Oliver Luck’s lawsuit against Vince McMahon has been put on pause until the resolution of the XFL’s Bankruptcy proceeding as the federal court in Connecticut stayed the former commissioner’s lawsuit against McMahon.
The court held that the XFL, Alpha Entertainment, LLC to be exact, was an “indispensable party” in Luck’s lawsuit meaning that he had to include the bankrupt company as a party to the lawsuit even though Luck argued that he had negotiated a personal guaranty for his services with McMahon.
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While a compelling argument, and shrewd negotiating on the part of Luck, McMahon argued that he had terminated Luck for cause which would preclude the former commissioner from collecting on his remaining salary. There were three specific offenses McMahon outlined in pleadings including using a cell phone for company use, leaving the XFL offices in March and failing to dismiss a player when directed to by McMahon. The latter being highlighted by McMahon in its opposition for Luck’s motion for prejudgment remedy which would have required the WWE boss to show that he had the funds to cover a potential judgment for Luck.
In siding with the WWE in denying the Motion by Luck’s attorneys, the Court noted that the XFL was a necessary party in the action. Since he was employed by the XFL, Luck would have to include them.
The reason why Luck did not want to include the XFL in his lawsuit was for the specific reason that his case would be stayed pending the resolution of the sale of the XFL’s assets. It’s clear that Luck is unlikely to be made whole (have his salary paid) buy the remaining assets of the league. He was not listed as a creditor and since he is seeking money from the league, he’d be an unsecured creditor which rarely is compensated for the full amount in these types of proceedings.
Notwithstanding having to go to bankruptcy court, once and if there is a sale of assets, Luck may have a chance to continue the lawsuit against McMahon pending any ruling by the bankruptcy court of the company that may purchase the company’s assets.
In the Court opinion, it indicated that the XFL entity was a necessary party that Luck needed to sue. McMahon argued that it was necessary because in the event he prevailed against Luck, the former commissioner could “relitigate” his claim against the XFL. Luck argued that the guaranty was with McMahon and not the XFL. He also claimed that since McMahon signed the guaranty, he anticipated an action without the need for the XFL.
However, the Court sided with McMahon. As McMahon argued, the XFL has an interest in the lawsuit as Luck’s employment as the commissioner was directly tied to whether he was correctly terminated for cause as the WWE head argues.
Payout Perspective:
This always seemed like the potential outcome. You do have to give credit to Luck for negotiating a guaranty from McMahon which allegedly would have made him personally liable for his salary if the XFL went under (which it did). However, McMahon also relied on the fact that the reason he would not pay Luck is for causal termination. As a result, it would bring in to question the factual reasons behind his dismissal as a part of XFL commissioner. Thus, the Court’s decision that the XFL was an “indispensable party,” a party that Luck had to sue if he wanted his salary. McMahon does bring up the legal issue that even if Luck was suing on the guaranty, he had to prove that he was due the amount he was requesting. And thus, the XFL was a necessary party since McMahon claimed that he was fired with cause. The obvious result is that Luck must wait out the XFL bankruptcy as an unsecured creditor which means if he believes he is due a sum from the league, he may not receive it in full as secured creditors would be in front of him. MPO will continue to monitor in the case of a potential appeal by Luck of the court opinion or what happens in the XFL bankruptcy.
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