue to promote [international] MMA

events . . . after the third bout described in the Consulting Agreement.”43

M-1 notes that on April 8, 2008, Atencio sent M-1 an email containing red-line revisions

to the Consulting Agreement.44 These changes included one that modified the description of the

subject matter of the Consulting Agreement from a contract “relating to certain promotional

rights” to a contract “relating to certain promotional and consulting related services[.]”45

Affliction argues that the Consulting Agreement was a sham contract designed to decrease

Emelianenko’s tax liability. Beard asserts that in a conversation with M-1 management prior to

42Spencer Decl., ¶ 8.

43Id., ¶ 9.

44SUF, ¶ 82; SGI, ¶ 82.

45COE, Exh. 377 at 1681.10


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execution of the agreement, M-1’s managers stated that “they had certain financial concerns in

having the entire $1.5 million dollar purse paid directly to Fedor,” and asked that the contract be

“split[ ] . . . into two agreements, keeping the $1.5 million . . . payments to Fedor, but drafting

it in a way that M-1 was to receive some of the monies.”46 Beard “did not have an objection to

the [consulting] agreement, but . . . understood . . . [it] was to pay Fedor Emelianenko $1.5

million. . . .”47 Atencio maintains that during a call with M-1 management, M-1 stated that “there

w[ere] some financial considerations regarding taxes,” and that it “wanted to have the monies paid

under the Fight Agreement and a side agreement.”48 He reports that “Affliction did not participate

in coming up with the $300,000/$1,200,000 breakdown, what to call this agreement, or the types

of ‘Consulting’ that [were] listed in” the agreement.49 He notes that “[a]fter the[ ] agreements

were [signed], [he] never heard in all of the communications [he] had, . . . written and oral, [with]

M-1 . . . anything about the Consulting Agreement until the meeting at Affliction’s office after

the Trilogy event was canceled in July 2009.”50

Affliction has proffered undisputed evidence that M-1 paid the $1.2 million per bout it

received from Affliction under the Consulting Agreement directly to Emelianenko or a company

owned by him.51

C. The First Two Bouts and Preparation for an August 1, 2009 Bout

On July 19, 2008, Emelianenko participated in a first bout promoted by Affliction

46Beard Decl., ¶ 9.

47Id., ¶ 11.

48Atencio Decl., ¶ 11.

49Id., ¶ 12.

50Id., ¶ 14.

51Finkelchtein Depo. at 41:13-24 (“Q. At any time in relation to the first fight, didAffliction actually perform by paying $1.2 million to M-1? . . . A. Yes. Q. Did M-1 take thatmoney and pay that to Fedor? A. Yes. Q. Did it pay it directly to Fedor or to one of these otherentities [owned by Emelianenko] that we’ve discussed? . . . [A.] I don’t remember. Somethingto him, something to the company”).

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Promotions called Affliction: Banned.52 Affliction paid M-1 $1.2 million for this bout, as required

by the Consulting Agreement.53 On January 24, 2009, Emelianenko participated in a second bout

promoted by Affliction Promotions called Affliction: Day of Reckoning.54 Affliction paid M-1 $1.2

million for this bout as well, pursuant to the Consulting Agreement.55

Commencing February 8, 2009, there were a series of communications between Affliction

Promotions and M-1, including “teleconferences M-1 and [Affliction Promotions] conducted[,]

to plan and discuss . . . [their] respective responsibilities in preparing for the third event.”56

On April 3, 2009, Raimond sent Affliction Promotions an email stating that he had initiated

discussions with DREAM, a Japanese MMA promotion company, about having the next event in

Tokyo, Japan under a co-production arrangement.57 The email stated: “[M-1] ha[s] initiated

discussion with Dream in Japan on the possibility of having the next event in Tokyo in a co-

production format. [¶] Dream has responded very positive[ly] and [M-1] ha[s] a tentative

reservation for the Saitama Arena in Tokyo for July 20th.”58 Raimond noted that “[the parties]

need[ed] to move swiftly as [a] lead time of 3 months [was] required to land any kind of [pay per

view] deal in Japan.”59 On April 6, 2009, Atencio sent an email response to Raimond’s financial

52SUF, ¶ 111; SGI, ¶ 111.

53Raimond Decl., ¶ 15 (noting that Affliction paid M-1 a $500,000 installment due on thesigning of the Consulting Agreement and M-1 later received a $700,000 installment).

54SUF, ¶ 112; SGI, ¶ 112.

55COE, Exh. 377 (Deposition of Michael Bassiri (“Bassiri Depo.”)) at 73: 14-17 (“I couldtell you that we paid 1.2 million for the first bout, 1.2 for the second bout.”).

56Raimond Decl., ¶ 19. See also COE, Exhs. 5-9 (emails setting up weekly conferencecalls in February and March 2009).

57SUF, ¶ 212; SGI, ¶ 212. See also COE, Exh. 10.

58COE, Exh. 10 at 53.

59Id.

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projections and outline of logistical requirements for the proposed July 20, 2009 event.60 Atencio

expressed concerns about the high cost of the event and the possibility of “no gain for

Affliction!”61 The next day, Raimond, Beard, and Atencio engaged in an e-mail exchange in

which Raimond attempted to explain his thinking regarding the event, and suggested that the

parties could work to build a longer term relationship with DREAM.62 Two days later, Raimond

sent an email to Affliction Promotions stating that M-1’s management “[is] available to call

[Affliction Promotions] at any time to discuss [a] path forward with respect to a possible Tokyo

event. [The] window of opportunity is diminishing by the day. [Raimond] realize[s] from

discussions with [Atencio] . . . that there are some concerns. The ones [Raimond] ha[s] heard to

date are all very easy to solve.”63

In response to these communications, Atencio sent M-1 an email on April 10, 2009, stating

that he had spoken with the Affliction Promotions partners and that “all agree[d] on two points[;]

1st the next event will be in the US and 2nd is that [Affliction Promotions’ partners] all want the

next fight to be Fedor v. [Josh] Barnett.”64 Raimond replied, asking for the date of the event and

whether it “was still within the contract limitations.”65 The record contains no evidence thta

Affliction Promotions answered this email.

In April 2009, hosted by M-1, Atencio and Beard traveled to Russia, Japan, and Korea,

to meet with M-1 representatives regarding, inter alia, a collaboration between M-1 and Affliction

Promotions to hold the “next” fight overseas, and to have Emelianenko and Affliction

representatives attend press conferences and grand openings of new Affliction stores, as well as


61COE, Exh. 14 at 62.


63SUF, ¶ 220; SGI, ¶ 220. See also COE, Exh. 18 at 76.

64COE, Exh. 19 at 77. Josh Barnett is an MMA fighter and former UFC Champion. (SUF, ¶¶ 22-23; SGI, ¶¶ 22-23).

65Id.; SUF, ¶ 222; SGI, ¶ 222. 13


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to discuss a potential long term partnership between M-1 and Affliction Promotions.66

On May 4, 2009, M-1’s counsel, Steve Bash, sent Affliction Promotions and members of

the M-1 team an email regarding Affliction Promotions’ request that Emelianenko participate in

an upcoming U.S. press tour.67 Bash explained that “[o]ne very important administrative issue

. . . [was] that Fedor’s U.S. visa ran through the ‘end’ date of his Affliction contract which was

March 31, 2009.” As a consequence, he noted, the parties “need[ed] to renew Fedor’s visa

ASAP.”68 On May 13, 2009, Atencio sent Bash a letter regarding “Fedor Emelianenko

Extension,” which stated:

“This shall confirm that pursuant to paragraph fourteen (14) of the Promotional

Rights Agreement, our Agreement with Mr. Emelianenko is hereby extended. Mr.

Emelianenko is to fight on August 1, 2009 against Josh Barnett. [¶] It is

contemplated that Mr. Emelianenko’s obligations pursuant to said Agreement will

be fulfilled within one year. [¶] Further to our discussions, Mr. Emelianenko is

expected to arrive in the United States on or about the first week of June 2009 to

begin the press campaign for his upcoming fight.”69

The letter was typed on Affliction letterhead.70

On May 11, 2009, Raimond sent Affliction Promotions an email discussing possible terms

for a long-term MMA promotion joint venture.71 As the e-mail documents, the parties

contemplated forming a partnership. Raimond was particularly concerned with how the

partnership might affect “Fedor and M-1’s present agreement” and “the August show in

66SUF, ¶ 230; SGI, ¶ 230.


68COE, Exh. 144 at 782.

69Declaration of Steven Bash in Support of Plaintiff’s Reply (“Bash Reply Decl.”), DocketNo. 218 (April 11, 2011), Exh. 1 (Extension Letter).

70Id. at 1557.

71SUF, ¶ 236; SGI, ¶ 236. See also COE, Exh. 88.14


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particular[.]”72

On May 18, 2009, Raimond sent an email to Affliction Promotions inviting it to participate

in a teleconference later that day.73 Raimond stated that he “c[ould not] help but conclude that [the

parties] ha[d] not achieved the progress [they had] agreed [to make] at [their] last

teleconference.”74 He noted, among other things, that M-1 had yet to receive an “action list” for

the August 1, 2009 event, that the “outstanding issues list” remained unresolved, that M-1 had

not received the preliminary fight card for the August 1, 2009 event, and that Affliction had not

responded to the proposed schedule for Emelianenko’s promotional tour.75 Raimond stated that

the parties would not be able to conclude the partnership arrangement before the third event. As

a result, he said, M-1 wanted to draft an agreement specific to the August 1, 2009 event, while

continuing to work on an agreement for the future joint venture.76 When the teleconference

Raimond had proposed did not go forward, he sent a follow-up email stating that the parties

“urgently need[ed] to move ahead for the August 1 event.”77

The following day, Atencio sent Raimond a “To Do List” for the August 1, 2009 event.78

It included setting and approving a show budget, establishing a marketing/advertising/promotions

budget, leasing the Honda Center, setting ticket prices and scaling the venue, completing

agreements with broadcast partners, agreeing on video pieces and assigning responsibility for

building them, holding a strategy meeting to determine what press releases were needed for the

show, deciding on a name and logo for the show, building a website, creating press releases for

72COE, Exh. 88 at 343-44.


74COE, Exh. 22 at 83.

75Id.

76SUF, ¶ 246; SGI, ¶ 246.

77SUF, ¶ 250; SGI, ¶ 250. See also COE, Exh. 23 at 86.

78SUF, ¶ 253; SGI, ¶ 253. See also COE, Exh. 25 at 91-94. 15


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advance ticket sales, developing an advanced pre-sale strategy, executing a hotel contract, setting

sponsor prices and a selling strategy, getting feature fighter bout agreements signed, fixing PR and

publicity timelines, creating the look of the show, and designating persons to coordinate fighter

travel, medical, tickets, bout agreements, licensing, and housing.79 None of the items on the list

are covered in the Fight Agreement between Affliction Promotions and Emelianenko.80

On May 20, 2009, Echteld, M-1’s scouter and match-maker, sent an email to Affliction

Promotions recommending twenty-nine fighters and fourteen matches in the light, middle, bantam,

feather, and welter weights for the undercard on August 1, 2009.81 Echteld noted that he had

developed the proposed matches over many weeks, attending fights in person, scouting the

proposed fighters in person and on film, conducting internet research, speaking with other fighters

and MMA experts, and analyzing such factors as the fighters’ age, strength, endurance, fighting

style, offensive and defensive skills, fighting record and rank, popularity, environment (where and

with whom the fighter trains), past performance, skill progression, and potential contract costs,

to determine the best matches.82 That same day, Atencio sent Raimond and other members of the

M-1 team, including Echteld, an email advising who would be on the August 1, 2009 fight card.

Atencio acknowledged the fact that M-1 wanted international fighters, but stated that Affliction

Promotions would have to discuss whether it could “work them in financially.”83

The following day, Raimond sent Affliction Promotions an email identifying tasks M-1

could perform for the August 1, 2009 event.84 Atencio responded with an email that described

the duties Affliction Promotions wanted M-1 to perform.85 Atencio stated, for example, that he

79SUF, ¶ 254; SGI, ¶ 254.

