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LESNAR FLASHBACK - Why did Brock Lesnar leave WWE in 2004?, Report on WWE/Lesnar fall-out

Apr 2, 2012 - 11:17:31 PM
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In February 2005, returning WWE star Brock Lesnar filed suit against WWE attempting to wave a no-compete clause that would have prevented him from working for another "competitor" - pro wrestling or MMA - until June 2010.

One year later, after public and private back-and-forth disputes between WWE and Lesnar, a settlement was reached to waive the no-compete clause that set in motion Lesnar's MMA fight career that has landed him on top of UFC's heavyweight division.

The following is a flashback to February 2005 with a detailed review of Lesnar's lawsuit in the Pro Wrestling Torch Newsletter. The report includes an early look at the possibility of Lesnar entering UFC - just as the organization was about to take off and challenge WWE for market share of PPV business - and what could have happened if Lesnar did not have the no-compete waived.

***

Pro Wrestling Torch Newsletter #848
Cover Dated: February 12, 2005
HEADLINE: Lesnar sues WWE, wanting his non-compete agreement invalidated
By Wade Keller, PWTorch editor


Former WWE headliner Brock Lesnar filed a lawsuit against WWE in U.S. District Court in Connecticut on Feb. 4, claiming the non–compete agreement he signed last year is “unreasonable” and “unenforceable.” The lawsuit states that the restrictions are “not reasonably tailored to protect WWE’s legitimate business interest, impose an excessive restraint on Lesnar’s ability to earn a living, interfere with the public interest, and are otherwise overly broad, unreasonable, oppressive, unfair, and inequitable.” Lesnar is asking for the agreement to be deemed invalid and in return be awarded “all costs, disbursements, and attorney’s fees.”

Lesnar signed a talent contract extension with WWE in 2003 that took effect July 1, 2003 and was set to last until June 30, 2010. Less than a year later, with a desire to attempt to play in the NFL, he asked to get out of his contract. WWE agreed to let him out of his contract, but only if he signed a non–compete clause. That non–compete clause restricted him from wrestling anywhere in the world with any “professional wrestling, ultimate fighting, and/or sports entertainment companies, associations, joint ventures, sole proprietorships, and/or partnerships, other than the WWE,” through the expiration date of his latest talent contract—June 30, 2010.

Lesnar signed the broad–in-scope agreement, eager to try his hand at making it in the NFL, figuring his most logical other option was returning to WWE if it didn’t work out. When he was unable to get a contract in the NFL, he began looking into other options. One of those options is returning to WWE, and another is competing in “ultimate fighting,” namely UFC or Pride, the two biggest mixed martial arts companies.

WWE management knew with Lesnar’s background in NCAA and general tough guy rep that if he didn’t make it in the NFL, it was likely he would at least consider earning a few good paydays fighting with an MMA promotion. That’s why in Lesnar’s case they expanded the boilerplate non–compete clause to include “ultimate fighting.” They expanded the scope of the non–compete to include the entire world, not just the U.S., in part because they knew Lesnar had market value in Japan—in either an MMA group or a traditional pro wrestling group.

WWE had, after all, pushed Lesnar hard as a top tier player, building the Smackdown brand around him more than anyone else from nearly a year before he signed his seven year contract extension to the time he asked to get out of his contract less than a year later. Had WWE thought there was a chance that Lesnar wouldn’t fulfill his long–term commitment to the company, management might have chosen to reduce his push in the year leading up to his departure, making him just one of many top wrestlers, and putting him in a position to do some strategic, high–profile jobs to up-and-coming wrestlers with main event potential who could have used the boost in reputation.

When Lesnar began calling Vince McMahon’s office a month or two ago, he wanted to return to WWE. The problem is, WWE sources say he wasn’t willing to return under the terms of his previous seven year contract. He wanted to work a part time schedule. “Lesnar’s demands are ridiculous, which set the tone for a less than ideal negotiating climate,” says one WWE source who heard details about early talks between the two parties. “Lesnar wants more money for less work and different working conditions than his (colleagues). It’s a bad plan. He is not a star who deserves different treatment from (other wrestlers).”

