Canelo Alvarez’s $365 million deal with sports streaming service DAZN, once the largest contract ever signed by a professional athlete, is now the subject of a federal lawsuit.
The middleweight champion on Tuesday filed a complaint in a Los Angeles federal court against DAZN, Golden Boy Promotions and Golden Boy’s CEO, retired champion Oscar De La Hoya. The complaint contains 10 claims, including for fraud, breach of contract, breach of good faith and interference with prospective economic relations. Alvarez demands a jury trial, at least $280 million in damages and a court-issued declaration that would authorize him to schedule his bouts without Golden Boy or DAZN’s involvement.
The lawsuit sheds light on how the COVID-19 pandemic has wreaked havoc on professional boxing, which was slow to restart once the sporting calendar was halted in early March. It also shows the tension that exists when stars like Alvarez, one of the sport’s few reliable pay-per-view draws, and their promotors and media partners debate which opponents to fight.
DAZN, which is led by former ESPN president John Skipper, said in a statement that the company doesn’t comment on legal matters. A spokesman for Golden Boy said in an email that “Canelo’s beef is with DAZN,” and that DAZN was refusing to honor the contract.
Alvarez, 30, asserts that the defendants have failed to live up to the five-year, 11-fight contract he signed in 2018 (that deal was part of a larger agreement between DAZN and Golden Boy). As described by Alvarez’s attorneys, Gregory Smith and Patrick Maloney, the contract guarantees the fighter a minimum of $365 million in compensation. Golden Boy is obligated to arrange and promote Alvarez’s fights, and DAZN must broadcast them. De La Hoya, the complaint maintains, “personally assumed liability for all guaranteed payments” owed to Alvarez.
According to his attorneys, Alvarez has more than met his end of the bargain. The native of Guadalajara, Mexico, fought and won three matches over the last 23 months, defeating Rocky Fielding, Danny Jacobs and Sergey Kovalev. The complaint insists that Alvarez also satisfied the contract’s required promotional activities. Alvarez, for instance, allowed DAZN to film training sessions. He also participated in press conferences, answered questions in media interviews and posted about upcoming fights on his social media pages.
The complaint references the parties reaching a tentative agreement earlier this year on an opponent and venue for a May 2020 bout. However, the agreement wasn’t finalized and, given the pandemic, didn’t lead to a bout.
Canelo’s signing was a major step for DAZN, which prior to 2018 was streaming in just a handful of specific international markets. The company was seeking a way into a saturated U.S. sports media landscape, and with all the major leagues locked into long-term deals, chose to focus primarily on boxing, where deep pockets could immediately access the sport’s biggest stars.
The company’s early boxing spend included an eight-year, $1 billion joint venture with U.K. promoter Matchroom Boxing, as well as the deals with Canelo and Golden Boy, which could be worth as much as $500 million, according to reports.
The COVID-19 pandemic has complicated the company’s plans. DAZN, which was looking to raise at least $500 million when the virus erupted, was among the first major media companies to outright tell rights holders it would only pay for games that were played, a break from industry tradition. The company recently laid off dozens of employees and has reportedly restarted potential fund-raising talks.
Alvarez clearly doesn’t view the pandemic, which triggered widespread cancellations and postponements in boxing, as a valid justification for a lack of fights. The complaint maintains that since May, state athletic commissions and titling organizations have released COVID-19 protocols for safely holding bouts. The protocols include use of testing, a bubble or campus setting and excluding or greatly limiting access to live audiences.
As retold from Alvarez’s perspective, his advisors and the defendants discussed possible arrangements for holding bouts in the second half of 2020. One suggested venue was the top of a skyscraper, where there would be no fans but the setting “could elevate a ‘COVID-19 Era’ event to historic and spectacular” heights. The parties also acknowledged how the absence of fans would reduce gate receipt revenue but remained confident they could attract significant broadcast revenue. The discussions (again, as told by Alvarez’s attorneys) also contemplated delayed compensation for Alvarez and Golden Boy, including through a reduction of a $40 million licensing fee. These areas of compromise were intended to facilitate the scheduling of bouts.
The complaint maintains the discussions broke down due to DAZN failing to make a proposal and then refusing to pay the licensing fee. DAZN, as described by Alvarez, invented “a series of excuses” including that Alvarez failed to agree to a third fight against former world middleweight champion Gennady Golovkin.
Golovkin is considered by many to be Canelo’s hardest, and most promotable, opponent. The complaint describes how DAZN believed that Alvarez was obligated to fight Golovkin, but Alvarez insists there was no obligation and, regardless, any fight against Golovkin would have required a separate and additional payment.
Alvarez’s demand for $280 million in damages is eye-catching. This proposed figure reflects what Alvarez terms “denied guaranteed payments, lost gate revenue, and opportunities for ancillary revenue associated with bouts, such as sponsorships and apparel revenue.” Alvarez also seeks a judicial determination specifying that he can lawfully arrange bouts outside of those sanctioned by Golden Boy or DAZN. If such a determination were granted, Alvarez could negotiate his own deals or team up with other promoters and broadcasters.
In the coming weeks, Golden Boy and DAZN will answer the complaint and attempt to rebut Alvarez’s arguments. There are several likely lines of defense.
First, Golden Boy and DAZN will surely supply a different retelling of facts. Expect them to describe their actions as fully compatible with the contract. They are also likely to portray Alvarez as obstinate in the face of a global pandemic and as unreasonably unwilling to compromise. Further, they might contend that Alvarez refused to fight Golovkin, in violation of contractual duties, or that he breached other obligations. The emphasis will be that Alvarez, not Golden Boy or DAZN, is in breach.
Second, the contract—which is not publicly available—could contain provisions that favor Golden Boy and DAZN. For instance, it might feature a force majeure clause that would permit a delay or cancellation in payments due to the pandemic. Alternatively, the contract might require the parties go to arbitration before they can sue each other. It might also contain a forum selection clause that requires litigation in a different state than California.
Third, there are general contract law principles that could favor Golden Boy and DAZN. Even if the contract lacks a force majeure clause or a compulsory arbitration clause, Golden Boy and DAZN could argue the defense of “impossibility,” also termed “impracticability” or “frustration of purpose.” With such a defense, they would maintain that the pandemic fundamentally and unforeseeably altered the contractual relationship. From that lens, they should be relieved of contractual obligations to pay Alvarez or to schedule fights for him.
Lastly, it’s possible that Golden Boy and DAZN will point fingers at each other. While Alvarez has joined them as defendants, their interests are separate and not necessarily aligned. They could countersue Alvarez or even sue one another over the now-disputed contractual relationship. These are well-financed entities with the capacity to complicate and prolong the litigation.