UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
January 24, 1997
AXEL SCHULZ; CEDRIC KUSHNER PROMOTIONS, LTD.; DER FIRMER SAUERLAND PROMOTION, A.G.; WILFRIED SAUERLAND
UNITED STATES BOXING ASSOCIATION; INTERNATIONAL BOXING FEDERATION, A DIVISION THEREOF; FRANCOIS BOTHA; MICHAEL MOORER, FRANCOIS BOTHA, APPELLANT IN 96-5200 UNITED STATES BOXING ASSOCIATION AND INTERNATIONAL BOXING FEDERATION, APPELLANT IN 96-5239
On Appeal from an Order of the United States District Court for the District of New Jersey Granting a Preliminary Injunction D.C. No. 96-1076
Before: SCIRICA and COWEN, Circuit Judges, and POLLAK, District Judge *fn*
POLLAK, District Judge.
Argued October 30, 1996
Filed January 24, 1997)
OPINION OF THE COURT
This case involves a court's authority to order a private organization that sponsors prizefights to strip a champion of his title. Defendant Francois Botha defeated plaintiff Axel Schulz in a fight for the International Boxing Federation (IBF) heavyweight championship. Botha then tested positive for use of steroids. After a hearing, the IBF declined to disqualify Botha, allowing him to retain his IBF crown. Schulz sued and the district court issued a preliminary injunction mandating that the IBF disqualify Botha. Botha, the IBF, and the IBF's parent United States Boxing Association (USBA) now appeal the grant of the preliminary injunction.
Three major bodies regulate and promote the sport of professional boxing: the World Boxing Association, the World Boxing Council, and the International Boxing Federation with its parent United States Boxing Association. Each of these organizations classifies boxers by weight class, ranks the boxers within each class, and, for a participation fee, sponsors -- or "sanctions" -- both championship and non-championship bouts. The IBF was formed to provide a mechanism through which the United States Boxing Association, a national organization, could crown world champions. According to its literature, the IBF was organized "by representatives of various athletic commissions and other interested persons for the purpose of obtaining greater efficiency and uniformity in the supervision of professional boxing and to encourage and assist professional boxing." App. 274.
The IBF has promulgated a set of rules and regulations governing IBF-sanctioned bouts. Rule 20, entitled "Anti-doping," requires boxers to provide a urine specimen after each fight to be tested for, among other substances, anabolic steroids and pain killers. This rule adds that "[s]hould that specimen prove positive, disciplinary action will follow." App. 284. In addition, Rule 26, entitled "Penalties," provides as follows: Should anyone be found in violation of the rules and regulations of the IBF or USBA by any Committees impaneled by the President, they may be subject to fine, forfeiture of monies, vacation of title or any other discipline directed by the Committee and approved by the President for the good of the organization. App. 291.
On December 9, 1995, Francois Botha of South Africa fought Axel Schulz of Germany in Stuttgart for the vacant IBF heavyweight championship. Before the bout, each fighter paid the IBF more than $45,000 in "sanctioning fees" and other fees. Each boxer's representative also signed a document entitled "Rules for IBF/USBA & Intercontinental Championship Bouts" ("Bout Rules"). The Bout Rules were also signed by Robert W. Lee, president of the IBF/USBA, and by a representative of the local boxing commission, the German Boxing Federation. The Bout Rules begin by stating that "[t]he Championship fight will be governed by the rules and regulations of the IBF/USBA and local Boxing Commission . . . ." App. 83. The Bout Rules then set out four pages of detailed requirements. The last of these is entitled "Anti-Doping" and reads as follows:
Each boxer is required to take a urinalysis immediately following the bout. Said specimen must be taken with a Ringside Physician and Commission Inspector on hand. The specimens should be taken in a plastic container and properly marked by the physician and boxer. It should be divided into two parts for each boxer, with bottles [sic] #1 being submitted to the laboratory. Should either boxer's specimen be positive for drugs, etc., all parties will be notified and another test made at a laboratory selected by the boxer and the local Commission. Should that specimen prove positive, disqualification and disciplinary action will follow. Specimens will be tested for the following drugs:
There follows a list that includes anabolic steroids and pain killers. App. 87.