80SUF, ¶ 256; SGI, ¶ 256.


82COD, Exh. C (Declaration of Apy Echteld (“Echteld Decl.”)), ¶ 14.



85See COE, Exh. 134.16


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wanted M-1’s consultant Spencer to continue his work on “international sales and coordination,

international commentary teams, [and] international coordination with . . . domestic

transmission.”86 As respects other duties, including M-1’s proposal that Echteld assist with match-

making, Atencio marked “NO!,” indicating that Affliction Promotions did not seek M-1’s

assistance.87

On June 4, 2009, Affliction Promotions invited M-1 to attend a June 16, 2009 production

meeting for the August 1, 2009 event, which had been named Affliction:Trilogy.88 On June 5,

2009, Atencio sent an email memorializing what had been discussed.89 The email directed

Raimond to “get [a] lighting plan, stage set-up, event start up sound, [and] staging music ideas,”

as well as “camera set-ups for different photo angles” and the “ring set-up for corner pads.”90

Despite having earlier rejected Echteld’s offer to assist with match-making, Atencio directed

Echteld to obtain particular fighters for the first and last fights of the night.91

On June 22, 2009, Raimond sent Beard an email, which stated: “Dear Todd, [¶] Doing

some catch-up reading and just realized that we are either just finishing or just past the exclusive

negotiating window for AP to make an offer to M-1 Global to extend Fedor beyond the third fight.

Obviously, this most likely is a moot point give our discussions about the partnership.

Nevertheless, AP should probably send us a firm offer right away to extend Fedor so AP can

protect its exclusive rights to negotiate. Probably just legal-ese but perhaps this will get Affliction

to step up immediately for the future so we can either get on with it or not.”92 Affliction

86Id. at 740. See also SUF, ¶ 269; SGI, ¶ 269.

87COE, Exh. 134 at 740. See also SUF, ¶ 264; SGI, ¶ 264.

88SUF, ¶ 309; SGI, ¶ 309.


90COE, Exh. 43 at 137.

91Id.

92SUF, ¶ 344; SGI, ¶ 344. 17


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Promotions never responded to this email.93

On June 24, 2009, Bash emailed Beard on Finkelchtein’s behalf to describe Finkelchtein’s

concerns regarding M-1’s relationship with Affliction.94 He noted that to develop the

“Affliction/M-1 Global business,” Finkelchtein had invested $1 million to open Affliction stores

in Moscow, had done “everything to make Affliction happy about the results of [the] developing

MMA project” and had endeavored to “meet all of [Affliction’s] wishes.”95 Bash observed that

Finkelchtein had used his personal contacts to ensure that Trilogy would be broadcast on Russia’s

state-run television channel.96 Bash then said: “Todd, M-1 Global is really concerned because it

seems to us that Affliction is holding something back.” He noted that Beard probably knew “that

UFC [was] ready to sign with Fedor on any terms [M-1] want[ed] . . . ,” but that M-1 had held

back, “follow[ing] the terms of [its] partnership [with Affliction Promotions] and tr[ying] to build

a competitive organization using Fedor as the trump card.” Bash said that M-1 was “putting [its]

business in jeopardy” by having Fedor fight Barnett, and asked for “some kind of compromise”

to ensure that “Josh Barnett [did] not leave [ ] with the champion belt.” He noted that if M-1 and

Affliction Promotions could not reach “a compromise” Finkelchtein would “be obliged to use [his]

contract right to refuse the opponent.”97 He concluded: “Todd, when [M-1 and Affliction

Promotions] met in Russia [they] were talking about the foundation of a new company. But

[Finkelchtein] do[es]n’t see any efforts from [Beard’s] side on doing it. [Finkelchtein] hope[s]

[he] [is] wrong about it and [Affliction Promotions] [is] going to stay in the business of MMA.”98

93SUF, ¶ 345; SGI, ¶ 345.

94SUF, ¶ 352; SGI, ¶ 352. See also COE, Exh. 148 at 790-91.

95Id.

96Id.

97Id.

98Id.

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Beard never responded to this email in writing.99

D. Affliction Negotiates with UFC and Cancels Trilogy

On or about July 9, 2009, Affliction began discussions with UFC regarding a potential

sponsorship relationship.100 Bassiri of Affliction Promotions met with UFC representatives on July

13, 2009, and returned the same week for a second meeting.101 At the July 13, 2009 meeting,

Bassiri and Lawrence Epstein, UFC’s general counsel, discussed the possibility that UFC would

assume responsibility for the Trilogy show and postpone it to September 19, 2009, in Dallas.102

Bassiri told Epstein that Affliction Promotions wanted to leave the MMA promotion business and

re-establish its relationship with the UFC. He said that Affliction had a strong relationship with

Emelianenko and felt confident Emelianenko would follow Affliction to the UFC.103 Beard,

Courtney Dubar, Clifton Chason, and Eric Foss of Affliction knew Bassiri was meeting with UFC

a second time on July 15, 2009.104 No one at Affliction told anyone affiliated with M-1 that it was

exploring the possibility of reestablishing a relationship with UFC.105

99SUF, ¶ 353; SGI, ¶ 353. See also Bash Decl., ¶ 8. Defendants object that this evidenceas irrelevant. The court overrules the objection, as evidence of Beard’s failure to respond isrelevant to M-1’s assertion that Affliction breached the implied covenant of good faith and fairdealing by inducing M-1 to continue working on Trilogy.

100SUF, ¶ 365; SGI, ¶ 365.

101See SUF, ¶ 370 (citing COE, Exh. 7 (Bassiri Depo. at 132:15-133:6)). Defendantsobject to this evidence as irrelevant under Rule 402. The court overrules defendants’ objectionand finds the evidence of Bassiri’s meetings with UFC to be relevant to M-1’s assertion thatAffliction breached the implied covenant of good faith and fair dealing in inducing M-1 tocontinue working to put on Trilogy while Affliction Promotions was negotiating with UFC. Forthe same reason, the court also overrules defendants’ identical objections to other informationregarding the meetings between UFC and Affliction discussed below.

102SUF, ¶ 371 (citing Bassiri Depo. at 137:1-139:7).

103SUF, ¶ 378 (citing COE, Exh. 380 (Deposition of Lawrence Epstein (“Epstein Depo.”))at 1784:12-16, 1793:10-1794:22).

104SUF, ¶ 374 (citing Bassiri Depo. at 143:11-144:4).

105SUF, ¶ 375 (citing Raimond Decl., ¶ 19). 19


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On July 21, 2009, M-1 learned from Affliction that the California State Athletic

Commission would not renew Josh Barnett’s license because he had tested positive for the use of

steroids. As a result, Barnett was ineligible to fight Emelianenko at Trilogy.106 After learning of

Barnett’s ineligibility, Atencio identified a short list of potential replacement opponents, including

Brett Rogers, Roy Nelson, and Allistair Overeem.107 On July 22, 2009, Atencio offered Rogers

$500,000 to replace Barnett as Emelianenko’s opponent at the August 1, 2009 Trilogy event.108

Strikeforce, with whom Rogers then had a promotional contract, was not willing to release him

from his contract to fight in the Trilogy event, however.109

When Bash called Affliction on July 22, 2009, regarding the status of the search for a

replacement fighter, he “was told by . . . [Atencio] and [Beard] . . . that ‘[they were] going to

make a decision tomorrow, and [they would] call [Bash] once . . . [they] figure[d] everything

out.’”110 Bash reports that, after Beard and Atencio “said [they]’d call in the morning . . . [t]here

was a period of time when [Beard] wasn’t answering his phone,” i.e., “[t]he whole [next] day,”

despite the fact that Bash “kept calling and texting.”111 The following day, Bash was in Los

Angeles, and decided to visit the Affliction offices in person.112 He spoke with Atencio, who told

him that the “partners [were] upstairs in a meeting, and they’re. . . making a financial decision

on . . . who the opponent’s going to be.”113 Bash waited for an hour and a half, but left when

106SUF, ¶ 384; SGI, ¶ 384.

107COE, Exh, 376 (Deposition of Tom Atencio (“Atencio Depo.”)) at 1545:18-25.

108SUF, ¶ 389; SGI, ¶ 389.

109SUF, ¶ 390; SGI, ¶ 390.

110Bash Depo. at 121:4-7.

111Id. at 121:25-122:4.

112Id. at 122:5-124:23.

113Id.

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Atencio promised to call him at 8:00 a.m. the next day.114

Also on July 23, 2009, Strikeforce released Rogers to fight in the event.115 By that time,

however, Affliction Promotions had decided to cancel Trilogy.116 At 4:00 p.m. that day, Affliction

concluded a deal with UFC.117 Paragraph 1 of the UFC/Affliction agreement provided: “[E]xcept

for any rights that [Affliction] has with respect to Fedor Emelianenko (‘Fedor’) and conditioned

upon [Affliction] . . . assign[ing] the agreements between [Affliction] and the [Affliction] Fighters

to the UFC, the UFC agrees to assume [Affliction]’s responsibility for payment of the entire purse

of the Affliction Trilogy Event which [Affliction] represents is not in excess of $741,000 purse

and $370,000 win bonus. . . .”118 Paragraph 2 stated that “[w]ith respect to Fedor, in the event

114Id.

115SUF, ¶ 391; SGI, ¶ 391. See also COD, Exh. G (Declaration of Brett Rogers (“RogersDecl.”)), ¶¶ 1-2.

116Bassiri Decl., ¶ 29 (“The decision to cancel was made on July 22, 2009 at approximately1:00 p.m.”). See also SUF, ¶ 397; SGI, ¶ 397.

117Bassiri Decl., ¶ 29.

118SUF, ¶ 405; SGI, ¶ 405. Defendants object to the relevance of this fact, noting that“[t]he negotiations with UFC began July 9, 2009, weeks before any one knew Barnett would testpositive for steroids. Prior to the Barnett news, the negotiations were only that any possible dealwould take affect after the August 1, 2009 fight. There was no requirement that the August 1,2009 fight be canceled, and the UFC did not ask Affliction to do so. The decision to cancelTrilogy was made by Affliction before any deal points were even agreed to between the UFC andAffliction and UFC played no part in that decision. Thus, these negotiations and contract haveno relevance [to] any of the issues [on] this motion or the case itself. In addition, the Trilogy fighthad already been cancelled before the UFC contract was entered into.” (SGI, ¶ 405). Defendants’ objection appears to concern the inferences that could be drawn from the fact thatUFC agreed to pay the purse for the Trilogy event. While defendants’ description of the timingof Affliction’s decisions supports one set of inferences, the fact that the decision to cancel Trilogyand the decision to enter into an agreement with UFC occurred on the same day, and that UFCagreed to pay the purse for Trilogy, just as plausibly give rise to a different set of inferences. Asa consequence, the evidence is relevant. This is true notwithstanding evidence that Affliction andUFC began negotiations prior to learning that Barnett would be ineligible to fight Emelianenko. For similar reasons, the court overrules defendants’ relevance objections to other provisions ofthe UFC/Affliction agreement.

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the UFC is able to come to an agreement with Fedor on terms and conditions satisfactory to the

UFC, the UFC shall assume responsibility for payments of Fedor’s purse for the Affliction

Trilogy event or cause Fedor to release [Affliction] from its agreement with Fedor.”119 Paragraph

6 required that Affliction Promotions cancel the Trilogy event.120

Atencio finally returned Bash’s telephone calls on July 24, 2009. He advised that Trilogy

had been cancelled and that Affliction had signed a deal with the UFC.121 Prior to the time M-1

learned of the cancellation, it had put Emelianenko on his scheduled flight to Los Angeles, and

given him footage of both Rogers and Vitor Belfort so that he could study the fighters while in

flight.122 Emelianenko did not learn that Trilogy had been cancelled until he arrived at Los

Angeles International Airport with thirty fans from Russia.123

E. The Letter Agreement Between Affliction Clothing and M-1

Following the success of Affliction: Banned, the first bout presented under the Fight

Agreement, the parties commenced negotiations regarding Affliction Clothing’s sponsorship of

a series of international MMA team competition events that the parties called the M-1

Challenge.124 On December 8, 2008, M-1 and Affliction Clothing executed a Letter Agreement

pursuant to which Affliction Clothing agreed to sponsor the M-1 Challenge for the remainder of

the 2008 season and the entire 2009 season.125 The Letter Agreement was a separate agreement

between Affliction Clothing and M-1, and was not predicated or contingent upon an extension of

the Consulting Agreement between Affliction Promotions and M-1 or the Fight Agreement

119SUF, ¶ 406; SGI, ¶ 406.

