Osherow, in his capacity as Chapter 7 Trustee et a v. Dundon et al

1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
IN RE: 	§ 	CASE NO. 19-50900-CAG
§
LEGENDARY FIELD EXHIBITIONS, 	§
LLC, et al., 	§
§
Debtors. 	§ 	CHAPTER 7
RANDOLPH N. OSHEROW, 	§
Chapter 7 Trustee for the Bankruptcy Estates 	§
Of Legendary Field Exhibits, LLC, et al., 	§
§
Plaintiff, 	§
§ 	ADV. NO. 22-05078-CAG
v. 	§
§
THOMAS DUNDON, JOHN ZUTTER, 	§
and DUNDON CAPITAL PARTNERS, LLC, 	§
§
Defendants. 	§
MEMORANDUM OPINION AND ORDER REGARDING PLAINTIFF’S FIRST
AMENDED COMPLAINT (ECF NO. 56)
IT IS HEREBY ADJUDGED and DECREED that the
below described is SO ORDERED.
Dated: November 25, 2025.
________________________________________
CRAIG A. GARGOTTA
CHIEF UNITED STATES BANKRUPTCY JUDGE
________________________________________________________________
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Introduction ..................................................................................................................................... 4
Jurisdiction ...................................................................................................................................... 4
Background ..................................................................................................................................... 4
Chapter 7 Case Procedural History ................................................................................................. 7
Colton Schmidt and Reggie Northrup v. AAF Players et al. ...................................................... 7
Dundon Capital Partners v. Charles Ebersol, Adversary No. 22-05077-cag ............................ 10
Procedural History, Adversary No. 22-05078-cag ....................................................................... 12
Parties’ Contentions ...................................................................................................................... 13
Summary of Witness Testimony and Credibility Determinations ................................................ 15
Findings of Fact ............................................................................................................................ 45
Background ................................................................................................................................... 46
Parties .................................................................................................................................... 46
ESMG and Its Operations...................................................................................................... 47
The Fowler investment .......................................................................................................... 54
AAF’s Television Contracts and Ratings .............................................................................. 58
Negotiations Involving the DCP Investments ....................................................................... 60
The Term Sheet ..................................................................................................................... 67
The ESMG Board and Shareholders Ratified the Term Sheet .............................................. 76
No Oral Agreement for $250 Million.................................................................................... 80
Dundon Breached His Fiduciary Duty .................................................................................. 89
Breach of Fiduciary Duty ...................................................................................................... 96
Unjust Enrichment ................................................................................................................. 96
The League Failed ................................................................................................................. 97
ESMG (Dundon and Zutter) and its Related Entities
Elect to File Chapter 7 Bankruptcy .................................................................................... 103
Dundon Proof of Claim ....................................................................................................... 107
Damages .............................................................................................................................. 109
Discussion ................................................................................................................................... 113
I. 	The Court Declines to Reconsider Defendants’ Arguments
Regarding the Term Sheet. ................................................................................. 113
II. 	Valid and Enforceable Oral Contract .................................................................. 115
A. 	DCP and DDFSP were the investors in the oral contract. ................................. 118
B. 	Consideration is proper and sufficiently definite................................................ 119
C. 	The oral contract was for equity investment. ...................................................... 123
D. 	Judicial admissions do not render the contract vague. ...................................... 125
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III. 	Dundon’s Contract Formation Defenses ............................................................. 127
A. 	ESMG ratified the parties’ oral contract. ........................................................... 127
B. 	Any alleged misrepresentations made by Ebersol
do not prevent enforcement of the parties’ contract. .................................................. 130
C. 	The parties’ contract was not impossible to perform. ........................................ 131
IV. 	Breach of Contract .............................................................................................. 133
V. 	Covenant of Good Faith and Fair Dealing .......................................................... 135
VI. 	Breach of Fiduciary Duty.................................................................................... 138
A. 	Dundon and Zutter owed fiduciary duties to ESMG and its subsidiaries........... 138
B. 	The Court reviews Dundon’s self-dealing under the entire fairness standard. .. 142
1. 	Spending Cuts ................................................................................................. 145
2. 	Contracts ......................................................................................................... 146
3. 	Bankruptcy Filing ........................................................................................... 148
4. 	Outside Investments ........................................................................................ 152
5. 	Advertising...................................................................................................... 156
C. 	Dundon failed to prove that the advertising transactions were entirely fair...... 157
D. 	Trustee failed to prove monetary damages. ........................................................ 163
E. 	Conclusion .......................................................................................................... 170
VII. 	Promissory Estoppel ........................................................................................... 171
VIII. 	Common Law Fraud; Fraudulent Misrepresentation;
Constructive Fraud; Fraudulent Non-disclosure ................................................. 175
IX. 	Fraudulent Inducement ....................................................................................... 177
X. 	Negligent Representation .................................................................................... 178
XI. 	Unjust Enrichment .............................................................................................. 179
A. 	Texas law applies to the unjust enrichment claim. ............................................. 180
B. 	Defendants were not unjustly enriched under Texas law. .................................. 181
C. 	Even if Delaware law applied, Defendants were not unjustly enriched. ............ 185
XII. 	Disallowance of Claims ...................................................................................... 187
XIII. 	Equitable Subordination...................................................................................... 192
Conclusion .................................................................................................................................. 198
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I NTRODUCTION
Came on to be considered for trial the First Amended Complaint (ECF No. 56) of Plaintiff
Randolph N. Osherow (“Trustee” or the “chapter 7 trustee”), and the consolidated bankruptcy
estates of Legendary Field Exhibitions, LLC (“LFE”); AAF Players, LLC (“AAF Players”); AAF
Properties, LLC (“AAF Properties”); Ebersol Sports Media Group, Inc. (“ESMG”); LFE 2, LLC
(“LFE 2”); and We Are Realtime, LLC (“Realtime”) (collectively “Debtors” or “Plaintiff”) and
Defendants Thomas Dundon, John Zutter, and Dundon Capital Partners, LLC’s First Amended
Answer (“First Amended Answer”) (ECF No. 65).1 Trial on the merits was heard on April 14, 15,
16, 17, 21, 22, 23, 24, 29, and 30; May 1, 28, 29, and 30; and June 2, 3, 4, 5, and 6, 2025. Closing
arguments were heard on June 30, 2025. For the reasons stated herein, the Court GRANTS IN
PART and DENIES IN PART the claims asserted in Plaintiff’s First Amended Complaint (ECF
No. 56).
JURISDICTION
This Court has subject matter jurisdiction over the First Amended Complaint pursuant to
28 U.S.C. § 1334(b). Trustee’s claims are core proceedings under 28 U.S.C. § 157(b)(2)(A), (B),
(C), (H), and (K). Venue is proper under 28 U.S.C. §§ 1408 and 1409. Plaintiff and Defendants
consent to a final order or judgment in this Adversary Proceeding.2 This matter is referred to this
Court pursuant to the District Court’s Order of Reference.
B ACKGROUND
This case arises from the creation and dissolution of the Alliance of American Football
(“AAF” or the “League”), an alternative professional football league. According to Plaintiff’s
1 “ECF” denotes electronic filing docket number in Adversary No. 22-05078-cag unless otherwise indicated. Unless
otherwise indicated, Defendants refer to Thomas Dundon, John Zutter, and Dundon Capital Partners, LLC.
2 ECF No. 300, ¶ 9.
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First Amended Complaint, the idea for AAF was first conceived in 2017 by Charles “Charlie”
Ebersol and others as a developmental football league for highly touted collegiate players and
former NFL players to gain exposure and garner interest from NFL teams.
AAF sought to improve upon previously unsuccessful alternative professional football
leagues in innovative and creative ways. For example, AAF aspired to be a true developmental
partner to the NFL, like other professional league relationships, such as the National Basketball
Association’s (“NBA”) “G League” and Major League Baseball’s (“MLB”) Minor League.
Negotiations between AAF and the NFL regarding a potential partnership began as early as
October 2018. Additionally, AAF was designed to introduce cutting-edge technology that would
allow for instantaneous metric data from the games to be collected and viewed by fans via AAF’s
app. AAF envisioned that this data—in addition to being used by the teams for scouting and player
evaluation—would be used to create enhanced wagering opportunities for fans. These new ideas
made AAF attractive to potential investors.
Initially, AAF had financial backing from Reginald Fowler, a former part-owner of the
Minnesota Vikings of the NFL. During the pendency of AAF’s first season, Fowler’s investment
commitment fell through because of accusations of financial crimes against him. In the market for
new investors, Ebersol, on behalf of AAF, engaged Erik Anderson about a potential investment.3
The First Amended Complaint alleges that Anderson, instead of investing in AAF himself, told
Thomas Dundon about the investment opportunity.4 Dundon called Ebersol to discuss the details
of a potential Dundon investment in AAF.
The First Amended Complaint alleges that Ebersol and Dundon agreed that Dundon would
3 According to the Complaint, Erik Anderson owned a large stake in Top Golf with Defendant Dundon. ECF No. 1,
¶¶ 50–51.
4 Dundon has had several successful business ventures, such as Santander, Top Golf, and Carvana, but he is now
known for his ownership of an NHL hockey team, the Carolina Hurricanes.
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provide $250 million to fund AAF for the rest of the first season and beyond. There is no written
document evidencing that both parties fully executed the Term Sheet for Series 2 Preferred Stock
Financing (the “Term Sheet”); only Ebersol’s signature appears on any of the versions of the
document that formed the basis of the Dundon commitment and investment. Trustee alleges that
Dundon made several public statements confirming his intention to invest $250 million in AAF
for the first year and beyond.
On or around February 13 or 14, 2019, Dundon or his agents sent Ebersol the Term Sheet,
which provided that Dundon would immediately send AAF an investment of $5.1 million and up
to $70 million upon request. Ebersol inquired about the discrepancy between the Term Sheet and
the $250 million investment they had allegedly agreed upon. The First Amended Complaint states
that Ebersol received assurances from Dundon that the deal had not materially changed and that
he still intended to invest $250 million. Once the Term Sheet was thought to be executed, Dundon
and his business partner, John Zutter, became controlling members of AAF.
Throughout the following weeks, Dundon—as sole manager of DDFS Partnership, LP
(“DDFSP”)—wired a total of $69,719,190 to AAF. The First Amended Complaint states that this
amount was not sufficient to keep AAF operating, and that the success of the League was
dependent on the full $250 million commitment from Dundon. Dundon was allegedly unhappy
with AAF’s operations and began implementing cost-saving measures. After reportedly laying off
employees and declining to fund marketing efforts, Dundon allegedly directed Zutter to engage
bankruptcy counsel for AAF.
AAF and its associated debtor corporate entities filed for chapter 7 bankruptcy protection
on April 17, 2019. All the entities’ bankruptcy cases were consolidated. Randolph Osherow was
appointed as Trustee to administer the consolidated debtors’ estates. This adversary was initiated
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on November 14, 2022, with the filing of the Original Complaint.5
CHAPTER 7 CASE PROCEDURAL H ISTORY
After the bankruptcy cases were filed on April 17, 2019, a Motion for Substantive
Consolidation was filed on May 9, 2019.6 During the initial stages of the consolidated cases,
Trustee had the difficult task of locating, storing, and selling personal property. AAF and its
investors owned eight teams; as such, any equipment, uniforms, big screen TVs, and cameras were
league-owned and had to be collected and organized for liquidation.7 AAF controlled accounting
and management functions; as such, AAF conducted team operations and was responsible for all
facets of a team’s operations. To date, Trustee has liquidated all personal property, and the only
source of recovery for creditors is this lawsuit.
Colton Schmidt and Reggie Northrup v. AAF Players et al.
One 	week 	prior 	to 	AAF 	filing 	bankruptcy, 	Colton Schmidt 	and 	Reggie Northrup,
individually and as putative class representatives of all AAF players, filed suit on April 10, 2019,
in the Superior Court of California, County of San Francisco, alleging multiple claims for relief
against some of the defendants in this case: Charles Ebersol and Thomas Dundon for failure to
perform on the player contracts (“Standard Player Agreement” or “SPA”). Briefly, AAF was
unique in that all players were compensated the same amount regardless of position and were paid
under a standard player contract that provided for a graduated increase in base salary over the
three-year period. The contracts contained other financial incentives a player could earn that are
not relevant here. Schmidt and Northrup alleged that AAF, Ebersol, and Dundon breached the
5 ECF No. 1.
6 Case No. 19-50900-cag, ECF No. 34. An Order substantively consolidating the bankruptcy cases was entered on
July 8, 2019. ECF No. 150.
7 Case No. 19-50900-cag, ECF No. 36; ECF No. 80; ECF No. 45; ECF No. 82. Trustee’s Report of Sale stated that
the football equipment sold for $455,000.00. ECF No. 156.
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player contracts by failing to pay them. Northrup and Schmidt also alleged other claims related to
AAF’s failure to pay them.8 After the consolidated bankruptcy cases were filed, this lawsuit was
removed to the United States District Court for the Northern District of California, which
subsequently transferred the case to the United States District Court for the Western District of
Texas. The District Court for the Western District of Texas then referred this case to this Court.9
After this lawsuit was referred to this Court, there was protracted litigation over the merits
of the Original Complaint, which involved multiple motions to dismiss with several amendments
to the complaint. In addition, the Court had to rule on the merits of class certification and whether
Schmidt and Northrup could serve as class representatives. Also, the chapter 7 trustee objected to
the players’ proof of claims, asserting that the players were priority wage claimants for part of
their unpaid salaries under the player contracts. The Court subsequently consolidated the chapter
7 trustee’s objection to players’ proofs of claim and this adversary proceeding for further
disposition.
Thereafter, the chapter 7 trustee, Schmidt and Northrup as putative class representatives
for all of the AAF players, and Ebersol requested that the Court approve a settlement agreement
that provided in relevant part: (1) that the AAF players were a certified class; (2) appointment of
Schmidt’s and Northrup’s counsel as class counsel; (3) that Schmidt and Northrup were lead class
plaintiffs; (4) that players who opted into the class would receive an allowed priority wage claim
for $13,650.00 under 11 U.S.C. § 507(a)(4); (5) that the class of players would receive a general
unsecured claim for $180,000.00 representing second and third year compensation under the SPA;
(6) lead plaintiffs would receive an additional unsecured claim for $135,000 for acting on behalf
8 The original complaint filed in California Superior Court included claims for breach of contracts; breach of implied
covenant of good faith and fair dealing; promissory estoppel; failure to pay wages; violation of business and
professions code; fraud; false promise; and inducing breach of contract.