An identical "Anti-doping" rule appears in an IBF/USBA document titled "Ring Officials Guide and Medical Seminar Outline." This Guide's introduction states that "[t]he major purpose of this Ring Officials Guide is to establish criteria to be followed in all IBF/USBA boxing matches so that uniformity in actions, responsibilities, duties and total performance of ring Officials can be attained . . . ." App. 65.
In the Stuttgart fight, Botha defeated Schulz in a split decision to win the IBF heavyweight championship. Each fighter then gave a urine specimen. Botha's specimen was sent to a German laboratory, where it tested positive for anabolic steroids. In accord with the anti-doping Bout Rule, Botha was then allowed to choose where the sample would be tested a second time; his choice, the UCLA Olympic Analytical Laboratory, also found anabolic steroids in his urine. During this period, Botha vigorously denied using steroids.
The German Boxing Federation -- the local boxing commission that signed the Bout Rules -- recommended on February 15, 1996 that the IBF disqualify Botha and that Schulz be designated IBF world champion. The Federation also barred all the boxers, promoters, referees, and trainers whom it licensed from taking part in Botha's bouts for two years.
On Saturday, February 24, 1996, upwards of two months after the Stuttgart bout, the IBF held a hearing in Elizabeth, New Jersey, to determine what action would be taken as a result of the positive steroid tests. *fn1 The hearing was conducted by the IBF's Executive Committee and its subcommittee, the Championship Committee; the Championship Committee was to make a recommendation to the Executive Committee, which had final authority. All persons having an interest in the outcome of the Botha/Schulz bout were notified of the hearing and given an opportunity to be heard. The committees heard testimony from Botha, from his attorney and two of his doctors, and from representatives of Schulz, the German Boxing Federation, and Michael Moorer.
Moorer was at the time a former IBF and World Boxing Association heavyweight champion. In September 1995, Moorer had sued the IBF in federal court in New Jersey over the IBF's rankings, seeking to block the Botha/Schulz bout because, he argued, he was entitled to fight next for the title. A settlement agreement signed later that month provided that Moorer would dismiss his action in return for a guarantee that he would, within 180 days of the Botha/Schulz bout, fight the winner for the IBF title. At the IBF's February 24, 1996 hearing, Moorer's counsel reminded the IBF of its agreement with Moorer.
Botha's testimony at the hearing was a surprise: he admitted for the first time that he had taken the drug found in his urine. He argued, however, that he had not known that what he took was a steroid. Botha stated that he had injured his arm in 1988 and his South African doctor had given him two prescriptions for the pain and swelling. In March 1995, after Botha had moved to California, his South African doctor had sent him a third medication for his continuing arm stiffness, which was the steroid (Deca Durabolin) that turned up in his urine. (There is a good deal of controversy about the steroids' possible impact on Botha's capacity as a fighter, but the controversy -- the main elements of which are summarized in the annexed footnote *fn2 -- does not appear to bear upon the issue before this court, namely the appropriateness of the district court's preliminary injunction.)
After hearing all the testimony, the IBF Championship and Executive Committees recessed to deliberate. When they returned, IBF President Robert W. Lee announced the IBF's decision: We will not vacate the title of Francois Botha. There are mitigating circumstances which cause us to feel that we should not vacate the title of Francois Botha.
However, what we will do is we will fine Francois Botha in the amount of $50,000 for having taken these substances into his system that were in violation of our rules.
Secondly, we will order a rematch between Francois Botha and Axel Schulz to take place within 180 days of today or not later than August 24, 1996.
Thirty days prior to that fight taking place Francois Botha must give a urinalysis to show that he no longer has these substances in his system.
The winner between Francois Botha and Axel Schulz will be obliged to fight Michael Moorer within 120 days of the date that they fight . . . . App. 210-11. *fn3
This announcement triggered vehement protests in the hearing room, but, after some wrangling, the hearing was adjourned with the IBF's decision unchanged.
Over the weekend, however, the members of the IBF Executive Committee conferred over the phone. On Monday, February 26, the Executive Committee issued an amended ruling in writing, stating that its members had not previously given sufficient consideration to the IBF's commitment to Moorer. *fn4 The amended ruling preserved the $50,000 fine against Botha but restructured the scheduled fights: Moorer would challenge Botha for the title before June 9, 1996, with Schulz to fight the winner of this bout within 120 days.
