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UPDATE ON FLOSPORTS VS. WWNLIVE LAWSUIT

By Mike Johnson on 2018-02-14 10:55:00

A pre-trial conference in the lawsuit Flosports filed against WWNLive last year is set for 2/27 before Judge Lee Yeakel in the United States District Court for the Western District of Texas, Austin Division.   

What is interesting about that conference is that on 12/28, Judge Yeakel signed an order referring the WWNLive motion claiming that the lawsuit against them should not be heard in Texas for lack of jurisdiction to another Judge,  Andrew W. Austin.  Judge Austin has not, to the best of PWInsider.com's knowledge, issued a ruling on that matter.

Flosports filed a motion on 12/22/17 seeking to have WWNLive's previous request for the lawsuit the streaming provider brought against them shut down.    Flosports' lawsuit, seeking $1 million in damages, revolves around allegations that WWN, run by Sal Hamaoui and Gabe Sapolsky, had "robbed Flosports" by provided false information that led to the streaming provider paying inflated prices for WWN content.

In the motion Judge Austin has yet to issue a ruling on, WWN argued that the Texas court lacks the jurisdiction to rule over their company, as they are based in Florida while their top executives, Hamaoui and Sapolsky, reside in Florida and Massachusetts, respectively.  Flosports has instead claimed that WWN, by entering into their agreement with Floslam, realized that Flo was a Texas-based company and therefore, fell under Texas law.  Flosports has previously noted that Hamaoui traveled to Texas to meet with Flosports and then physically signed the agreement between the two companies while in Texas.  They also stated that when WWNLive signed their five year deal with the company, they agreed to be governed by Texas law.

Flosports has claimed that WWNLive had misled their company, claiming WWN had, "induced FloSports to enter this Exclusive Media Agreement (“the Agreement”) by misrepresenting the number of fans purchasing viewership access to their events, and that representation and warranty was expressly incorporated into the parties’ written contract. In fact, WWN contractually promised that “all data [it] provided . . . regarding financial performance of events [it] put on . . . was accurate, reliable and truthful.” FloSports paid hundreds of thousands of dollars to WWN in reliance on this promise. But WWN’s data was false. When pressed for the data that backed up WWN’s representations, WWN originally claimed the data was lost or deleted. Ultimately, WWN sent records listing subscribers more than once and including customers who had not purchased broadcast services. Even accounting for that artificial inflation of its viewership, WWN’s numbers proved far less than originally represented."

Flosports has also argued against WWNLive's claims that the company did not run regularly in Texas since WWNLive had promoted six events in the Lone State State.  It should be noted that many of those were due to the timing and location of WWE's Wrestlemania being held in Dallas in 2016 and that WWN had not run Texas prior to that point and did not run there again until after the WWNLive-Flosports agreement was signed.  Had Wrestlemania not been in Texas, obviously WWNLive would not have promoted here.  Flosports also noted that WWN would have returned to Texas in November 2017 had Flosports not severed their agreement. 

Flosports has argued "WWN’s physical presence in Texas during these multiple stages of the Agreement distinguishes this case from any authority cited by WWN" and that WWN's relationship with Flosports required continued travel to Texas.

Flosports also argued that their agreement called for a long-term relationship between the two companies, including Flofilms being tapped to produce films designed to promote WWNLive events, three of which had been produced at the time the relationship was severed and that WWN.  Two of the films featured Matt Riddle and another was an "All Access" film surrounding the WWNLive More Then Mania event.  Flosports stated they also teamed in the production of WWNLive events and cited that a document review to "has revealed at least 368 emails sent from WWN to FloSports in Texas during the course of the parties’ dealings, in addition to voluminous text messages, several conference calls between the parties, and the in-person meetings."  

So, Flosports argued that since the agreement led to each side working together in Texas, the case should be heard in Texas.  They are also arguing that since Gabe Sapolsky was involved from Massachusetts, where he resides, "so his share of communications and contractual activity occurred outside of Florida as well."   Flosports noted that their payments to WWN came from Texas and that WWN's streams originated from Flosports' headquarters in Austin, Texas.

The filing featured statements from Tobey Mergler, the former Vice President of Global Rights Acquisition for FloSports and Phil Wendler, the current Senior Vice President of Global Rights Acquisition and Subscription that, interestingly, are now redacting the subscription numbers that Hamaoui provided to Flosports, despite those numbers having been previously revealed in court and publicly reported by PWInsider.com and other outlets.

The contract between Flosports and WWNLive was revealed in the November 2017 filings, noting that it called for WWN to be paid $75,000 in 2016, $500,000 in 2017, $550,000 in 2018, $605,000 in 2019, $670,000 in 2020 and $740,000 in 2021. 

The contract also called for incentives to be paid to WWN under the following conditions: "In addition to the Rights Fee described in Section 3a, FloSports will pay an incentive to Events Rights Holder if financial performance exceeds specified levels.  Events Rights Holder will receive the greater of the Rights Fee listed in Section 3a or 30% of total Net Cash attributed to WWN over the course of the year. Example: Net cash in 2017 equals $1,000,000. Events Right Holder receives a total of $500,000. Net cash in 2018 equals $3,000,000. Events Right Holder receives a total of $900,000."

The contract required Flosports to promote the WWNLive events promising they would  "provide $250,000 of advertising value per year on FloSports (i.e. custom digital display, email newsletters, social media, editorial previews/coverage/recaps, etc.)."   How that amount of advertising value may have been tallied is not directly explained in any of the court documents, but Flosports' amended lawsuit claimed, "FloSports performed on the Agreement and spent hundreds of thousands of dollars pursuant to its terms, including on its advertising spend for WWN and in the fees paid directly to WWN—all in reliance on WWN’s breached warranty and misrepresentations."

