Things Get Ugly Between WWE And Panini In Contract Dispute
The Panini empire is absolutely crumbling. The WWE announced it is terminating its deal with Panini with two years left on its contract.
That has put the Texas-based company in a familiar situation; it is now suing to protect its rights. To make matters more complicated, some believe Panini has now released unsigned WWE 1/1 cards to get even.
What a mess! We give you the lowdown in our full coverage of how the WWE terminated its contract with Panini.
According to court documents, on August 28th, Panini received a notice that the WWE was terminating its contract and had the right to do so, thanks to a breach of the terms of the agreement.
The agreement between the wrestling federation and card company, which came into force in January 2022, was supposed to run until 2025.
The WWE filed a civil complaint that was sealed at their request. Therefore, we do not have access to its contents. However, it has been mentioned and referred to in the Panini lawsuit that was subsequently served. So, we have a pretty good idea of what is in there.
In essence, the wrestling federation has claimed that Panini has not upheld the contract to produce cards and NFTs and is, therefore, attempting to make their contract with the card company null and void.
The center of the WWE complaint is that Panini “did not engage in good faith efforts to exploit the rights licensed to it under the Agreement.”
This clause is why the WWE terminated its contract with Panini
Here is the relevant clause in the agreement in full:
“The termination relied on provisions in the Agreement whereby WWE had a contractual right to terminate if Panini did not engage in good faith efforts to exploit the rights licensed to it under the Agreement. 23. The provisions in question are similar and state: Good Faith Effort to Exploit Rights. If within three (3) months of the Effective Date of this Agreement, Licensee has failed to take good faith steps to exploit the rights granted to it, including the creation of prototypes of each item of the Licensed Products and seeking to obtain WWE’s approval of same, or if Licensee has failed to make the Licensed Products available for sale both in-store and online by no later than June 1, 2022, WWE shall have the immediate right to: terminate this Agreement; rescind the exclusive nature of any rights granted under this Agreement; or delete individual products from the definition of Licensed Products in subparagraph 1(f), as shall be determined by WWE in its sole discretion.”
WWE request for a temporary restraining order denied
Lawsuits take a long time to adjudicate. Sides to the disputes will often try to limit the other sides’ room to maneuver as this process occurs. Panini filed the paperwork for a temporary restraining order, which would force the company to stop producing WWE cards for the legal process.
However, the court denied this motion. We do not know the exact grounds for the decision because the judgment merely states that the temporary restraining order was dismissed “for the reasons stated at the hearing.”
That lack of information is typical for a brief restraining order motion. However, this is a win for Panini. It allows them to continue to produce WWE cards in the meantime.
But they are probably not celebrating down in Texas. They could still lose the case, which will continue to damage their reputation.
On what grounds is WWE pulling out of the agreement?
The WWE claims that Panini has not produced “trading card games” per their mutual agreement. They seem to be implying that the card company should produce products along the lines of the high-profile Panini NBA Monopoly game.
However, Panini claims that the products that it has made, such as “Box Wars” and “Pack Wars,” cover that clause in the agreement. In the lawsuit, the card company notes:
“Panini has consistently used WWE trading cards for a game played at conventions and events called ‘Box Wars’ or ‘Pack Wars,’ where participants bring a sealed box of a chosen trading card type to play, and the organizer selects a category or set of guidelines on what will determine a winner; each participant then opens a pack of cards, and the winner receives a prize.”
The wrestling federation also claims that Panini has not produced payments to the level provided for in the contract. However, the suit claims that the amounts paid so far are “well in excess of the contractually guaranteed minimum payments, dramatically expanding the market for WWE trading cards and stickers.”
Therefore, the WWE demands that the contract be recognized as null and void. In addition, they are asking for the contractual minimum royalty payments, amounting to $5,625,000, which are “now immediately due and payable to WWE.”