Schulz, together with his promoters Cedric Kushner Promotions and Der Firmer Sauerland Promotion, and his manager Wilfried Sauerland, brought suit in the District of New Jersey, naming the USBA and IBF as defendants, with Botha and Moorer joined as necessary defendants because their rights were affected. Moorer filed a counterclaim and crossclaim seeking specific performance of his settlement agreement with the IBF. The district court had jurisdiction pursuant to 28 U.S.C. Section(s) 1332. *fn5
After a hearing, the district court found that Schulz and his co-plaintiffs had met the criteria for preliminary injunctive relief. *fn6 On March 29, 1996, the court accordingly ordered that (1) the USBA and IBF "amend their decision of February 26, 1996 so as to disqualify Francois Botha"; (2) Moorer and Schulz "proceed to a bout prior to June 9, 1996 as set forth in the September 19, 1995 settlement agreement" between Moorer and the USBA and IBF; (3) the USBA and IBF "determine the consequences of the order with respect to the ratings of the various boxers in conjunction with the IBF rules"; and (4) plaintiffs post a $100,000 bond.
The IBF/USBA and Botha separately appeal the issuance of the preliminary injunction, which Schulz and Moorer seek to have upheld. This court has jurisdiction pursuant to 28 U.S.C. Section(s) 1292. A motions panel of this court denied the IBF's motion for a stay and Botha's motion for an expedited appeal.
On June 22, 1996, Moorer and Schulz fought the bout mandated by the preliminary injunction. *fn7 Moorer won, regaining the IBF championship belt. On November 9, 1996 (some ten days after the argument of this appeal), Moorer fought Botha, successfully defending his title with a twelfth-round TKO. II. Analysis
We review a district court's ruling on a preliminary injunction to determine if there has been an abuse of discretion, an error of law, or a clear mistake of fact. See Louis Vuitton v. White, 945 F.2d 569, 574 (3d Cir. 1991). In this appeal, the parties dispute whether the district judge was correct in finding that Schulz and his co-plaintiffs (hereinafter "Schulz") were likely to succeed on the merits of their claim. No party challenges the district court's findings regarding irreparable harm or the effect of the injunction on third parties and the public interest.
Without discussing specific precedents, the district court summarized the law governing this case as follows:
We are dealing here with a private association, albeit one in which the public has a substantial interest. Under New Jersey law a private association has the right to adopt, administer and interpret its internal regulations and is granted substantial deference when judicial review is sought. When, however, an association departs from its own prescribed procedures, or where its actions are in total violation of its own rules and regulations, a court will intervene to protect the property rights and other substantial interests of those who are subject to its rules.
. . .
The critical question is whether the IBF violated its rules when it failed to disqualify Botha for his drug use. App. 533-34.
After reviewing the Bout Rules and the IBF rules and regulations, the district court concluded: It is abundantly clear to me that IBF and USBA have established a policy that has been made crystal clear to the boxers who fight under their aegis that no boxer is to take the drugs proscribed in the rules, and that if a boxer does take such drugs he will be disqualified regardless of what other disciplines may be imposed. The broad general language which appears in Rule 26 cannot trump the unmistakably clear language of the Bout Rules which the IBF and the boxers sign and the Ring Officials Guide which IBF and USBA promulgate. It is hard to imagine how the two organizations can adopt any other policy if they were to retain the confidence of the public and the fighting profession. App. 536-37.
On this basis, the district court concluded that Schulz had a high likelihood of succeeding on the merits.
With the opinion of the district court as predicate, we proceed to examine whether the court had the authority to set aside the IBF's decision not to disqualify Botha. As the court properly observed, the courts of New Jersey (and like courts in other jurisdictions) will ordinarily defer to the internal decisions of private organizations. Indeed, "[c]ourts have been understandably reluctant to interfere with the internal affairs of [private] associations and their reluctance has ordinarily promoted the health of society." Falcone v. Middlesex County Medical Society, 170 A.2d 791, 796 (N.J. 1961). *fn8
In Rutledge v. Gulian, 459 A.2d 680 (N.J. 1983), the New Jersey Supreme Court identified the limited occasions when a court may set aside the determinations of private organizations regarding discipline of their members. *fn9 Rutledge was a former Grand Master of a Masonic Grand Lodge who had been found guilty of misappropriation of lodge funds by a Masonic trial panel under the Masonic Code for Trials. A successor Grand Master suspended operation of the Code for Trials procedures by which the local lodge would ordinarily have imposed punishment, ordering instead that a special "Lodge of Judgment" convene to determine Rutledge's punishment. Rutledge challenged the Masons' unwillingness to discipline him according to their established procedures.