Lesnar was expressly unhappy in his final months in WWE, complaining that as a small town farm boy, he wasn’t used to so much travel. He made it clear he was miserable and needed a change in order to continue with the WWE lifestyle. He bought himself a private plane to help expedite travel, hoping that would alleviate his fatigue. He began asking for perks that only those with more than a decade of experience and years of being a proven draw would even consider requesting. When Lesnar couldn’t get the reduced schedule he wanted, he began to dream of other lifestyles, including playing in the NFL. He worked hard to learn his craft pro wrestling, but he was also a quick study in that he became a very good worker at a young age, able to carry his end of top-notch main events quicker than most of his colleagues with similar experience. He figured he might be just as athletically gifted in football, something he hadn’t played since high school. He gambled on switching careers and it didn’t work out. He was left without a job in either field.

NON-COMPETES NOT BLACK & WHITE

To a layperson, it would seem that Lesnar has no case. He agreed to not work for other wrestling and fight promotions through 2010. He gave his word. He signed a document. And now, since his NFL dream didn’t work out, he wants to have all of his options back on the table. The legal context, though, is much more complicated and favors Lesnar in several ways. For one, the courts may not find the non–compete clause valid any more than they would a contract Lesnar signed with WWE to sell illegal drugs to fellow wrestlers. If the non–compete is deemed illegal, it doesn’t matter that he signed it; it will be invalidated by the courts.

It seems extreme in the sense that the boilerplate non–compete clause built into the contracts Lesnar had previously signed simply said he couldn’t wrestle for any wrestling group in the U.S. only for one year. So, at least in theory, had Lesnar just stopped showing up for work last April, he would have been in breach of contract and subject to only the one year U.S. non-compete. A judge may believe that the standard boilerplate non–compete clause is more reflective of a more reasonable protection of WWE’s interests than the one Lesnar signed last March.

However, a Connecticut lawfirm website (tylercooper.com) talks about adding non–compete clauses after employment begins: “If a restrictive covenant is not part of the initial employment agreement, new consideration should be provided to the employee in exchange for the new restriction. The new consideration may take the form of a payment of money and should be described in a written agreement as consideration for the restrictive covenant.” In this case, Lesnar agreed to the new non–compete clause in exchange for getting out of his existing WWE contract on good terms with the company.

Non–compete clauses are interpreted and enforced differently from state to state. Many judges don’t look fondly on such agreements if they are deemed unreasonable. A reasonable non–compete clause is considered one that adequately protects the former employer while also protecting the worker’s ability to earn a living at their craft. While many cases have ruled non–competes unreasonable, either striking them down entirely or reducing the scope and duration of them, one key factor works against Lesnar in this situation. The non–compete he is fighting was signed when he was seeking to work elsewhere in another chosen field while breaking an existing contract. That is looked at differently than if the non–compete part of his original contract, something he signed at the time he was just trying to get his foot in the door with WWE.

According to the Lawyers.com website’s section on non–compete contracts, “when an employee decides to leave a job (rather than signing one upon the start of employment with a company), the non-compete agreement may be a significant impediment to future employment or may prevent employees from becoming self-employed.”

POINT BY POINT BREAKDOWN

There are several specific elements of thes non–compete clause that make this anything but a typical worker-employer situation.

-- Employer vs. Worker Rights: The Lawyers.com website states: “Courts recognize that employers have a legitimate interest in protecting the time, investment, and other resources they have invested in employees, but that interest must be balanced against an employee’s job mobility in a free enterprise system. Courts generally will scrutinize non-compete agreements carefully to make sure that they are geared to protect the reasonable business interests of an employer without unduly limiting an employee’s other work opportunities. Therefore, these arrangements must usually be tailored narrowly to restrict truly competitive activities without forbidding an employee from working in the same industry or profession in a way that is not competitive.”

An authority on contract law, the late E. Allan Farnsworth, stated the following regarding non–compete contracts: “The justification for (postemployment restraints) is the public interest in a workable employer-employee relationship with efficient use of employees. In general, therefore, postemployment restraints are sustained only if the employer stands to lose its investment in confidential information relating to some process or method...or in customer lists or similar information. Against this interest in a workable relationship, courts balance the public interest in individual economic freedom, free dissemination of ideas, and reallocation of labor to areas of greatest productivity. Because post–employment restraints are often the product of unequal bargaining power and may inflict unanticipated hardship on the employee, they are scrutinized with more care than are covenants in the sale of a business.”

The key in this case may be that Lesnar was not in a vulnerable position when he signed the non–compete. He was initiating getting out of his $6 million minimum salary remaining on his contract. Had he been coerced into signing the non–compete contract when he had no leverage and was simply looking to get his foot in the door to WWE, it would be a different situation. In this case, he was seeking to escape his contractual obligation to pursue something else he preferred instead.