120SUF, ¶ 409; SGI, ¶ 409.

121SUF, ¶ 425; SGI, ¶ 425.

122SUF, ¶ 426; SGI, ¶ 426. See also Raimond Decl., ¶ 94.

123SUF, ¶ 428; SGI, ¶ 428.

124SUF, ¶ 446; SGI, ¶ 446.

125SUF, ¶ 447; SGI, ¶ 447. See also COE, Exh. 90 (Letter Agreement). 22


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between Affliction Promotions and Emelianenko.126

M-1 promised to provide specified promotional benefits to Affliction Clothing realted to

the M-1 Challenge, including: (1) “Affliction shall be identified as the Presenting Sponsor of

every live M-1 Challenge event”; (2) “[t]he title of the M-1 Challenge for all live events will be:

“‘M-1 Challenge Presented By Affliction’ with the Affliction logo to be included in the title”;

(3) “Affliction[’s] name and logo will be incorporated into all M-1 Global marketing and

advertising activities for the M-1 Challenge. . .”; (4) “Affliction shall receive brand recognition

and logo placement at all M-l Challenge live events and corresponding pre[-] and post[-]bout

events such as weigh-ins, press conferences, open workouts, and training seminars. Signage and

other exposure will include. . .:” “Red and Blue corner positions on ring mat”; “Red and Blue

corner posts”; “Bumper pads (if permitted by local commission)”; “Fighter stage/tunnel

entrance”; “Interview backdrop”; “Step and Repeat Banner at press conferences and weigh-ins”;

“Arena banners and signs for camera exposure”; “Arena Jumbotron/Scoreboard and/or in-house

monitors”; “Regular verbal mentions to live audience by Ring Announcer”; “Affliction T-Shirt

Giveaways during live shows or other product placement in arena including permission to sell

Affliction merchandise at permitted venues.”127 The Letter Agreement stated that “Affliction

[would] receive branding and name recognition during worldwide television broadcasts of each

M-1 Challenge,” and that “M-1 Global [would] produce each year at least 30 unique 1 hour

episodes of the M-1 Challenge live events, equaling at least 30 hours of television. . . .” M-1

committed to “produce each telecast in such a way . . . that Affliction’s on-site presence [was]

prominently featured on-screen.” It also agreed that “M-1 Challenge fighters, corners, referees,

jury, and production crew [would] wear Affliction clothing during broadcasts.”128

126SUF, ¶ 449; SGI, ¶ 449.

127Letter Agreement at 397-398. See also SUF, ¶¶ 452-56; SGI, ¶¶ 452-56. The LetterAgreement stated that “[s]hould any of the above items be expressly prohibited by the hostingvenue for the M-I Challenge live event, M-1 Global shall provide alternate exposure or othercompensation to Affliction on case-by-case basis.” (Letter Agreement at 398).

128Id.

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In exchange, Affliction Clothing agreed to pay M-1 $1,000,000, with a first payment of

$500,000 due by January 31, 2009, and a second payment of $500,000 due by July 31, 2009.

Affliction Clothing agreed to supply 60 t-shirts and 15 polo shirts to M-1 for each M-1 Challenge

live show.129 The parties acknowledged that “time [was] of the essence in the rendering of all

consideration due [to] M-1 Global” under the Letter Agreement.130

1. Performance of the Letter Agreement

Pursuant to the Letter Agreement, M-1 promoted and staged ten live M-1 Challenge

competitions/tournaments during the 2009 season, from February 21 through December 3,

2009.131 Eight of these were tournaments that took place in venues around the world; the

remaining two were the semi-finals and a final championship tournament.132 Raimond, who

personally attended seven of the ten M-1 Challenge events, asserts that “[a]t each of the 2009 M-1

Challenge events [he] attended, Affliction Clothing [ ] was identified as the presenting sponsor . . .

[,] [Affliction Clothing]’s logo and website address was placed at the corner positions of the ring

mats . . . [,] each ring contained red and blue corner posts. . . .[and] [Affliction Clothing]’s logo

(the Affliction name) was prominently displayed on the bumper pads.”133 He contends that

“[Affliction Clothing]’s brand and log[o], along with the jointly developed M-1 Affliction

Challenge logo/graphic, was prominently displayed [on] all interview backdrops and step and

repeat banners at press conferences and weigh-ins. [Affliction Clothing] also received regular

verbal mentions . . . by the Ring Announcer[.]”134 Raimond also notes that the “fighters

participating in each of the 2009 M-1 Challenge events wore Affliction-branded t-shirts during

129Id. at 399.

130Id.

131SUF, ¶ 467; SGI, ¶ 467.

132SUF, ¶ 469; SGI, ¶ 469.


134Id.

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interviews, press conferences, weigh-ins, fighter announcements and ring entrances.”135 He

asserts, however, that although “M-1 requested t-shirts from [Affliction Clothing] branding the

Affliction logo for the fighters to wear in the Semi-Finals and Final tournaments[,] [Affliction

Clothing] would not supply any t-shirts to M-1 after [Affliction Promotions] cancelled the . . .

Affliction: Trilogy event in July 2009.”136

Raimond reports that “[i]n addition to . . . live broadcasts of the [M-1 Challenge] events . .

. , 3 one-hour television episodes were produced from the 8 separate tournaments, 2 one-hour

television episodes were produced for the 2009 M-1 Challenge Semi-Finals and 1 one-hour

television episode was produced for the 2009 M-1 Challenge Finals, followed by an additional

episode of the Top 20 Knockouts of 2009. The tape-delayed episodes plus live broadcasts

exceeded 30 hours of television broadcasts.”137 In addition, the “events were streamed live over

the internet through M-1’s websites . . . as well as other international websites. . . .”138 Atencio

disputes this. Based on his review of all of the DVDs of M-1 Challenge events produced during

discovery, he asserts that “[t]here were only 27 fight videos provided and the contract calls for

30 one hour episodes.”139

M-1 has proffered evidence that it “spent hundreds of thousands of dollars putting on the

2009 M-1 Challenge events. . . .” It contends that “[e]ach M-1 Challenge event cost around

$250,000 U.S. Dollars, which include[d] expenses such as [a] venue fee, host country visa fees,

travel expenses for production crews and staff, stage set up, and referees.”140 Raimond asserts

that although “Tom Atencio and Todd Beard attend[ed] some M-1 Challenge events, at no time

135Id., ¶ 125.

136Id., ¶ 126. See also COE, Exh. 395 (September 13, 2009 email from M-1 employeePatrick de Witte to Atencio requesting Affliction team t-shirts for the semi-finals).


138Id., ¶ 133.

139Atencio Decl., ¶¶ 48-49.

140Raimond Decl., ¶ 137.25


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did [they] or anyone on behalf of [Affliction Clothing] ever advise [him] . . . that M-1 was not

performing any part of the Letter Agreement.”141 In addition, Raimond states, “[a]t no time did

anyone ever communicate to [him] [that] [Affliction Clothing] was not satisfied with M-1’s

performance under the Letter Agreement[,] . . . that [Affliction Clothing] believed it was not

receiving sufficient brand recognition and/or logo placement at the M-1 Challenge events and/or

broadcasts, or that [Affliction Clothing] was being underrepresented.” Raimond “did not learn

of [Affliction Clothing’s] contention [in this regard] . . . until this litigation [began].”142

Affliction Clothing paid M-1 the first $500,000 due under the Letter Agreement.143 It has

not paid the second installment of $500,000, which would have been due on July 31, 2009,

pursuant to paragraph 4.A. of the Letter Agreement.144

F. Claims Asserted

Emelianenko and M-1 allege seven claims: (1) breach of the Fight Agreement; (2) breach

of the implied covenant of good faith and fair dealing in the Fight Agreement; (3) breach of the

Consulting Agreement; (4) breach of the implied covenant of good faith and fair dealing in the

Consulting Agreement; (5) breach of the Letter Agreement; (6) declaratory relief concerning the

validity of the Fight Agreement and the parties’ obligations thereunder; and (7) declaratory relief

concerning the validity of the Consulting Agreement and Letter Agreement and the parties’

obligations thereunder. Plaintiffs seek compensatory damages, attorneys’ fees and costs, and

interest. M-1 has moved for summary judgment on its third, fourth, and fifth causes of action.

Defendants have cross-moved for summary judgment on plaintiffs’ first and second causes of

action.

141Id., ¶ 159. See also COE, Exh. 389 (Deposition of Todd Beard (“Beard Depo.”)) at164: 2-19 (testifying that although he thought Affliction Clothing was underrepresented at the M-1Challenge events, he did not tell anybody about this opinion).

142Raimond Decl., ¶ 160. See also SUF, ¶ 616; SGI, ¶ 616 (“AC did not raise anycomplaints concerning M-1’s performance under the Letter Agreement until this litigation”).

143SUF, ¶ 608; SGI, ¶ 608.

144SUF, ¶ 609; SGI, ¶ 609. 26


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II. DISCUSSION

A. Legal Standard Governing Motions for Summary Judgment

A motion for summary judgment must be granted when the pleadings, the discovery and

disclosure materials on file, and any affidavits show that there is no genuine issue as to any

material fact and that the movant is entitled to judgment as a matter of law.

FED.R.CIV.PROC. 56(a). A party seeking summary judgment bears the initial burden of informing

the court of the basis for its motion and of identifying those portions of the pleadings and

discovery responses that demonstrate the absence of a genuine issue of material fact. See Celotex

Corp. v. Catrett, 477 U.S. 317, 323 (1986); see also Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 248 (1986) (“[T]he substantive law will identify which facts are material. Only disputes over

facts that might affect the outcome of the suit under the governing law will properly preclude the

entry of summary judgment. . . . [S]ummary judgment will not lie if the dispute about a material

fact is ‘genuine,’ that is, if the evidence is such that a reasonable jury could return a verdict for

the nonmoving party”).

Where the moving party will have the burden of proof on an issue at trial, the movant must

affirmatively demonstrate that no reasonable trier of fact could find other than for the moving

party. On an issue as to which the nonmoving party will have the burden of proof, however, the

movant can prevail merely by pointing out that there is an absence of evidence to support the

nonmoving party’s case. See Celotex Corp., 477 U.S. at 323. If the moving party meets its initial

burden, the nonmoving party must set forth, by affidavit or as otherwise provided in Rule 56,

“specific facts showing that there is a genuine issue for trial.” Liberty Lobby, 477 U.S. at 250.

Evidence presented by the parties at the summary judgment stage must be admissible.

FED.R.CIV.PROC. 56(c)(1)(B). In reviewing the record, the court does not make credibility

determinations or weigh conflicting evidence. Rather, it draws all inferences in the light most

favorable to the nonmoving party. See T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n,

809 F.2d 626, 630-31 (9th Cir. 1987). Conclusory, speculative testimony in affidavits and

moving papers is insufficient to raise genuine issues of fact and defeat summary judgment. See

Falls Riverway Realty, Inc. v. Niagara Falls, 754 F.2d 49, 56 (2d Cir. 1985); Thornhill Pub. Co.,

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Inc. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979).

B. Standard Governing Motions for Summary Judgment Involving Contract

Interpretation

In general “summary judgment is appropriate [in contract interpretation cases] only if the

contract or the contract provision in question is unambiguous.” See Northwest Acceptance Corp.

v. Lynnwood Equipment, Inc., 841 F.2d 918, 920 (9th Cir. 1988) (quoting National Union Fire

Ins. Co. v. Argonaut Ins. Co., 701 F.2d 95, 97 (9th Cir. 1983) (quoting Castaneda v. Dura-Vent

Corp., 648 F.2d 612, 619 (9th Cir. 1981)). The rationale for this rule is that “ambiguity in a

contract raises a question of intent, which is a question of fact precluding summary judgment.”