The Panini lawsuit to counter WWE’s termination of its contract with Panini
Panini responded with a lawsuit filed on September 20, 2023, in the Southern District of New York. Unlike the WWE, which is trying to keep this dispute low profile, Panini has made it a habit to make their court documents public and accompany them with public relations statements.
According to court documents, the card company is “seeking a declaratory judgment that WWE has breached the agreement and other appropriate relief pursuant to a license agreement between the parties.” Therefore, they claim that the dissolution of the agreement is invalid.
Panini claims that the agreement signed with the WWE must remain in force because they have fulfilled the letter.
According to the lawsuit, Panini has been “fulfilling its obligations under the Agreement and paying WWE royalties on the sold products licensed under the Agreement well more than the contractually guaranteed minimum payments, dramatically expanding the market for WWE trading cards and stickers.”
Indeed, Panini claims that it has been hard at work on WWE cards. The lawsuit notes, “Quickly following the signing of the Agreement, Panini launched the trading card set WWE Prizm in April 2022, and a set of stickers and sticker album in May 2022.”
They are also planning future releases. Therefore, Panini claims that the withdrawal from the contract “causes irreparable harm to Panini, including because it prevents Panini from carrying out the remaining term of its Agreement with WWE, in which Panini has invested significant resources, and damages Panini’s business reputation.”
What does Panini want?
Panini seeks two immediate remedies in this lawsuit. First, it believes the contract between the card company and the WWE is still in force.
According to the case: “Panini seeks declaratory judgment that it has not breached the Agreement, that WWE’s purported termination is invalid and ineffective, and that the Agreement remains in full force.” Therefore, Panini is also unwilling to pay the minimal payments owed to the WWE unless the contract is fulfilled.
In pursuit of this goal, Panini seeks injunctive relief to stop the WWE from undermining its agreement with the company.
Lawyers representing Panini wrote, “WWE’s breach warrants injunctive relief enjoining WWE from engaging in, enforcing, carrying out, renewing, or attempting to engage in, enforce, or carry out, its attempts to terminate the Agreement.”
Is Panini violating its contract with WWE?
The Consumer Products License between the WWE and Panini is at the heart of the dispute, signed on March 14, 2022. The agreement allowed Panini exclusive rights to manufacture trading cards, NFTs, and stickers while paying the wrestling federation for the privilege.
Perhaps the strongest argument Panini has in their favor is their claim (if true) that the WWE had never expressed the opinion that the card company violated the agreement before it announced the termination of the contract.
According to the lawsuit, “At no point did WWE identify any deficiencies in Panini’s performance, complain about a failure to launch certain products or engage in any particular activities, or protest about any alleged failures by Panini to perform under the agreement.”
The card company notes that the WWE had ample opportunity to notify them of any problem with the products produced so far. In the lawsuit, their lawyers claim that Panini has been “maintaining consistent contact with WWE including via weekly calls and weekly submissions for approval and seeking and receiving approval for each product launched and sold with the WWE licensed rights.”
Instead of complaining Panini claims that the WWE accepted generous payments and “praised Panini for tripling the business.”
We don’t have access to the full WWE complaint. Therefore, our knowledge of the case is imcomplete. However, the wrestling federation seems to have an uphill battle proving its point.
The reactions of Panini do not cite claims of the sort of material breach that would typically render a legal contract null and void.
The timing is suspect
Even if the WWE can prove that not all the elements of the contract were fulfilled correctly, it will still face problems proving its case. After all, there are still two years left in the agreement.
Therefore, Panini can convincingly claim that it will produce all the products and fulfill its obligations by the time the contract term has reached its end.
Panini also noted that WWE and Panini had been working together under the Agreement for more than a year since any alleged breach would have occurred, and thus, any right to terminate from the April 1 or June 1, 2022 dates had been waived and that WWE was estopped from asserting a right to end with no notice after having accepted Panini’s performance for an extended period of time with no complaint.
The timing of the complaint is a problem from another perspective as well. According to the clause cited in the lawsuit, the WWE has three months to determine the breach of the contract.