9 Adv. No. 19-05053-cag, ECF No. 1.
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of the settlement class for their time and expense; (7) that plaintiffs would retain all claims against
Dundon; (8) that class counsel would receive a 33% payment out the settlement proceeds from
distributions to class members; and notably (9) the class plaintiffs assigned all rights and interests
(with some conditions and reservations of rights) to the chapter 7 estate against the Debtors and
Ebersol and the right of recovery for certain damages against Dundon.10 The effect of this
settlement was to waive any estate claims against Ebersol, such that the Trustee would be the
assignee of all AAF player claims against Dundon.
The defendants filed a response in opposition, arguing that players were not entitled to
wage priority status. The defendants also claimed Ebersol gained a waiver of claims against him
in exchange for his testimony in support of the plaintiffs, putting the integrity of the bankruptcy
system at risk because Ebersol would be rewarded for his testimony against Dundon and his
entities.11
The initial motion sought approval of class certification, designation of Schmidt and
Northrup as class representatives, and appointment of class counsel.12 The Court granted the
parties’ initial request to approve class certification and provide notice of the proposed settlement
to the class of AAF players.13 After the class of players had the opportunity to opt into the
settlement, the Court issued its order approving the settlement agreement; certifying the class;
appointing class counsel and class representatives; and approving compensation of class counsel.14
After the class certification and settlement agreement were approved, plaintiffs, the
chapter 7 trustee, and Ebersol requested the Court grant a partial judgment as to the claims resolved
10 Adv. No. 19-05053-cag, ECF No. 175.
11 Id. at ECF No. 187.
12 Id. at ECF No. 194.
13 Id.
14 Id. at ECF No. 215.
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by the final settlement order. The parties argued that there was no longer a dispute between the
settling parties, and, therefore, the Court should grant the entry of a partial judgment.15 Given that
there were no remaining disputes or claims between the settling parties, the Court granted a partial
final judgment under Federal Rules of Civil Procedure 54(b) (“FRCP”).16 As a result of the
settlement and partial final judgment, the only remaining claims were those asserted against
Dundon individually for damages related to Dundon’s failure to pay any amounts in excess of or
separate from the amounts not paid under the SPA. Because the plaintiffs assigned their claims
against Dundon and his related entities to Trustee, plaintiffs elected to enter a stipulation of
dismissal with the defendants with prejudice under FRCP 41 to resolve the adversary proceeding.17
Dundon Capital Partners v. Charles Ebersol, Adversary No. 22-05077-cag
After the AAF player litigation was concluded, Dundon and his entities, Trustee, and
Ebersol initiated litigation against one another. In this adversary, Dundon Capital Partners
(“DCP”) asserted that Ebersol made material misrepresentations to DCP to induce DCP to invest
in AAF and omitted material facts regarding AAF’s finances. DCP pled claims for fraudulent
inducement; violations of the Texas Securities Act; and violations of the Texas Business and
Commerce Code for false promises and representations. When the instant adversary (22-05078-
cag) was filed, the parties recognized that many of the operative facts for both adversaries were
the same. As such, the parties worked collaboratively to conduct discovery for both adversary
proceedings. Both adversary proceedings were tracked through the same litigation process using
the same scheduling order in both cases.18 The parties then agreed to consolidate Adversary
15 Id. at ECF No. 219.
16 Id. at ECF No. 222.
17 Id. at ECF No. 236.
18 See Adv. No. 22-05077-cag, ECF No. 50; id. ECF No. 57.
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Nos. 22-05077 and 22-05078 for a joint trial.19
Defendant Ebersol moved for summary judgment arguing that (1) DCP lacked standing to
pursue claims against Ebersol because DCP did not loan the money to ESMG and did not suffer
an injury in fact; (2) that DCP did not suffer any damages because of Ebersol’s alleged misconduct
because DDFSP loaned the money to ESMG; (3) that there are no statutory and securities fraud
claims because no stock was sold or conveyed to DCP; and (4) that there was no competent
summary judgment evidence to support DCP’s fraud claims.20 After both parties finished briefing
the issues raised in the summary judgment motion, and the Court ruled on objections to summary
judgment evidence, the Court granted Ebersol’s Motion for Summary Judgment.21 Based on the
competent summary judgment evidence, or lack thereof, the Court found that under Delaware law,
DCP’s failure to sign the term sheet resulted in no binding written contract, such that DCP had no
standing to pursue this case.22 Second, there was insufficient evidence to raise an issue of material
fact on the issue of injury in fact for consideration of DCP’s standing at trial. Rather, the
uncontradicted evidence shows DDFSP paid ESMG and DDFSP took the loss, not DCP.
Therefore, the Court found DCP lacked an injury in fact under Article III of the Constitution.23
Third, because the Court found an absence of a written contract and that Dundon failed to
undertake any diligence on any of the alleged misrepresentations Ebersol made, there could not be
any justifiable reliance to support any fraud claims.24 Finally, the Court held that the securities
fraud claims failed as a matter of law because no stock was conveyed.25 The Court’s granting of
19 Id. at ECF No. 85; ECF No. 88.
20 Id. at ECF No. 101.
21 Id. at (ECF No. 171.
22 Id. at ECF No. 71, 7–13).
23 Id. at ECF No. 71, 15–16.
24 Id. at ECF No. 71, 17–20.
25 Id. at ECF No. 71, 20–23.
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Ebersol’s summary judgment resulted in a take-nothing judgment in favor of Ebersol.26
PROCEDURAL H ISTORY, ADVERSARY N O. 22-05078-CAG
Trustee filed his Original Complaint in this case on November 14, 2022, alleging 17 claims
for relief, including claims that the AAF players assigned to Trustee.27 Defendants filed their
Motion to Dismiss, seeking dismissal of all claims.28 After extensive briefing, the Court granted
in part, and denied in part, Defendants’ Motion to Dismiss.29 Plaintiffs then filed their First
Amended Complaint on November 27, 2023.30 Defendants timely filed their First Amended
Answer and affirmative defenses on December 22, 2023.31 There were multiple discovery disputes
and requests for protective orders to preclude publishing alleged sensitive or confidential
information during the discovery period.
In late 2024, at the close of discovery and dispositive motions, Defendants timely filed
their summary judgment motions.32 Additionally, the parties objected to each other’s summary
judgment evidence. After disposing of all the objections, the Court held a hearing on Defendants’
summary judgment motions on February 4, 2025. The Court denied Defendants’ Motions for
Summary Judgment.33 Shortly thereafter, Trustee attempted to amend his Complaint based on the
discovery that neither Dundon nor any other representative of DCP signed the Term Sheet, thereby
indicating that there was no written contract.34 Defendants sought leave of court to amend their
26 Id. at ECF 180. DCP timely exercised its right of appeal. ECF No. 183.
27 ECF No. 1.
28 ECF No. 18.
29 ECF No. 54. The Court denied the Motion to Dismiss as to some claims, allowed repleading on other claims, and
dismissed one count with prejudice. As to the claims that were subject to further amendment, the Court granted
Plaintiffs 14 days to replead, or those claims would be dismissed with prejudice.
30 ECF No. 56.
31 ECF No. 63.
32 Dundon and DCP filed their motion jointly. ECF No. 173. Zutter filed his individually. ECF No. 175.
33 ECF Nos. 281, 292.
34 ECF Nos. 247, 249, 255.
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answer to include the affirmative defense of merger.35 Both motions were denied as untimely and
prejudicial.36 After roughly two and a half years from the filing of the original complaint, dozens
of pretrial motions, several summary judgment motions considered and denied, this Adversary
Proceeding advanced to trial on April 14, 2025, taking 21 days to try and argue over a period of
78 calendar days.
PARTIES ’ CONTENTIONS
The parties filed their Joint Pre-Trial Order on April 9, 2025.37 The Court notes that, despite
the parties’ disagreement on many facts and the law, the lawyers in this case adhered to the highest
level of civility, professionalism, and candor toward the Court. The Court describes the contentions
below as follows.
Trustee, through his primary witness, Charlie Ebersol, argues that when Ebersol decided
to start AAF, he solicited the advice and support of persons with NFL and football experience.
Ebersol used his connections through his father, Dick Ebersol (of NBC Sports and Olympic fame),
to attract interest in a spring league that Ebersol believed would be unique, as described herein.
Ebersol believed that with the support of Reggie Fowler as his primary investor, AAF could sustain
itself through the first year of operation. Based upon what Ebersol thought he could do in
marketing AAF to attract more investment, Ebersol hoped that with television and cable exposure,
AAF could establish itself as a spring football alternative. AAF’s technology was creative and
new, and Ebersol believed that he could cultivate a partnership with the NFL.
Once the Fowler funding became problematic, Ebersol lacked the resources or investment
35 ECF No. 246.
36 ECF Nos. 269, 267.
37 ECF No. 300. The Joint Pre-Trial Order is 123 pages, excluding the attached exhibits. The Pre-Trial Order lists
13 stipulated facts and 11 stipulations as to what law (Delaware, Texas, or federal law) applies.
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base for AAF to launch its first games. Tom Dundon was the only alternative that could support
AAF through its first season. Dundon’s investment and control of ESMG removed Ebersol’s and
the previous ESMG board members’ decision-making power and control over AAF. Dundon and
his designated representative, John Zutter, determined early on that AAF needed to rid itself of
unfavorable media contracts, vendor deals, and personnel. As a result, Ebersol stated that Dundon
would not consider other investors or sponsors, with the attendant effect that Dundon would be the
only source of funding for AAF. Further, Ebersol maintained that Dundon had always represented
to him that Dundon would fund AAF beyond its first year of operations. When Dundon told
Ebersol that he would not provide any funding beyond roughly $70 million, Dundon knew, based
on the available financial information, that AAF would lose money in its first year and would fail.
Ebersol says that Dundon orchestrated AAF’s demise for the sole purpose of divesting AAF of its
most important assets: its technology and player contracts.
Ebersol says that Dundon gave him assurances about the $250 million investment, and this
representation provided Ebersol with false hope about the success of AAF. Ebersol relied upon
Dundon’s statements to the media and other persons connected with AAF that Dundon was
committed to the long-term success of AAF. Trustee argues that Dundon did no due diligence into
AAF’s financial condition. As such, any evidence about AAF’s misrepresentations regarding
AAF’s financial condition is unavailing because Dundon made no effort pre-investment to
ascertain AAF’s financial stability. Ebersol maintains that through Dundon’s and Zutter’s control,
they breached their fiduciary duty to the ESMG board, AAF’s investors, and the players. Had
Dundon acted with AAF’s best interests in mind, Dundon could have facilitated AAF’s survival.
Dundon, Zutter, and DCP see it differently. Dundon is steadfast in his statements that he
never told Ebersol, AAF, or his employees that his commitment or investment exceeded
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$70 million. Dundon maintains that his media statements were nothing more than “puffery” and
intended to market AAF. Further, Dundon and Zutter maintain that contractually, DCP was only
committed to the $70 million investment. Dundon notes that AAF was financially insolvent when
he and Zutter took over and that Dundon wanted all media and vendor contracts renegotiated to
reduce costs and achieve viability. Moreover, AAF’s business model was not sustainable. Further,
when DCP employees reviewed accounts payable and vendor agreements, they realized that a
$70 million investment was woefully inadequate to fund AAF. Dundon says that he, Zutter, and
DCP reached the difficult decision that AAF could not survive under its present structure and that
bankruptcy and/or an asset sale were the only options to salvage AAF. Dundon insists he wanted
AAF to succeed, but by the time he and DCP became involved, there was not enough cash or time
for them to keep AAF alive.
S UMMARY OF WITNESS T ESTIMONY AND CREDIBILITY DETERMINATIONS
The Court heard from 23 witnesses and admitted hundreds of exhibits. The Court will
briefly summarize each witness’s testimony for context, subject to making findings of fact, and
provide its evaluation of each witness’s credibility. The operative events in this litigation occurred
more than five years ago—many of the witnesses have not thought about the events of late 2018
and January–April 2019. Understandably, some witnesses do not recall much from their
involvement in AAF or DCP at that time. Nonetheless, given that the parties dispute much of what
happened, credibility and recollection are paramount in this Court’s findings of fact.
Roger Goodell
Roger Goodell, Commissioner of the NFL, testified by video for roughly 25 minutes.
Goodell vaguely recalled discussing the possibility of an NFL developmental league concept with
Ebersol. Goodell was aware of the possible technological aspects of AAF but could not offer an
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opinion on AAF’s viability. Goodell stated that spring leagues are inherently problematic and
unsuccessful. Goodell’s testimony was credible but of little probative value other than his
acknowledgment that spring football leagues are unsuccessful.
Charles Ebersol
The Court finds Mr. Ebersol charismatic, engaging, creative, driven, and smart. Ebersol
was well-liked by AAF employees, and AAF staff appeared to respect him. Nonetheless, Ebersol’s
testimony over multiple days was inconsistent at times and questionable regarding operative facts.
His direct examination was, at times, confused and disorganized, which did not enhance his
credibility. Ebersol professed concern for the AAF players, yet Ebersol allowed AAF to play the
first game of the season with insufficient funds to pay the players. Ebersol was unwilling to put
his personal resources into AAF to pay players or sustain AAF operations. While Ebersol appeared
sincere in his testimony on behalf of Trustee and the players, the reality is that he was testifying in
exchange for his release from any liability to Trustee or the players, with the added incentive of
possibly recovering something in this litigation if Trustee is successful.
Ebersol testified credibly about his business plan for AAF, and he was thoughtful in
selecting his support personnel and AAF team coaches. The Court recognizes that Ebersol had no
control over Fowler’s demise as an investor, which served as the catalyst for Dundon’s
involvement. While Ebersol discussed investing in AAF with several investors, little capital was
actually raised. Ebersol testified that his initial conversations with Dundon centered on obtaining
a bridge loan to meet immediate financial needs (such as paying the players for their first game),
and that Dundon raised the idea of a much higher financial investment. Ebersol’s recollection of
the terms regarding the investment is not any more probative than what Dundon testified; Ebersol
could not recall how the investment would be made, the terms, the structure (equity or debt or a
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combination), or what Dundon’s role would be after the investment. Notably, at no time during
Ebersol’s examination did Ebersol say he thought Dundon’s alleged investment of $250 million
was “puffery” or for media purposes only. Ebersol consistently maintained that Dundon told
Ebersol that he would invest $250 million in AAF. Ebersol also testified credibly that Dundon did
not conduct any pre-investment due diligence and did not want access to any data room containing
AAF financial information.
Ebersol’s testimony was less than clear as to whether he solicited ESMG board approval
of Dundon’s investment or complied with the ESMG governing documents regarding board
approval prior to Dundon’s investment and dissolution of ESMG stock. Ebersol was unclear if
stockholders knew that their stock was being diluted until after DCP acquired 75% of ESMG.