National Union, 701 F.2d at 97. “The usual statement of the rule, however, assumes that there

is at least some evidentiary support for competing interpretations of the contract’s language.” Id.

Where there is no evidentiary support for the interpretation urged by a party, summary

judgment against that party is appropriate, even if the contract is ambiguous on its face. Id.

(“National cannot rely on the mere possibility of a factual dispute as to intent to avert summary

judgment. Nor can it expect the district court to draw inferences favorable to it when they are

wholly unsupported. National failed to raise a genuine issue of material fact as to the contract’s

proper interpretation. Summary judgment was appropriate”); see Compagnie Financiere de CIC

et de L’Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith Inc., 232 F.3d 153, 159 (2d

Cir. 2000) (“This Court may resolve the ambiguity in the contractual language as a matter of law

if there is no extrinsic evidence to support one party’s interpretation of the ambiguous language

or if the extrinsic evidence is so[ ] one[-]sided that no reasonable factfinder could decide contrary

to one party’s interpretation”); 3Com Corp. v. Banco do Brasil, S.A., 171 F.3d 739, 746-47 (2d

Cir. 1999) (“As with any other factual issue, however, the court may resolve ambiguity in

contractual language as a matter ‘of law’ if ‘the evidence presented about the parties’ intended

meaning [is] so one-sided that no reasonable person could decide the contrary,’” quoting Boston

Five Cents Sav. Bank v. Sec’y of Dep’t of Hous. & Urban Dev., 768 F.2d 5, 8 (1st Cir. 1985)

(alteration original)); Unicom Systems, Inc. v. Electronic Data Systems, Corp., No. CV 04-6716

AHM (RZx), 2005 WL 5801534, *8 (C.D. Cal. Nov. 1, 2005) (“Where a party presents no

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evidence in support of its contract interpretation, summary judgment is appropriate”); see also

Ferguson v. Lion Holding, Inc., 478 F.Supp.2d 455, 468 (S.D.N.Y. 2007) (“In rare instances,

summary judgment will be appropriate where there exists a contractual ambiguity, yet the relevant

extrinsic evidence is so one-sided as to compel a finding as a matter of law,” citing Compagnie

Financiere, 232 F.3d at 159); Joseph M. Perillo, CALAMARI & PERILLO ON CONTRACTS § 3.15,

at 164 (5th ed. 2003) (“Where . . . extrinsic evidence is introduced in aid of interpretation of a

writing, the question of meaning is left to the jury except where, after taking the extrinsic evidence

into account, the meaning is so clear that . . . the question is treated as one of law” (footnotes

omitted)).

As the Ninth Circuit has explained:

“If we find a contract to be ambiguous, we ‘ordinarily’ are hesitant to grant

summary judgment ‘because differing views of the intent of parties will raise

genuine issues of material fact.’ Maffei v. Northern Ins. Co., 12 F.3d 892, 898

(9th Cir.1993). This circuit has not, however, adopted a rigid rule prohibiting

reference to extrinsic evidence in resolving a contractual ambiguity on a summary

judgment motion. See, e.g., International Bhd. of Elec. Workers Local 47 v.

Southern Cal. Edison Co., 880 F.2d 104, 107 (9th Cir.1989) (examining parol

evidence on summary judgment motion in effort to reconcile conflicting contract

provisions). Rather, ‘[c]onstruing all evidence in the light most favorable to, and

making all reasonable inferences in favor of, the non-moving party,’ we have

sought to determine whether the ambiguity could be resolved in a manner consistent

with the non-moving party’s claim. Id. Only if the ambiguity could be so resolved

would summary judgment be denied. Id.” San Diego Gas & Elec. Co. v.

Canadian Hunter Marketing Ltd., 132 F.3d 1303, 1307 (9th Cir. 1997).

C. Whether M-1 is Entitled to Summary Judgment on its Claims for Breach of the

Consulting Agreement and Breach of the Covenant of Good Faith and Fair

Dealing Implied in That Contract

M-1 seeks summary judgment in its favor on its claims for breach of the Consulting

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Agreement, and breach of the covenant of good faith and fair dealing implied in that contract. It

cites Affliction Promotions’ failure to pay $1.2 million for the third bout and its failure to pay all

costs M-1 incurred as a result of performing the specified consulting services.

To prevail on its breach of contract claim, M-1 must prove the existence of a valid

contract, its performance of the contract or excuse for nonperformance, defendant’s breach, and

resulting damage. See Coprich v. Superior Court, 80 Cal.App.4th 1081, 1092 (2000); Harris v.

Rudin, Richman & Appel, 74 Cal.App.4th 299, 307 (1999); Walsh v. West Valley Mission

Community College District, 66 Cal.App.4th 1532, 1545 (1998). See also Kremen v. Cohen, 99

F.Supp.2d 1168, 1171 (N.D. Cal. 2000). “Implicit in the element of damage is that the

defendant’s breach caused the plaintiff’s damage.” Troyk v. Farmers Group, Inc.,171

Cal.App.4th 1305, 1352 (2009).

California law implies a covenant of good faith and fair dealing in every contract. Carma

Developers (Cal.), Inc. v. Marathon Development California, Inc., 2 Cal.4th 342, 371 (1992);

see also Chodos v. West Publishing Co., 292 F.3d 992, 996 (9th Cir. 2002) (noting that

“California law, like the law in most states, provides that a covenant of good faith and fair dealing

is an implied term in every contract” (citations omitted)). The covenant is implied “to prevent a

contracting party from engaging in conduct which (while not technically transgressing the express

covenant) frustrates the other party’s rights [to] the benefits of the contract.” Marsu B.V. v. Walt

Disney Co., 185 F.3d 932, 938 (9th Cir. 1999) (citing Los Angeles Equestrian Ctr., Inc. v. City

of Los Angeles, 17 Cal.App.4th 432, 447 (1993)).

“In order to state a claim for breach of an implied covenant of good faith and fair dealing,

the specific contractual obligation from which the implied covenant of good faith and fair dealing

arose must be alleged.” Inter-Mark USA, Inc. v. Intuit, Inc., No. C-07-04178 JCS, 2008

WL552482, *6 (N.D. Cal. Feb. 27, 2008) (citing Love v. The Mail on Sunday, No. CV05-7798

ABC (PJWx), 2006 WL 4046180, *7 (C.D. Cal. Aug. 15, 2006)). This is because “[i]t is

universally recognized [that] the scope of conduct prohibited by the covenant of good faith is

circumscribed by the purposes and express terms of the contract.” Id. at *7 (quoting Carma

Developers, 2 Cal.4th at 373). See Commercial Union Assurance Companies v. Safeway Stores,

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Inc., 26 Cal.3d 912, 918 (1980) (“However, what that duty embraces is dependent upon the

nature of the bargain struck between the [parties] and the legitimate expectations of the parties

which arise from the contract ”). See also Spencer v. DHI Mort. Co., Ltd., 642 F.Supp.2d 1153,

1165 (E.D. Cal. 2009) (“‘The prerequisite for any action for breach of the implied covenant of

good faith and fair dealing is the existence of a contractual relationship between the parties, since

the covenant is an implied term in the contract.’ The ‘implied covenant of good faith and fair

dealing is limited to assuring compliance with the express terms of the contract, and cannot be

extended to create obligations not contemplated by the contract,’” quoting Smith v. City and

County of San Francisco, 225 Cal.App.3d 38, 49 (1990); Pasadena Live, LLC v. City of

Pasadena, 114 Cal.App.4th 1089, 1093-94 (2004)).

Defendants contend it would be improper to enter summary judgment in M-1’s favor on

its breach of the Consulting Agreement and breach of the implied covenant in the Consulting

Agreement claims because triable issues exist as to the validity of the contract. Affliction

Promotions does not dispute that it signed the Consulting Agreement on April 14, 2008, and that

the contract required it to “pay M-1 a consulting fee in the amount of One Million Two Hundred

Thousand U.S. Dollars (USD $l,200,000) for each of the Fedor Bouts. . . , due no later than forty

eight hours (48) prior to each of the second (2nd) and third (3rd) Fedor Bouts and contingent upon

arrival of Fedor [in] the city of the then scheduled Bout. . . .”145 It contends, however, that the

Consulting Agreement is not valid because it was a “sham transaction” and lacked

consideration.146

1. Whether Defendants Have Raised Triable Issues Regarding the Fact

that the Consulting Agreement Was a Sham Instrument

Under the sham instrument doctrine, even where a writing purports on its face to be a

complete agreement, a party may demonstrate that it was “a sham to be used in dealings with third

parties and not intended to bind the ostensibly contracting parties.” 1 B. Witkin, SUMMARY OF

145Consulting Agreement, ¶ 3.

146See Opp. at 7-15.31


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CALIFORNIA LAW (10th ed. 2005), CONTRACTS, § 129. When such a defense is asserted, parol

evidence is admissible to demonstrate that the instrument is a sham. In P. A. Smith Co. v. Muller,

201 Cal. 219, 222 (1927), the California Supreme Court considered the “contention of the

defendant that the writings sued upon were sham, and executed for the purpose of influencing

third persons, and that the oral agreement set out in the special defense was the only contract

entered into between the parties.” Given this contention, the Court held that parol evidence was

admissible because the “evidence [would] not change a written contract by parol, but serve[ ] to

establish that such contract had no force, efficacy, or effect.” Id. See also Hutchings v.

Drommerhausen, No. B191211, 2007 WL 1241361, *11 (Cal. App. Apr. 30, 2007) (“However,

the parol evidence rule does not prohibit the consideration of extrinsic evidence which is offered

to show that a written instrument is merely a sham document[,]” citing P.A. Smith).147

The Ninth Circuit has further developed the law regarding sham transactions in the context

of tax avoidance. In Bail Bonds by Marvin Nelson, Inc. v. Commissioner of the Internal Revenue

Service, 820 F.2d 1543, 1549 (9th Cir. 1987), the court announced that “[i]n determining whether

a transaction is a sham, courts typically focus on two related factors: 1) has the taxpayer shown

that it had a business purpose for engaging in the transaction other than tax avoidance? 2) has the

taxpayer shown that the transaction had economic substance beyond the creation of tax benefits?”

The court explained that “[t]he business purpose factor often involves an examination of the

subjective factors which motivated a taxpayer to make the transaction at issue. The economic

substance factor involves a broader examination of whether the substance of a transaction reflects

its form, and whether from an objective standpoint the transaction was likely to produce economic

benefits aside from a tax deduction.” Id.

The Bail Bonds court concluded that plaintiff had “failed to demonstrate that the Anglo

147“Although the court is not bound by unpublished decisions of intermediate state courts,unpublished opinions that are supported by reasoned analysis may be treated as persuasiveauthority.” Scottsdale Ins. Co. v. OU Interests, Inc., No. C 05-313 VRW, 2005 WL 2893865,*3 (N.D. Cal. Nov. 2, 2005) (citing Employers Ins. of Wausau v. Granite State Ins. Co., 330F.3d 1214, 1220 n. 8 (9th Cir. 2003) (“[W]e may consider unpublished state decisions, eventhough such opinions have no precedential value”)).

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Dutch transaction had either a business purpose or economic substance.” Id. It observed: “First,

it is clear that the transaction between Bail Bonds and Anglo Dutch was motivated and shaped

solely by tax avoidance concerns. Second, because both the loan and the repayment of the loan

consisted of nothing more than circulations of funds . . . , Bail Bonds did not actually secure the

use of or pay for the use of the $25,000.” Id.

