On March 7, Zuffa filed for arbitration on Couture's promotional contract, pursuant to the terms of the agreement, in Nevada district court. The action marks the first time that Zuffa has formally made the promotional contract the issue of legal proceedings.
According to Zuffa, the proceeding will "necessarily require resolution of disputes between Zuffa and Couture over key terms of the promotional agreement," including those at issue in the HDNet Fights declaratory judgment action in Texas state court.
The action also continues in Texas. On March 13, Zuffa filed a notice of removal to federal district court in HDNet's declaratory judgment action brought against the company in Texas district court last month.
The stated ground for removal, and the basis for federal jurisdiction, is diversity of citizenship. Federal law provides jurisdiction to federal courts in matters in which the plaintiff and defendant are not residents or citizens of the same state. When diversity of citizenship exists in a suit filed in state court, the defendant may choose to remove the case to federal court.
However, it appears that diversity of citizenship has been destroyed by a clever legal move on the part of HDNet.
HDNet MMA 2008 is actually a Nevada LLC, formed on Dec. 28, rather than a Texas LLC, as previously assumed. The citizenship of an LLC is determined by the citizenship of its members, which in this case is HDNet Sports Inc., a Nevada corporation formed on Feb. 1.
Because HDNet MMA 2008, Zuffa and Randy Couture (Pictures) are all technically citizens of Nevada for federal jurisdictional purposes, diversity of citizenship would appear to be destroyed.
Zuffa alleges that these efforts represent an attempt by HDNet to "manipulate the court's jurisdiction."
"These actions were designed to deprive Zuffa of its statutory right to remove this action to [federal court] and prevent the parties to the contract at issue in the declaratory judgment action (Zuffa and Couture) from litigating their disputes in the contractually agreed upon Nevada forum," alleged Zuffa in court filings obtained by Sherdog.com.
"Because HDNet MMA 2008 was incorporated in Nevada for the improper purpose of circumventing diversity jurisdiction, this court should disregard the Nevada citizenship of HDNet MMA 2008 for purposes of determining the existence of diversity jurisdiction and retain jurisdiction over this action," argues Zuffa in its motion for removal.
In response, HDNet says Zuffa's "only argument for diversity jurisdiction is that the court should disregard the admitted diversity and examine the parties' motives, an argument which this court expressly rejected in [a 2004 case]."
HDNet goes on to say the "removal is nothing more than a bald-faced tactic to slow down this case in favor of a later-filed action or to ensure that HDNet's fight cannot happen."
On March 18, HDNet filed a motion to remand the case to Texas state court and asked for expedited proceedings, which the court granted. Zuffa has until March 28 to respond. HDNet may then submit a reply, if any, by April 1.
According to the filings obtained by Sherdog.com, HDNet hopes to promote Couture vs. Fedor Emelianenko (Pictures) in October of this year.
Meanwhile, on March 25 in the 8th Judicial District of Nevada, Couture's motion to dismiss was denied in Zuffa v. Couture -- the state court action concerning his employment contract.
An order was also recently entered that softened the language of the preliminary injunction granted by the court last month. Couture is allowed to corner fighters, and fighters may wear Xtreme Couture gear.
Adam Swift is the Editor of MMAPayout.com and a regular contributor to Sherdog.com.