Ebersol acknowledged that, prior to Dundon’s investment, AAF had over 1,000 employees,
including players, and that if Fowler had made his full investment of $250 million, AAF would
have operated at a loss—even with revenue. Ebersol agreed that internally, AAF staff had advised
him that projections showed AAF was underfunded and unable to pay vendors and media outlets.
Ebersol also testified that he had little involvement in the decision to file for bankruptcy or in
determining which chapter ESMG and related entities should file under.
In sum, while the Court found Ebersol’s testimony credible at times, Ebersol was not any
more credible than Dundon about Dundon’s investment or the terms of his investment. Ebersol
was evasive about AAF’s financials and reluctant to testify about AAF’s failure to pay players or
vendors. While the Court recognizes that Dundon conducted no due diligence, such that there was
no justifiable reliance under a claim of fraud, neither Ebersol nor AAF accurately portrayed the
state of financial distress AAF was in at the time Dundon made his investment.
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Gabriel Giordano
Gabriel Giordano is a former BYU football player who has coached high school football.
Giordano previously knew Ebersol from another sports venture and was intrigued by AAF model.
He lives in San Diego and, given that San Diego no longer had an NFL team, believed there was
potential for an AAF team there. Giordano asked Ebersol about being involved in AAF, and
Ebersol suggested that he lead the local effort to attract investors through the “FANchise” model,
which allowed an investor to invest locally in an AAF team. Giordano took the initiative to contact
local investors to invest in the San Diego AAF team. Giordano stated that once Dundon invested
in AAF, Giordano was terminated because Dundon did not believe that outside investment was
necessary. Giordano was not privy to the DCP/AAF negotiations regarding Dundon’s investment
and did not have any personal knowledge about Dundon’s investment. While Giordano was
credible, his testimony was of limited value, other than to underscore Ebersol’s plan to attract local
investor interest through FANchises, which was unsuccessful and raised little money.
Megan Hanson
Megan Hanson was responsible for public relations and media communications for
ESMG/AAF. She worked for Ebersol in one of his other companies before joining ESMG. She
now works for Ebersol in one of his current ventures. Hanson testified that she thinks Ebersol is
honest. Hanson was credible. She had a firm recollection of her involvement in ESMG and testified
convincingly about the events regarding the media publication of Dundon’s investment. While
Hanson did not recall everything about her time at ESMG, when she did recall something, the
Court had the definite belief that her testimony was accurate and true.
Hanson initially became involved with AAF when training camp began, and AAF wanted
to publicize training camp in San Antonio and the League’s start-up. She talked daily with Ebersol.
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Hanson was intimately involved in the Carolina Hurricanes’ press release regarding Dundon’s
investment in AAF. Hanson explained that, based on her experience in public relations, it is not
wise to be overly specific in media blasts, as they could be misinterpreted. She explained that
Dundon wanted to see the drafts of the press release and that Dundon was most anxious to publicize
his investment in AAF. Several persons were involved in writing the press release, and several
drafts were circulated. Hanson cautioned them about using too much hyperbole or too many
details. Hanson further suggested not including any specifics regarding financial information.
Dundon told Hanson that he wanted the AAF press release to state that he was making an
investment of $250 million in AAF. Hanson acknowledged that she did not comment on the use
of the word “commitment” versus “investment” in the press release. Hanson also testified that she
was not part of the changes being made to the press release. Hanson acted as the conduit to Ebersol
and Dundon regarding any AAF media communications.
Hanson stated that Dundon leaked the press release to a local sports reporter, which was
not her advice on how to publish the press release. When AAF decided to cease operations, Hanson
discussed with Zutter how best to publicize that AAF was ceasing operations. Zutter told Hanson
that he did not want any attribution to who decided to cease operations.
Thomas Dundon
Dundon is a self-made billionaire. Dundon has a world-class business acumen and is adept
at making marginal companies profitable. Dundon is well regarded in the business community, but
several witnesses opined that Dundon is not particularly warm or personable. Nonetheless, every
witness who commented on Dundon’s personality praised him for his personal accomplishments.
Before trial, Dundon consistently maintained that he was only making an initial investment
in AAF for $70 million and that any commitment to invest up to $250 million was contingent on
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several unspecified conditions. Dundon said that his initial impression of Ebersol was that he was
energetic and charismatic. His recollection regarding his acquisition of AAF is unclear. Dundon
acknowledged that he expanded Ebersol’s initial request for Ebersol to fund player payroll and
make a bridge loan that went from $10 million to an investment of $70 million. Dundon,
notwithstanding all his business and financial acumen, could not recall the initial terms of the AAF
deal and any specifics about how his investment would fund AAF; the structure of the investment
(equity, debt, or a combination); what percentage of AAF Dundon or DCP would receive as part
of any investment in AAF; or how Dundon would obtain control of AAF.
Dundon used the words “commitment” and “investment” interchangeably, attaching
different significance to each word depending on what part of the AAF deal he was explaining.
Dundon stated during his trial testimony that he did tell Ebersol about the potential for a
$250 million commitment, but for the first time in Court (after three depositions), Dundon said his
use of the words “$250 million commitment” was merely puffery and marketing. Neither Dundon
nor Ebersol disputes that Dundon said $250 million during Dundon’s acquisition of AAF, but both
disagree as to the context and terms of what $250 million meant. Other than various press releases
stating 	$250 million 	commitment 	or 	investment, 	nowhere 	is 	there 	proof 	of 	$250 million
investment being part of the Term Sheet.
Trustee tried to elicit testimony from Dundon that the purpose of the AAF acquisition was
to take advantage of the tax benefits associated with investing in economic opportunity zones. The
Court could not discern from Dundon’s testimony or admitted exhibits that achieving tax attributes
was the motivating reason to acquire AAF. Rather, the testimony from Dundon and others was
that because Dundon was unable to buy an NFL team, owning the Hurricanes was the next best
thing alternative to owning a sports franchise. Also, because Dundon was unable to buy an NFL
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team, he was attracted to buying a football league.
Dundon testified about matters that related to his fiduciary duty to AAF. Dundon stated
that he neither attempted nor allowed outside investment in AAF once he acquired it. Dundon
agreed that he and Zutter initiated cost-saving measures on vendor and media contracts and
required AAF employees to compromise outstanding balances. More troubling, evidence was clear
that while AAF employees were negotiating reductions in unpaid bills, Dundon and Zutter had no
intention of paying any reductions on delinquent bills and did not authorize payment of most of
the compromised bills. Also, Trustee intimated that Dundon’s assurances of a $250 million
commitment were to persuade the AAF players to continue to play, notwithstanding that
$70 million could not sustain AAF operations for the entire season. Prior to filing bankruptcy,
Dundon knew by late March 2019 that AAF was not sustainable based on revenue projections and
available cash. As such, Dundon and Zutter explored filing options for bankruptcy without ESMG
involvement or Ebersol’s consent. Dundon asked Ebersol to come up with options to save AAF,
but ultimately concluded bankruptcy was his only option. Dundon could not explain or recall his
decision-making process about filing bankruptcy or why Dundon and Zutter chose to file under
chapter 7 of the Bankruptcy Code, other than he took the advice of counsel on filing bankruptcy.
Most importantly, Dundon’s testimony was no more credible than Ebersol’s on what “the deal”
was such that the Court cannot weigh either Dundon’s or Ebersol’s testimony more favorably—
they cancel each other out.
Walter Ballard
Walter 	Ballard 	was 	the 	corporate 	representative 	under 	Rule 30(b)(6) 	for
PricewaterhouseCoopers (“PwC”). He was designated as a witness to testify as to tax attributes for
the Dundon entities. Ballard testified in the course of his work for Dundon that he had worked
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closely with John Zutter and Jeffrey Vanderbilt of DCP. Ballard was asked to review the term
sheet, which he referred to as “Project Football.” Ballard was also asked to consider the tax
attributes connected to acquiring AAF. In particular, Ballard was asked whether acquiring AAF
and treating it as an “economic opportunity zone” would allow Dundon to reduce his overall tax
liability.
Ballard had little recollection regarding the Term Sheet or the terms of the parties’ contract.
Ballard was also unsure if he had any direct discussions with Dundon or his team about the benefits
of acquiring AAF and using it to acquire economic opportunity zone tax credits. Ballard was
pressed about any net operating losses (“NOL”) from AAF and how that might reduce Dundon’s
tax liability. Ballard explained that assuming there were NOLs from AAF, the tax benefits for
Dundon using those NOLs would be limited at best. Ballard has no recollection that Dundon and
Zutter considered the tax benefits of acquiring AAF. Also, Ballard said that while he was briefly
involved in assisting Dundon and Zutter with a potential bankruptcy filing, he did not recall that
they filed for bankruptcy to obtain a tax benefit.
The Court found that Ballard was credible and forthright. Ballard was unable to corroborate
Trustee’s theory that acquiring AAF was to enable Dundon to take advantage of an economic
opportunity zone tax benefits or that the filing of bankruptcy had anything to do with tax
considerations.
Michael Sundheim
Michael Sundheim was the media relations manager for the Carolina Hurricanes and served
as director of hockey operations. Sundheim was responsible for promoting the team through media.
Sundheim explained that the Hurricanes have internal protocols to ensure the accuracy of press
releases but stated that the team did not correct errors or omissions present in press releases
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procured from other parties.
Sundheim explained that he would get press releases from Megan Hanson on behalf of
AAF. Sundheim did recall that Dundon was involved in the Hurricanes’ press release regarding
Dundon’s acquisition of AAF. Also, Sundheim recalls that Dundon used the phrase “$250 million
commitment” in the press release. Sundheim recalled that it was rare for Dundon to be intimately
involved with any press release. Sundheim did not recall whether the AAF acquisition was for
$70 million or $250 million, although Sundheim did recall making changes to the press release.
Sundheim explained that if Dundon wanted to issue a press release on his own, he did not need to
clear it through him. Sundheim was credible but had no recollection of what Dundon said other
than what was contained in the Hurricanes’ press release. Sundheim could not recall if Dundon
intended to invest or commit $250 million into AAF.
Kellie Vugrincic
Kellie Vugrincic worked at AAF and was primarily responsible for payroll and human
resources. She previously worked in the human resources department of the NBA’s Golden State
Warriors. She stated that she knew AAF was a start-up company and was familiar with the Fowler
investment. Vugrincic testified that players not being paid the first week of the season was not the
first time that AAF was in danger of not making payroll. She was also responsible for employee
healthcare and “on boarding” of players—assistance with direct deposit for their checks, training
camp details such as hotel stays and transportation. She was familiar with accounts payable as it
pertained to human resources.
Vugrincic attended some of the meetings in Dallas in February 2019. She recalled meeting
with Dundon, Zutter, and other members of DCP. They asked Vugrincic about her role at AAF
and inquired about human resources. Vugrincic was appreciative that Dundon had knowledge of
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managing a major sports team and how that experience assisted Dundon in understanding the
structure of AAF. Vugrincic was aware of, but did not participate in, reducing claims or making
decisions about which vendor to pay. Vugrincic did observe DCP personnel negotiating bills and
instructing AAF personnel on which bills to pay. Vugrincic did terminate AAF personnel at DCP’s
direction.
Vugrincic mostly testified about the lack of certainty regarding whether the initial player
payroll would be made and who would be the source of the funds. She also expressed frustration
with the “false narrative” that player payroll would be paid during the first week of the season but
was uncertain as to the source of the false narrative. Vugrincic was aware that without DCP’s
investment in AAF, AAF would have failed the first week of the season. Vurgrincic did not have
any personal knowledge about the type of investment Dundon was making or any of the material
terms of the investment. The Court finds Vugrincic credible and that the probative value of her
testimony was that without Dundon’s investment, AAF would have failed.
Mark Teitelman
Teitelman is a producer and director for live sports. He has an impressive work history in
the sports industry, having worked for the NFL, Amazon’s Thursday Night Football, and the NFL
Combine and Draft. Teitelman is knowledgeable about live sports, particularly football, and how
to interpret television ratings. He was attracted to the idea of a spring football league and the
opportunity to run the TV production for AAF.
Teitelman explained that the AAF games were produced in Arizona and that the League
produced two games per week. Teitelman said that remote production was new and innovative.
Teitelman explained that the initial ratings for the AAF games were excellent across all
demographic groups and that AAF either outperformed or was competitive against other broadcast
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sports, such as the NBA and National Hockey League (“NHL”). Teitelman noted that both CBS
and the NFL Network were pleased and surprised by how well AAF’s ratings were. Teitelman
noted that the AAF games on TNT also did well for a Saturday nighttime slot on a cable network.
Also, given that CBS and TNT were not interested in producing the AAF games, AAF
elected to self-produce games, which gave AAF more control over its content. Teitelman
acknowledged 	that 	AAF 	was 	having 	difficulty 	competing 	against 	the 	NCAA 	basketball
tournament. In sum, Teitelman provided a good portrayal of how the AAF competed against other
sports during the initial part of its season. The difficulty in evaluating Teitelman’s testimony is
how well AAF would have competed against golf, basketball, and hockey had it successfully
concluded its season.
Eric Anderson
Eric Anderson owns and manages investment groups. He is the owner of West River
Group. Anderson looks for long-term investments and reviewed the DCP/AAF term sheet.
Anderson stated that he had a business relationship with Dundon and that he told Dundon about
investing in AAF. Anderson could not recall any specifics about AAF and the term sheet. Anderson
referred the possibility of investing in AAF to Dundon because he knew that Dundon was
interested in investing in sports groups. Anderson explained that he generally does not invest in
startups because of the significant need for capital and the risks of investing. In sum, the only
probative testimony that Anderson provided was that he referred Dundon to Ebersol for investing
in AAF.
Craig Kessler
Craig Kessler met Dundon in early 2016 when Dundon was on the board of Top Golf and
Kessler worked there. Kessler described Dundon as a private person. Kessler said that Dundon is
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smart, full of good ideas, and a good operator. Kessler noted that Dundon has an excellent track
record in business. Kessler had no understanding of the Dundon investment in AAF or any of the
terms of the investment. Kessler vaguely recalled discussing AAF with Zutter . Kessler could offer
no probative testimony about Dundon’s involvement in AAF.
Daniel Miller
Daniel Miller is a friend of Gabriel Giordano. Giordano sent Miller some information about
AAF, including a PowerPoint about AAF and some financial information. Miller described AAF
as an interesting concept, and he did meet with AAF representatives. Miller did consider
purchasing a FANchise and investing $1 million. Miller did not enter into a formal agreement with
AAF, and he believed at the time of making his investment that Fowler was still investing money
in AAF. Miller was supportive of getting a team in San Diego. After Miller became aware of
Dundon’s investment in AAF, he elected not to pursue further investment in AAF. Miller has no
recollection of what the Dundon investment was in AAF or the terms.