In this case, there is sufficient evidence that would permit a jury to conclude that the

Consulting Agreement was a sham instrument. Defendants have proffered evidence that two M-1

employees told them that “[M-1] had certain financial concerns in having the entire $1.5 million

dollar purse paid directly to Fedor” and therefore, that it requested that Affliction Promotions

“split[ ] the agreement into two agreements, keeping the $1.5 million dollar payments to Fedor,

but drafting it in a way that M-1 was to receive some of the monies.”148 Atencio further maintains

that during a call with M-1 management, M-1 stated that “there w[ere] some financial

considerations regarding taxes,” and that it “wanted to have the monies paid under the Fight

Agreement and a side agreement.”149 This testimony alone would be sufficient for a jury to find

that the purpose of the Consulting Agreement was tax avoidance and that it had no economic

substance beyond the creation of tax benefits.

The inferences that a jury could draw from this testimony are corroborated by other

evidence in the record. It is undisputed, for example, that early drafts of the Fight Agreement,

including two revised drafts prepared by M-1 employees, stated that Emelianenko would be paid

$1,500,000 per bout. Drafts reflecting the $300,000/$1,200,000 split were prepared only after

the conversations recounted above. In addition, M-1 admits that it received $1,200,000 from

Affliction for the first and second bouts, and immediately paid that money to Emelianenko or to

a company he owned. Throughout the parties’ discussions, M-1 referred consistently to

Emelianenko’s per bout purse of $1.5 million from Affliction and $500,000 from M-1. In a May

12, 2008 email, for example, Finkelchtein noted that M-1 was responsible for paying Emelianenko

148Beard Decl., ¶ 9.

149Atencio Decl., ¶ 11. 33


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$500,000 per fight.150 In a January 8, 2009 email, Raimond noted that “Fedor [was] under . . .

contract [with M-1] for [ ]$2,000,000 per fight,” and that M-1 would “supplement” Affliction’s

payment of $1,500,000 to satisfy its contract with Emelianenko.151 Similarly, on May 18, 2009,

Raimond sent an email stating that “Affliction’s obligations include[d] $1.5MM to Fedor in two

agreements. . . [and that] M-1 Global’s obligations include[d] $500,000 to Fedor. . . .”152 The

fight card for Trilogy stated that Emelianenko’s purse was $1,500,000.153 In addition to this

evidence suggesting that the $1.2 million to be paid to M-1 was intended and destined for

Emelianenko, defendants have also proffered evidence that the Consulting Agreement was never

mentioned after it was executed, either orally or in writing, until this action was filed.154

M-1 has proffered evidence contradicting defendants’ assertion that the Consulting

Agreement was a sham. It has, for example, adduced the testimony of Finkelchtein and Spencer,

who drafted the Consulting Agreement, that M-1 sought to develop a co-promotion agreement

with Affliction, and that Finkelchtein understood that the Consulting Agreement was the vehicle

by which such a relationship could be established. Plaintiffs have also proffered substantial

evidence that M-1 provided consulting and promotional services for each bout that were not called

for in the Fight Agreement – a contract to which it was not a party and that did not call upon it

150Atencio Decl., Exh. A at 821.

151Id., Exh. C at 698. M-1 was obligated to pay Emelianenko $2,000,000 per bout, plusa signing bonus of $1,500,000. It paid a portion of the signing bonus each time Emelianenkofought.

152Id., Exh. D at 828.

153Id., Exh. E at 857.

154Id., ¶ 14 (“After these agreements were entered into, I never heard in all of thecommunications I had, both written and oral, from M-1 . . . anything about the ConsultingAgreement until the meeting at Affliction’s office after the Trilogy event was cancelled in July2009. I had plenty of announcements about what was in the Fight Agreement and M-1’s feelingsof name recognition for the fights”); Beard Decl., ¶ 14 (“[F]rom the time the Fight Agreementwas signed, . . . I have had countless conversations with Joost Raimond, including conversationsthat Vadim Finkelchtein [was] involved in, through a translator. . . . In not one of thoseconversations, did any M-1 representative ever reference the Consulting Agreement”).

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to provide any services. M-1, in fact, has proffered evidence that it performed services that were

explicitly mentioned in the Consulting Agreement. These included Echteld’s provision of

“[f]ighter scouting”; “[l]ocation scouting for future Bouts [and] recommendations,” which

included recommendations for a proposed event in Tokyo; and “International (ex US)

sponsorships[,]” which included sponsorships by international vodka producers.155

Given the conflicting evidence as to whether the Consulting Agreement was a sham

instrument, the court cannot resolve the claim on a motion for summary judgment. Consequently,

it denies M-1’s motion for summary judgment on its third and fourth causes of action.156

155Finkelchtein Depo. at 52:19-53:7

156The triable issues of fact that defendants have raised concerning the validity of theConsulting Agreement defeat M-1’s motion for summary judgment on the claim for breach of thecovenant of good faith and fair dealing implied in that agreement. See Spencer, 642 F.Supp.2dat 1165 (“‘The prerequisite for any action for breach of the implied covenant of good faith andfair dealing is the existence of a contractual relationship between the parties, since the covenantis an implied term in the contract.’ The ‘implied covenant of good faith and fair dealing is limitedto assuring compliance with the express terms of the contract, and cannot be extended to createobligations not contemplated by the contract,’” quoting Smith, 225 Cal.App.3d at 49; PasadenaLive, 114 Cal.App.4th at 1093-94). To the extent a jury could find that the Consulting Agreementwas a sham instrument “to be used in dealings with third parties and not intended to bind theostensibly contracting parties[,]” moreover, it could also conclude that the contract lackedconsideration. If the parties intended that the Consulting Agreement would serve only as a vehiclefor paying part of Emelianenko’s for participating in the bouts, and if they did not intend that M-1would actually perform the consulting services described in the Consulting Agreement, then theagreement did not require that plaintiffs do anything they were not already required to do underthe Fight Agreement. See, e.g., Garcia v. World Sav., FSB, 183 Cal.App.4th 1031, 1040 (2010)(“‘[D]oing or promising to do what one is already legally bound to do cannot be consideration fora promise[,]’” quoting 1 B. Witkin, SUMMARY OF CALIFORNIA LAW, CONTRACTS, § 218, p. 251(10th ed. 2005)).

Even if the Consulting Agreement is not a sham instrument, moreover, there are triableissues of fact as to whether the contract expired. Defendants have proffered evidence that, by itsterms, the Consulting Agreement expired on March 31, 2009. (See Consulting Agreement, ¶ 1(“Term. Commencing upon M-1’s execution of this Agreement and continuing until the earlierof: (i) March 31, 2009; or (ii) conclusion of the final Fedor Bout which is a minimum of three (3)Bouts, unless the term of this Agreement is terminated sooner or extended further pursuant to thisAgreement or pursuant to a separate writing executed by AP and agreed to by M-1”)). Plaintiffs,however, have proffered evidence that the expiration provision was waived because defendantengaged in conduct antithetical to the position it currently takes that the agreement terminated on

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D. Whether M-1 is Entitled to Summary Judgment on its Claim for Breach of the

Letter Agreement

M-1 also moves for summary judgment on its fifth claim for breach of the Letter

Agreement. It is undisputed that Affliction Clothing failed to make the second of two $500,000

payments due under the Letter Agreement. Unlike the Consulting Agreement, Affliction Clothing

does not dispute that the Letter Agreement is a valid contract. Its sole argument is that it was

excused from making the second payment because M-1 materially breached the agreement by

failing to perform its obligations. It notes that the agreement “required that the title of . . . M-1

Challenge live event[s] be a certain way,” and asserts that this “did not happen according to the

videos submitted by M-1 in support of its motion.” It also asserts that its “name and logo [did

not] appear the way [they were] required to appear, per the terms of the letter agreement, in and

around the ring.” Finally, it maintains that “most of the contracts that M-1 claims it entered into

in relation to the M-1 Challenge events make no mention of Affliction as the sponsor.”157

“‘A party complaining of the breach of a contract is not entitled to recover therefor unless

he has fulfilled his obligations.’” Wiz Technology, Inc. v. Coopers & Lybrand, 106 Cal.App.4th

1, 12 (2003) (quoting Pry Corp. of America v. Leach, 177 Cal.App.2d 632, 639 (1960)). “It is

elementary [that] a plaintiff suing for breach of contract must prove [he] has performed all

conditions on [his] part or that [he] was excused from performance.” Consolidated World

Investments, Inc. v. Lido Preferred Ltd., 9 Cal.App.4th 373, 380 (1992) (citing Reichert v.

General Ins. Co. of America, 68 Cal.2d 822, 830 (1968)).

March 31, 2009. Specifically, although the written extension, described infra, appears to applyonly to the Fight Agreement, M-1 has proffered sufficient evidence from which a jury couldconclude that the parties intended to extend both agreements. For example, M-1 has profferedevidence that it performed numerous tasks in preparation for the Trilogy event, such as scoutingfighters and seeking international sponsorships and broadcast opportunities, none of which wouldhave been required by the Fight Agreement, but each of which was expressly required by theterms of the Consulting Agreement. M-1 has also proffered evidence that Affliction Promotionsactively sought its assistance with these services, and never once suggested that the ConsultingAgreement had expired.

157Opp. at 21 (record citations omitted). 36


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Generally, only a material breach of contract excuses further performance by the injured

party and entitles that party to terminate the contract. See Pry Corp. of America v. Leach, 177

Cal.App.2d 632, 639 (1960) (“‘In promises for an agreed exchange, any material failure of

performance by one party not justified by the conduct of the other discharges the latter’s duty to

give the agreed exchange even though his promise is not in terms conditional,’” quoting

RESTATEMENT (FIRST) OF CONTRACTS, § 274 (1932) (emphasis added)); 1 B. Witkin, SUMMARY

OF CAL. LAW, Contracts, § 796 p. 719 (9th ed. 1990) (“The plaintiff must be free from substantial

default in order to avail himself of the remedies for the defendant’s breach”).

A breach is material if it goes to the essence of the agreement. See Federal Deposit Ins.

Corp. v. Air Florida System, Inc., 822 F.2d 833, 840 (9th Cir. 1987) (“a partial failure of

consideration justifies rescission only if the failure is ‘‘material,’ or go[es] to the ‘essence’ of the

contract,’” citing Wyler v. Feuer, 85 Cal.App.3d 392, 404 (1978)); Taylor v. Johnston, 15 Cal.3d

130, 137 (1975) (“[R]epudiation must be either with respect to the entire performance that was

promised or with respect to so material a part of it as to go to the essence. It must involve a total

and not merely a partial breach”); Taliaferro v. Davis, 216 Cal.App.2d 398, 412 (1963)

(“[W]here the consideration fails in whole or in part through the fault of a party whose duty it is

to render it, the other party may invoke such failure as a basis for rescinding or terminating the

contract, provided the failure or refusal to perform constitutes a breach in such an essential

particular as to justify rescission or termination,” citing Crofoot Lumber v. Thompson, 163

Cal.App.2d 324, 332-33 (1958) (“The right of the injured party to claim release from obligations

[and] to elect to terminate the contract depends upon the gravity of the breach”)); see also Superior

Motels, Inc. v. Rinn Motor Hotels, Inc., 195 Cal.App.3d 1032, 1051 (1987) (a breach is material

if it is “so dominant or pervasive as in any real or substantial measure to frustrate the purpose of

the contract,” quoting Jacob & Youngs v. Kent, 230 N.Y. 239, 243 (1921) (Cardozo, J.))).158

158California courts frequently cite the factors set forth in the Restatement of Contracts indeciding whether a particular breach is material. See, e.g., Linden Partners v. Wilshire LindenAssociates, 62 Cal.App.4th 508, 531 (1998); Sackett v. Spindler, 248 Cal.App.2d 220, 229(1967). These factors include: “(a) the extent to which the injured party will be deprived of the

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Whether an obligation or the breach of that obligation is material is generally a question

of fact. Associated Lathing etc. Co. v. Louis C. Dunn, Inc., 135 Cal.App.2d 40, 49 (1955); see

Superior Motels, 195 Cal.App.3d at 1051-52 (“‘Whether a breach is so material as to constitute

cause for the injured party to terminate a contract is ordinarily a question for the trier of fact,’”

quoting Whitney Inv. Co. v. Westview Dev. Co., 273 Cal.App.2d 594, 601 (1969)); see also Bemis

v. Whalen, 341 F.Supp. 1289, 1291 (S.D. Cal. 1972) (“Whether a given breach is material or

essential, or not, is a question of fact”).