-- Reasonable Duration: As for duration, the website notes: “Generally, non-compete agreements one or two years in length will be valid, and longer time periods may be suspect.” In Lesnar’s favor are past court decisions, such as Young v. Meyer, a 1989 Minnesota Court of Appeals case which reduced a three-year non–compete agreement to 18 months because it felt the non–compete clause was “unreasonable.” A legal commentator, William Christopher Penwell, commented in 2002 that a general rule of thumb for non-competes is one year from the date of separation, but it could be as short as six months or as long as two or three years, based on circumstances. However, there have been other cases, including in Connecticut where Lesnar’s attorney filed the lawsuit, that have upheld longer no compete clauses. Scott v. General Iron & Welding Co. in 1976 upheld a five year statewide covenant barring a former employee from working as a manager for a competing business.

-- Geographical Scope: The website states that larger geographical limitations are more accepted today than in the past due to the expanded global marketplace. With Japanese promotions having made inroads into PPV over the past 15 years, including regular events by Pride, and with WWE running more regularly in Japan with aspirations to do events more frequently in the future, the “worldwide” limitation may not seem “unreasonable” to a judge.

In Lesnar’s case, the duration wasn’t an arbitrary number of years proposed by WWE and designed to punish him or stifle his career. It was simply a way for WWE to be sure that if anyone received the benefits of his talents during the duration of the contract Lesnar had previously agreed to and now was trying to get out of, it would be them and nobody else who competes with them.

-- Genre Scope: Lesnar’s other top options are to work in Japan or for UFC. The UFC option intrigues him, and UFC officials are interested for obvious reasons. Lesnar is someone who could bring a lot of wrestling fans over to their world of MMA fighting. The two sports are not competition in the sense that UFC only runs about six shows a year and doesn’t have a highly rated weekly TV series or house shows. They are competition, though, in the sense that they are going after a limited sports PPV budget among a certain number of fans who could go either way when it comes to their event purchases. Ken Shamrock, Dan Severn, and Daniel Puder had MMA backgrounds before working for WWE. Don Frye fought in UFC before moving into a more traditional pro wrestling promotion in Japan.

WWE wanted to be sure they didn’t let Lesnar out of his contract, only to have him end up taking that star power that he gained in part through their good faith pushing of him as a top star where he was portrayed as a “tough guy” and “fighter” and use it to lure PPV customers to a new, potentially threatening product to their fanbase. Thus the added stipulations in Lesnar’s non–compete clause.

A judge, though, may not see UFC as true competition since Lesnar’s skills needed to succeed in WWE are wholly independent of his skills needed to win truly competitive fights in the MMA genre. There are, though, enough precedents of crossover athletes between pro wrestling and “ultimate fighting” to make this less than a black and white issue for either side. WWE even held a UFC-like cage match presented as a “shoot” between Ken Shamrock and Owen Hart on PPV. WWE even promoted their own legitimate fights in the “Brawl for All” tournament in 1999.

WWE RISKS MAJOR RAMIFICATIONS

Rather than have their contracts scrutinzed in court, which might shine a spotlight on the potentially invalid classification of wrestlers as “independent contractors,” WWE may try to avoid the courtroom. Their contracts are suspect in part due to the fact that once talents sign with WWE, they aren’t able to offer their services to other employers for the duration of their contracts.

A judge could also “reclassify” Lesnar as an “employee” for the sake of the lawsuit since Lesnar is not able to work for anyone other than WWE while under contract. That could have wide–ranging ramifications regarding the validity of current WWE talent contracts and the enforceability of current WWE talent contracts. In a 1985 case in Florida, Lenox v. Sound Entertainment, a judge ruled that a D.J.’s non–compete clause was invalid because he was wrongly classified as an independent contractor instead of an employee. This lawsuit could draw the attention of government enforcement agencies. Also, if a judge were to deem WWE’s noncompete clause invalid, it could set a precedent that could open the doors for another corporation’s attempt to more easily sign away top WWE stars for a new start–up company some time in the future.

Once WWE’s attorney’s look over the specifics of the case, they might propose a compromise, perhaps reducing the number of years of the non–compete or offering Lesnar a chance to fight in UFC as long as they received a percentage of his payoff as a booking fee. Jerry McDevitt, attorney for WWE, told the Connecticut Post that WWE plans to fight the suit. “We put a ton of money and time into promoting him as a star,” he said, adding that Lesnar agreed to the separation stipulations.

