When he lured Oliver Luck away from the NCAA to oversee the XFL’s second attempt, Vince McMahon, the billionaire founder of World Wrestling Entertainment, instantly injected credibility into his fledgling venture. Luck, an attorney by trade and a seasoned, respected sports executive, checked every box for a legitimate commissioner. He previously served as president of NFL Europe, was CEO of the Houston Sports Authority and the athletic director of West Virginia University. The 60-year-old was also a retired NFL quarterback and the father of Indianapolis Colts quarterback Andrew Luck.
By hiring him, McMahon muted doubts that the new XFL would suffer the same fate as the first, which lasted only one season, in 2001.
Luck had leverage, too. He was already well-paid. According to NCAA tax filings obtained by Sportico, Luck earned $1,020,686 in total compensation from the NCAA as executive vice president for external affairs in 2017.
So why would Luck give up his NCAA gig to run XFL: The Sequel?
Exceptional compensation was a driving force. On May 30, 2018, Luck signed a five-year contract valued at $35 million. It featured an annual salary of $5 million and a guaranteed annual bonus of $2 million. The contract was signed with Alpha Entertainment, of which McMahon is chairman and controlling owner.
The contract contained a personal guarantee from McMahon that he would honor Alpha’s pledge. Court filings reviewed by Sportico reveal the sweeping language of McMahon’s commitment. He “irrevocably and unconditionally guaranteed” that Luck would be paid. This personal warranty was “absolute, unconditional, continuing and irrevocable” and would “remain in full force and effect” so long as Alpha owed Luck.
Luck therefore gained certainty that if the XFL failed, McMahon would still pay him.
Or so it seemed.
As is typically true of employment contracts, the deal contemplated how it could end. Alpha negotiated the right to terminate Luck’s employment without cause or for cause.
In a “without cause” firing, the employer removes an employee without claiming the employee engaged in any wrongdoing. For example, when the general manager of a team decides to replace the coach, the coach is ordinarily fired without cause. Maybe the team underperformed. Maybe the coach and GM no longer get along. Regardless, there’s no allegation the coach neglected his or her duties; the team simply decided to change leaders.
A “for cause” firing, in contrast, means the employee allegedly committed unauthorized acts or exhibited bad faith. Luck’s contract established six grounds for cause. They include “willful and intentional material misconduct in performance of his duties or gross negligence of his duties . . . including an intentional failure to follow any applicable XFL policies or directives.”
The classification for Luck’s firing has become central to the league’s story.
On April 9, Alpha terminated Luck for cause. The move stunned the sports industry, not only because of Luck’s reputation but also because the XFL had shown promise. Although its TV ratings would diminish after an initial splash, the XFL was poised to continue. It shut down when the COVID-19 pandemic struck.
For Luck, the financial ramifications of his firing were grim. He was only entitled to accrued salary and vested benefits. Had Luck been fired without cause, he would have received a lump sum cash payment worth, according to his math, $23.8 million.
Within days of Luck’s firing, other XFL employees were terminated. Citing the pandemic’s impact on revenues and more than $50 million in liabilities, Alpha filed for Chapter 11 bankruptcy on April 13.
Once again, the XFL would last just one season.
But as a legal entity, the XFL continues. And it must contend with an aggrieved ex-commissioner.
On April 16, Luck filed a federal lawsuit in Connecticut against McMahon for breach of contract. Luck maintains that Alpha wrongfully fired him and that McMahon must pay the guaranty used to “induce” him.
There are two key legal questions: First, did Alpha lawfully fire Luck with cause? Second, is McMahon personally on the hook to pay Luck?
McMahon’s attorneys contend that Luck intentionally failed to follow XFL policies, and thus gave Alpha lawful cause. From McMahon’s perspective, “cause” was established in four ways:
1 – Luck signed Antonio Callaway in contravention of XFL policy. On January 15, Luck signed the former Cleveland Browns wide receiver. He did so allegedly without disclosing to McMahon that Callaway, in McMahon’s view, failed to meet the league requirement of being a “quality player with good character.” In recent years, Callaway had been accused of engaging, and in some cases found to have engaged, in wrongful conduct related to drugs. As a college player at the University of Florida, Callaway had been accused of sexual assault (he was later cleared of wrongdoing in a Title IX hearing).
