Court’s OK sought for AAF settlement
Proposed deal would give former players some pay after football league’s collapse
It’s been almost 2 ½ years since the Alliance of American Football abruptly ceased operations and filed for bankruptcy liquidation.
Now, the league’s roughly 400 players could receive payments as part of a settlement agreement of a lawsuit brought in the bankruptcy case against the league and its backers.
It calls for each of the players to receive a priority wage claim of $13,650 in connection with lost pay for the final two games, which were never played, during the AAF’S only season in 2019.
Each player also will receive a $180,000 claim covering the wages they were supposed to have been paid during the final two years of their three-year contracts. That claim, however, is subject to the bankruptcy estate first paying other creditors’ claims.
Lawyers for the players, the bankruptcy trustee overseeing the Chapter 7 case and AAF founder and CEO Charlie Ebersol on Monday asked a bankruptcy judge to grant preliminary approval of the settlement.
U.S. Bankruptcy Judge Craig
Gargotta, however, said he would issue his ruling on the request Sept. 28.
“I want to think about this,” he said at the end of an hour-long hearing.
The AAF’S inaugural season abruptly ended after eight games in April 2019 when majority owner Thomas Dundon suspended football operations.
About two weeks later, the league filed for bankruptcy in San Antonio. Dundon is majority owner of the National Hockey League’s Carolina Hurricanes.
San Antonio was among the cities to field a team in the AAF. It was known as the Commanders.
Two AAF players — Colton Schmidt and Reggie Northrup —
sued the league, Ebersol and Dundon for fraud, breach of contract and other claims over the league’s collapse. The lawsuit became part of the bankruptcy.
The players want Gargotta to certify the case as a class-action lawsuit.
The judge presumably will also issue his decision on that request at the hearing set for later this month.
An amended version of the lawsuit that was filed in February 2020 alleges the players were misled and defrauded by Ebersol and Dundon.
Ebersol held out promises that the AAF developmental football league that could provide a “potential path” to the National Football League for players, their complaint said.
“In reality, the AAF was started by Ebersol to be a technology business, not as a developmental football league,” the players’ suit added.
The league was developing gambling technology intended to
allow viewers to bet on each play during a game using their mobile devices. It planned to license the technology to other leagues, the suit said.
USA Today reported — before the league folded — that the technology “may revolutionize pro sports and gambling.”
The AAF was established to use the players as “lab rats” to test the technology, the players said in their lawsuit.
The players hold roughly $700 million in claims in the bankruptcy.
MGM Resorts International, which invested $7 million to finance development of the technology, ended up with it under a 2019 sale approved by the judge.
Dundon, who holds $70 million in claims in the AAF’S bankruptcy, has objected to the settlement agreement.
He alleged the bankruptcy trustee, who is involved in the settlement, is paying for “what appears to be” Ebersol’s “cooperation and future testimony as a witness in future litigation against third parties to this settlement” — including Dundon — in exchange for the release of
claims against Ebersol.
Brent Hockaday, Dundon’s lawyer, noted Ebersol is not paying any consideration to get out of the case other than his cooperation.
“That seems very akin to like a plea deal you see in the criminal context,” Hockaday told the
judge. “And that is not something, as I understand it, that’s available under the civil context.”
Under the settlement agreement, the players are not releasing any non-wage claims against Dundon.