Hurwitz v. Luck (In re Alpha Entm't)
| Docket Number | Adversary Proceeding 3:23-cv-118 (VAB),20-10940 (LSS) |
| Decision Date | 23 June 2023 |
| Parties | In re ALPHA ENTERTAINMENT LLC, Debtor. v. OLIVER LUCK, Defendant. PETER HURWITZ, solely in his capacity as Plan Administrator of Alpha Entertainment LLC, Plaintiff, OLIVER LUCK, Third-Party Plaintiff, v. VINCENT K. MCMAHON, Third-Party Defendant. |
| Court | U.S. District Court — District of Connecticut |
RULING AND ORDER ON MOTION TO DISMISS THIRD-PARTY COMPLAINT
Oliver Luck has sued Vincent K. McMahon, seeking to enforce a guaranty. See Third-Party Compl., Hurwitz v Luck, No. 22-50256 (LSS) (Bankr. D. Del. Aug. 17, 2022) ECF No. 27 (“Third-Party Compl.”). Alpha Entertainment (“Alpha” or the “Debtor”), a Connecticut limited liability company principally owned by Mr. McMahon, previously employed Mr. Luck, and Mr. McMahon had allegedly agreed to personally guarantee Alpha's obligations to Mr. Luck under his employment contract with Alpha. See id. ¶¶ 3, 10-12, 15-16.
In April 2020, Alpha terminated Mr. Luck and shortly thereafter filed for bankruptcy. See id. ¶¶ 20-21. Alpha's plan administrator, Peter Hurwitz (the “Administrator”), later initiated an adversary proceeding against Mr. Luck in which he sought to avoid and recover certain payments made to Mr. Luck under the employment contract between Mr. Luck and Alpha. See Compl., Hurwitz v. Luck, No. 22-50256 (LSS) (Bankr D. Del. Apr. 11, 2022), ECF No. 1 (“Avoidance Action Compl.”).
Mr Luck then filed a Third-Party Complaint against Mr. McMahon, requesting a judgment that Mr. McMahon would be liable under the guaranty for any amounts recovered by the Administrator from Mr. Luck in the Avoidance Action and for fees and expenses incurred by Mr. Luck. See Third-Party Compl. ¶¶ 30-33, 38-39.
Mr. McMahon has moved to dismiss the Third-Party Complaint under Federal Rule of Civil Procedure 12(b)(6). See Mot. to Dismiss Third Party Compl., ECF No. 26 (“Mot. to Dismiss”).
For the following reasons, Mr. McMahon's motion to dismiss is DENIED.
According to Mr. Luck's Complaint, Alpha was originally formed for the purpose of operating the XFL professional football league, and the company was principally owned and capitalized by Mr. McMahon. Third-Party Compl. ¶¶ 9-10.
On May 30, 2018, Alpha and Mr. Luck allegedly executed an employment agreement (the “Employment Contract”) under which Mr. Luck would serve as the Commissioner and Chief Executive Officer (“CEO”) of the XFL. Id. ¶¶ 11-12; Ex. 1 to Third-Party Compl., ECF No. 1 (“Employment Contract”). Under the Employment Contract's Monetary Compensation Provisions, Mr. Luck would receive a base salary of $5,000,000 per year plus an annual bonus of $2,000,000 that would be paid on the last day of each contract year, provided that Mr. Luck was still employed on that date. Third-Party Compl. ¶ 13. The agreement also contains an Indemnification Provision, which states:
To the fullest extent permitted by law, both during and after the Term, Alpha shall pay all reasonable expenses incurred by Mr. Luck and any judgments or fines rendered or levied against Mr. Luck in any action, arbitration, investigation or other proceeding brought by any third party against Mr. Luck (whether or not the XFL, Alpha or any of their affiliates is a party to that action) that arises from or otherwise relates to the course or scope of Mr. Luck's employment, unless such action or other proceeding arises directly from Mr. Luck's gross negligence or willful misconduct....This paragraph shall survive any expiration or termination of this Contract.
Id. ¶ 14; Employment Contract at 5-6.[1]
On the same date that the Employment Contract was executed, Mr. McMahon allegedly executed a guaranty (the “Guaranty”) in favor of Mr. Luck in which Mr. McMahon agreed to personally guarantee Alpha's payment and performance of all of its obligations under the Employment Contract. Third-Party Compl. ¶¶ 15-16. The Guaranty provides that Mr. McMahon “irrevocably and unconditionally guarantees, as primary obligor and not merely as a surety, the due and punctual payment [and] performance by [Alpha] of all of its agreements and obligations under the [Employment Contract].” Third-Party Compl. ¶ 16; Ex. A to Employment Contract at ¶ 1, ECF No. 27-1 at 7 (“Guaranty”).
