Connecticut Employment Law Blog : Connecticut Employment Lawyer & Attorney : Daniel Schwartz : Stamford, Hartford New Haven, CT

Back in February, a federal court in Connecticut dismissed a lawsuit brought by three former wrestlers who contended, among other things, that they were improperly classified as independent contractors.

The case garnered national attention (see, for example, this post by Zach Lowe at The American Lawyer) for a variety of reasons, including the disclosure of the wrestlers contracts. (If you'd like to see the details on the contract, you can view them here.)

But after that, two of the three wrestlers (Scott Levy and Christopher Klucsarits) filed a motion to amend the judgment or otherwise set it aside to allow them an replead (or refile) their claims.  Notably, one of the wrestlers --- Michael Sanders -- did not join in this motion.

On July 31, 2009, the District Court denied the wrestlers' motions, finding that even if it allowed the amendments at this late date, such amendments would be "futile". In other words, even if the court allowed the amendment, the wrestlers would STILL lose on the merits.  You can download the decision here. 

The wrestlers contended that they could still make a claim under the federal law governing benefit plans. But the court said that even that claim would fail. 

In the proposed amended complaint, Plaintiffs assert that “they are participants in
defendant [World Wrestling Entertainment, Inc.’s] ERISA plans and are entitled to the full
benefits of such plans.”  However,  this claim relies on the reiteration of Plaintiffs’ argument espoused in the first complaint. Plaintiffs assert that they were unaware of Defendants’ intention to treat them as independent contractors and that an employer-employee relationship developed between themselves and  Defendants.

However, this Court has already rejected Plaintiffs’ argument that their relationship with  defendants evolved to employer/employee status. The Booking Contracts that outline the terms and conditions of the relationship  between WWE and each wrestler specifically stipulate that Plaintiffs are independent contractors.  Furthermore, Plaintiffs cite no authority to support their employer-employee claim and did not show that the Booking Contracts were invalid. Thus, an amendment to assert an ERISA  claim premised upon an employer-employee relationship between Plaintiffs and Defendants  would be futile as it fails to state a cognizable cause of action.

The wrestlers now have the option of appealing the matter to the Second Circuit Court of Appeals.  But given how the district court disposed of the matter, the results of such an appeal may be as preordained as a professional wrestling match.

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Two of the three wrestlers, whose lawsuit against World Wrestling Entertainment, Inc. ("WWE") was dismissed late last month, have asked a federal court to reconsider the matter and give them another opportunity to plead their case against the WWE.

In a motion to alter/amend the judgment filed late Wednesday (download available here), Scott Levy and Christopher Klucsartis contend that the court should have allowed them to raise claims under the federal law regarding employee benefits (ERISA), after the court made its initial ruling dismissing the matter. They also contend that they should be allowed another opportunity to raise certain state law claims with additional facts.

The wrestlers attach a copy of a proposed amended complaint that they would file, if the court gives them an opportunity to do so and propose that the matter be seen again as a class action claim. The amended complaint has some new details about the extent that the wrestlers contend that the WWE "controlled" their behavior. It'll be of interest to wrestling fans to see what allegedly happens "behind the scenes". 

As followers of this story will recall, there were originally three wrestlers who brought suit against the WWE, with Michael Sanders being the third. He is apparently not involved in this latest request and the proposed amended complaint drops him as a named plaintiff.  The materials submitted by the two remaining wrestlers are silent as to the reasons why Mr. Sanders has decided not to pursue this matter further at this time.

Even if these claims were allowed to proceed, WWE has previously argued that the claims (even if amended) are barred by a statute of limitations.  I would suspect that the WWE will argue that the amendments here would be futile because the claims would ultimately be dismissed. 

WWE will have until the end of March to respond to this latest motion and a decision from the court can be expected no earlier than mid April 2009. 

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In a closely-watched case, a federal district court last week threw out claims by three wrestlers that they were employees, rather than independent contractors of the World Wrestling Entertainment, Inc. (WWE) in a thorough repudiation of their claims.

The decision in Levy v. WWE (download here) is based, in part on the language of the wrestlers' contracts (which can be found here). I've discussed this case extensively in a variety of posts here.

If there were any doubt that the WWE is entertainment, not a sport, the court readily dismisses that at the outset:

Though wrestling is a sport in which two combatants engage in efforts to throw each other, as presented by defendant it is not a competitive engagement but is a staged pseudo-match, scripted, choreographed by agents of defendant and executed by wrestlers assigned by defendant which directs and controls the wrestlers’ conduct and the outcome.

Alas, the rest of the decision is not nearly as theatrical as a WWE match. Indeed, it is more akin to the Olympic-style wrestling matches you might see -- methodical with only flashes of action.