Dawn Belt
Ebersol 	described 	Belt 	as 	the 	attorney 	for 	ESMG. 	Belt 	works 	at 	the 	firm 	of
Fenwick & West. She has an MBA and a law degree and describes herself as a corporate attorney.
Belt attended some of the meetings in February 2019 between AAF and Dundon. She created some
of the corporate documents for Debtors. Belt also took the minutes of the ESMG board meetings
regarding the Dundon acquisition and worked on the Fowler investment. Belt explained that the
Fowler investment was a mixture of equity and debt, and that if AAF were liquidated, then Fowler
would have his stock liquidated first.
Belt had a limited recollection regarding the Dundon investment. She could not recall if it
was for $70 million or $250 million. Belt understood that Dundon’s Series 2 Stock would be a new
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investment. Belt did not know if she had prepared the Term Sheet for the Dundon investment. She
was familiar with the February 19, 2019 holder voting agreement that was a condition of Dundon’s
investment, such that Ebersol had Fowler’s proxy to vote his shares.
Belt served as the ESMG secretary for the board meetings in late February 2019 and took
minutes of the ESMG board’s discussion. Belt has no recollection of Dundon investing
$250 million in AAF, any draft of the Term Sheet indicating a $250 million investment, or a fully
executed term sheet. Belt explained that, based on the ESMG governing documents, Ebersol could
not, on his own, accept a $250 million investment without ESMG board approval. Belt understood
that ESMG accepted roughly $12 million from DCP before board approval of the Dundon
$70 million investment. Belt understood that Dundon got 75% of ESMG in exchange for
$70 million investment. The ESMG board approved and ratified all prior actions involving
Dundon investing $70 million.
Belt observed that there is no discussion in the ESMG minutes about an additional
investment of $180 million or a total investment of $250 million. Belt did not recall if it was an
event of default under the MGM financing documents for Dundon to have taken over majority
ownership in ESMG. Also, Belt was unsure whether David Pottruck waived his rights under his
loan documents to declare a default due to the Dundon investment and change of ownership. In
summary, although Belt is a sophisticated attorney who was alleged to be ESMG’s attorney and
secretary, her memory and understanding of the Dundon transaction are poor at best. As such, Belt
could not offer any credible testimony beyond what was contained in the minutes regarding
Dundon and Ebersol’s February 2019 agreement.
Kevin Freedman
Kevin Freedman testified that he met Ebersol in late 2017 and that his expertise is in
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working with entrepreneurs and startups. Freedman acts as a consultant, providing guidance on
strategies to help startup companies achieve success. Freedman explained that as a consultant, he
was hired to secure funding for AAF. Freedman testified that he worked on negotiating the terms
of the Fowler investment and drafting related documents. According to Freedman, Fowler’s
investment had two components: equity and a letter of credit. Freedman agreed that Fowler did
not meet his funding commitments. Additionally, other than Fowler, Freedman had difficulty in
soliciting investor interest because he knew little about AAF revenue and most investors wanted
to know when AAF would become profitable before investing in AAF.
Freedman explained that he went from a consultant to AAF to being the Chief Operating
Officer (“COO”) for the non-football operations of AAF. Freedman focused his time on obtaining
a binding agreement with the NFL and attempted to negotiate a term sheet with the NFL that would
include a spinout for a technology company and AAF appearing on the NFL network.
Freedman stated that as training camp began, AAF spending requirements increased.
Freedman was aware of the need for additional funding and attempted to secure additional
investment in December 2018–January 2019. Freedman explained that he was unsuccessful and
does not recall who he spoke to about the investment. Thereafter, Freedman knew that by the time
AAF started playing games on February 9, 2019, cash flow was low and that AAF needed another
source of funding other than Fowler.
Freedman said he was involved in negotiating the Term Sheet with DCP and had discussed
the Term Sheet and its changes with Zutter and Belt. Freedman recognized that the $70 million
was a red-line change, but he could not recall its origin. Freedman opined that the words
“75% control” dictate ownership of AAF. Freedman saw both the Fowler and Dundon terms
sheets, and he did not see anything in writing about an additional $180 million.
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Freedman also worked with Dundon post-investment. Freedman recalled media interviews
with Dundon and his use of the phrases “$250 million investment” and “my money is in the bank.”
Freedman observed Dundon instructing AAF employees to negotiate with vendors to reduce
outstanding invoices. Freedman was involved in Dundon’s discussions with the NFL Players
Association (“NFLPA”), and it was Freedman’s impression that if AAF achieved unspecified
milestones, the NFL might consider a partnership with AAF.
Kevin Farrell
Farrell had an undefined role at AAF that he described as a “jack of all trades” role that
included tracking expenses. Farrell testified that he initially served as a consultant to AAF and
later became an employee with an unspecified role or title. Farrell was less engaged with the AAF’s
football operations. Farrell testified about the logistical challenges involved in managing eight
football teams and their operations across eight cities. Farrell was aware that by the end of training
camp, AAF had used up all of Fowler’s funding and that AAF was on the brink of insolvency.
Farrell knew that vendor claims needed to be paid, and that Ebersol was seeking new investors.
Farrell estimated that the opening week vendor payables were roughly $10 million to $11 million.
Farrell’s testimony was consistent with that of other witnesses who stated that without the Dundon
investment, AAF would have failed.
Farrell was privy to the Ebersol-Dundon discussions in February 2019 and said he knew a
one-page deal was in the works to secure cash for AAF and football on the field. Farrell knew
through Allen Kantowitz that there were accounts payable that needed to be paid immediately.
Farrell was aware that there was an AAF accounts payable tracker, but was less clear about how
accurate it was. Farrell attempted to keep DCP apprised of cash needs on a weekly or daily basis.
Farrell understood that he needed either Vanderbilt’s or Zutter’s approval to pay bills. Farrell also
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understood that any day-to-day AAF operational decisions required DCP approval. Farrell also
testified that any settlement of an invoice required DCP approval.
Jeffrey Vanderbilt
Vanderbilt was the Chief Financial Officer (“CFO”) for DCP and operated other Dundon
businesses. Notably, Vanderbilt served as CFO of the Carolina Hurricanes, including running the
arena where the Hurricanes played and ensuring compliance with the NHL’s revenue-sharing
agreement. Vanderbilt worked directly with Dundon and described him as direct and matter-of-
fact, with an acute ability to turn failing businesses around. Vanderbilt had no role at either ESMG
or AAF and was neither an employee nor a contractor for AAF. Vanderbilt reported directly to
Dundon and worked closely with Zutter.
Vanderbilt stated that he did not know about AAF until after Dundon began discussions
with Ebersol to acquire AAF. Vanderbilt acknowledged that he heard about Dundon’s public
statements about investing $250 million in AAF but did not question the veracity of Dundon’s
statements or their purpose. Vanderbilt said that he thought the limit of Dundon’s investment in
AAF was $70 million and that Vanderbilt’s experience was that Dundon did not do a deal that was
not well documented. Vanderbilt stated that his first task regarding AAF acquisition was to obtain
Directors and Officers Insurance for Dundon and Zutter as board members of ESMG. Vanderbilt
accessed the AAF data room. Vanderbilt did not recall seeing any financial projections. Although
Vanderbilt was presented with several emails as either the originating or receiving party, he could
not recall any specifics about AAF’s cash needs, the status of any accounts receivable, or balances
on any AAF employee credit cards. Vanderbilt said that AAF and its employees were cooperative,
transparent about AAF’s operations, and forthcoming with financial information during the
Dundon acquisition of AAF.
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Vanderbilt stated that shortly after the DCP meetings with AAF around February 14, 2019,
he saw some financial projections and thought that if he could reduce expenses by roughly 30%,
AAF might have survived its first year of operations. Vanderbilt agreed that DCP originally
decided not to pay vendors, but later concluded that it might pay some vendors to maintain AAF’s
going-concern value. Vanderbilt stated that he met with Kevin Farrel of AAF almost weekly to
identify all accounts payable due that week, and which accounts payable or vendor bills AAF could
pay. Vanderbilt did not think the AAF acquisition was to take advantage of economic opportunity
zones to reduce Dundon’s tax liability.
Vanderbilt testified that DCP had to review AAF at two levels: team expenditures and
league operations. Vanderbilt noted that team operations were conducted individually and that
none of the teams had established good record-keeping practices. For example, Vanderbilt found
that the teams lacked both a policy on travel and expenses and controls to monitor stadium
contracts or vendor claims. Vanderbilt observed that the accounts payable tracker was inaccurate,
negatively affecting financial forecasts and cash allocation to accounts payable. Vanderbilt
conducted a financial analysis to determine whether AAF could operate on the remaining funds
from the $70 million investment and concluded that AAF would need about $7 million per week.
As AAF operated from week four of the season forward, Vanderbilt realized that AAF was losing
more money than expected and could not sustain operations based on Dundon’s remaining
investment without more capital being infused into AAF. Vanderbilt explained that by week eight
of the season, AAF would have to cease operations due to insufficient revenue and capital.
Sonia Desai
Sonia Desai was Plaintiff’s expert on valuation. Desai works in Toronto with a public audit
firm. Desai has certification as a professional accountant (Canada) and is a forensic accountant.
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Desai has done business appraisals for over 18 years in several types of businesses but has not
valued a sports team. Desai stated that, because AAF was in its infancy with little revenue, she
examined other valuation variables, such as market transactions, debt versus equity, and asset and
liability data.
Desai recognized that it was difficult to value AAF because it did not have a track record
of performance. She concluded that the best way to value AAF was to treat it as a technology and
sports league. Desai explained that she was hired to determine AAF’s enterprise value (“EV”) by
valuing AAF based on its debt structure, equity, and cash reserves. Desai examined AAF’s value
the day before Dundon took over (February 13, 2029) and the day the AAF ceased operations
(April 2, 2029). Desai gave no consideration to the effect of COVID on future AAF operations.
Desai did not conduct any fraud analysis or breach-of-fiduciary-duty analysis. Desai considered
the viability or failure of football spring leagues.
Desai explained that there were three primary ways she could value AAF based on its
assets, income, or observable market transactions. She decided to value AAF based on market
transaction and income because the asset approach would not consider the intangible value of
AAF. In conducting her analysis, Desai did not question the reliability of any document. Desai
determined that EV of AAF was $144.1 million on February 13, 2019, using the market transaction
approach because AAF had limited historical income data. In reaching her valuation, Desai relied
upon the Fowler and NFLPA transactions as the best indicators of value. She did not consider the
Dundon investment in her analysis because it was disputed. She also considered AAF’s projections
in her analysis because she viewed them as reliable.
Desai acknowledged that, in preparing her report, she did not use the $82.5 million
valuation that Ebersol and Dundon discussed in the term sheet negotiations around February 14,
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2019, as an indication of value. Further, Desai made no adjustment for either AAF or DCP, causing
AAF to fail. Desai also did not include causation in her computation of damages. Additionally,
Desai declined to calculate the loss of marketing on AAF, the lack of sponsorships, or the absence
of digital revenue. In addition, Desai failed to recognize that the $1 million Bird investment was
returned, rendering her reliance on the $115 million valuation moot. Further, the deal with CBS to
broadcast games was never executed, and no warrants were exercised with the NFL/32 equity deal.
Also, Fowler made his investment on November 21, 2018, and Desai used a valuation date of
February 13, 2019, 84 days after Fowler’s investment.
In sum, while the Court believes that Desai is competent, her methodology is unreliable
and fails to account for all the variables affecting AAF’s value. Desai made unrealistic assumptions
and failed to consider several factors that would have reduced her valuation of AAF. More
importantly, the data points she used to reach her value—the Fowler investment, the CBS deal,
and the NFL/32 equity investment—were unreliable. Finally, Erica Bramer, Defendants’ expert,
demonstrated that Desai’s analysis was plagued by improper assumptions and a reliance on AAF
data that was clearly wrong. As such, the Court cannot find that Desai’s determination that AAF
lost $144.1 million in value because of Dundon/DCP’s involvement.
John Zutter
Three primary witnesses testified regarding the Dundon investment/commitment in AAF:
Ebersol, Dundon, and Zutter. Like Dundon, Zutter possesses superior business acumen, despite
having no formal education in finance. Zutter rose through the ranks of Wall Street based upon his
tenacity and propensity to understand complex financial transactions and evaluate a business’s
potential. Before working for Dundon, Zutter worked for JPMorgan, where he met Dundon. Zutter
then worked with some of Dundon’s other companies before taking an executive role at DCP.
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Zutter exhibits a nearly photographic memory of Dundon’s businesses and their relationships.
Zutter is closely aligned with Dundon and is one of Dundon’s most trusted advisors. There was no
doubt that, although Dundon was in charge when he took over AAF, Dundon deferred to Zutter’s
judgment and advice.
Zutter acknowledged that he worked on the AAF Term Sheet and worked closely with
members of both AAF and DCP in drafting the Term Sheet. Zutter and Dundon were involved in
making changes to the initial draft of the Term Sheet. Zutter indicated that he learned about the
proposed DCP/AAF deal from Dundon. While Zutter did not recall his conversations with others
involved in the AAF investment with clarity, his name appears on numerous emails, demonstrating
that he had direct involvement in drafting the Term Sheet and operating AAF. Zutter recalls that
Dundon’s initial investment was to be a bridge loan to stabilize AAF through the first week of
games played. Dundon made the decision to expand his investment in AAF to $70 million. Zutter
was non-committal about Dundon’s alleged statements to invest $250 million in AAF, but he
agreed that Dundon made public statements about $250 million, but did not state a $250 million
investment to him privately.
Zutter explained that his primary objectives regarding AAF were to minimize Dundon’s
exposure and risk regarding his investment and to ensure that he and Dundon would have the
requisite control over ESMG and the operation of AAF. Remarkably, Zutter does not recall the
Term Sheet being signed by anyone on behalf of DCP, nor did he retain any copies of a fully
executed Term Sheet. Zutter’s testimony regarding whether Dundon intended and agreed to invest
$250 million in AAF was vague at best. Zutter testified that he knew that Dundon was “telling a
story” about investing $250 million in AAF, yet Zutter never disclosed to anyone his sense that
Dundon was not committed to making a $250 million investment. Zutter was unclear on whether
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Dundon told Ebersol that Dundon was willing to invest $250 million in AAF for the first year of
AAF and beyond. Critically, Zutter did not memorialize in writing whether the Dundon investment
could be more than $70 million, and Zutter concentrated his efforts on making changes to the Term
Sheet, which only evidenced a $70 million investment in AAF.
