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All American Football League Sports Law

All American Lawsuit

AAFLA couple of years ago, it seemed like NFL Europe and Arena Football were going to have some stiff competition on its hands with the introduction of another Football Minor League. The AAFL was getting some good coverage leading up to its inaugural draft. I even shook hands with players like Chris Leak and Peter Warrick at Team Florida’s draft party. And then everything went down the drain…at least for this year. But what about all those players that got drafted on January 26th? And how about the Protected Players that were signed to each team prior to the draft (Team Florida had 39 such players)? Class Action Lawsuit time!

Atlanta, GA based attorney, Steve Estep, has filed a class action suit against the AAFL and its founder/chairman Marcus Katz. It seems like Estep is targeting Katz under a theory of respondeat superior, allowing Estep to go after the big bucks based on the tort theory of liability.

Marcus Katz was going to be the money behind the league. He said so on several different occasions, so if the league isn’t capitalized, under the piercing-the-corporate-veil theory you can go after the people who were supposed to be capitalizing it. We don’t know if AAFL has a dollar of its own, but we do know that Marcus Katz has lots of dollars, or at least he says he does.

We’re seeking to recover what [the players] were to have been paid plus whatever out of pocket damages they could show, the kind of hard dollar expenses associated with getting new apartment leases and moving, things like that.

I think that the claim seems pretty reasonable based on recovery for reliance damages. A player may not have purchased certain items had he not been promised a spot in the new league. It will be interesting to see how this suit ends up being litigated.

By Darren Heitner

Darren Heitner created Sports Agent Blog as a New Year's Resolution on December 31, 2005. Originally titled, "I Want To Be A Sports Agent," the website was founded with the intention of causing Heitner to learn more about the profession that he wanted to join, meet reputable individuals in the space and force himself to stay on top of the latest news and trends.

Heitner now runs Heitner Legal, P.L.L.C., which is a law firm with many practice areas, including sports law and contract law. Heitner has represented numerous athletes and sports agents as legal counsel. He has also served as an Adjunct Professor at Indiana University Bloomington from 2011-2014, where he created and taught a course titled, Sport Agency Management, which included subjects ranging from NCAA regulations to athlete agent certification and the rules governing the profession. Heitner serves as an Adjunct Professor at the University of Florida Levin College of Law, where he teaches a Sports Law class that includes case law surrounding athlete agents and the NCAA rules.

6 replies on “All American Lawsuit”

Wow, very interesting.

“Piercing the corporate veil” comes up in Corporations and grew out of a desire to prevent individuals from escaping the consequences of their individually wrongful acts by using a corporate entity for criminal or fraudulent purposes. So when a corporate veil is pierced, the corporation’s creditors can go after the assets of its shareholders. That’s a radical concept because limited liability of shareholders is a bedrock of modern capitalism. So theoretically one should only ‘pierce’ when absolutely, positively necessary. Thus, judges will look at the totality of the circumstances to make their ruling, and choose to pierce the veil only if it’s necessary to prevent fraud or achieve equity.

Under the undercapitalization test, failure to provide adequate capitalization for the corporation AT THE TIME OF FORMATION is an important element, however MOST courts are reluctant to pierce the veil solely on this basis.

Per one attorney: “Whether a corporation was adequately capitalized when it was formed is a relevant determination with respect to this factor, the idea being that insufficient capital infusion is a red flag that a corporation was started as a sham. Proving a corporation that was adequately funded on formation became undercapitalized due to business losses will not suffice. Nevertheless, IF shareholders fail to infuse needed capital after an existing corporation significantly changes the nature of its business or substantially expands, this may constitute undercapitalization sufficient to satisfy the court.”

So either show Katz didn’t properly infuse the League with capital from the get-go, or that he didn’t do so later. Katz will argue that he properly funded the league, and that the lack of a television contract and/or other deals forced the League under.

I WAS ONE THE PLAYERS THAT WAS PICKED FOR TEAM ALABAMA A WEEK EARLY. AFTER I SIGNED MY CONTRACT I LEFT MY JOB AND I COULDNT GO BACK AFTER THEY CANCLED THE SEASON. DUE TO THAT I WAS OUT OF AND STILL LOOKING FOR A JOB! I HAVE LOST MY JOB, MY CAR HAS BEEN REPO AND I HAVE NO TRANSPORTATION NOW, POWER AT MY PLACE WAS OFF FOR A MONTH IN A HALF, WAS GETTING EVICTED FROM MY PLACE, I HAD GOT A JOB BUT LOST IT BECAUSE MY CAR WAS REPO, LOST MY CREDIT AND MY BANK ACCOUNT CLOSE……..ALL THIS HAS OCCUR SINCE HAVE CLOSE THE SEASON AND ITS NOT RIGHT !!!!! I NEED SOME TYPE OF RELIFE COMPUSATION!!!!!!

Hi guys,

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We need a quarterback – maybe you were drafted to AAL and havent found a team yet.
Please contact me on this email address: [email protected]

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Kristian
Manager

Such
wonderfully helpful posts! Thanks so much guys! They’re super valuable!

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