As described in the Letter Agreement, M-1 promised to provide specified promotional

benefits to Affliction Clothing in connection with the M-1 Challenge. These included a

commitment that “Affliction [would] be identified as the Presenting Sponsor of every live M-1

Challenge event”; “[t]he title of the M-1 Challenge for all live events [would] be[ ] “‘M-1

Challenge Presented By Affliction’ with the Affliction logo . . . included in the title”;

“Affliction[’s] name and logo [would] be incorporated into all M-1 Global marketing and

advertising activities for the M-1 Challenge . . .”; “Affliction [would] receive brand recognition

and logo placement at all M-l Challenge live events and corresponding pre[-] and post[-]bout

events such as weigh-ins, press conferences, open workouts, and training seminars. Signage and

other exposure [was to] include. . . :” “Red and Blue corner positions on ring mat”; “Red and

Blue corner posts”; “Bumper pads (if permitted by local commission)”; “Fighter stage/tunnel

entrance”; “Interview backdrop”; “Step and Repeat Banner at press conferences and weigh-ins”;

“Arena banners and signs for camera exposure”; “Arena Jumbotron/Scoreboard and/or in-house

monitors”; “Regular verbal mentions to live audience by Ring Announcer”; “Affliction T-Shirt

benefit which he reasonably expected; (b) the extent to which the injured party can be adequatelycompensated for the part of that benefit of which he will be deprived; (c) the extent to which theparty failing to perform or to offer to perform will suffer forfeiture; (d) the likelihood that theparty failing to perform or to offer to perform will cure his failure, taking account of all thecircumstances including any reasonable assurances; [and] (e) the extent to which the behavior ofthe party failing to perform or to offer to perform comports with standards of good faith and fairdealing.” RESTATEMENT (SECOND) OF CONTRACTS, § 241 (2005). The standard is necessarilyflexible, and is to be applied “in such a way as to further the purpose of securing for each partyhis expectation of an exchange of performances. See id., cmt. a.

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Giveaways during live shows or other product placement in arena including permission to sell

Affliction merchandise at permitted venues.”159 The Letter Agreement stated that “Affliction

[would] receive branding and name recognition during worldwide television broadcasts of each

M-1 Challenge,” and that M-1 would “produce each year at least 30 unique 1 hour episodes of

the M-1 Challenge live events, equaling at least 30 hours of television. . . .” M-1 undertood to

“produce each telecast in such a way . . . that Affliction’s on-site presence [was] prominently

featured on-screen.” It agreed that “M-1 Challenge fighters, corners, referees, jury, and

production crew [would] wear Affliction clothing during broadcasts,” and that “[w]hen available,

M-1 Global [would make commercial inventory available at no cost.”160

The only evidence Affliction Clothing has proffered to demonstrate that M-1 materially

breached its obligations under the Letter Agreement is Atencio’s declaration. Atencio states that

“[i]n relation to the Letter Agreement . . . , [he] went to a couple of the M-l Challenge

events. . . . ” Atencio states that he “did not have concerns at the events that [he] went to

relating to M-l’s promotion of Affliction in those events,” and “did not voice . . . concerns to

M-l.” He notes, however, that he was “not able to go to each of the[ ] [events].”161 Atencio’s

declaration is consistent with his deposition testimony, in which he stated that he did not “have

any knowledge of whether or not M-1 [ ] fully performed under the letter agreement[.]”162 The

declaration asserts, however, since his deposition, Atencio has “personally [ ] watched each of

[the] events in reference to M-1’ s conformance to the obligations in th[e] Letter Agreement,” and

that he found non-conformities. Specifically, he identifies the following breaches:

159Letter Agreement at 397-398 (emphasis added). See also SUF, ¶¶ 452-56; SGI, ¶¶ 452-56. The Letter Agreement also noted that “[s]hould any of the above items be expressly prohibitedby the hosting venue for the M-1 Challenge live event, M-1 Global shall provide alternateexposure or other compensation to Affliction on case-by-case basis.” (Letter Agreement at 398).

160Id. (emphasis added)


162Atencio Depo. at 53:13-15 (“Q: Do you have any knowledge of whether or not M-1 hasfully performed under the letter agreement? A: No.”).

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“Round 1: No signage in the locker room. . . . [¶] Round[s] 4[-6]: No Bumper or

corner posts and no notification to Affliction that they were not permitted (Contrary

to 3.B.iii). . . . [¶] Round[s] 7[-9]: M-1 took the Red and Blue posts and gave us

the white when the agreement calls for the opposite (3.B.ii) [¶] . . . Round[s] 10[-

24]: No Bumper or corner posts (3.B.ii + iii). . . . Round 25 (Semi Finals): No

Affliction sign on Fighter shirts. [¶] No Bumper or corner posts. [¶] No signage in

locker room. [¶] No signage on weigh-in backdrop. [¶] Round 26: No Affliction

sign on Fighter shirts. [¶] No Bumper or corner posts. [¶] No signage in locker

room. [¶] Round 27: (Final): [¶] No Affliction sign on Fighter shirts. [¶] No

Bumper or corner posts. [¶] No signage in locker room. [¶] No signage on

weigh-in backdrop[.]”163

Atencio also asserts that “[t]here were only 27 fight videos provided [while] the contract calls for

30 one hour episodes,” and that “the contract call[ed] for Affliction to be offered commercial

inventory,” which it never was.164 Based on the evidence presented, Atencio contend that M-1

“did not do what [it was] supposed to do under the agreement.”165


164Id., ¶¶ 49-50.

165Id., ¶ 51. See also Beard Decl., ¶ 29 (“On the issue of the ‘[L]etter Agreement’ for theM-1 Challenge event, I went to a few of the events. . . . In the events I did go to, it was myopinion from what I saw . . . that the branding was no[ ]where what it should be for the Afflictionbrand. Our name was not prominently placed and it was to me that M-1 was utilizing theAffliction name in a secondary manner. I said nothing to M-1 because as long as Fedor foughtfor Affliction, that was all that mattered”).

Plaintiffs object to Atencio’s declaration on the ground that it is a sham affidavit. Wherea party opposing summary judgment proffers a declaration that contradicts or seeks to explainearlier deposition testimony, the court must make a factual determination as to whether thedeclaration is an attempt to create a “sham” issue of fact and avoid summary judgment. If itmakes such a finding, the declaration cannot be considered in ruling on the opposing party’smotion. Kennedy v. Allied Mutual Ins. Co., 952 F.2d 262, 266-67 (9th Cir. 1991) (limiting therule first articulated in Radobenko v. Automated Equip. Corp., 520 F.2d 540, 543-44 (9th Cir.1975)). An affidavit is not a sham if: (1) it “merely elaborat[es] upon, explain[s] or clarif[ies]prior testimony,” Messnick v. Horizon Industries, Inc., 62 F.3d 1227, 1231 (9th Cir. 1995); (2) if

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Plaintiff M-1 advances several arguments as to why Atencio’s declaration is insufficient

to raise triable issues of fact. Some of these address the proper interpretation of the contract. The

Letter Agreement provides that “[w]hen available, M-1 Global will make commercial inventory

available at no cost.”166 M-1 contends that this provision does not require that it “‘offer . . .’

[Affliction Clothing] commercial inventory,” as Atencio asserts.167 It asserts that Atencio does

not state “whether [Affliction Clothing] requested commercial inventory, what commercial

inventory was requested, to whom the request was submitted, or that M-1 refused to provide the

commercial inventory requested. . . .”168 As noted, “summary judgment is appropriate [in

contract interpretation cases] only if the contract or the contract provision in question is

unambiguous.” Northwest Acceptance Corp., 841 F.2d at 920. Because a reasonable jury could

find that a contract term requiring M-1 to “make commercial inventory available” to Affliction

Clothing required M-1 to offer the inventory to Affliction Clothing, the court cannot grant

summary judgment in M-1’s favor.

M-1’s other arguments are factual. It asserts, for example, that “[a]s for the 30 1-hour

T.V. shows . . . the [Letter Agreement] provides [that] ‘[f]or the 2009 season, M-1 Global shall

produce a minimum of ten (10) Live M-1 Challenge events that will result in a minimum of thirty

(30) one-hour television shows.’ This is exactly what M-1 did. [Affliction Clothing] does not

“the witness was confused at that time of the earlier testimony and provides an explanation for theconfusion,” Pacific Ins. Co. v. Kent, 120 F.Supp.2d 1205, 1213 (C.D. Cal. 2000) (citingKennedy, 952 F.2d at 266); or (3) if the declaration concerns newly discovered evidence, id. Atencio has adequately explained the differences between his deposition testimony and hisdeclaration. He states that his deposition testimony was based on knowledge gleaned from havingattended only “a couple of the M-l Challenge events,” and that, by the time he submitted hisdeclaration, he had reviewed all of the videotapes of M-1 Challenge events produced in thislitigation. The court, therefore, declines to exclude this portion of Atencio’s declaration as sham.

166Letter Agreement at 397-398.

167Reply at 14. See Atencio Decl., ¶ 50 (“[T]he contract calls for Affliction to be offeredcommercial inventory. We never were offered this.”).

168Reply at 15.41


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dispute M-1 promoted 10 live M-1 Challenge events in 2009. Between the 27 tape-delayed

episodes and the live broadcasts taking place in Bulgaria, Japan, Brazil, South Korea and Russia

(Rostov-on-Don and St. Petersburg), M-1 produced well over 30 hours of T.V. . . . M-1 was

required to ‘produce’ a minimum of 30 hours of T.V. shows and the evidence shows M-1

indisputably complied with this obligation.”169

M-1 appears to have overlooked the provision in the Letter Agreement that requires that

it “produce each year at least 30 unique 1 hour episodes of the M-1 Challenge live events,

equaling at least 30 hours of television.”170 M-1’s selective quotation of the Letter Agreement

focuses on the number of events it was required to produce. It indisputably produced this number

of events; M-1 ignores, however, the number of “unique episodes” it was required to produce.

As respects this metric, there is a factual dispute as to whether it complied with the contract.

Atencio asserts that M-1 produced only 27 unique episodes.

The question remains, however, whether a reasonable jury could conclude that the

purported breaches Atencio identifies were sufficiently material that they justified Affliction

Clothing’s repudiation of the contract. M-1 argues that each of the breaches Atencio has identified

is small or insignificant. It asserts, for example, that the alleged fact that it “took the Red and

Blue posts and gave [Affliction Clothing] the white when the agreement call[ed] for the opposite”

did not deprive Affliction of the benefit of its bargain. Similarly, it argues that the fact that there

were “[n]o Bumper or corner posts and no notification to Affliction that they were not permitted”

at three of the events does not justify Affliction’s failure to pay the agreed $500,000.

M-1 asserts “[t]he evidence clearly shows [that it] continued to perform the [Letter Agreement]

until the end of the 2009 season and [that Affliction Clothing] received the substantial benefit of

the [Letter Agreement][.]”171 It contends, with regard to those obligations that Atencio asserts

were breached, that “to the extent M-1 failed to comply, [these obligations] are only one small

169Id. at 16.

170Letter Agreement at 398.

171Reply at 20. 42


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part of a much larger comprehensive agreement.”172

M-1 is correct that, considered in isolation, each obligation it agreed to perform could be

viewed as small or insignificant. Under the Letter Agreement, however, M-1 agreed to give

Affliction Clothing specific promotional benefits in exchange for Affliction’s sponsorship of the

M-1 Challenge. Presumably, Affliction Clothing believed it would benefit from the brand

recognition created by having a ubiquitous display of its name and logo during M-1 Challenge

events. Because each of M-1’s contractual obligations contributed to the aggregate benefit

Affliction Clothing sought to derive from its sponsorship, it is impossible for the court to decide

as a matter of law that the various breaches identified “do[ ] not go to the root of the

consideration[.]” Karz v. Department of Professional and Vocational Standards, 11 Cal.App.2d

554, 557 (1936).