The Rutledge court began by setting out the applicable standard:
In Higgins v. American Soc'y of Clinical Pathologists, 51 N.J. 191, 238 A.2d 665 (1968), this Court analyzed judicial intervention into the affairs of a private organization as follows: (1) does the plaintiff have an interest sufficient to warrant judicial action, and (2) has that interest been subjected to an unjustifiable interference by the defendant? 459 A.2d at 682.
In examining the first prong, the court concluded that Rutledge's "status, attributable to membership in a prestigious, socially-active fraternity, merit[ed] protection from unreasonable discomfiture." Id. at 683. *fn10
With respect to the second prong of the test articulated in Higgins, the Rutledge court concluded that an organization subjects a plaintiff's interest to "unjustifiable interference" in either of two circumstances: when the organization's conduct is driven by principles that violate public policy, or when the procedures employed by the organization offend principles of fundamental fairness. 459 A.2d at 683-84; see also Brounstein v. American Cat Fanciers Association, 839 F. Supp. 1100, 1110-12 (D.N.J. 1993) (summarizing the Rutledge test). The Rutledge court determined that, although Rutledge's membership in the Masons was an interest that merited judicial protection, the convening of the Lodge of Judgment did not violate either public policy or fundamental fairness.
Following the Rutledge test, and undertaking to assess the issues as of the time the district court issued its preliminary injunction, we must therefore ascertain, first, whether Schulz had "an interest sufficient to warrant judicial action," and -- if the answer to the first question is in the affirmative -- second, whether "that interest [was] subjected to an unjustifiable interference" by the IBF. In considering the first prong, we observe that Schulz's status in the boxing community, as well as his public reputation, were clearly affected by the IBF's decision not to disqualify Botha. In addition, although Schulz would not have become the champion on Botha's disqualification, *fn11 he had an economic interest in being declared the winner of his bout with Botha. *fn12 We therefore conclude that Schulz had an interest in the IBF's decision sufficient to warrant judicial action. *fn13
In determining whether Schulz's interest was "subjected to an unjustifiable interference" by the IBF, we must inquire whether the IBF's refusal to disqualify Botha violated either public policy or fundamental fairness. If the refusal offended either of these principles, then the Rutledge standard was met and judicial intervention was warranted.
We turn first to public policy. The Rutledge court made clear that public policy on its own can justify judicial protection of a plaintiff's interests. *fn14 In determining New Jersey public policy, we turn to the enactments of the state legislature as an authoritative source. See Higgins, 238 A.2d at 671 ("The grant of a license to a laboratory director found by the State Board of Medical Examiners to be qualified in compliance with [N.J.S.A. 45:9-42.1 et. seq.] evinces a legislative policy determination that the operation of bioanalytical laboratories by qualified non-doctors, as well as by physicians, is in the public interest."); see also Desai v. St. Barnabas Medical Center, 510 A.2d 662, 666-67 (N.J. 1986). *fn15
The New Jersey legislature has declared, as "the public policy of [the] State," that
it is in the best interest of the public . . . that boxing . . . should be subject to an effective and efficient system of strict control and regulation in order to . . . [p]romote the public confidence and trust in the regulatory process and the conduct of boxing . . . . N.J. Stat. Section(s) 5:2A-2.
Moreover, the regulations of the state Department of Law and Public Safety implementing this statute also evince a purpose to instill public confidence in the sport. Cf. Desai, 510 A.2d at 667 (relying in part on agency regulations to ascertain New Jersey's public policy). The Department's 1995 proposal for readoption of its regulations noted that "[t]he rules in this chapter have helped New Jersey be recognized as a leader in the area of boxing regulation" and observed that a primary purpose of the rules was "furthering the trust and confidence of the public." 27 N.J.R. 2096 (June 5, 1995).