The court dismisses the claim that WWE breached the wrestlers' contracts by not doing tax withholdings (assuming they were employees) because the court finds that the wrestlers weren't harmed by that action.  Indeed, the court also finds that the claim that the wrestlers were deprived of benefits connected to the withholdings to be "fabricated":

The allegation of a deprivation of benefits "paid for by such withholding" is fabricated of whole cloth as withholding is subtracted from an employee’s compensation and paid to the government for application to an employee’s tax liability. It accrues no added earnings which plaintiffs make no claim were not paid in full to them. No particular benefits are claimed to have been lost.

As to the unjust enrichment claim, the court dismisses that claim because there is an express contract (namely the booking contracts) that prevents such claims from being raised. The court also finds that the statute of limitations on many of the wrestlers' claims also applies.

The wrestlers can move to have to decision reconsidered or can take an appeal.  However, given the court's thorough dismissal of their claims, it's difficult to see that they have any real good options left.  

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The WWE has filed its reply brief (download here) in further support of its motion to dismiss yesterday contending that three former wrestlers "cannot escape the clear language of the booking contracts". For background on the case involving "Raven" and two other former wrestlers, click here. 

The brief is filled with lots of "smackdowns" (to borrow a wrestling phrase) chiding the wrestlers about not doing their research before filing their claims (p2, footnote 1),  about conducting a "fishing expedition" (p2, footnote 2), about pursuing futile claims (p3), about using "sleight-of-hand tactics" (p7, footnote 5), and, well, just about everything else.

The brief is a lawyers' dream -- and a wrestling fan's cure for insomnia. (The new movie, "The Wrestler" may be a better entertainment choice.) The arguments are thick with legal analysis that frankly will only excite those with an interest in this arcane area of law. But the gist of the argument is that the claims are filed too late and are barred by various legal theories.  And even when there might be viable claim under ERISA, the wrestlers never amended their complaint to add it (and WWE contends that it is too late to do so now).

Is there anything all that new or revealing? No, not really,  At the end of the day, the plain language of the booking contracts is what should control the outcome of the case, argues the WWE. It's not very different from the argument it made in its first brief.

Zach Lowe, of the AmLaw Daily blog, provided this delicious update on the case (and welcome to readers of the blog as well).

I would expect that a decision on the matter will not be forthcoming for several more months. Until then, the matter is likely to remain fairly quiet. 

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Many weeks after the WWE filed its motion to dismiss the lawsuit brought by three former WWE wrestlers ("Raven" and "Kanyon" and others -- otherwise known as Scott Levy, Chris Klucsartis and Michael Sanders ), the wrestlers have fired back filing their papers opposing WWE's motion.  (For full coverage of this lawsuit, click here.) 

The papers, filed late Wednesday afternoon, are available for download here.  There aren't, as some much have hoped for, any more source documents attached to it (such as the wrestlers contracts that were attached to WWE's original motion) so readers will just have to make do with legal arguments.

For those following the matter, the opposition papers use much of the same theory that was advanced in the complaint -- that the WWE is pure entertainment, not sport, and the WWE controls everything about it.

Specifically, the wrestlers claim that the WWE exercises:

virtually complete dominion and control over its wrestlers -- determining when and where the wrestlers will perform, where and how they will train, scripting the fight and wrestlers' pre- and post-fight interviews, controlling the wrestlers' costumes, props and personas and pre-ordaining the results of each fight.

The wrestlers argue that the court should look to the specifics of the relationship, not the contracts themselves.  They contrast themselves with professional boxers, an interesting comparison.   Moreover, they argue that its too early for the court to decide the issues -- and that the case should proceed with discovery (in other words, each party asking the other party questions and for certain documents). 

Interestingly, the wrestlers also bring up the fact that in 2001 WWE argued that a former wrestler (Nicole Bass) should be barred from bringing certain claims because she was an employee, not an independent contractor -- the reverse position argued here.   

However, the wrestlers highlight an interview given to a British newspaper in August 2008 about the case that suggests a bit more complicated of a picture. While the result is the same -- she was treated as an employee, not an independent contractor, it appears the WWE argued that she was not an employee. 

In the interview, K&L Gates attorney Jerry McDevitt noted that the only time WWE litigated the issue - it actually lost on the legal argument (though ultimately prevailed in the case on other grounds).

The independent contractor v employee situation has only come up once before in litigation in the long history of the WWE, when they were sued for sexual harassment by former female wrestler Nicole Bass.

Jerry reveals: “The sexual harassment laws, of the United States at least, are purposely designed to protect employees and do not extend to independent contractors.

“However the interpretation given under Title VII of the Civil Rights Act which covers sexual harassment is very broad, as it wants to include in it as many people as possible.So a preliminary issue that came up was whether she was an employee, for Title VII purposes, or an independent contractor. 

She was determined to be an employee.

As I've often said, you can't do complete justice to an argument in a short post, so review it for yourself to get a complete picture.

The WWE will now have 10 days to file a reply to this, if it wishes (and I can't imagine that it will leave this argument unchallenged). After that, the court will rule on the motion. Don't expect a decision overnight, however. It is likely that a decision won't be forthcoming for at least 2-3 months.