As an example, given that the Letter Agreement required that “Affliction[’s] name and logo

be incorporated into all M-1 Global marketing and advertising activities for the M-1

Challenge[,]”173 the court cannot decide as a matter of law that placing only Affliction’s name, and

not its logo, on marketing materials, or incorporating the name and logo in “some,” but not “all”

marketing materials was an immaterial breach. Similarly, given that the Letter Agreement

required that “Affliction receive brand recognition and logo placement at all M-l Challenge live

events and corresponding pre[-] and post[-]bout events such as weigh-ins, press conferences, open

workouts, and training seminars[,]”174 the court cannot decide as a matter of law that it was not

a material breach to fail to provide such placement at post-bout events. While M-1 contends it

was not a material breach to produce 27, rather than 30, “unique episodes,” the court cannot

conclude as a matter of law that the line dividing material from non-material breaches falls

somewhere below 27 episodes. See Superior Motels, 195 Cal.App.3d at 1051 (“Where the line

is to be drawn between the important and the trivial cannot be settled by a formula. In the nature

172Id.

173Letter Agreement at 397-98.

174Id.

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of the case precise boundaries are impossible” (citation and quotation marks omitted)). It is for

this reason that California courts have routinely found that the materiality of a breach is a question

of fact reserved for the jury. The court therefore denies plaintiff’s motion for summary judgment

on this claim.

E. Whether Affliction is Entitled to Summary Judgment on Plaintiffs’ Claims for

Breach of the Fight Agreement and the Implied Covenant of Good Faith and

Fair Dealing Implied in That Contract

Affliction seeks summary judgment on plaintiffs’ claim for breach of the Fight Agreement.

Plaintiffs contend that Affliction breached the contract by cancelling the third bout and failing to

pay Emelianenko’s bout fee, travel and accommodation expenses. Affliction asserts that the claim

fails because the Fight Agreement expired on March 31, 2009 and because Affliction was excused

from performance by Barnett’s ineligibility.

1. Whether Affliction is Entitled to Summary Judgment Because the Fight

Agreement Expired on March 31, 2009

The first paragraph of the Fight Agreement between Emelianenko and Affliction sets forth

the contract term:

“Term. Commencing upon Fighter’s execution of this Agreement and continuing

until the earlier of: (i) March 31, 2009; or (ii) conclusion of the last Bout (as more

specifically defined below) in which Fighter is obligated to participate which is a

minimum of three (3) Bouts, unless the term of the promotion agreement or any

extension thereto is terminated sooner or extended further pursuant to this

Agreement or pursuant to a separate writing executed by [Affliction Promotions

(‘AP’)] and agreed to by Fighter. AP acknowledges and agrees that Fighter is

currently scheduled to participate in a match on or around December 31, 2008 in

Japan. As a result, AP agrees to schedule all Bouts no less than 60 days prior to

the Japan Event to allow for Fighter to prepare and compete in the Japan Bout.

Furthermore, in the event that [a bout with Randy Couture] takes place during the

Term, the parties agrees that the term shall be extended for four (4) additional

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consecutive months.”175

Affliction contends that because the “last Bout” did not occur before March 31, 2009, the contract

had expired and Affliction thus cannot be held liable for its breach.

“A contract remains in force until it has been terminated either according to its terms or

through the acts of the parties evidencing an abandonment.” Busch v. Globe Industries, 200

Cal.App.2d 315, 320 (1962). See also San Bernardino Public Employees Assn. v. City of

Fontana, 67 Cal.App.4th 1215, 1223 (1998) (“Once the [contracts] expired under their own

terms, the employees had no legitimate expectation that the longevity based benefits would

continue unless they were renegotiated as part of a new bargaining agreement”); Beatty Safway

Scaffold, Inc. v. B.H. Skrable, 180 Cal.App.2d 650, 654 (1960) (“It is the general rule that when

a contract specifies the period of its duration, it terminates on the expiration of such period”).

“When interpreting contracts, the language used controls if it is clear and explicit. We

must view the language of a contract as a whole, avoiding a piecemeal, strict construction

approach.” Segal v. Silberstein, 156 Cal.App.4th 627, 633 (2007). The provision of the Fight

agreement setting the contract term clearly states that the contract was to terminate on the earlier

of March 31, 2009 or the completion of the third bout. Because the third bout did not occur

before March 31, 2009, the Fight Agreement expired on that date unless the parties agreed to

extend it.

The provision identifies two methods by which the contract can be extended: (1) “pursuant

to this Agreement”; and (2) “pursuant to a separate writing.” The agreement identified two

circumstances under which the term would be extended. The first is found in the provision setting

the contract term itself – i.e., that the term would be extended by four months if a bout with

Randy Couture took place.176 Second, Affliction was given the right to extend the term if

Emelianenko “fail[ed] or [was] unable to perform any obligation [under the contract] due to any

illness, injury or disability; to an order of [any] legal or regulatory entity; or as a result of any

175Fight Agreement, ¶ 1.

176Id.

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breach or non-performance hereunder.” Affliction also had the right to extend the term if any

scheduled bout was postponed for these reasons or “due to an event of force majeure, disaster,

labor action or other reason beyond [Affliction’s] reasonable control. These are the only

provisions in the agreement that concern extension of the contract term; ”177 the agreement did not

give Emelianenko power to extend the term. Plaintiffs have proffered no evidence that

Emelianenko had a bout with Couture. Nor have they proffered evidence that Affliction exercised

its right to extend the contract term. The undisputed evidence, therefore, indicates that there was

no extension “pursuant to” the agreement.

Plaintiffs, moreover, have proffered no evidence that the parties executed a separate writing

extending the contract term prior to expiration of the Fight Agreement on March 31, 2009. They

contend, however, that the parties waived the written extension requirement and that Affliction

should therefore be estopped from arguing that the Fight Agreement terminated on March 31,

2009.

“‘[P]arties may, by their conduct, waive such a provision’ where evidence shows that was

their intent.” Biren v. Equality Emergency Medical Group, Inc., 102 Cal.App.4th 125, 141

(2002) (quoting Frank T. Hickey, Inc. v. Los Angeles Jewish Community Council,128 Cal.App.2d

676, 682-683 (1954)). In Biren, the court considered whether shareholders could orally modify

a contract that required written approval for billing contracts and mandated that modifications of

the contract be in writing. The appellate court noted the trial court’s finding “that in the past, the

shareholders took oral votes on billing company contracts,” and concluded that it “reasonably

could infer” that they intended to dispense with the written approval requirement. The court noted

that defendant’s “acts also show[ed] an intent to treat the written approval provision as if it never

existed,” and held that, “[b]ecause she ‘behaved in a manner antithetical’ to it, she may not now

rely on it.” Id. (quoting Wagner v. Glendale Adventist Medical Center, 216 Cal.App.3d 1379,

1388 (1989)). See also 1 B.E. Witkin, SUMMARY OF CALIFORNIA LAW § 968 (10th ed. 2005) (“If

a contract requires that modifications be in writing, this provision may be waived when the

177Fight Agreement, ¶ 14.46


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modification conforms to the parties’ intent”).

“When one party has, through oral representations and conduct or custom, subsequently

behaved in a manner antithetical to one or more terms of an express written contract, he or she

has induced the other party to rely on the representations and conduct or custom. In that

circumstance, it would be equally inequitable to deny the relying party the benefit of the other

party’s apparent modification of the written contract.” Wagner, 216 Cal.App.3d at 1388. Cf.

Conley v. Mathes, 56 Cal.App.4th 1453, 1466 (1997) (“Whether or not the escrow instructions

contained a clause precluding modification except by a writing, by accepting the benefits of the

modification, Donald Conley is estopped from arguing it is barred by the parol evidence rule”).

Plaintiffs have proffered evidence from which a jury could conclude that Affliction engaged

in conduct antithetical to reliance on the provision stating that the contract would expire on March

31, 2009. There is evidence that approximately two weeks after the January 24, 2009 bout, the

parties began planning the “next bout.” Commencing February 8, 2009, there were a series of

communications between Affliction and M-1, including “teleconferences M-1 and [Affliction]

conducted to plan and discuss the status of [their] respective responsibilities in preparing for the

third event.”178 On April 3, 2009, Raimond advised Affliction that he had initiated discussions

with DREAM, a Japanese MMA promotion company, about having the “next event” in Tokyo,

Japan on July 20, 2009, under a co-production format.179 On April 6, 2009, Atencio sent an email

responding to Raimond’s proposal for the July 20, 2009 event.180 At no point did Atencio suggest

that Emelianenko was no longer under contract, or that he had no obligation to fight a third bout

promoted by Affliction.

On April 10, 2009, Atencio sent M-1 an email stating that he had spoken with Affliction’s

partners and that “all agree[d] on two points[;] 1st the next event will be in the US and 2nd is that

178Raimond Decl., ¶ 19. See also COE, Exhs. 5-9 (emails setting up weekly conferencecalls in February and March 2009).


180SUF, ¶ 216; SGI, ¶ 216. See also COE, Exh. 14. 47


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[Affliction’s partners] all want the next fight to be Fedor v. Barnett.”181 In response, Raimond

asked for the date of the event and whether it “was still within the contract limitations.”182 The

record is devoid of evidence that Affliction responded to this inquiry.

On May 13, 2009, Atencio sent a letter on Affliction letterhead to Bash. The subject of

the letter was “Re: Fedor Emelianenko Extension.” It stated:

“This shall confirm that pursuant to paragraph fourteen (14) of the Promotional

Rights Agreement, our Agreement with Mr. Emelianenko is hereby extended. Mr.

Emelianenko is to fight on August 1, 2009 against Josh Barnett. [¶] It is

contemplated that Mr. Emelianenko’s obligations pursuant to said Agreement will

be fulfilled within one year. [¶] Further to our discussions, Mr. Emelianenko is

expected to arrive in the United States on or about the first week of June 2009 to

begin the press campaign for his upcoming fight.”183

Although the letter mentions “the Promotional Rights Agreement” rather than the “Fight

Agreement,” a reasonable jury could find that Atencio meant to refer to the Fight Agreement.

The preamble to the Fight Agreement states that Affliction and Emelianenko were executing the

contract with reference to “Fighter’s grant to AP of exclusive promotional rights[.]”184 Paragraph

14 of the Fight Agreement grants Affliction the right to extend the contract term. Paragraph 14

of the Consulting Agreement, by contrast, addresses the interpretative force to be given paragraph

headings,185 while paragraph 14 of the Letter Agreement provides that the contract is severable.186

In his May 13, 2009, Atencio references a paragraph 14. Since the subject of the letter is an

181COE, Exh. 19 at 77.

182Id.; SUF, ¶ 222; SGI, ¶ 222.

183Extension Letter at 1.

184Fight Agreement at 39.

185Consulting Agreement, ¶ 14.

186Letter Agreement, ¶ 14. 48


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extension of the contract term, it appears likely that Atencio was referencing paragraph 14 of the

Fight Agreement. Finally, the Fight Agreement is the only one of the three agreements to which

Emelianenko is a party. On its face, therefore, Atencio’s May 13, 2009 letter evidences

Affliction’s clear intention to extend the Fight Agreement through the August 1, 2009 bout.

After May 13, 2009, the parties conducted themselves as if the Fight Agreement had been

extended. For example, on May 18, 2009, Raimond invited Affliction to participate in a

teleconference in an email noting “that [the parties] ha[d] not achieved the progress [in preparing

for the August 1, 2009 bout to which they had] agreed at our last teleconference.”187 On May 19,

2009, Atencio sent Raimond a “To Do List” for the event.188 On May 20, Echteld, M-1’s scouter

and match-maker, recommended twenty-nine fighters and fourteen matches in the light, middle,

bantam, feather, and welter weights for the undercard on August 1, 2009.189 On May 21, 2009,

Raimond emailed Affliction concerning the tasks M-1 could perform for the event.190 Later that

day, Atencio responded, identifying those tasks with which Affliction wanted M-1’s assistance.191

On June 4, 2009, M-1 received an invitation to attend a June 16, 2009 production meeting for the

event, which had been named Affliction:Trilogy.192 On June 5, 2009, Atencio directed Raimond

to “get [a] lighting plan, stage set-up, event start up sound, [and] staging music ideas,” as well

as “camera set-ups for different photo angles” and the “ring set-up for corner pads.”193 He asked

Echteld to assist in obtaining particular fighters for the first and last fights of the night.194

187SUF, ¶ 245; SGI, ¶ 245; COE, Exh. 22 at 83.