2 – Luck didn’t promptly terminate Callaway’s contract. As portrayed by McMahon’s attorneys, McMahon told Luck to immediately cut Callaway. Luck, according to McMahon’s account, waited several days to take action. Because of the wait, Callaway continued to practice, and he then suffered a knee injury, which required surgery. Alpha had to cover the surgery’s costs. It might also be responsible to pay workers’ comp.
3 – Luck violated the league’s technology policies. Luck is depicted as repeatedly misusing XFL technology, including a company cell phone, for personal matters.
4 – Luck grossly neglected his duties after the COVID-19 pandemic started. Luck, McMahon asserts, essentially quit on the XFL once the pandemic arrived. Luck left Connecticut, where the XFL was headquartered, and travelled to Indiana. McMahon says Luck never called to explain his intentions.
As detailed in court filings, Luck categorically rejects McMahon’s allegations and insists that his firing was without cause.
Among his arguments, Luck maintains that McMahon pressured him to “upgrade the quality” of XFL wide receivers, which swayed Luck to sign Callaway.
In addition, Luck describes the XFL’s “good character” hiring policy in a vastly different light. He contends the XFL would only reject otherwise qualified players if they: (1) had a felony conviction for dealing drugs; (2) had multiple misdemeanor convictions that established a pattern or habit; or (3) had faced “a credible allegation of sexual assault or domestic violence.” Luck maintains Callaway didn’t fit into any of those categories and was thus eligible.
The legality of Alpha’s firing Luck also hinges on whether the company gave him an adequate opportunity to “cure” (fix) any act or omission that could be construed as “cause.” Luck asserts that he was abruptly fired without opportunity to repair alleged wrongdoing.
Attorneys for Luck also maintain that McMahon’s personal obligation is enforceable regardless of whether the underlying employment contract is enforceable. This goes to the heart of Luck’s legal strategy: Instead of seeking payment from a bankrupted Alpha, Luck demands that billionaire McMahon pay.
Attorneys for McMahon flatly disagree.
First, they maintain that because McMahon’s alleged misconduct could not be undone—Callaway’s situation, for example, was irreversible once he became injured—there was no way of fixing things.
Second, they insist that McMahon’s guarantee only concerns obligations owed by Alpha. Alpha asserts that because Luck was fired with cause, it doesn’t need to pay him. If Alpha doesn’t need to pay Luck, then—under McMahon’s line of reasoning—neither does McMahon.
The case could turn on which side offers more credible witnesses and corroborating evidence. For example, Luck and McMahon describe completely different requirements for signing players. Or take Luck’s use of a company cell phone: Did it truly warrant a “for cause” firing or was it, more or less, consistent with ordinary usage by XFL employees? Without the testimony of more impartial witnesses, it’s hard to know.
The Case Is Now in the Orbit of the XFL’s Bankruptcy
McMahon recently secured a favorable ruling. Judge Victor Bolden held that Luck must first establish that Alpha breached the employment contract before he can prove that McMahon owes him money. Alpha is therefore an “indispensable party” to the case and must be joined.
But that joining can’t happen until the bankruptcy process is resolved. Alpha is up for auction. Judge Laurie Selber Silverstein is overseeing a process where the deadline for bids is July 30. The auction will take place on August 3. Proceeds will eventually go to Alpha’s creditors.
For now, Luck’s case is stayed (postponed). However, once the case resumes, it could pose complications for McMahon, Luck and whoever buys the XFL. The longer it goes on, the more likely the case will lead to sworn testimony about sensitive topics and the sharing of emails and texts that no side may want revealed. Unlike an arbitration or mediation, a lawsuit leads to a public record for all to digest. Prospective XFL bidders, meanwhile, know if they buy Alpha, they buy all that comes with it, including pending litigation.
A settlement might thus become an attractive option—especially if the XFL hopes to become a trilogy.