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UPDATE 10/8/08 - I have posted a FAQ on the lawsuit this morning due to the extraordinary interest in this subject. You can find it here. 

UPDATE 10/7/08 - Welcome various wrestling fans (who are visiting by the thousands this morning)!  The links to the contracts are below. 

One note to clarify some of the reports on this: These contracts were not "leaked". They were filed by WWE in federal court in Connecticut and are publicly available on the court's website.  I have merely downloaded them and have them available here since many people don't know how to access the court system.  If you have any questions or comments, please feel free to use the comment box.

As expected, WWE filed its motion to dismiss (download here) the lawsuit brought by three wrestlers who claimed that they were improperly classified as "independent contractors" and not employees.  (For prior blog coverage, see prior posts here and here.)

The argument is lengthy but fortunately the WWE has prepared a "summary of argument".  The gist of the argument is that the wrestlers don't have a a legal claim and that even if they did, those claims are barred by statute of limitations.  But reading it, one is also left with the impression that WWE's arguments have been developed over time and nuanced to withstand judicial scrutiny. 

First, ... the plain and unambiguous language of the Booking Contracts does not obligate WWE to pay plaintiffs’ taxes or make withholdings to pay such taxes, nor obligate WWE to provide plaintiffs with the “rights, incidents and benefits of employment.” Second, plaintiffs’ unjust enrichment claims fail as a matter of law because all aspects of plaintiffs’ relationships with WWE are governed by their Booking Contracts, including specifically those aspects of the relationship at issue in the present litigation. Third, plaintiffs’ breach of contract and unjust enrichment claims are barred by the applicable statutes of limitation. Fourth, plaintiffs’ state law claims are disguised attempts to create a private cause of action based upon the application of federal and/or state tax law and to circumvent the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001, et seq. ...

Fifth, even if plaintiffs sought leave to amend their state law claims as direct claims under ERISA, such an amendment would be futile since their claims must be dismissed for failure to file their Complaint within the applicable limitations period, for failure to allege exhaustion of administrative remedies, and for failure to allege any facts to support standing to bring direct claims under ERISA. Finally, because plaintiffs’ individual claims against WWE fail, plaintiffs cannot, as a matter of constitutional standing, continue to assert putative class claims on behalf of absent class members.

The wrestlers will now have several weeks to respond, though don't be surprised to see them ask for an extension of time of at least 30 days to respond further to it. 

While the legal brief may be of interest to in-house counsel and others in the entertainment industry, the exhibits to the motion will be of much greater interest to most.  Why? Because the exhibits contain the booking contracts of each of the wrestlers.

Wrestler Scott Levy's contract in 2000 (download here) appears to be the richest with guarantee minimums of $75,000, $150,000 and $200,000 for the first three years.  By comparison, wrestler Michael Sanders' contract in 2001 (download here), called for guarantees of $52,000 and $75,000 in the first two years.  And Chris Klucsarits' contract in 2002 (download here) called for a guarantee of $100,000 in each contract year.   

Wrestling fans may enjoy reading about their favorite wrestlers but for human resource professionals and others, the contracts are useful to read because they show a serious attempt by WWE to keep the wrestlers as independent contractors and not employees. 

In fact, paragraph 13.1 of the agreement specifically addresses this issue. That provision states "WRESTLER is an independent contractor" and "Nothing in this Agreement shall be construed to constitute WRESTLER as an employee..."  Will this be dispositive?  Probably not since parties cannot avoid legal obligations just by language of a contract, but it will be an obstacle for the wrestlers to overcome. 

Who will ultimately prevail? It's too early to tell, particularly without seeing the wrestlers' response.  But one thing is certain -- even WWE can't script the outcome to this fight.

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As I've cross-posted over at Overlawyered.com today, three wrestlers have sued Connecticut-based World Wrestling Entertainment, Inc. (WWE) claiming that they have been improperly classified as "independent contractors" and not employees.

On Friday, WWE removed the lawsuit to federal court from state court claiming that federal questions are implicated in what would otherwise seem to be a "breach of contract" claim.  (You can read the removal papers here.) What federal questions? Well, federal employment tax questions for one.

But the interesting part of the case is not the removal papers, but the underlying lawsuit itself. (You can download the complaint here.) The wrestlers -- who are seeking class-action status -- claim that they were required to sign a "booking contract" that specified the terms of their engagement such as their training regiment, costumes, and -- to the surprise of no one -- the "outcome of each match".  They claim that they were akin to "employees" and should have been paid as such.  WWE denied the allegations in a 10-Q filing late last month.

While the employees are seeking damages, typically, the penalty for employers is to pay the employment taxes of the employees with some penalties.  It's unclear here what else the wrestlers are actually seeking.  The case has been assigned to Senior Judge Peter Dorsey.

The proper classification of workers has been a thorny issue for employers, going back to the days of the landmark Microsoft lawsuit from the late '90s.    As an employer, you can get a headstart on the issue by going to the IRS website which has lots of commentary and resources on the subject. 

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