188SUF, ¶ 253; SGI, ¶ 253. See also COE, Exh. 25 at 91-94.



191See COE, Exh. 134.

192SUF, ¶ 309; SGI, ¶ 309.

193COE, Exh. 43 at 137.

194Id.

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On July 23 or 24, 2009, Emelianenko boarded a flight to Los Angeles in preparation for

the Trilogy event.195 M-1 gave Emelianenko footage of potential replacement opponents so that

he could study the fighters while in flight.196

Based on this evidence, a reasonable jury could conclude that Affliction behaved in a

manner antithetical to its current position that the Fight Agreement terminated on March 31, 2009,

and thereby induced plaintiffs to rely on fact that the contract had been extended or was still in

force. The jury could thus find that “it would be . . . inequitable to deny the relying party the

benefit of [Affliction’s] apparent modification of the written contract.” Wagner, 216 Cal.App.3d

at 1388. See also Darling Intern., Inc. v. Baywood Partners, Inc., No. C-05-3758 EMC, 2006

WL 2374635, *7-8 (N.D. Cal. Aug. 16, 2006) (finding triable issues of fact as to a claim of

waiver where plaintiff, inter alia, failed to inform defendant that it believed the contract had been

terminated, sent emails suggesting that the parties were still operating under the contract, and

failed to respond to defendant’s requests for clarification); id. at *10 (holding, with regard to a

claim of estoppel, that “partial summary judgment in favor of Baywood [was] unwarranted

because there [was] a genuine dispute as to whether Baywood was indeed ignorant of the true state

of facts – i.e., of Darling’s position that the contract terminated on May 31, 1997. . . . As for

Darling’s motion for partial summary judgment, there is a genuine dispute as to whether Darling

acted as if the Purchase Agreement was still in existence thereby inducing Baywood’s reliance.

For example, in spite of the two Mellina letters described above, Darling subsequently remained

silent in the face of repeated affirmations of the contract by Baywood. Also, Darling never told

Baywood that the contract terminated before or after Baywood funded the Second Deposit”).

Affliction’s motion for summary judgment on the basis that the Fight Agreement terminated on

March 31, 2009 is therefore denied.

2. Whether Affliction Is Entitled to Summary Judgment Because It Was

Excused From Performing the Fight Agreement


196Id.

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Affliction next contend that Barnett’s ineligibility excused its performance under the Fight

Agreement. It asserts that any obligation it may have had to produce the Trilogy bout was excused

by the doctrines of force majeure and impossibility or impracticability.

a. Force Majeure

Paragraph 14 of the Fight Agreement granted Affliction the right to extent the contract term

“[i]n the event that: (a) Fighter fail[ed] or [was] unable to perform any obligation hereunder due

to any illness, injury or disability; due to an order of the Commission or other legal or regulatory

entity; or as a result of any breach or non-performance hereunder; or (b) [if] any Bout scheduled

under this Agreement [was] postponed for any reason provided in the immediately preceding

clause (a) or in the applicable Bout Agreement, or due to an event of force majeure, disaster,

labor action or other reason beyond AP’s reasonable control[.]”197 The clause also gave

Affliction “the right to terminate th[e] Agreement” if “Fighter” – that is, Emelianenko – failed

to fight in a bout, engaged “in any activity or conduct which [was] illegal, which violate[d] any

applicable law or Commission or other governmental, regulatory or sanctioning body role or

regulation, or which subject[ed] [him] or [Affliction] to public ridicule, scorn, contempt or

embarrassment,” or breached the agreement.198

The common law force majeure defense is similar to the defense of impossibility due to an

“act of God,” which excuses a party’s non-performance of an obligation. See CAL. CIV. CODE

§ 1511 (“The want of performance of an obligation, . . . in whole or in part, . . . is excused by

the following causes, to the extent to which they operate:. . . 2. When it is prevented or delayed

by an irresistible, superhuman cause, or by the act of public enemies of this state or of the United

States, unless the parties have expressly agreed to the contrary”). Force majeure extends,

however, to impossibility caused by human acts as well. See Mathes v. City of Long Beach, 121

Cal.App.2d 473, 477 (1953) (“‘Force majeure,’ or the Latin expression ‘vis major,’ is not

necessarily limited to the equivalent of an act of God”). Thus, “‘the test for force majeure is

197Fight Agreement, ¶ 14 (emphasis added).

198Id.

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whether under the particular circumstances there was such an insuperable interference occurring

without the party’s intervention as could not have been prevented by the exercise of prudence,

diligence and care.’” Id. (quoting Pacific Vegetable Oil Corp. v. C.S.T., Ltd., 29 Cal.2d 228,

238 (1949)); see also Horsemen’s Benevolent & Protective Assn. v. Valley Racing Assn., 4

Cal.App.4th 1538,1564 (1992) (“Force majeure is not necessarily limited to the equivalent of an

act of God, but the test is whether under the particular circumstances there was such an

insuperable interference occurring without the parties’ intervention as could not have been

prevented by prudence, diligence and care.”).

Here, a reasonable jury could conclude that force majeure did not excuse Affliction’s from

performance. In Valley Racing, a horsemen's organization sued a racing association seeking

damages for breach of a purse agreement. 4 Cal.App.4th at 1545. Under an agreement between

the two groups, the purse paid to the horsemen for a given race in a given year was based on a

calculation involving the wagers made for that race the prior year.199 Id. at 1546-47. After

noticing that the wagers made for the 1986 year were substantially less than the year before (upon

which the 1986 purse amount was to have been based), the racing association made a unilateral

decision to cut the 1986 purse amount. Id. at 1548. When the horsemen’s association sued, the

racing association invoked the contract’s force majeure provision. Id. at 1564. The court noted

that the force majeure provision could not be construed “to countenance a unilateral modification

of payouts merely because the revenues were not as projected.” Id. at 1565. It held that “‘[a]

force majeure clause is not intended to buffer a party against the normal risks of a contract. . . .

A force majeure clause interpreted to excuse the buyer from the consequences of the risk he

expressly assumed would nullify a central term of the contract.’” Id. (citing Northern Indiana

Pub. Serv. v. Carbon County Coal, 799 F.2d 265, 275 (7th Cir. 1986) (holding that a force

majeure clause did not excuse performance of a long-term fixed-price coal contract where a

government commission that regulated fuel rates had ordered the party to buy from utilities that

would sell electricity to it at prices lower than its cost of internal generation)).

199This was standard practice in the horseracing industry. Id. at 1547.52


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Plaintiffs have proffered evidence from which a jury could reasonably conclude that

Barnett’s ineligibility was one of the “normal risks of” a bout contract. They note that the Fight

Agreement gave Affliction the right to extend or terminate the contract if Emelianenko became

ineligible or was unable to fight. Under paragraph 14, Affliction could extend the contract term

if Emelianenko failed or was unable to perform “due to an order of the Commission or other legal

or regulatory entity.”200 It had the right to terminate the agreement if Emelianenko “engage[d]

in any activity or conduct which [was] illegal[ ] [or] which violate[d] any applicable law or

Commission or other governmental, regulatory or sanctioning body role or regulation.”201 These

provisions make clear the fact that the parties contemplated the possibility that Emelianenko might

become ineligible “due to an order of the Commission.” A reasonable jury could conclude that

it was therefore foreseeable that Emelianenko’s opponent might similarly become ineligible. This

is particularly true given Atencio’s testimony that he knew Barnett had previously tested positive

for steroids when he recommended that he be Emelianenko’s opponent.202

While there is no evidence that defendants could have prevented Barnett from testing

positive for steroids, the question is whether cancellation of the bout was a necessary consequence

of Barnett’s and/or the Commission’s action or whether it “have been prevented by prudence,

diligence and care.” Mathes, 121 Cal.App.2d at 477. Although the parties have presented

conflicting evidence regarding the availability of worthy replacement opponents, plaintiffs have

adduced sufficient evidence that a reasonable jury could conclude that cancellation of the bout

could have been prevented by the exercise of due care. For example, if the decision to cancel

Trilogy was made on July 22, 2009, after Strikeforce indicated it would not release Rogers from

his contract to fight, Affliction could have rescheduled the bout when it learned the next day that

Rogers was available. This is particularly true since Affliction did not announce the cancellation

publicly or inform M-1 of it until July 24, 2009.

200Fight Agreement, ¶ 14 (emphasis added).

201Id.

202COE, Exh, 376 (Deposition of Tom Atencio (“Atencio Depo.”)) at 1544:4-9.53


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Certainly, a verdict for plaintiffs on this claim is by no means a forgone conclusion, as

there is sufficient evidence from which a jury to conclude that Rogers would not have been able

to fight by August 1, 2009, that Affliction’s extension of the Fight Agreement pertained only to

“a fight on August 1, 2009 against Josh Barnett,”203 or that finding a replacement fighter on one

week’s notice and having to change marketing and other plans was more than required by

“prudence, diligence and care.” Presented with conflicting evidence, however, the court cannot

decide the question on a motion for summary judgment.

b. Impossibility or Impracticability

At common law, a finding that a contract was impossible to perform required literal or

physical impossibility. Kennedy v. Reece, 225 Cal.App.2d 717, 724 (1964). Modern cases,

however, recognize that performance is legally impossible when it is impracticable. Id. (“The

enlargement of the meaning of ‘impossibility’ as a defense, (which at common law originally

meant literal or physical impossibility of performance) to include ‘impracticability’ is now

generally recognized.”). Under the doctrine of impracticability, “[a] performance may be so

difficult and expensive that it is described as 'impracticable,' and enforcement may be denied on

the ground of impossibility. However, this does not mean that any facts, which make performance

more difficult or expensive than the parties anticipated, discharge a duty that has been created by

the contract.” Id. (citing City of Vernon v. City of Los Angeles, 45 Cal.2d 710, 719 (1955)

(quotation marks omitted)). “Impossibility [or impracticability] of performance is a defense and

the burden of proof in establishing it rests on defendant.” Oosten v. Hay Haulers Dairy Emp. &

Helpers Union, 45 Cal.2d 784, 788 (1955). “A party invoking the impossibility defense must

show that he used reasonable efforts to surmount the obstacles which prevented performance.”

McCalden v. California Library Assn., 955 F.2d 1214, 1219 (9th Cir. 1990), superceded by

statute on other grounds as recognized in Harmston v. City and County of San Francisco, 627

F.3d 1273, 1280 (9th Cir. 2010).

For the reasons discussed previously, the court cannot grant summary judgment in favor

203Extension Letter at 1.54


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of Affliction on the basis that the Fight Agreement was impossible or impracticable to perform.

Plaintiffs have proffered evidence from which a jury could find that Affliction failed to “use[ ]

reasonable efforts to surmount the obstacles which prevented performance.” Id. Defendants’

motion for summary judgment on plaintiff’s claim for breach of the Fight Agreement is therefore

denied.

III. CONCLUSION

For the reasons stated, the court denies both M-1’s motion for partial summary judgment

and Affliction’s cross-motion for partial summary judgment.204

DATED: June 6, 2011 MARGARET M. MORROW

UNITED STATES DISTRICT JUDGE

204Both plaintiffs and defendants made numerous objections to their opponents’ evidence. To the extent the court relied on evidence to which there was an objection, the objections areoverruled, for the reasons stated in the footnotes of this order. To the extent the court did not relyon the evidence, the parties’ objections are moot. The evidence upon which the court has reliedis detailed in this order; none of it, in the court’s view, is inadmissible.

55


affliction sj decision

Documents

breach of consulting

breach of fight agreement

summary judgment motion

breach of letter agreement

oral agreement

unknown affliction ertainment

fair dealing fight agreement

support of defendants