But as the Panini lawsuit states, “WWE and Panini had been working together under the Agreement for more than a year since any alleged breach would have occurred, and thus any right to terminate from the April 1 or June 1, 2022 dates had been waived and that WWE was estopped from asserting a right to terminate with no notice after having accepted Panini’s performance for an extended period of time with no complaint.”
Is Panini playing dirty tricks?
Not long after these allegations surfaced, some sharp collectors noticed that some unsigned Panini WWE 1/1 cards had appeared on eBay. That is certainly not something we see very often, and it seems unlikely that this is a complete coincidence.
Where did these cards come from? The worst-case scenario is that Panini, as a matter of policy, released these from their vaults to undermine the WWE. However, that is very detrimental to the already fragile public image of the company. Therefore, I would find it surprising if that was the case.
More likely, this is the initiative of employees. Perhaps an employee took them, knowing that it was unlikely anyone would ever sign them? Either way, Panini is responsible for these cards surfacing, which is a terrible look for the company.
How bad is Panini’s current situation?
The news that WWE was trying to terminate its contract with Panini is eerily similar to what the company experienced with the NFL. The NFLPA concluded its agreement with Panini early, despite having a deal that would allow the card company to produce licensed professional football cards until 2025.
Meanwhile, Panini has also sued Fanatics for what it views as its role in trying to pressure the company into dropping its rights to the NFL and NBA early.
This joins a series of catastrophes for Panini that have followed since they lost the rights to the NBA and NFL to Fanatics and Topps.
They have experienced a break-in, have had their employees poached, and are generally believed to be in severe financial trouble.
The legal fees that Panini is paying to maintain multiple high-profile lawsuits against corporations with deep pockets are certainly not helping the company’s precarious financial situation.
Are Fanatics behind the WWE termination of its Panini contract
It would not be surprising if Panini feels that Fanatics is the driving force behind this wave of reneging on agreements. It views this move as part of a broader attempt to exert a forceful monopoly over the sports card industry.
Therefore, Panini sued Fanatics for alleged anti-trust law violations. That has led to a Fanatics countersuit, although we do not believe it has much merit.
Indeed, a statement from Panini’s lawyers about this case hinted at that possibility. It said, “We believe the purported termination is nothing but a pretext to seek to substitute Fanatics (or its subsidiary Topps) as an exclusive licensee in disregard of Panini’s rights, which continue for several additional years. This action is precipitous, unwarranted, and illegal.”
There is no evidence in Panini’s suit that Fanatics is behind this move. So, if you will pardon the legal pun, the jury is out.
But it’s hard to believe the WWE would be launching an expensive lawsuit (also doing no favors to their reputation for upholding contracts) unless they were pretty sure Fanatics was promising them big money and quickly. Otherwise, the WWE would likely wait for the contract to expire and then see what bids they get.
Final word on how WWE terminated its contract with Panini
It is worth noting that the WWE did not make their case public. Therefore, we are mostly getting Panini’s side of the story. It is unclear if this was just a wrong PR move or because the WWE is unsure it has a solid legal position to stand on.
Having said that, the WWE case looks pretty flimsy. Even if they can nail Panini for a breach of a clause or two, it will be difficult to argue that it invalidates the entire case. And the timing raises a lot of questions. The WWE had 3 months to raise concerns and did not.
In fact, Panini claims there were no concerns raised at all. All this creates a clear impression that the WWE is asking to void the contract to get into a more lucrative one with Fanatics. It does not suggest that they are outraged at some terrible failure by Panini.
If you put this case into the context of allegations that Fanatics has been trying to muscle Panini out of the business through various means, such as buying the printing company they use, poaching their employees, and the like, it paints a disturbing picture.
We need to keep in mind that Fanatics has already beaten Panini. Their doom was foretold when they won the rights to the NBA and NFL. But now they are unwilling to let the patient die. Meanwhile, the WWE is doing no favors to its reputation for business ethics either.