Both the legislative and executive branches of the New Jersey state government have, therefore, made it clear that they consider it to be the public policy of the state to inspire the "trust and confidence" of the citizenry in boxing. The public's confidence that the outcome of a prizefight is fair rests squarely on the assumption that the result was not improperly influenced -- by illicit equipment, *fn16 by gifts, *fn17 or by the involvement of managers convicted of crimes of moral turpitude. *fn18
The regulations of the state Department of Law and Public Safety also make clear that "the public confidence and trust" in boxing are promoted by banning the use of substances that can affect a boxer's performance. See N.J. Admin. Code tit. 13:46 Section(s) 12.3(a) (1995). The regulations provide that "[t]he use of any drug . . . by a boxer either before or during a match, shall result in the immediate disqualification of the boxer from the match and indefinite suspension from boxing." Id.
This express statement of public policy by New Jersey's political branches is mirrored in the Bout Rules that the IBF drafted and required the pugilists to sign before the Stuttgart fight. *fn19 Given the strength of New Jersey's public policy, we concur in the district court's observation that the IBF could not have established a less demanding protocol. See supra at 10. Of course, the bout took place not in New Jersey but in Germany; however, to the extent we have any information regarding the policy of the fight venue, we observe that the German Boxing Federation not only recommended that Botha be disqualified for his steroid use, but banned all persons whom it licenses from participating in Botha's bouts for two years.
New Jersey has adopted an express policy of promoting the public trust and confidence in boxing, and has specifically mandated disqualification of boxers who use drugs. The IBF itself has adopted, and reaffirmed shortly before the contest at issue here, an identical rule mandating disqualification for drug use. The public's trust and confidence in boxing is undermined if one of the sport's major sanctioning bodies flouts its own rule which comports with the state's public policy. *fn20 We conclude, at this preliminary stage, that the IBF's failure to disqualify Botha likely violated New Jersey's public policy.
We now return to the standard for judicial intervention in the workings of a private organization, as set forth in Rutledge. Under that standard, a reviewing court should invalidate a private organization's decision affecting a plaintiff's interest only if (1) the plaintiff's interest is sufficient to warrant judicial action, and (2) that interest has been subjected to an unjustifiable interference by the defendant -- that is, violates public policy or fundamental fairness. We have determined that Schulz's interest in the IBF's decision merited judicial protection and that the IBF's decision likely violated public policy as expressed by New Jersey's legislature and executive branch. Therefore, at this preliminary stage, both elements of the Rutledge test were met, and judicial intervention was warranted. *fn21
We note, finally, that this case might have been decided on alternate grounds. The district court did not address whether the Bout Rules constitute a contract, and none of the parties has briefed this question in any detail. Rather, almost all argument has centered on whether the IBF violated its own internal rules and, if so, whether a court may then intervene to mandate that the IBF disqualify Botha. Because this case is still at a preliminary stage, however, we think it appropriate to point out that the Bout Rules themselves may well be deemed a contract, and that application of contract law may therefore constitute an independent basis for the district court's decision.
As the New Jersey Supreme Court has stated:
A contract arises from offer and acceptance, and must be sufficiently definite 'that the performance to be rendered by each party can be ascertained with reasonable certainty.' . . . Thus, if parties agree on essential terms and manifest an intention to be bound by those terms, they have created an enforceable contract. Weichert Co. Realtors v. Ryan, 608 A.2d 280, 284 (N.J. 1992) (citations omitted).
Of course, "[n]o contract is enforceable . . . without the flow of consideration -- both sides must 'get something' out of the exchange." Continental Bank of Pennsylvania v. Barclay Riding Academy, Inc., 459 A.2d 1163, 1171 (N.J.), cert. denied, 464 U.S. 994 (1983) (citations omitted).
The Bout Rules were signed by representatives of Botha and Schulz as well as the IBF and the German Boxing Federation; the signatures manifested an intention to be bound by these rules. The provisions of the Bout Rules were definite, so that "the performance to be rendered by each party can be ascertained with reasonable certainty." Each party's agreement to abide by the Bout Rules provided consideration for the other parties' agreements. Moreover, each boxer's payment of more than $45,000 for the privilege of fighting under the IBF's aegis constituted additional consideration for the IBF's agreement to enforce the Bout Rules. And, as we have seen, the Bout Rules expressly provided that, if one of the boxers violated the anti-doping rule, that boxer would be disqualified.
Therefore, it appears likely that application of the law of contract to this case would yield a result identical to that reached in the main body of this opinion.
The district court was correct in finding that Schulz was likely to prevail on the merits, and therefore appropriately granted the preliminary injunction ordering the IBF, in accordance with its own rules, to disqualify Botha.
For the reasons stated, the judgment of the district court is affirmed.