According to documents that were filed in the Vince McMahon-Oliver Luck case, the WWE owner signed a personal guaranty for Luck to be XFL Commissioner.
The personal guaranty which Luck sued to enforce claiming that the WWE Head breached the agreement contends that McMahon, not Alpha Entertainment, LLC, the company that ran the XFL. Alpha Entertainment, LLC is currently in Chapter 11 Bankruptcy.
The guaranty, which is attached as an exhibit states that on May 30, 2018, McMahon as the guarantor and controlling owner of Alpha Entertainment, LLC guaranteed the performance of the company to include payment of Luck’s salary. This is the reason why Luck sued McMahon and not Alpha as well. McMahon’s lawyers contend that Alpha is an “indispensable party” in the lawsuit which would require Luck to file a lawsuit against Alpha and go to bankruptcy court to request that it pursue an action against the company since it is in Chapter 11.,
Luck contests the termination letter sent to him by McMahon and Alpha Entertainment’s lawyer Jerry McDevitt which terminated Luck for cause for “gross neglect” of his post as commissioner. If terminated for cause, presumably, McMahon would not have to honor the personal guaranty. There were three specific items outlined in the letter it gave as examples for his dismissal. The first was signing an athlete with a criminal past. Specifically, Antonio Callaway was identified as a player that Luck signed for the XFL. Callaway had some prior misdeeds with the law. McMahon had given the edict that no such players with criminal backgrounds be signed by the league. Despite this, Luck signed Callaway according to the letter. But when McMahon told Luck to dismiss Callaway, he did not do so immediately. As a result, prior to his termination, Callaway suffered a season ending knee injury which required surgery. McMahon attorney noted that due to this, Callaway’s medical expenses would be paid by the XFL as well as his $125,000 salary for the season.
Additionally, McDevitt pointed out that Luck did not return to the XFL offices in Connecticut upon leaving without notifying anyone in mid-March. This was during the time that the pandemic was starting to garner more concern. Also, an iPhone that was property of the XFL was not returned to the company.
Payout Perspective:
As we’ve discussed here and here, McMahon’s lawyer has not responded to the substantive merits of the case although it filed briefing when Luck’s lawyer filed a request for an application of prejudgment remedy requiring McMahon to show that he has the assets to cover a potential judgment of over $23 million. The letter seems like a technical reason for his termination with cause. It’s hard to determine whether the three examples identified by McDevitt result to “gross neglect” and grounds for termination.
The personal guaranty is uncommon in executive negotiations for work because it holds an individual out to personal liability as we see here. Luck is an experienced sports lawyer and executive. Crafting the employment agreement to ensure that compensation is personally guaranteed shows that Luck may have been weary of McMahon and worried about the possibility that he would be left out in the cold without being paid. Just for this scenario, he now has viable arguments in linking the guaranty to McMahon and not being forced to be dragged into bankruptcy court which may hinder recovery.
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