FLAWS IN LESNAR’S ARGUMENTS

Lesnar’s lawsuit makes the case that he did make a diligent effort to succeed in the NFL, apparently an attempt to fend off any accusations that he never intended to play in the NFL and simply wanted to move on to a WWE competitor and used the NFL dream as an escape plan. The lawsuit also states that Lesnar’s services, “though valuable, are not special, unique, or irreplaceable,” key words in previous non–compete clause cases. States the lawsuit: “During the time that Lesnar was associated with WWE, it awarded the World Heavyweight Champion title no less than twenty-five times to no less than fifteen different professional wrestling performers, including four Heavyweight Championship titles awarded to three different wrestling performers since March 14, 2004.”

The point being made to a judge here seems to be that many different wrestlers are deemed worthy of World Title status, not just a select few of which Lesnar is one. WWE could counter by saying that between Lesnar’s first and last title reign, Kurt Angle and Big Show were the only other two Smackdown–brand champions, and Angle is limited in what he can do at this point due to injuries and Big Show held the title for less than a month.

Lesnar, meanwhile, held the title for the majority of his time as a headliner in WWE once he won his first title. On the other brand, Triple H held the Raw World Title for all but four months during the time Lesnar was headliner on Smackdown. In other words, Lesnar wasn’t just one of many at his level; he was deemed one of two primary qualified wrestlers once he was trained and promoted to that level within the company.

Lesnar’s lawsuit states that “WWE’s professional wrestling events and promotions were never dependent upon the appearance or participation of any one individual wrestler, including Lesnar.” WWE can debunk this as a relevant point by noting that Lesnar had one of the highest guaranteed downside contracts in the company, that he was the main event performer on virtually every PPV once he reached main event status, he was the primary wrestler featured on ads and in posters for events he was on, and nobody younger than him earned more money.

The lawsuit also states that WWE has abandoned any claim that Lesnar’s services are irreplaceable because WWE has advised Lesnar since October 2004 that it had no interest in retaining his services as a wrestler or otherwise. If WWE sources are accurate, their lack of interest has to do with his wanting a schedule that is different than he agreed to when he signed his seven year contract extension in June 2003. WWE could also, although less convincingly, contend that Lesnar’s inability to make it on an NFL team hurt his reputation among WWE fans as a top notch athlete, thus reducing his market value. WWE could also try to argue that Lesnar’s disparaging remarks about the wrestling industry after leaving WWE last year alienated him from fans.

The lawsuit states that Lesnar now “desires to work and earn a living in the only occupation for which he has been trained and which he knows, professional wrestling, and/or the occupation for which his physical gifts and training as an amateur wrestler make him particularly well–suited, professional combat sports.” The wording is precise and revealing. Lesnar wants to be able to fight in UFC, but rather than calling it “ultimate fighting,” it is referred to as “professional combat sports,” just in case a judge decides “ultimate fighting” isn’t a well–defined term and somehow doesn’t apply to UFC or Pride. In the lawsuit, Lesnar contends that WWE failed to explicitly define what “ultimate fight” or “sports entertainment companies” entailed.

The lawsuit contends that by the time the non–compete clause expires, Lesnar will be 33 years old, “which for a professional athlete is the age at which many consider retirement due to the physical demands of their chosen occupation.” WWE can slice and dice this section, considering UFC’s top fighter in recent years, Randy Couture, was in his late–30s while beating much younger opponents, and that WWE regularly promotes wrestlers in main events who are much older than 33, including Batista, Shawn Michaels, Chris Benoit, Eddie Guerrero, and Ric Flair—whose top earning years were all well after age 33.

Lesnar’s lawsuit also claims that his “chosen profession” is pro wrestling (or pro combat fighting), yet he walked away from that “chosen profession” in order to pursue another occupation, that of a pro football player. Lesnar has not pursued all avenues of pro football, only the NFL which pays the best, but not the Canadian Football League, NFL Europe, or Arena Football. He was openly courted by at least one CFL team last fall. He might be able to earn a living in the profession he chose over pro wrestling last March, but hasn’t exhausted those options yet.

At stake in this case are Lesnar’s professional future and the validity of all of WWE’s non–compete clauses and their contracts in general.

[Torch photo credit Wade Keller (c) PWTorch.com]


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