The now redacted spreadsheet lists buys for WWNLive events held in 2015 and 2016.  For EVOLVE events, buys ranged from 539-2,479 purchases with the events on the higher end being shows specifically promoted by WWE online.  SHINE iPPVs ranged from 525-729 buys.  Full Impact Pro events ranged from 24 buys to 288 buys.

Back in September 2016, after news of the lawsuit broke, PWInsider.com reported we had been "told that in actuality, in 2016, WWN (on average) was doing in the area of 1,300 iPPV buys for EVOLVE, 600-700 for SHINE and less than 200 buys for FIP events while selling those events. The year before, which they also provided to FloSports, those numbers were lower and the EVOLVE numbers were said to have been way up from the year before because WWE was promoting that brand."

It should be noted that the numbers in the lawsuit filings match up with what WWNLive sources claimed to PWInsider.com shortly after the suit was filed and if anything, showcase that Flosports moved forward into the agreement despite knowing what numbers WWNLive was bringing in - which of course calls some of their allegations into question.

In the Amended lawsuit, Flosports alleged, "During the first year of the Agreement’s term, FloSports became suspicious that WWN’s data was inaccurate. Over the course of several months, FloSports repeatedly asked WWN to send FloSports more detailed data to support the original spreadsheet. WWN failed to comply, alleging that the information was lost or deleted.    On August 18, 2017, WWN finally emailed the detailed viewership records, which contained additional misrepresentations: the records listed customers more than once and added purchasers of DVDs to the records, rather than limiting its numbers to the broadcast subscribers as it had promised were reflected in the original spreadsheet. Even with this fraudulent inflation of its data, the records showed viewership numbers far less than those reflected in the October 2016 spreadsheet, proving that WWN’s original representations were false."

WWNLive had previously responded to that, claiming, "That data was pulled from and compiled by a now-defunct third-party company named Fineline Hosting that was based in Florida." 

What is interesting is that while Flosports alleges that, "Among the promises WWN made in the Agreement was that “all data provided by [WWN] regarding past financial performance of events put on by [WWN] was accurate, reliable and truthful.” - yet there is no language regarding that data (truthful or not) in the agreement filed with the court.

The lawsuit also alleges that "WWN breached the Agreement by failing to adequately perform under its terms, including its provision of inaccurate, unreliable, and false viewership data to FloSports" yet the Agreement filed with the court lists no description of what "adequately performing" would be.  

Instead, based on the two page agreement, WWN was to produce events, handling the management of the video production (at no cost to Flosports) including Planning, Logistics and Production Teams, required video equipment including a two camera shoot, an Encoder to deliver the live stream to Flosports, personnel to "manage and run the video production for all events", Internet with a minimum upload speed of 5 mbps for all events, delivery of a fully produced live stream via RTMP feed to Flosports and that WWNLive would produce and deliver five live events per month (with the exception of December, where they were only required to produce three events).  The agreement noted, "The quality of the events should be reasonably similar or better than the same events in 2015 and 2016 through the Term of the Contract."

It is also interesting to note the following language in the contract: "FloSports has the right to terminate this Agreement by providing notice during the month of January each year, starting in 2018. If FloSports exercises this option, the agreement will continue for 12 months after the date of notification before terminating." 

It should be pointed out that Flosports terminated their deal with WWN in September of 2017 (well before January 2018) shortly after filing their lawsuit.  So, by the letter of the contract, a judge could potentially consider an argument from WWNLive that Flosports actually breached their own deal. 

While Flosports' lawsuit alleges that "In fact, WWN contractually promised that “all data [it] provided . . . regarding financial performance of events [it] put on . . . was accurate, reliable and truthful.” - the legalese in the two page agreement between the two sides that was filed with the court on 11/27 does not appear to cover any other sort of termination of the deal, including whether the deal could be halted or terminated if the records provided by WWNLive Inc. actually turned out to be incorrect. 

The FloSlam streaming service officially launched in October 2016, but PWInsider.com is told by sources that conversations with WWN began as early as January 2016.  At that point, FloSlam was hoping to make deals with WWN, Ring of Honor and New Japan Pro Wrestling.  In the end, WWN signed with FloSports first and the other two companies passed.  The majority of the content on the streaming service came from WWNLive until their relationship was severed in September 2017.  Since then, Flosports has shuttered the entire service.

WWNLive sources have previoisly told PWInsider.com that they would be filing a counter-suit against Flosports, but as of this writing, that has not yet been filed.

Since the lawsuit was filed, WWNLive.com's Gabe Sapolsky has signed a consultancy deal with World Wrestling Entertainment, which is interesting for several reasons.  One, WWE was an investor in Flosports, which means the company they invested in is now suing someone WWE is paying contractually.  Two, with Sapolsky working more and more on the WWE NXT brand, his future working with WWN itself has to be put into question - after all, if WWE requires more commitment and responsibility from Sapolsky, it's just a matter of time before he would have to extricate himself from the day to day of WWN and its family of promotions.

WWN's EVOLVE promotion will hold its 100th event this Saturday at La Boom in Queens, NY featuring eaturing EVOLVE champion Zack Sabre Jr. vs. Austin Theory with Priscilla Kelly, WWN champion Keith Lee vs. AR Fox, EVOLVE Tag Team champions Chris Dickinson & Jaka vs. The End, Matt Riddle vs. James Drake, Tracy Williams with Stokely Hathaway vs. Anthony Henry, Fred Yehi vs. Dom Garrini and a three-way with Darby Allin vs. Jason Kincaid vs. Jarek 1:20 with Candy Cartwright scheduled.  

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