The Guaranty further states that Mr. McMahon's obligations “shall be absolute, unconditional, continuing and irrevocable and shall remain in full force and effect until the full performance by the [Alpha] of all of its agreements and its obligation under the [Employment Contract], irrespective of the validity, regularity or enforceability of [the Employment Contract].” Guaranty ¶ 2. Mr. McMahon's obligations under the Guaranty also are not affected by “any dissolution, liquidation or termination of [Alpha], or any other circumstances that may otherwise constitute a legal or equitable discharge or defense of [Mr. McMahon], all of which are hereby waived by [Mr. McMahon].” Id.
On April 9, 2020, Alpha allegedly terminated Mr. Luck's employment as Commissioner and CEO of the XFL. Id. ¶ 20. Mr. Luck alleges that he was wrongfully terminated, while Alpha asserted that the termination was for cause. Id.
Four days later, on April 13, Alpha filed a voluntary Chapter 11 petition for bankruptcy in the United States Bankruptcy Court for the District of Delaware (the “Delaware Bankruptcy Court”). Id. ¶ 21.
On April 16, 2020, Mr. Luck filed a complaint against Mr. McMahon in this Court (the “Wrongful Termination Action”), asserting claims for breach of the Guaranty in connection with Mr. Luck's alleged wrongful termination. See Compl., Luck v. McMahon, No. 20-cv-516 (VAB) (D. Conn. Apr. 16, 2020), ECF No. 1.
After this Court concluded that Alpha was an indispensable party in that action, Mr. Luck obtained an order from the Delaware Bankruptcy Court lifting the bankruptcy stay for the limited purpose of joining Alpha as a nominal defendant in the Wrongful Termination Action. See Ruling and Order on Mot. for Prejudgment Remedy, Luck v. McMahon, No. 20-cv-516 (VAB) (D. Conn. June 26, 2020), ECF No. 79 (“Joinder Order”); Relief from Stay Order, In re Alpha Entertainment LLC, No. 20-10940 (LSS) (Bankr. D. Del. Aug. 7, 2020), ECF No. 355. In order to obtain relief from stay from the bankruptcy court, Mr. Luck agreed to waive “any recovery against Debtor or its bankruptcy estate on account of any claim or claims . . . in this bankruptcy case.” Id. at 2.
On June 23, 2022, Mr. Luck, Mr. McMahon, and Alpha stipulated to the dismissal of the Wrongful Termination Action with prejudice. See Stipulation of Dismissal, Luck v. McMahon, No. 20-cv-516 (VAB) (D. Conn. June 23, 2022), ECF No. 484; Ex. 1 to Reply, ECF No. 38-1 (“Settlement and Release Agreement”).
On April 11, 2022, the Administrator initiated an adversary proceeding against Mr. Luck in the District of Delaware Bankruptcy Court (the “Avoidance Action”). See Avoidance Action Compl. In that action, the Administrator sought to avoid and recover certain payments made to Mr. Luck under the Employment Contract, alleging that these payments constituted fraudulent or preferential transfers under the Bankruptcy Code and state law. See id. ¶¶ 27-61.
On August 17, 2022, Mr. Luck filed his Third-Party Complaint against Mr. McMahon, seeking a judgment that Mr. McMahon would be liable under the Guaranty for any amounts recovered by the Administrator from Mr. Luck in the Avoidance Action and for fees and expenses incurred by Mr. Luck. See Third-Party Compl.
On January 27, 2023, the Bankruptcy Court granted a motion by Mr. Luck to transfer venue to this Court. See Order, Hurwitz v. Luck, No. 22-50256 (LSS) (Bankr. D. Del. Jan. 27, 2023), ECF No. 56.
On February 21, 2023, Mr. McMahon filed a motion to dismiss the Third-Party Complaint. See Mot. to Dismiss; Third Party Def. Vincent K. McMahon's Mem. of Law in Supp. of his Mot. to Dismiss Third Party Compl., ECF No. 26-1 (“Mem.”).
On March 14, 2023, Mr. Luck filed his memorandum in opposition to Mr. McMahon's motion to dismiss. See Third-Party Pl. Oliver Luck's Opp'n to Third-Party Def. Vincent K. McMahon's Mot. to Dismiss, ECF No. 31 (“Opp'n”).
On March 28, 2023, Mr. McMahon filed a reply in support of his motion to dismiss. See Third-Party Def. Vincent K. McMahon's Reply in Supp. of his Mot. to Dismiss Third Party Compl., ECF No. 37 (“Reply”).
On May 26, after receiving permission from the Court, Mr. Luck filed a sur-reply to address new arguments raised for the first time in Mr. McMahon's reply. See Sur-Reply to Third-Party Def. Vincent K. McMahon's Reply in Supp. of his Mot. to Dismiss Third Party Compl., ECF No. 51 (“Sur-Reply”); Order, ECF No. 48 ().
A complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a). Any claim that fails “to state a claim upon which relief can be granted” will be dismissed. Fed.R.Civ.P. 12(b)(6). In reviewing a complaint under Rule 12(b)(6), a court applies a “plausibility standard” guided by “[t]wo working principles.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
First “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id.; see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) ...
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