Last year, Warren Buffett and Quicken Loans injected a bit of absurdist fun into March Madness by offering to pay $1 billion to anybody who could correctly guess the results of every game. This was, of course, a near impossible feat; with 64 teams playing in six elimination rounds (the contest did not include the play-in games), the rules stated that the odds of winning were 1 in 9 quintillion. (Though, to be fair, a more reasonable number might have been 1 in 128 billion). But fans put aside rational expectations and rooted for an immaculate bracket to emerge, until the dream died less than halfway through the tournament, when Memphis’ victory over George Washington eliminated the last three contestants.
This year, you will not enjoy a chance, however infinitesimally slight, of winning the Oracle of Omaha’s money. There will be no Billion Dollar Bracket Challenge. What spoiled the fun? It seems we can probably blame a court case involving Yahoo, which has essentially accused Buffett of contest theft, and one very ticked-off company in the little known business of promotions underwriting.
Just as the NCAA tournament was getting underway last year, Dallas-based SCA Promotions filed a lawsuit in Texas against Yahoo, claiming that the Internet company had reneged on the deal to partner on a billion-dollar contest much like Buffett’s.
SCA Promotions is, basically, an insurance company that fills an extremely specific niche by helping businesses run contests with cash prizes. For instance, if a golf course wants to offer $100,000 to whomever can sink a hole-in-one, or a basketball team wants to give $20,000 to the lucky fan who can hit a half-court shot, SCA will agree to cover the potential payout in return for a fee. It’s profitable for SCA, because people rarely hit holes in one or half court shots. Meanwhile, companies get the peace of mind of knowing that they haven’t just blown lots money on a silly marketing stunt. SCA has apparently insured promotions involving everything from bull riding to procuring evidence of Bigfoot’s existence.
Now here’s where the legal kerfuffle begins. SCA’s president, Bob Hamman, plays bridge with Warren Buffett, whose Berkshire Hathaway also happens to insure these sorts of long-shot promotions. In their version of the story, told to the Wall Street Journal, the two men thought up the billion-dollar bracket during a lunch. They eventually approached Yahoo, which is, as we all know, a glorified fantasy sports portal, to put on the contest.
Sadly, the parties hit an impasse. While the odds of anybody actually filling out a perfect bracket were microscopically small, Buffett was concerned that if tens of millions of fans signed up, those chances would rise just a bit. Thus, he wanted Yahoo to pay him an extra premium for every additional participant after the first 10 million. The sides deadlocked, and Buffett walked away, leaving SCA to strike its own deal with Yahoo.
Later, according to the WSJ, Buffett ran into Quicken Loans founder and Cleveland Cavaliers owner Dan Gilbert at an event in Detroit. The two chatted, and decided to sponsor the bracket challenge together, with a cap of 15 million contestants. In the end, Yahoo hosted Buffett’s version on its site, dropping SCA.
This is where things get dicey. In its lawsuit, SCA claimed it signed an agreement with Yahoo to run its own billion-dollar bracket competition; according to SCA, the contract required Yahoo to pay half the insurer’s $11 million fee in the event of a cancellation, but the company refused to do so.
Yahoo responded with a countersuit that offered an opposite narrative. The company claimed that the billion-dollar bracket was its own brainchild all along, and that it approached SCA to help find another underwriter that could insure the hefty prize. According to the suit, SCA was subject to a strict confidentiality clause requiring them to keep mum about the precise details of the contest, which it apparently violated during talks with Berkshire about acting as an underwriter. Here’s how they describe what transpired, in some wounded-sounding legalese:
Despite the special relationship in law between Yahoo and SCA, SCA acted in its own best interest in misusing and abusing Yahoo’s trust by disclosing Yahoo’s confidential and proprietary information and trade secrets to third parties.
As a result of the acts undertaken by SCA, in an effort to mitigate its losses, Yahoo has by necessity been forced to work with third parties as part of the “Billion-Dollar Bracket Challenge,” which was going forward with or without Yahoo’s participation.
In short, SCA shopped the idea to Warren Buffett, who stole the idea. And Yahoo had no choice but to host the challenge on its site, since it was happening anyway.
Personally, I have no idea how a company could be expected to find someone to insure a $1 billion prize for picking a perfect NCAA tournament bracket without divulging the details that the idea was to pay someone $1 billion if they happened to fill out a perfect NCAA tournament bracket. But in any event, the suit is ongoing (at the moment, Yahoo is attempting to get records from Berkshire Hathaway). While the parties aren’t talking to the press, it seems the legal proceeding may be why Buffett has decided to forgo the joy of dangling goofy amounts of money in front of sports fans who stand just next to zero chance of winning it.