After the Term Sheet was thought to be fully executed, Zutter focused his attention on
understanding AAF’s debt structure, outstanding accounts payable, and redrafting vendor, media,
and stadium agreements. Zutter also examined AAF’s personnel, evaluating whether their roles
were necessary and their compensation appropriate. Zutter then required that either he or Dundon
approve all expenditures, thereby taking all financial decisions from AAF. Zutter also directed that
AAF personnel seek reductions or compromises of outstanding invoices. Like Dundon, Zutter
admitted that he and Dundon had AAF negotiate settlements on delinquent invoices without any
intention of paying the compromised amount.
In addition to Zutter’s efforts to streamline AAF operations, Zutter was careful to ensure
that any asserted security interests in AAF assets were subordinated to DCP’s investment. He also
insisted that Fowler execute a release of his ESMG board position, such that he and Dundon were
the majority holders in AAF. Zutter also ensured that other ESMG stockholders had their stock
diluted such that he and Dundon acquired a 75% voting interest and control of AAF.
Zutter knew by mid-March 2019 that AAF would run out of the $70 million in funding and
that AAF would have to cease operations without further capital infusions. Zutter enlisted the
assistance of PwC to evaluate whether bankruptcy could preserve Dundon’s investment in the
AAF. Zutter also explored the hiring of bankruptcy counsel and discussed with Bracewell LLP
whether AAF could pursue bankruptcy relief under chapter 11 of the Bankruptcy Code. Further,
Zutter initiated discussions with Dundon about filing for bankruptcy and their options. Zutter first
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considered a pre-packaged bankruptcy and the potential of an asset sale, where DCP would get
AAF’s assets, and the remaining liabilities would be unpaid through bankruptcy. During this time,
Zutter continued to evaluate AAF personnel and the possibility of firing non-essential employees.
Zutter explained that he wanted to “extend the runway” on Dundon’s investment such that it would
lead to an asset sale.
After his initial discussions with PwC and Bracewell, Zutter concluded that AAF was not
viable and that PwC should cease all restructuring work for AAF by late March 2019. PwC’s and
Bracewell’s fees were paid from the remaining funds from Dundon’s investment. Zutter primarily
discussed bankruptcy with Dundon and considered Ebersol’s input as to what options AAF might
have in completing its first season. Nonetheless, Zutter testified that he and Dundon were the ones
who elected to file a chapter 7 bankruptcy.
Zutter was asked about his fiduciary duty to both DCP and AAF. He acknowledged that he
had a duty to both but could not articulate which duty was paramount over the course of DCP’s
involvement in AAF. Zutter tried to cut costs and make AAF more efficient. As controlling
members of ESMG’s board, Zutter and Dundon did little, if anything, to consider what other
shareholders wanted regarding the operation of AAF. Rather, Zutter and Dundon made decisions
without input from the ESMG board and showed little interest in attending ESMG board meetings.
Zutter, like Dundon, took corrective measures to enhance AAF by cutting costs and compromising
accounts payable. Ebersol made misrepresentations regarding the AAF’s financial condition,
particularly as to the number of accounts payable and the amount of revenue AAF was generating.
Zutter spent considerable time investigating AAF’s finances and enlisted both DCP and AAF
personnel to understand how AAF operated. But neither Dundon nor Zutter conducted any due
diligence regarding AAF’s finances. Zutter maintains that no one at AAF approached him about
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outside investors.
Zutter was credible in explaining his role in Dundon’s investment in AAF and in managing
AAF. He was clear in his understanding of the undisclosed financial considerations that impaired
AAF operations. Zutter was less conversant on the details regarding Dundon’s investment and
could not credibly explain whether Dundon intended to invest $70 million versus $250 million,
notwithstanding his close business relationship with Dundon. Also, his testimony regarding
Dundon’s businesses and their relationship was contradictory; he provided less information in his
pleadings filed with the Court but could recall in exacting detail how Dundon structured his
businesses on his direct examination. Like Ebersol and Dundon, Zutter could not explain what the
exact terms of the Dundon investment were or the precise amount. The Court cannot find that
Zutter’s testimony on the alleged contractual terms of the term sheet was any more probative than
Dundon’s or Ebersol’s.
Joseph Petrucelli
Plaintiff listed Joseph Petrucelli as a CPA who qualifies as a certified financial analyst. He
teaches forensic accounting at a college level and has provided litigation support. Petrucelli was
asked to provide an analysis of whether Dundon and DCP had sufficient liquidity to fund AAF for
an additional $180 million. Petrucelli was qualified to render an opinion, but did not do so at the
time he was deposed. At trial, Plaintiff’s counsel attempted to elicit testimony that Defendants did
not have the requisite liquidity to fund AAF for the full amount of $250 million. Defendants
asserted that, given Petrucelli’s prior testimony that he had no opinion about Defendants’ liquidity,
Petrucelli could not offer an opinion at trial. The Court sustained Defendants’ objection, and the
Court ruled that it would not consider Pertucelli’s testimony on liquidity.
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Robert Whitsitt
Mr. Whitsitt has considerable experience in sports, notably in the NBA, serving in general
manager or leadership roles with the Indiana Pacers, Seattle SuperSonics, Portland Trail Blazers,
and Kansas City Kings. His responsibilities for those teams included developing team operating
budgets, securing naming rights to basketball stadiums, managing stadiums, and broadcasting
deals with major networks. He also worked for Diamond Sports Group, which provided regional
sports casts before filing bankruptcy. Whitsitt was asked to opine on AAF’s broadcast operations.
Whitsitt noted that ticket and sponsorship projected sales were substantially lower than actual sales
and that broadcasting AAF games on major television networks was having a significant cash drain
on AAF operations. Whitsitt observed that broadcasting AAF games would support its brand,
which would in turn make the league more profitable. That said, Whitsitt questioned the AAF’s
business model of absorbing $275,000 to $300,000 in production costs for broadcasting games and
paying the networks to broadcast the games.
Whitsitt noted that AAF had a four-year arrangement with CBS, which granted CBS
exclusive control over broadcasting AAF games, including AAF covering production costs and
sharing revenue with CBS. Further, AAF could not negotiate broadcasts of its games with other
networks. In addition, Whitsitt stated that AAF’s broadcast agreement with the TBS network
required AAF to be responsible for a “quality broadcast” and pay for all the associated costs in
TBS televising AAF games.
Whitsitt contended that a fundamental flaw in AAF’s spring league was that, by spring,
consumers were experiencing “football fatigue” and would be less interested in watching football.
Moreover, football fans would be more interested in NFL-related events such as the draft. Whitsitt
also noted that AAF’s hurried start to its games did not provide the AAF teams or its potential
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fanbase with enough lead time to prepare for the start of the league.
Whitsitt stated that Dundon’s approach to offering free advertising to marquee advertisers
such as AT&T and Carvana was a sound business practice. Whitsitt explained that by offering free
advertising to notable businesses such as AT&T and Carvana, AAF had the attendant effect of
legitimizing itself and attracting other advertisers. He also explained that, due to the rushed start
of AAF, it did not have sufficient lead time (typically 12 months) to attract and negotiate contracts
with advertisers. Whitsitt stated that AAF failed to sell all of its television advertising slots by the
time Dundon took over, thereby making it more difficult to sell ads to advertisers with revenue
projections that fell short of actual revenues.
Whitsitt argued that AAF overpaid its players more than other spring leagues, such as the
XFL. He also noted that a spring football league has too many competing sports leagues, such as
the NBA playoffs, NHL playoffs, NCAA March Madness, NASCAR, the Master’s gold
tournament, and the beginning of MLB, to sustain revenues.
On cross-examination, Whitsitt acknowledged he had no real experience with a startup
league, the NFL, or any experience with technology or sports apps. Whitsitt was not conversant
on AAF’s connections with Dick Ebersol or how AAF negotiated its vendor deals. Whitsitt
recognized that the AAF assembled coaches and GMS with considerable NFL and/or collegiate
football experience, as well as an understanding of the impact their reputations would have on fan
support of AAF. Whitsitt also lacks an understanding of how AAF’s streaming rights would have
impacted future revenues. In sum, while Whitsitt knew much about the operations of professional
basketball teams, he does not have real experience with professional football or start up leagues.
Kenneth Schanzer
Kenneth Schanzer has an impressive television background with experience working as an
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executive vice president for NBC baseball and as president of NBC Sports. He is well acquainted
with Dick and Charlie Ebersol. As the former president of NBC Sports, Schanzer has considerable
experience in negotiating broadcast deals, strategic partnerships among different sports leagues,
and hands-on experience with the NFL and Notre Dame football. Schanzer explained that he
partnered with Vince McMahon of the XFL to start a spring league and argued that the downfall
of the XFL was that it was never properly promoted to the public. He explained that
Charlie Ebersol learned from his experience with the XFL and recognized that AAF would have
to structure a league that was “authentic.” Schanzer explained that having coaches with NFL
playing and coaching experience and involving Bill Polian (former General Manager of the
Buffalo Bills) made AAF more attractive to football fans.
Schanzer discounted Whitsitt’s testimony about the sufficiency of AAF’s number of
advertisers, noting that in his experience, no sports league gets favorable broadcasting rights until
the league is established. Schanzer recognized that AAF’s retention of its streaming rights would
have been a valuable asset in today’s streaming environment. Also, Schanzer recognized that CBS
allowed AAF to promote its brand during the 2019 AFC Championship game, which was more
valuable than any loss in advertising revenue. Also, Schanzer opined that “football is king” in
American sports media and that there is no saturation point to televising football games.
Nonetheless, Schanzer admitted that AAF’s broadcasting agreement with CBS and TBS was not
the industry norm and that it would be difficult for any league to survive its first year of operation
with advertising revenue. In sum, while Schanzer was credible like Whitsitt, neither had direct
experience with spring football leagues and the unique challenges that spring football leagues have
in succeeding. Moreover, while both offered their perspective on the necessity of having
advertising revenue for AAF, the Court finds that AAF’s obligation to pay to broadcast its games
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was detrimental to AAF operations and its success.
Elisa Lee
Elisa Lee has her degree in Finance from Southern Methodist University. She currently
lives in California, but initially stayed in Texas after college to work at Santander Consumer at the
end of May 2015. In her role at Santander, she managed a single portfolio of asset sales. Lee
reported directly to John Zutter, from whom she received her assignments and was required to
update him on her progress while working on a project. Tom Dundon then asked Lee to work for
him at DCP.
Lee first learned about DCP’s investment in AAF through receiving an email with the
Term Sheet of the deal, which was not signed, but she believed it operated as an enforceable
contract. Lee was tasked with compiling a data room of AAF files, so she created an outline of
financial modeling processes, including the League’s revenues and expenses. Lee claims that her
work for this job was not typical of other DCP deals, and AAF needed capital immediately to
operate. Lee compiled details of how AAF was structured, both at the team and league levels. Lee
received an email from Alan Kantowitz on February 16, 2019, requesting that she create a data
room and meet with him in Dallas, along with other DCP and AAF personnel. The purpose of the
meetings was to gain an understanding of all the different AAF departments and company leaders
to understand AAF business as quickly as possible. Kantowitz requested that she compile a weekly
estimate on a cash flow basis so that DCP could get an idea of AAF’s cash flow needs and a model
of AAF’s financial protections.
Lee examined all available AAF invoices to understand AAF’s expense categories and
used income data, such as contract or ticket sales, to develop a model of AAF operations. Lee had
to make assumptions at both the team and league levels to produce a profit-and-loss analysis for
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AAF. Lee testified that significant information was missing from the data room, preventing her
analysis from being complete. Lee stated that she had requested all expenses related to completing
her model, including invoices and contractual obligations, but that AAF was unable to provide the
missing information. For example, Lee was unable to find contracts related to football operations
for the Atlanta Legends, Birmingham Iron, and San Diego Fleet.
Lee stated that the AAF acquisition was a distressed situation, and there was possibly
missing information in the data room, such as accounts payable information and vendor contracts.
Nonetheless, Lee did not recall any “red flags” in her examination of AAF’s finances. Lee
explained that she worked closely with Kantowitz, who was responsive and forthcoming about
any request for AAF documentation. In sum, Lee was credible, and Lee’s testimony demonstrated
that AAF lacked an accurate accounting system and controls to provide Lee with the requisite
information to develop revenue and expense models for AAF and each team.
Alan Kantowitz
Alan Kantowitz was AAF’s direct interface with DCP and appeared to have been
responsible for providing DCP personnel, such as Lee, Zutter, and Vanderbilt, with all financial
information and projections. Kantowitz appears on many emails, both as a sender and recipient of
AAF’s financial information. The Court expected Kantowitz to be the principal AAF witness in
explaining AAF operations. The Court was disappointed with Kantowitz’s testimony and his
limited recall of many emails and the subject matter in those emails. While the Court believes that
Kantowitz is competent, he had no recollection regarding AAF’s financial projections, how they
were compiled, or the assumptions for those projections. Kantowitz was unable to explain AAF
revenues or expenses. Kantowitz did acknowledge that AAF’s financial projections were flawed
and that AAF was seriously undercapitalized. Remarkably, he was unconcerned about Fowler’s
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failure to make scheduled capital investment payments and did not consider that a red flag for the
league’s operations. Kantowitz admitted that AAF was underfunded at the beginning of the season,
and its expenses were excessive. In sum, Kantowitz’s lack of recollection and his inability to testify
about emails he drafted and received undermine any credibility the Court can give to his testimony.
The Court recognizes that the operative events in this case happened six years ago but would have
expected Kantowitz to be able to recall and testify about AAF’s financial structure, its capital
needs, and its expenses.
Erica Bramer
Erica Bramer was Defendants’ principal witness on damages. Plaintiff contested Bramer’s
methodology in a Daubert motion and argued during trial that Bramer was not properly disclosed
about her testimony. The Court denied both motions. Bramer has impressive credentials: she
graduated from the Wharton School of Business, is a certified valuation analyst, and is an
insolvency and restructuring advisor. She previously worked at PwC and the Alix Group. Barmer
has worked on many bankruptcy disputes and has testified in bankruptcy court. She provided
expert testimony in the bankruptcy case of the MLB Texas Rangers. The Court finds her expertise
persuasive and her testimony more credible than Plaintiff’s expert, Sonia Desai.
Bramer testified as to the difficulties she had in accessing Debtors’ QuickBooks. Bramer
testified about how inaccurate Debtors’ accounts payable were, noting that during the time that
DCP was negotiating with AAF about the Dundon investment, roughly 700 invoices were not
disclosed, and about 1,000 accounts payable were entered after the Term Sheet was negotiated.
She opined that AAF had looming notes payable to investors David Pottruck, Ebersol-St. James
and MGM, which Desai failed to include in her valuation. Bramer disagrees with Desai’s
conclusions about AAF’s immediate cash needs and concluded that AAF would have needed
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significant capital infusions because of the number of accounts payable outstanding, and that
revenues were lower than projected. Further, Bramer noted that Desai’s expert report failed to
opine on causation or the value of damages. Bramer also disagreed with Desai’s failure to evaluate
damages for both a $70 million and $250 million investment by DCP.
