(Diaz hanging with the Tapout crew, before it all fell apart. Photo via Dan Diaz/OC Weekly)
Tapout is one of the most prominent apparel brands in MMA, worn mainly by the sport’s in-crowd consisting of loyal, uber-cool and educated fans, many of whom who have either trained or competed in martial arts themselves.
In 2012, news broke of a major scandal involving the Tapout brand and Hitman Gear founder Dan Diaz. Diaz had sold Hitman to Tapout in 2007 in exchange for 1.25 million shares in the new company, a five-year employment contract and the promise of radical expansion of the Hitman brand.
What Diaz ended up getting was a raw deal, with Hitman being sold for zero dollars when Tapout was sold to Authentic Brands Group (ABG) in September 2010, thus making his shares worthless. His employment contract was also terminated with the sale to ABG, leaving him high and dry.
Rather than settling for chump change, Diaz opted to take his case to the courts. He’s not just suing for damages—Diaz wants the moral victory of exposing the corruption that robbed him of the personal pride he put into his company.
The trial between Dan Diaz and Tapout/Authentic Brands Group has been set for July 7 of this year. Beyond the damages Diaz is seeking, there are allegations that many MMA fighters who licensed their names for Tapout signature shirts like Chuck Liddell, Kenny Florian and Keith Jardine, have been defrauded of royalties.
Despite the implications of this news, outside of some mentions on smaller websites like FightOpinion and MMAPayout, larger MMA media outlets have been muted on the trial between Dan Diaz and Tapout. The last time MMA reporters showed this much disinterest in a scandal was in 2009 during the Xyience debacle between Rich Bergeron and Zuffa when Xyience went bankrupt, creditors were stiffed and Zuffa took over the assets.
Unfortunately for Rich Bergeron, the details of how Xyience went bust went over the heads of most people, especially those without the skills to decipher legal jargon. The Dan Diaz lawsuit poses similar problems, as it’s a story about how apparel manufacturers allegedly overcharged for their goods in exchange for various financial kickbacks—a messy, complicated series of underhanded maneuvers occurring in the shadows and crevices of accounting ledgers.
There might be more to the Dan Diaz/Tapout situation than meets the eye: Diaz alleged that UFC owners Lorenzo Fertitta, Frank Fertitta and Dana White were minority of Tapout prior to the company’s sale to Authentic Brands Group.
“There’s no direct proof, but that is what Dan Caldwell (also known as “Punkass”) told me on at least three different occasions,” Diaz told CagePotato. “During one of the depositions, an Authentic Brands Group rep did say [Lorenzo Fertitta, Frank Fertitta and Dana White] were still owners in the new Authentic Brands Group Tapout as well.”
Despite this, Diaz says that the Ferttita brothers and Dana White were non-managing members who had no knowledge of Tapout’s day-to-day operations. If that’s the case, then the owners of the UFC can hardly be held accountable for the charges leveled against Tapout.
The question of why MMA fighters who have had signature shirts made through Tapout would not seek legal action is also a prickly pear. Managers with multiple fighters under contract are not going to be eager to kick up a shitstorm with a company like Tapout that might sponsor other fighters they manage. Other fighters might simply not want to deal with the hassle of dealing with the legal system. Without any action from the fighters, however, it’s a license to steal from them—basically par for the course in the MMA game.
For information and updates on the trial, Dan Diaz started a thread on the Underground MMA forums. He also has plans to write a tell-all book, and a documentary might be in the works.
It will be interesting to see what the fallout of the trial is—if Dan Diaz is successful, it may inspire other MMA fighters to seek damages, generating further negative publicity for Tapout in the future.
Brian J. D’Souza is the author of the critically acclaimed book Pound for Pound: The Modern Gladiators of Mixed Martial Arts. You can check out an excerpt right here.