San Antonio, OK, bankruptcy judge pays former football league players

Up to 480 former Alliance of American Football players will receive unpaid wages as part of a legal settlement approved by a San Antonio bankruptcy judge on Tuesday.

The players will each receive $13,650 – before attorneys’ fees – in salary covering the final two games of the league season alone. The league suspended operations in 2019 and filed for bankruptcy before ending the season.

They will also each receive an unsecured claim of $180,000 for wages they would have received in the last two years of their three-year contracts. This claim, however, is subject to the prior payment by the bankruptcy estate of the claims of other creditors.

“Notably, there were no objections or exclusions (from the settlement), which is remarkable in a case of this magnitude,” US Chief Bankruptcy Judge Craig Gargotta said in approving the settlement.

Two players had sued the league and others for fraud, breach of contract and other claims related to the league’s collapse. The lawsuit became part of the AAF’s bankruptcy proceedings in San Antonio.

San Antonio was among the cities to field a team in the AAF. He was known as the Commanders.

The class action lawsuit was brought by two players, linebacker Reggie Northrup and punter Colton Schmidt, who played for the Orlando Apollos and Birmingham Iron. respectively. They will each receive an unsecured claim of $135,000 that is not subordinated to other creditors. However, it’s not immediately clear how much of this they will actually receive.

Jonathon Farahi, a California attorney representing the players, said many feared they would be “blackballed” if they took legal action against the league.

“It took a lot of courage … for Mr. Northrup and Mr. Schmidt to put their names to this lawsuit,” Farahi told the judge. “They really stood up for the rest of those guys. Talking to the rest of the class, I know how grateful they are to these two people.

The priority salary claim totals approximately $6.5 million, assuming all 480 players submit claims. Their lawyers will receive a third of this amount.

The settlement was reached with the league, the trustee overseeing the bankruptcy and AAF founder and CEO Charlie Ebersol.

The players alleged in a court filing on Thursday that they had been “seduced and abandoned, enticed into putting their bodies on the line and giving up other opportunities to play for the AAF.” They also said they were not told the league was failing financially.

In their complaint, the players alleged that the AAF was designed as a technology company rather than a sports league. It was developing gaming technology intended to allow viewers to bet on every play during a game using their mobile devices. Players said they were used as “lab rats” to test the technology.

MGM Resorts International, which invested $7 million to fund the development of the technology, ended up with it in a 2019 sale approved by the judge.

Players still have claims against Thomas Dundon, the AAF’s majority owner who reportedly agreed to invest $250 million in the league. He is the majority owner of the Carolina Panthers of the National Hockey League.

Dundon, who holds $70 million in claims in the AAF bankruptcy, previously opposed the settlement agreement. But his lawyers raised no objections during Tuesday’s hearing.

Dundon had alleged that the trustee in bankruptcy, 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.

Gargotta asked the attorney to report to him within 30 days to update him on the status of the litigation against Dundon.

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