Bramer disagrees with Desai’s use of the unexecuted NFL/32 equity agreement as a
valuation basis. No warrants were exercised. Bramer argues that because the NFL/32 transaction
did not occur, it is speculative to base any valuation on the NFL/32 equity agreement. The same
basis for the CBS broadcast deal that never materialized. Bramer also disagreed with Desai’s use
of EV as a basis for valuing AAF because Desai should have included debt in her valuation model.
Further, had Desai included recoverable debt in her valuation model, she would have needed to
reduce her valuation to account for debt in a distressed company. Bramer does agree with Desai
that she should have used a 28% tax rate in her calculations.
Bramer 	stated 	that 	Desai 	made 	several 	assumptions 	regarding 	revenue 	that 	were
unsupported by either data or rational projections. For example, Desai accepted at face value the
average ticket price of $50.00 when tickets were sold at a discount. Also, Desai used attendance
figures that were much higher than those reported by the teams. Bramer argues that Desai double-
counted sponsorships and presumes strong attendance growth without any rational basis. Bramer
testified that Desai impermissibly relied on digital revenue as a component of growth, where there
was no indication when AAF would receive revenue from digital platforms. Desai also accepted
the premise that AAF would grow by two teams each year without evaluating the attendant cost
of adding teams. Also, Bramer believed Desai incorrectly relied on AAF’s belief that the NFL
would pay part of players’ salaries going forward, despite having no agreement to do so. Bramer
says that Desai incorrectly concluded that the NFL would pay roughly $21 million in player
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salaries without any agreement to do so. Bramer is critical of Desai’s reliance on March 29, 2019,
AAF projections in her valuation analysis as unreliable and unsupported. Bramer argues that even
if Dundon had invested $250 million in AAF, AAF would not have been viable in 2021, and that
it would have required $500 million in capital investment to operate AAF successfully for years.
On cross-examination, Plaintiff’s counsel was able to demonstrate that the number of
missing accounts payable not listed in the QuickBooks is a small percentage of the known accounts
payable, so Bramer’s concerns about missing accounts payable appear inflated. Bramer could not
explain why she did not consider the $115 million valuation of AAF used on February 14, 2019,
when Bird offered to invest $1 million in AAF at that valuation. Bramer acknowledged that this
valuation had a basis in fact but pointed out that Bird returned his investment. In sum, Bramer
demonstrated that Desai’s report lacked an acceptable methodology and relied upon invalid
assumptions or unverified data.
FINDINGS OF FACT
The Court finds that statements listed as Findings of Fact, which are more properly
Conclusions of Law, be considered Conclusions of Law, and that statements listed as Conclusions
of Law, which are more properly Findings of Fact, be considered Findings of Fact, regardless of
the heading under which they are listed. Further, the Court finds that statements which constitute
mixed statements of law or fact be considered Findings of Fact and Conclusions of Law as
appropriate, regardless of the heading under which they are listed.
The Court finds that the following facts have been established either by stipulation or
admission of the parties, or by the preponderance of the evidence at trial. Grogan v. Garner,
498 U.S. 279, 286 (1991) (finding that the preponderance of the evidence standard is applicable in
most civil proceedings).
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B ACKGROUND
Parties
1. 	The bankruptcy estate of Debtors (the “Debtors’ Estate”) is a consolidated entity,
defined as the master bankruptcy matter.38
2. 	The trustee, Randolph N. Osherow (“Trustee”), is the individual who is the duly
appointed chapter 7 trustee for each of the Debtors and the Debtors’ Estate and continues to
serve in that capacity.
3. 	Defendant Thomas Dundon (“Dundon”) is an individual and a former board
member of ESMG.
4. 	Defendant John Zutter (“Zutter”) is an individual and a former board member of
ESMG.
5. 	Defendant Zutter has worked for Dundon and the Dundon family or related
entities since 2015.39
6. 	Defendant Dundon Capital Partners, LLC (“DCP”) is a Delaware limited liability
company with its principal offices in Texas.
7. 	AAF intended to follow the Super Bowl and precede the NFL Draft.
8. 	Ebersol Sports Media Group, LLC (“ESMG”) was the parent of subsidiary entities
(LFE, AAF Players, AAF Properties, LFE 2, and Realtime) formed at various times, all of which
together operated a springtime professional football league known as the Alliance of American
Football.40 ESMG and ESMG’s subsidiaries are referred to collectively herein as “AAF” or the
“League.”
38 Case No. 19-50900-cag, ECF No. 150; 11 U.S.C. §§ 301, 541.
39 Trial Tr. 128:19–130:25, ECF No. 396.
40 Trial Tr. 224:4–229:25, ECF No. 323.
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9. 	Legendary Field Exhibitions, LLC, formed on April 13, 2018, owned and
controlled all eight AAF teams (with no separate team owners), entered into operational
agreements for goods, services, and facilities, and incurred substantial debt in its enterprise
capacity with vendors and third parties.41
10. 	AAF Players, LLC, formed in September 2018, owned and was the counterparty
to all Standard Player Agreements with each AAF player.42
11. 	AAF Properties held AAF’s intellectual property and commercial licenses.43
12. 	LFE 2 was the employer of AAF’s California-based staff and a counterparty to
medical plans.44
ESMG AND I TS O PERATIONS
13. 	Until February 14, 2019, Charles Ebersol (“Ebersol”) served as ESMG’s chief
executive officer (“CEO”) and chairman of ESMG’s board of directors and generally oversaw
AAF’s operations. Prior to February 14, 2019, Ebersol owned a majority of the common stock
and approximately two million preferred shares of ESMG. Ebersol’s family trust owned
additional common stock and preferred shares of ESMG.45
14. 	ESMG, through its wholly owned entities, maintained ownership and operational
control of AAF’s team-related entities, ensuring a single-entity model for all core organizational,
logistical, and football business functions.46
15. 	ESMG’s business plan recognized that AAF would require outside financial
support for the first five to six years to address projected negative cash flow.47
41 Id. at 229:12–14.
42 Id. at 226:14–15.
43 Id. at 226:11–13.
44 Id. at 229:22–25.
45 Id. at 224:14–16; Trustee’s Ex. 0807 at 0032 [hereinafter “T-_”].
46 Trial Tr. 224:7–13, ECF No. 323.
47 Trial Tr. 133:22–24, ECF No. 319; T-0015.
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16. 	AAF planned to complement, rather than compete with, the NFL. The failure of
prior spring leagues informed the plan. NFL Commissioner Roger Goodell even recommended
certain personnel to AAF to assist it.48
17. 	AAF had many high-profile NFL veterans and leaders among the sports and
entertainment industry advising, working for, or leading the League.
18. 	ESMG was formed under Delaware law.49
19. 	A board of directors ran ESMG. Ebersol served as the chairman of the ESMG
board. The other board members included Reggie Fowler, Dick Ebersol, Jeff Moorad, and Keith
Rabois. Dick Ebersol is Charlie Ebersol’s father. The elder Ebersol served as the president of
NBC Sports and had experience with a prior professional spring football league (the original
XFL). Moorad, a lawyer, worked at Morgan Lewis, one of two firms the League had retained.
Ebersol testified that Moorad had substantial experience in the sports industry and led the sports
practice at Morgan Lewis.50
20. 	Ebersol was the manager of all the subsidiary LLCs and generally oversaw the
League’s operations.51
21. 	Alan Kantowitz served as the League’s chief of staff. He created and updated the
pro forma projections used in soliciting investors.52
22. 	Kevin Freedman served as the chief operating officer. He worked with Kantowitz
and was also responsible for operational oversight.53
23. 	Kevin Farrell served as an operations consultant. He managed accounts payable
48 Id. at 95:4–13, 104:15–17.
49 Def.’s Ex. 22 [hereinafter “D-_”].
50 Id.; D-1; D-135; Trial Tr. 123:14–19, 58:10–15, 137:25–139:5, ECF No. 321.
51 Trial Tr. 79, ECF No. 327.
52 Trial Tr. 268–69, ECF No. 398; Trial Tr. 124, ECF No. 331.
53 Trial Tr. 65:6–9, ECF No. 327; Trial Tr. 82:25–26, ECF No. 412.
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and spending.54
24. 	The League was a startup spring football league Ebersol contemplated as a
business idea as early as 2016, after he produced the 30 for 30 film “This is the XFL.” Ebersol
envisioned the League becoming a minor league, feeder option to the NFL. The League would
showcase both fringe professional players seeking another chance to play and former college
and practice squad players looking for experience and exposure to gain a roster spot on an NFL
team.55
25. 	The League consisted of eight teams in eight markets: Atlanta, Birmingham,
Memphis, Orlando, Salt Lake City, San Antonio, San Diego, and Tempe. The teams would play
a 10-game regular season, followed by a two-week playoff, with the championship game leading
up to the NFL Draft.56
26. 	Each of the League’s players entered a standard player agreement, which
consisted of a three-year deal. The League contracted to pay the players $70,000 for the first
season, $80,000 for the second season, and $100,000 for the third season.57
27. 	The player contracts prohibited players from playing for other professional spring
football leagues, with an opt-out for playing in the NFL. The NFL opt-out did not require the
NFL to pay or share revenue with the League.58
28. 	The League began raising money in 2017. Ebersol knew that professional spring
football was a risky venture. In early interviews, he admitted that every professional spring
football league prior to AAF had failed. Other witnesses in this case echoed that sentiment.59
54 Trial Tr. 86:14–25, ECF No. 413; id. at 88:6–17.
55 Trial Tr. 125–26, ECF No. 319.
56 Id. at 187; Trial Tr. 145, ECF No. 327.
57 T-1291; Trial Tr. 33, ECF No. 319.
58 T-1291.
59 T-0709.
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29. 	At trial, Ebersol named several wealthy potential investors in the League.
Although several of them testified at trial, none of them had a significant interest in investing
substantial money into the League. The only substantial monetary commitments the League ever
made were those of Fowler, who defaulted, and Dundon, who provided $70 million to the League
through DDFSP and ultimately lost it all.60
30. 	Ebersol also identified well-known entertainment and sports figures as having a
serious interest in investing in the League, but none of the persons he named showed up at trial
to substantiate that testimony. The well-known names that did invest did not contribute
substantial capital relative to the League’s need for hundreds of millions of dollars. Time and
again, Ebersol referred to unnamed, and waiting-in-the-wings investors, poised to “follow a
legitimate lead,” referring to an investor who commits after a respected investor has publicized
a significant financial commitment.61
31. 	Some of the League’s early business decisions did not work to the League’s
advantage.
32. 	Generally, any successful sports venture is a television deal, normally the most
effective way to present a sports product and attract a large fan base across the country. Typical
economics of a professional sports television deal rely on networks to bear the production costs
and pay a league or teams for the right to air games on their networks.62
33. 	AAF’s business model worked backwards. Rather than securing networks as a
revenue generator, the League secured a time buy, paying networks for the privilege of airing
games on television. Ebersol described the CBS and NFL deals as one-sided in CBS’s and the
60 See generally ECF No. 354 (testifying about potential and defaulting investors).
61 See T-0709 (identifying “Series Seed Preferred Stock” purchasers); T-0757 (identifying Series 1 Preferred Stock”
purchasers); T-0020.
62 Trial Tr. 114:22–115:15, ECF No. 397.
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NFL’s favor. The packages the League secured with CBS, Turner, and the NFL for games to air
on CBS, CBS Sports, TNT, and the NFL Network became one of the League’s largest expenses.
The League paid the production costs, not the networks.63
34. 	In an effective business model, a network would work with the League to sell
advertising slots during game programming and sell much of the entire season prior to the first
game or broadcast. The league and the teams would aim to complete all sponsorship and
distribution deals well in advance of the actual season. In this case, the League had the
responsibility to secure advertising during its airtime. By the start of its inaugural season, the
League had sold little airtime.64
35. 	AAF advertising prices depended on the part of the game in which it was
displayed, the platform on which it was shown, and its duration.
36. 	A successful sports league—like any other business—requires budgeting, cost
controls, and coherent reporting systems that allow departments within the business to
communicate and ensure accurate transmission of information. Under Ebersol’s leadership, the
League lacked sufficient internal reporting and controls between the main league office and
teams, within the league office itself, and between the league office and its representatives, who
entered deals with third parties but failed to inform league management in real time. Often,
league management discovered the expense after it received an invoice months later. The League
failed to implement a coherent system for reporting and tracking revenue and expenses at league
or team levels.65
37. 	The abundance of other sporting events in the spring contributed to the lack of
63 Trial Tr. 212:7–14, ECF No. 412; D-47; Trial Tr. 115:17–122:23, ECF No. 397; T-0719; T-0771.
64 Trial Tr. 115:17–116:8, 117, 130:20–131:1, 141:21–142:9, ECF No. 397.
65 Trial Tr. 107–08, ECF No. 413; Trial Tr. 39–40, ECF No. 398.
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interest in the League. The NCAA basketball tournament, the NHL and NBA playoffs, the start
of MLB, the Masters PGA tournament, and a myriad of other traditional spring sporting events
saturated the spring viewing market. The week before the League shut down, viewership ratings
had dropped to one-fourth of week one’s ratings.66
38. 	The League hired aggressively. Between late 2017 and the start of league play,
the league grew from a handful of employees to more than 900. The League paid its players
more than double what the XFL paid players—a $21 million per season difference. The League’s
non-player salaries were double what they should be for a startup. Jeff Moorad, one of the
League’s board members, observed that Ebersol ran the League like a 10-year business rather
than a startup.67
39. 	From the outset, the League used a pro forma to show revenue and expense
projections to potential investors. The projections included projected ticket sales, sponsorship
deals, merchandise, the technology application, and what the league referred to as PAL or
FANchise agreements.68
40. 	The pro formas contemplated deriving ticket revenue from the games and
sponsorship and merchandise revenue at the league and team level. The technology-driven
revenue centered on an app that fans could use to interact with and watch the games and
ultimately place wagers on the games.
