Law360 (June 10, 2020, 5:04 PM EDT) -- The $24 million breach of contract suit between ousted XFL Commissioner Oliver Luck and the bankrupt football league's owner, Vince McMahon, won't be resolved until a Connecticut federal judge decides whether the league's corporate parent should be added to the case.
U.S. District Judge Victor A. Bolden said Wednesday that he would hold off deciding the merits of Luck's lawsuit until he addresses the "threshold issue" of whether Alpha Entertainment LLC — currently in Chapter 11 proceedings in Delaware — should be a part of it.
"Once I address that, I'll turn to the issue of the prejudgment remedy, and to the extent a hearing is necessary, we'll get back together," Judge Bolden said at the end of a roughly hourlong Zoom hearing that was at times marred by technical difficulties. The judge added that he would try to decide the Alpha question "fairly expeditiously."
The prejudgment remedy refers to Luck's request to have a lien placed on some of McMahon's assets in order to ensure he is able to pay if Luck ultimately prevails, a request McMahon, the billionaire CEO of World Wrestling Entertainment Inc., has strongly opposed.
During the hearing, attorneys for Luck argued that adding Alpha to the suit is unnecessary because the guarantee McMahon signed with Luck is so ironclad that it requires him to cover any unpaid compensation allegedly owed by Alpha regardless of whether Luck was terminated "for cause," meaning he had breached his contract with Alpha in some way.
McMahon's attorneys — who contend that Luck was indeed fired for cause — called that argument "absurd" and born of desperation. They argued that Alpha must be added to the case because only then can Judge Bolden determine whether Luck breached the contract with Alpha or not. If Luck was fired for cause, McMahon's attorneys said, then Alpha owes him nothing and thus there's nothing for McMahon to guarantee.
However, Luck attorney Paul Dobrowski of Dobrowski Larkin & Stafford LLP told Judge Bolden he need look no further than Alpha's actions, or lack thereof, to make a decision. He cited Rule 19 of the Federal Rule of Civil Procedure, which governs whether nonparties should be added to federal cases in certain circumstances.
"Under Rule 19, one of the tests for whether a nonparty is indispensable is whether the nonparty seeks to assert its interest and protect it," Dobrowski said. "Alpha is not on this phone call, your honor, and it has not sought to intervene in this case."
Alpha is the corporate entity behind the XFL, an alternative football league that McMahon resurrected in 2018, following a 2001 debut that saw the league play one season and then promptly fold.
Luck, a former NFL quarterback and NCAA executive, joined the XFL as commissioner in July 2018. The revived XFL played its debut game Feb. 8 and reportedly garnered modest fan engagement and viewership, but was quickly decimated when the ongoing coronavirus pandemic forced it to cancel all its games in the middle of the season.
Luck was fired on April 9. Alpha suspended operations, laid off most of its employees and filed for bankruptcy a few days later. Luck sued McMahon roughly a week after that.
The league is set to sell off its assets at an August bankruptcy auction, and McMahon is providing a $3.5 million debtor-in-possession loan to see the league through to the end of that process.
Luck's contract with Alpha entitled him to a $5 million annual base salary and an annual $2 million bonus if certain conditions were met. The contract was due to expire in 2023, and Luck claims he is still owed $23.8 million from that agreement.
McMahon signed a guarantee under which he agreed to foot the bill for that contract in the event Alpha failed to pay.
Luck claims the guarantee was drafted so lopsidedly in his favor that it requires McMahon to cover the unpaid amount regardless of whether he was fired for cause or not.
"I know it sounds a little odd, but the fact is courts have found recently that it's appropriate to pursue the guarantor directly" with hardly any analysis of the underlying contract, Dobrowski said.
McMahon attorney Jerry S. McDevitt disagreed, saying the argument was made only because "they now recognize Luck was fired for cause."
"It's akin to saying Mr. Luck didn't have to do anything to earn that money," McDevitt said. "He could've embezzled or committed other acts of fraud, and McMahon would have to pay him anyway. It's frankly an absurd position."
McMahon contends that Luck was fired not only because he neglected his duties in a time of need, but also because he broke XFL policies by using an XFL-issued cellphone for personal calls and by hiring several football players who had been disciplined by the NFL for drug-related offenses, another alleged violation of XFL policy.
McMahon claims it is essential to add Alpha to the case because only Alpha can provide the records needed to prove that Luck was fired for cause.
Luck is represented by Paul Dobrowski, Vanessa L. Pierce and Jared A. McHazlett of Dobrowski Larkin & Stafford LLP and Andrew M. Zeitlin, Sarah E. Gleason and Joette Katz of Shipman & Goodwin LLP.
McMahon is represented by Jerry S. McDevitt and Curtis B. Krasik of K&L Gates LLP and Jeffrey P. Mueller of Day Pitney LLP.
The case is Oliver Luck v. Vincent K. McMahon, case number 3:20-cv-00516, in the U.S. District Court for the District of Connecticut.
--Additional reporting by Zachary Zagger, Hailey Korvath, Dave Simpson and Mike Curley. Editing by Peter Rozovsky.
For a reprint of this article, please contact firstname.lastname@example.org.