June 24, 2019 - Class Action Removed to California District Court
A lawsuit detailed on this page, Schmidt et al. v. AAF Players, LLC et al., has been removed from San Francisco County superior court to California's Northern District. The notice of removal can be found here.
[Update: Shortly after publication of this post, a third proposed class action lawsuit was filed against the Alliance of American Football. The lawsuit, this time out of the Central District of Utah, alleges violations of the WARN Act and can be read here.]
A little more than a week after it permanently suspended operations just eight games into its inaugural season, the defunct Alliance of American Football (AAF) finds itself staring down more than one proposed class action lawsuit.
Lodged by former players and employees, the allegations presented in the lawsuits out of California state and federal court run the gamut from apparent violations of the federal Worker Adjustment and Retraining Notification Act of 1988—the WARN Act—to breaches of contract and unpaid wages.
Before we can get into the meat and potatoes of the complaints, we’ll need to bring everyone up to speed on what the AAF is . . . erm, was.
What was the Alliance of American Football?
Founded in 2018, the AAF was meant to be a "solid football product" that existed outside of the NFL and its dominance over the fall and winter seasons. The eight-team league was the brainchild of television producer Charlie Ebersol, son of legendary TV producer and former NBC Sports Chairman Dick Ebersol, and long-time National Football League executive and ESPN analyst Bill Polian. Ebersol and Polian latched on to the vision of creating an alternative product to that offered by the NFL, an ostensible minor league for pro football, that avoided the missteps and overall poor play of WWE owner Vince McMahon’s failed late-1990s XFL (which itself is making a comeback in 2020) while still attracting fans.
What went wrong?
With teams in Atlanta, Birmingham, Memphis, Orlando, Arizona, Salt Lake City, San Antonio and San Diego, the AAF kicked off its planned 10-week season to, let’s say, subdued fanfare (but decent enough TV ratings) on February 9, 2019. Despite having a number of former NFL players and front-office guys at the helm (some of whom are defendants in the lawsuits detailed below), not to mention the widely held belief that it had a stronger chance of survival than its predecessors, the AAF was not long for this world. It was announced on April 2 that operations would be suspended for good.
In its wake, the league’s demise has largely been credited to its chief financier and chairman, Thomas Dundon, who bought into the league (for alleged reasons we’ll get to in a minute) amid troubling financial rumors after its season began and who declined to shell out the reported $20 million it would’ve cost to keep the AAF above ground through the final weeks of its regular season and playoffs. In an unaccredited statement to players and coaches, the league admitted that its decision to end operations put everyone involved in a tough spot and offered little else as far as an explanation:
We understand the difficulty that this decision has caused for many people and for that we are very sorry. This is not the way we wanted it to end, but we are also committed to working on solutions for all outstanding issues to the best of our ability. Due to ongoing legal processes, we are unable to comment further or share details about the decision.”
Many players, some of whom reportedly found out about the league’s shuttering on the Internet before they heard word from their teams, were left on the hook for their own medical bills, housing promised by the league, and expenses to find their ways home once the AAF’s doors closed. For some, the questions left behind from an unsigned apology and a collection of mum executives could not go unanswered.
What do the lawsuits allege?
The case filed in California superior court by former Birmingham Iron punter Colton Schmidt and former Orlando Apollos linebacker Reggie Northrup alleges the league misled players with regard to both its financial viability and defendant Tom Dundon’s ultimate goal: to send the league out to pasture once he acquired its gambling technology and intellectual property.
Filed against the AAF; Dundon; Ebersol; Legendary Field Exhibitions, LLC; AAF Properties, LLC; and Ebersol Sports Media Group, Inc., the 21-page lawsuit makes plain that players would not have signed on with the league or subjected themselves to the risk of serious physical harm had they known the AAF was “not financially viable from the outset.” According to the suit, the players would have similarly stayed away had they been aware Dundon, its main investor, planned to “fraudulently, deceptively, and pretextually acquire” the league’s intellectual property and technology before closing up shop. (Reports from earlier this month have claimed Dundon does not own the AAF’s technology, which is instead possessed by Legendary Field Exhibitions.)
The plaintiffs say they and every other AAF player entered into three-year contracts with the league, which centrally ran each team, that stipulated they’d receive payments of $70,000 for the 2019 league year, $80,000 for the 2020 league year, and $100,000 for the 2021 league year. These agreements, the case states, prohibited proposed class members from playing football or attempting to play any type of football for any other team or league other than the AAF. The plaintiffs and proposed class members signed their contracts, the case states, with the belief that those running the AAF made clear to investors that “if you are not committed seven to ten years, you are not taking this seriously.”
Just weeks after the AAF’s debut, the case continues, Dundon threw the league a $250 million lifeline of credit to ensure operations could continue. The bailout made Dundon chairman of the board and gave him full control of the AAF’s future—all despite Ebersol’s assurance that the AAF was in no serious financial peril. The lawsuit alleges Dundon threw his financial weight behind the AAF not for the benefit of the league, or even for profit, but for more pretextual aims:
The acquisition of the league through his investment was pretext: the true motivation of Defendant Dundon was to acquire the smartphone application intellectual property that could be used for gambling on player performance in fantasy football and real time proposition bets, all tied to player compensation based upon performance.”
The plaintiffs assert that on April 2, the date of the league’s closing, their contracts “had not been voided, canceled, or terminated." As the lawsuit tells it, the defendants’ decision to shutter the league constitutes “both an anticipatory breach of the contract and a material breach of the contract." From the complaint:
Defendant has materially breached the Contract, by among other things, failing and refusing to pay Plaintiffs the annual base compensation in the amounts stated in the Contract. Defendant has clearly and positively indicated, by words and/or conduct, that it will not and cannot meet the Contract requirements.”
Filed by former Birmingham Iron executive James Roberson Jr., the WARN Act suit filed in California’s Northern District names as defendants the AAF; Legendary Field Exhibitions, LLC; Founders Fund; The Chernin Group; Slow Ventures; MGM Resorts International; Charles King’s M Ventures; Polian; and former NFL players Jared Allen, Troy Polamalu and J.K. McKay. The suit charges that the defendants failed to comply with the WARN Act’s requirements by permanently closing the business operations of the league and laying off all of its employees without at least 60 days’ advance written notice.
According to the lawsuit, proposed class members are entitled to at least 60 days’ worth of wages, bonuses, accrued holiday pay and accrued vacation, as well as 401(k) contributions and health insurance coverage.
Who do these lawsuits look to cover?
Unless you were an employee of or player for the Alliance of American Football, it’s safe to say you won’t be involved in either of these lawsuits. But that’s not to say it’s out of the question for fans who bought season tickets or otherwise interacted with the league and were denied a full season won’t file their own proposed class action. If it comes to that, we’ll bring you a full report.