41. 	The League designed PAL agreements to bring in investors as quasi-owners of
the teams. For a negotiated price, the League hoped it would start at $10 million; a PAL or
FANchise owner could purchase a profit-sharing interest in a team. The purchaser would own a
66 Trial Tr. 149–50, ECF No. 397; Trial Tr. 112:3–113:8, ECF No. 354.
67 Trial Tr. 24–25, ECF No. 331; Trial Tr. 148, ECF No. 397; D-31; D-33.
68 D-2; D-26.
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market-wide right to that team’s revenue and sales, but the teams would remain under league
ownership at the league level.69
42. 	Originally, the League planned to grow by two teams every other season. But, at
the urging of a potential investor to inflate the pro forma projections, the league changed its
projections to show the league growing by two teams every season.70
43. 	The League contemplated that FANchise agreements would produce significant
revenue, and, according to early proformas, supply a significant source of revenue in 2018, but
the League never generated any revenue from selling FANchises.71
44. 	Around May 2018, the League projected that it would earn $176 million in
revenue through the end of 2019.72
45. 	The evidence presented at trial showed that the pro formas consisted of
speculative projections that had no real basis in fact. The League frequently modified the
projections, which showed widely varying revenue, expense, and capital needs.73
46. 	In spring 2018, Ebersol caught wind that the XFL, a former professional spring
football league his father co-founded with former WWE President Vince McMahon in 2001,
planned to relaunch its league during the spring of 2020.
47. 	To beat the XFL to market, Ebersol moved up the League’s launch date by one
year to debut the week after the Super Bowl in February 2019. As a result of that change, the
League began incurring massive obligations and liabilities almost immediately and rushed to
launch.74
69 Trial Tr. 147, ECF No. 319.
70 Trial Tr. 18, 22–23, ECF No. 331; D-12.
71 Trial Tr. 16–17, ECF No. 331.
72 Trial Tr. 172, ECF No. 434
73 Trial Tr. 14–23, 93–101. ECF No. 331; Trial Tr. 230–47, ECF No. 380; Trial Tr. 172–74, ECF No. 434; D-2; D-6;
D-31; D-75; D-188; T-0015.
74 Trial Tr. 299, ECF No. 354.
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T HE FOWLER INVESTMENT
48. 	Beginning in June 2018, ESMG met with Reggie Fowler about making a large
investment in the League.75
49. 	Fowler presented himself as a successful businessman in the business of
manufacturing drones for the military and in real estate, with more than $300 million in liquid
assets.76
50. 	Fowler provided ESMG with bank statements evidencing that his balances and
liquidity exceeded his funding commitments.77
51. 	Eventually, Fowler’s entity FO2 LLC entered a Term Sheet for Series 1 Preferred
Stock Financing with ESMG, which obligated FO2 to make a $50 million equity investment and
provide a $120 million line of credit.78
52. 	Almost immediately after the League signed the FO2 Term Sheet, FO2 defaulted
on its initial funding obligations. The default began at the same time as the League began
incurring significant costs attributable to the start of the season, including the pending training
camp in January 2019. Throughout December 2018 to February 2019, Fowler repeatedly failed
to meet the equity funding requests submitted by ESMG. The parties later discovered that the
federal government had seized many of the wire transfers Fowler sent to the League before they
reached the League’s bank accounts. The situation became so dire that, as early as the fourth
quarter of 2018, ESMG realized it could not rely on Fowler and began a concerted effort to find
investors to replace him. Ultimately, Fowler funded around $22 million of the $50 million equity
funding, and none of the $120 million line of credit. The Trustee sought and obtained a judgment
75 T-0757.
76 Trial Tr. 177:14–18; 180:9–23, ECF No. 319.
77 Id. at 178:13–18, 179:16–19, 180:7–24, 181:4–12, 183:18–184:6; T-0757.
78 T-0016.
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against Fowler for $53,189,261.80 in damages based on a finding of total loss to ESMG.79
53. 	Even after Fowler failed to comply with his obligations, Ebersol told an NFL
representative that Fowler had fully funded $170 million. Ebersol told other investors the League
was fully funded. Charlie even told his father, Dick Ebersol, that the main investors had put
nearly $200 million into the League.80 None of those statements was true.
54. 	After Fowler failed to meet a significant funding request in late December 2018,
Ebersol became concerned about the League launching. The League had only $2 million in
capital and was within a week of running out of funds. Ebersol told the board the League’s
options were to sell to the XFL or forfeit the 2019 season. He met with McMahon about selling
the League to the XFL leader. McMahon had no interest in acquiring any part of the League.81
55. 	Prior to the Dundon investment, while Fowler was making sporadic investments,
AAF could not rely on other investors for providing capital. While there may have been
testimony as to the possible investors in addition to Fowler and Dundon, there is no credible
evidence that these alleged investors made any significant investments in AAF such that the
Dundon investment was not critical to AAF’s survival. In mid-December 2018, Ebersol had no
viable funding source that could meet the League’s impending obligations. Ebersol considered
shutting down the League altogether, as keeping it open would increase the amount of debt by
tens of millions of dollars.82
56. 	Eventually, in late December 2018, some funding from Fowler avoided the
federal government’s seizure efforts. Ebersol described a check deposited by ATM as a
79 Trial Tr. 80–81, 96, ECF No. 412; Trial Tr. 8–12, ECF No. 413; Trial Tr. 36–37, 39, 41–42, 44–47, 49–50, ECF
No. 331; D-23; D-29; D-31; D-33; D-100; Trial Tr. 110–11, ECF No. 321; D-36; D-208.1.
80 Trial Tr. 117–18, 124, ECF No. 331; D-20; Trial Tr. 177:14–178:13, 183:21–184:2, ECF No. 354; D-47.
81 Trial Tr. 41–43, ECF No. 331; D-36; D-29.
82 D-29.
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$13.4 million Christmas miracle. The amount was insufficient to finance the League through
training camp the following month, much less the entire season. The League used the funds to
pay 2018 expenses. Nonetheless, Ebersol moved forward and allowed the League to remain open
and incur tens of millions of dollars in additional liabilities without a reliable funding source in
place.83
57. 	Ebersol conceded that the dire financial situation completely ruined the League’s
marketing and sponsorship efforts. Ebersol had to slash those expenditures, which cratered
projected revenues. In Ebersol’s own words, “Reggie’s delinquency screwed us with respect to
revenue by killing our marketing.”84
58. 	Ebersol cut production, national marketing, and sponsorship when the League
needed to raise awareness, sell advertising, sell tickets, and sell sponsorships. Ebersol also cut
marketing personnel and funding necessary to drive local awareness. Ebersol testified that the
League terminated its advertising agency, McGarry Bowen. In fact, McGarry Bowen terminated
the League because it was about $3 million.85
59. 	Ebersol failed to cause the League to invest in revenue-generating digital
products, which led to the League failing to earn revenue from digital products or related
sponsorship sales.86
60. 	By the end of December 2018, AAF projected the League would need more than
$24 million to get through most of January 2019 and would continue to incur millions in
expenses to critical vendors without adequate funding.87
83 Trial Tr. 8:3-17, 11:24–12:10, ECF No. 413; Trial Tr. 193–94, ECF No. 319; Trial Tr. 7–8, ECF No. 321; Trial Tr.
38, ECF No. 331; D-36.
84 Trial Tr. 39, ECF No. 331; D-33.
85 Trial Tr. 89–101, ECF No. 331; Trial Tr. 143–45, 164–65, 167–72, ECF No. 434; D-33; D-40; D-41; Trial Tr.
130:20–131:1, ECF No. 397; Trial Tr. 46, 218–19 ECF No. 323; D-224.
86 Trial Tr. 102, ECF No. 331; D-41; Trial Tr. 170–172, ECF No. 434; D-40.
87 D-35; Trial Tr. 149–52, ECF No. 434.
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61. 	In January 2019, the League’s training camp began. As a result, the League’s
spending increased substantially. At the close of training camp, the League was in poor financial
condition, and bills were piling up. Following a late December funding, Fowler’s funds
continued not to reach the League’s accounts consistently and never in the amounts requested.
The League’s financial condition became so dire that, absent a new investor to replace Fowler,
it was on the verge of collapse.88
62. 	On January 7, 2019, based on an analysis done by Freedman and Kantowitz, the
league finance committee downgraded the projected revenue from $176 million to $59 million
for 2018 and 2019. The decreased revenue projections resulted from Ebersol’s failure to secure
adequate funding and his failure to market the League, secure sponsorships, and promote local
awareness before rushing the League into its first season of football.89
63. 	The League’s expenses did not reduce proportionally to reduced projected
revenues. The League retained its previously negotiated broadcast contracts and commitments
to stadium leases and countless vendors and third parties, including over 400 players, referees,
and football staff, needed to put on a game. Ebersol made the decision to move forward with the
League, aware that it had incurred significant liabilities that had not been paid and would
continue to be deferred and would also incur additional liabilities without a committed source of
capital. 	Ebersol pushed forward in developing technology even though the League knew the
technology would not yield substantial revenue immediately. Ebersol built the League with the
expense structure of a 10-year mature business (including nearly 1,000 employees) and
operational employees at double what a startup should pay. These decisions, along with
Ebersol’s decision to enter employment agreements with more than 400 players promising them
88 Trial Tr. 95, ECF No. 412; Trial Tr. 187, ECF No. 434; D-100; D-48.
89 D-40; D-41; Trial Tr. 164–65, 167–72, ECF No. 434.
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more than double a market rate for a three-year term and allowing them to play for the NFL with
no compensation from the NFL if players exercised their opt-out rights, made the League’s
business model unsustainable.90
64. 	Just 	a 	few 	weeks 	later, 	on 	January 22, 	2019, 	Kantowitz 	sent 	an 	urgent
memorandum to Ebersol, Freedman, and Farrell about the League having then $8 million in
incurred but unpaid liabilities and approximately at least another $8 to $9 million in additional
liabilities the league anticipated incurring to get through the first game of the season three weeks
later, and an unknown amount owed to critical vendors like CBS. Kantowitz disclosed that
Ebersol had the League playing a game of chicken with critical vendors, like CBS, whose bills
were overdue.91 Notwithstanding the League’s financial distress, AAF did enjoy favorable
television ratings.
AAF’S T ELEVISION CONTRACTS AND RATINGS
65. 	On October 23, 2018, the NFL granted AAF access to its Game Statistics
Information System (GSIS) to support AAF’s technological innovations. GSIS is the NFL’s
official system for capturing and distributing real-time game data.92
66. 	AAF secured a media agreement with CBS Television and CBS Sports Network
to televise select AAF games, including its premier and championship games, providing AAF
with broad national visibility.93
67. 	As part of the agreement, CBS aired commercial promotional spots for the League
in the 2019 AFC Championship and the Super Bowl, together with other promotional units to
90 Trial Tr. 185–87, ECF No. 434; D-50; D-31; D-33; Trial Tr. 148, ECF No. 397.
91 D-50; Trial Tr. 221, 225, 226, ECF No. 398; Trial Tr. 179–86, ECF No. 434.
92 Trial Tr. 130:24–131:19, ECF No. 321.
93 Trial Tr. 11:16–12:2, ECF No. 323; T-0719.
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spotlight upcoming AAF matchups or storylines.94 The promotional spots CBS aired for AAF
during the Super Bowl represented significant value inventory that could not be sold for cash;
the NFL never allowed another sport or football venture to be promoted during the Super Bowl
prior to AAF.95
68. 	On 	January 30, 	2019, 	AAF 	secured 	a 	broadcasting 	agreement 	with 	NFL
Enterprises LLC (NFL Network) under which the NFL agreed to broadcast AAF’s games. AAF
also entered a media agreement with Turner Sports, Inc. to televise AAF games.96
69. 	NFL Network integrated AAF game telecasts into its programming schedule and
utilized its existing in-game ticker and “NFL bug” (logo/score graphic) to promote other network
content. It was significant for the NFL shield to appear on screen alongside the AAF logo
because it carried the imprimatur of the NFL, which, as Schanzer testified, is the single most
important sports brand in America and possibly the world.97
70. 	AAF’s premiere game aired in primetime on CBS Network on February 9, 2019.98
71. 	Over six million people watched AAF games in their first weekend. After Week 1
of AAF play, on February 10, 2019, AAF’s app was the number one trending sports app in both
the Apple and Google Play app stores (and number 33 overall in the Apple App Store).99
72. 	NFL Network executives were “genuinely surprised” AAF was “getting much
better ratings than they thought” because “spring football is hard to sell.” NFL Network
consistently delivered strong ratings throughout the season, including 0.32 (“very good one” for
an NFL network), 0.33 (“good rating for 8:00 at night in March”), and maintained ratings of 0.2-
94 Trial Tr. 11:16–12:2, ECF No. 323; T-0719; Trial Tr. 270:11–17, ECF No. 397.
95 Trial Tr. 270:11–20, 272:7–20, ECF No. 397.
96 Trial Tr. 19:21–20:4, 27:7–11, ECF No. 323; T-0771.
97 Trial Tr. 51:24–52:11, ECF No. 323; Trial Tr. 282:3–9, 284:23–285:9, ECF No. 397.
98 Trial Tr. 308:16–309:1, ECF No. 354; T-0719.
99 Trial Tr. 84:7–19, 106:8–16, ECF No. 321; T-0020.
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0.24 even when competing against March Madness basketball.100
73. 	As in all its broadcast deals, AAF retained digital rights to stream games on its
own OTT (refers to the delivery of content directly to users via the internet) and mobile
platforms, enabling secondary distribution alongside linear TV promotion. Ebersol’s approach
to negotiating deals was to retain digital rights, which Schanzer advised was critical, given that
2019 marked the beginning of cord-cutting and new technology. These retained digital rights
had significant future value because, as streaming’s role in the media landscape grows, the
greater the ability to monetize content and the more exclusivity over content, the greater the
value.101
74. 	The League failed to pre-sell its advertising slots, leaving it with advertising
inventory during the season. In Dundon’s experience, advertising is typically sold upfront before
the season starts. Bob Whitsitt testified: “Advertising, ticket sales, broadcast advertising, most
of your revenue streams should be sold before you play your first game.”102
NEGOTIATIONS I NVOLVING THE DCP I NVESTMENTS
75. 	As noted herein, the League’s first games debuted on February 9, 2019. At that
point, the League was still seeking investors to replace Fowler, who continued to fail to meet his
funding commitments. At the same time, Ebersol continued to misrepresent Fowler’s investment
and the status of ongoing fundraising efforts.103
76. 	Ebersol knew of the dire financial condition of the League from December 2018
100 Trial Tr. 81–101, ECF No. 354; T-0518.
101 Trial Tr. 14:18–15:19, 16:3–17:4, 21:7–22:9, ECF No. 323; T-0719; Trial Tr. 265:13–24, 267:8-11; 267:25–
268:10, ECF No. 397.
102 Trial Tr. 49–50, ECF No. 349; Trial Tr. 130:20–131:1, ECF No. 397.
103 On February 11, 2019, Ebersol told Jeff Goldfarb that he was “very happy” about the status of Fowler’s funding.
The Court acknowledges that Ebersol provided considerable testimony about alleged sources of capital funding and
interested investors, but as noted herein, none of these sources or investors provided any source of capital that would
have precluded the need for Dundon to make his investment. See D-71.
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to February 2019. Ebersol knew that the League had no reliable investor from December 2018
through early February 2019 to fund League operations or knew that its only investor was not or
could not meet funding commitments. Ebersol knew that the League had overdue obligations to
critical vendors in January 2019.104
77. 	The situation left Ebersol scrambling to find funding. None of the existing or
potential 	investors 	stepped 	up, 	and 	Ebersol 	himself, 	who 	claimed 	he 	could 	cover 	the
$5.1 million, did not step up and invest. Due to Ebersol’s actions, the condition of the League
after the first week of play was such that the League had no reliable investor, had a dismal
outlook for revenue, had overdue obligations to critical vendors, and was incurring ongoing
obligations to players, vendors, stadiums, and others despite lacking the funds to pay its existing
debts. Payroll had to be funded on a strict deadline (due to a new payroll system), or the players
would likely quit, and the League would likely fail before the second week of games. Instead of
using his family’s money to cover the payroll, Ebersol opted to press forward and hope for a
new investor.105
78. 	On February 13, 2019, Erik Anderson introduced Ebersol to Tom Dundon, a
Texas resident, as a potential investor in the League. Anderson was a longtime business
acquaintance of Dundon, whom Ebersol had unsuccessfully solicited for an investment in the
League for a year.106
79. 	Anderson told Dundon that the League had lost its lead investor, was in trouble,
and needed money immediately, and that Anderson had been approached to invest, but that the
investment was too large for him.107
104 Trial Tr. 61–62, ECF No. 331; Trial Tr. 11:21–13:21, ECF No. 413; D-50.
105 Trial Tr. 187–88, ECF No. 434; Trial Tr. 61–63, ECF No. 327; Trial Tr. 12–14, ECF No. 413.
106 T-0329; Trial Tr. 177, ECF No. 332; Trial Tr. 25, 127, ECF No. 354.
107 Trial Tr. 123–25, 134–37, 215, ECF No. 354.
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80. 	Dundon founded DCP in 2015 and serves as its CEO, Chairman, and Managing
Partner. DCP is headquartered in Texas, and Zutter is also a DCP partner.108
81. 	Dundon is an entrepreneur and investor in sports-related ventures. He began his
career by founding a subprime auto finance business that was later acquired by Santander Bank.
Following his exit from Santander, Dundon purchased the Carolina Hurricanes, a professional
hockey team, though, admittedly, his goal was to purchase an NFL or NBA team. Dundon has
also invested in, among other things, TopGolf and the Professional Pickleball Association.109
82. 	Dundon had not previously met Ebersol and had no relationship with him or
Debtors.110
83. 	Dundon and Ebersol first spoke via telephone on the morning of February 13,
2019. Dundon and Ebersol were the only people on the call. They discussed a potential
investment opportunity with the League.111
84. 	Ebersol testified that he arranged for Dundon to speak directly with leading
industry figures—including Bob Bowman (MLBAM founder), Jeff Zucker (then CNN Chairman
and CEO), David Zaslav (then CEO of Warner Bros. Discovery), and Jonathan Kraft (President
of the Kraft Group and New England Patriots)—to provide firsthand perspectives on AAF’s
value and potential.112
85. 	During the call, Dundon asked Ebersol how much money it would take for the
League to make it through the first season. Ebersol told Dundon that the number could be as low
as $55 million or as high as $70 million. The evidence does not reflect that, during the initial
108 Trial Tr. 23:13–16, ECF No. 343. Trial Tr. 10:1–2, ECF No. 383.
109 Trial Tr. 161:20–165:17, 170–71:5, 172:16–18, ECF No. 349.
110 Id. at 156.
111 Trial Tr. 139–40, ECF No. 335.
112 Trial Tr. 68:16–22, ECF No. 332.
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call or otherwise, Dundon and Ebersol discussed a $250 million agreement.113
86. 	That same morning, Ebersol sent Dundon an email, touting the League’s ratings
from the first week of play, He attached league financial projections, including an investor deck,
a financial projections model, and a capitalization table. Ebersol did not inform Dundon that a
month prior, the League had drastically downgraded its projected revenue due to cuts in
marketing, advertising, and technology, which had adversely affected sponsorship, ticket sales,
and general awareness of the league at a critical time—just before the start of the season. The
revenue projections Ebersol provided to Dundon for 2019 were $5 million higher than the
projections presented to the finance committee weeks earlier, with no explanation for the
discrepancy. Projected expenses for 2019 differed by $21 million between the budget set by the
finance committee and what Ebersol gave Dundon. Ebersol and his executive staff knew about
substantial discrepancies between the projections he provided to Dundon and reality. Still,
Ebersol did not disclose those discrepancies in the information he gave to Dundon.114
87. 	The financial projections that Ebersol sent to Dundon differed materially in
several respects from those Ebersol had sent to Fowler just months earlier. The projections sent
to Dundon contemplated the addition of two teams to the league every season for the first five
seasons, whereas the earlier projections contemplated the addition of two teams every other
season. Ebersol and his team knew about the immediately due and past-due payables not
referenced in the projections (in addition to the $5.1 million Ebersol did disclose). Defendants’
expert Erica Bramer quantified the total accounts payable as of February 13 (excluding the
$5.1 million need for payroll) at $21.1 million. The projections sent to Fowler disclosed
$46 million in expenses the league intended to pay from the revenue generated from the sale of
113 Trial Tr.140:2–141:18, ECF No. 335; Trial Tr. 88:16–89:11, ECF No. 349.
114 D-75; Trial Tr. 95–102, ECF No. 331; D-41.
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FANchises in 2018. Although evidence suggested there was interest from investors in buying
FANchises, none of those potential investors purchased a FANchise. The projections sent to
Dundon did not disclose the decision to halt FANchise sales, actual expenses for 2018, or the
status of payment for 2018 expenses.115
88. 	On February 13 and 14, Ebersol and Dundon had a series of phone calls, during
which Ebersol stressed that the League needed money and that if Dundon did not make an
investment, the League could not make payroll on February 14, 2019. Ebersol stated that the
League’s continued viability depended on its making payroll.116
89. 	Dundon forwarded the same information to Zutter on the morning of February 13,
2019.117 Zutter testified at trial that he recalled receiving and reviewing the information and
giving feedback to Dundon, but previously testified that he did not remember.118
90. 	Zutter received the draft Term Sheet from Dundon and provided written
comments on the proposal, calling the proposal “delusional,” expressing his opinion that the
company was “burning cash,” and noting he could “do a 1-dollar senior loan with foreclosure
rights and wipe you out and restructure equity.”119
91. 	Following their initial call, Dundon suggested to Ebersol that AAF needed a
single funder instead of continuing rounds of fundraising. Dundon called this “series infinity”—
a single, comprehensive capital solution.120
92. 	Ebersol failed to disclose that the League had millions of dollars in preexisting
obligations in addition to player payroll. The only pre-existing liability he disclosed was the
115 T-0015; D-75; D-50; Trial Tr. 59–62, ECF No. 331; Trial Tr. 49, ECF No. 434.
116 Trial Tr. 140, ECF No. 335.
117 T-0807.
118 Trial Tr. 40:15–44:20, ECF No. 383.
119 Id. at 44:21–51:14; T-0805.
120 Trial Tr. 147:19–148:3, ECF No. 321; Trial Tr. 48:12–23, ECF No. 332.
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$5.1 million needed for the League’s payroll and related expenses. Ebersol stated that the League
needed between $55 and $70 million to make it through the first season of play, which would
conclude at the end of April, meaning that the League needed $55–$70 million for the remaining
eleven weeks of the season.121
93. 	Three days before Ebersol met Dundon, on February 10, 2019, Ebersol sent an
email to Michael Kives, a potential investment contact. Ebersol told Kives that the League
needed $70 million to finish the season. Contemporaneous league projections supported a similar
estimate.122
94. 	Ebersol led Dundon to believe the League had paid expenses previously incurred
by the League from inception through the first week of play—for items such as stadium fees,
hotel accommodations for players—and that only the $5.1 million for player payroll, advertising
expenses, and back-office expenses remained outstanding.123
95. 	Ebersol testified he and Dundon initially discussed a $10 million bridge loan, but
that there was no agreement on who (Dundon or one of his entities) would be the lender. After
Ebersol sent a form note to Dundon, Dundon called Ebersol back and said he (Dundon) was out,
meaning there was no deal. Ebersol provided Dundon with more details about the AAF business
model and suggested that Dundon call industry professionals to verify AAF’s legitimacy. One
of those industry professionals—David Zaslov—called Ebersol late that night and, for the first
time, mentioned the figure $250 million as a potential investment. At almost midnight on
121 Trial Tr. 51:6–12, ECF No. 343. Trial Tr. 191–93, ECF No. 396; T-0021; D-237, Ex. A ¶ 6; D-50; Trial Tr. 141,
ECF No. 335.
122 Trial Tr. 209–10, ECF No. 412; Trial Tr. 201–03, ECF No. 343; see T-0020 (“[I] need $10M to get through the
next 2 weeks and an additional $60M to get through the end of the season. I have investors who will follow a legitimate
lead.”).
123 D-75; T-0021; Trial Tr. 50:10–25, 51:6-12; 62:15–21, ECF No. 343.
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February 13, Ebersol ended his day with no deal.124
96. 	The next morning, Ebersol had a call with Dundon in which Ebersol claims to
have completed a deal for a Dundon investment. In the Complaint, Trustee claimed the
agreement involved an undisclosed Dundon entity investing $250 million over an unidentified
period in exchange for a majority stake in and control of the league, with the structure including
both debt and equity.125
97. 	In his deposition, Ebersol testified that the terms were not even as clear as in the
complaint: Ebersol stated that, for $250 million, Dundon would receive a majority of ESMG and
total control of the board. Ebersol admitted he and Dundon had not reached an agreement on
whether the investment would be debt or equity.126
98. 	At trial, Ebersol claimed to recall certain terms in specific detail and volunteered
new terms never mentioned in the six years since he said he made the deal. According to
Ebersol’s testimony, the deal consisted of Dundon’s agreement to invest $250 million in
exchange for a 75% equity interest in the League, no debt component, control of the board of
directors, and complete control of the League. Ebersol also testified contrary to his deposition
that he and Dundon had agreed to a valuation of the League at $82.5 million. Trustee presented
multiple press reports and internal emails referencing a $250 million commitment, investment,
or some combination of those terms. None of that evidence documented an exchange of
$250 million for 75% of the league equity, control of the board, or an agreed valuation. No
124 Trial Tr. 120, 128, 130, 132, 140, 141, 142–44, ECF No. 32; Trial Tr. 30:2–31:7, ECF No. 323; Trial Tr. 71–72,
ECF No. 332.
125 ECF No. 56 at 18–19 ¶ 65 (“Dundon again assured Ebersol of his promise and commitment to fund a total of
$250 million, keeping as an open item only the form such funding would take (debt, equity, or some combination).”);
ECF No. 1 at 18 ¶ 65; ECF No. 56 at 40 ¶ 142 (“Dundon offered and Ebersol accepted . . . that Dundon would invest
$250 million in the AAF through ESMG, structured as both equity and debt, in exchange for a majority stake in and
control of the AAF.”); ECF No. 1 at ¶142, ECF No. 1 (same).
126 Trial Tr. 19–25, ECF No. 327.
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document discusses any other material terms of a $250 million transaction, including which
Dundon-affiliated entity would be a party to the agreement, the timing or terms of the
contribution of the funds, or how they would be repaid. No document mentions an agreed
valuation between Dundon and Ebersol. The Term Sheet contains no reference to $250 million
and contains no reference to an agreed-upon value of ESMG.127
99. 	According to Ebersol, he called the existing board members and a few major
existing shareholders and obtained their approval of the $250 million Dundon deal. Ebersol also
claims to have called Fenwick lawyer Jordan Roberts. Notably, none of the board members,
shareholders, or lawyers Ebersol claimed to have called testified at trial. The one investor who
did testify—Dan Miller—contradicted Ebersol’s testimony. Miller said Ebersol told him that he
(Ebersol) had obtained financing for the season, but Miller did not recall Ebersol mentioning a
$250 million deal.128
T HE T ERM S HEET
100. 	Ebersol and Dundon discussed various scenarios, investment amounts, and
structures during multiple calls within the 24 hours between their initial introduction and when
DCP transferred the initial $5.1 million to ESMG. At the time that these discussions took place,
ESMG, through Ebersol, was being advised by attorneys with Fenwick.129
101. 	On February 14, 2019, Dundon connected Ebersol with John Zutter, who worked
with DCP, an investment vehicle Dundon used to make investments. Dundon is DCP’s manager,
and DDFS Management, LLC is DCP’s sole member. Dundon is the sole member of DDFS
Management, LLC, which is the sole general partner of DDFS Partnership LP. DCP and DDFSP
127 Trial Tr. 169:13–15, 171:11–15, ECF No. 321; Trial Tr. 184–87, ECF No. 332.
128 Trial Tr. 123–24, 161, 163–68, 180, ECF No. 321; Trial Tr. 184–85, ECF No. 327; Trial Tr. 189–90, 205, ECF
No. 354.
129 Trial Tr. 123:12–13, ECF No. 321; D-85 (cc’ing attorneys).
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are pass-through entities for tax purposes.130
102. 	During their February 14, 2019, morning call, Dundon and Ebersol discussed how
to value a potential deal, with Dundon initially referencing a $90 million cap from the term sheet,
Ebersol countering that they were at $115 million (where Fowler and others had invested), and
Dundon responding he had them at $75 million before they agreed to split the difference at
$82.5 million.131
103. 	On February 14, 2019, Dundon was aware that AAF lacked a permanent funding
solution, required additional capital to continue operations, and was actively negotiating with
multiple potential investors as alternative sources of funding beyond his own investment.132
104. 	When Dundon connected Ebersol with Zutter, Dundon and Ebersol had not yet
come to an agreement finalizing a potential investment. Dundon tasked Zutter with structuring
and negotiating, on behalf of DCP, the terms of a potential investment in the League. Zutter
testified that he never discussed a potential investment of $250 million with anyone prior to
execution of the Term Sheet.133
105. 	Initially, DCP conducted little due diligence on a potential investment in the
League because ESMG needed the funding within a few hours to make the payroll deadline.
Ebersol did not disclose to Dundon that the Ebersol family trust could have fulfilled the
immediate $5.1 million for payroll and given DCP time for diligence.134
106. 	Dundon accepted, for due diligence purposes, ESMG’s documentation, the
investor deck, the financial projections model, and the capitalization table that Ebersol emailed
130 T-0021; D-85; Trial Tr. 51–53, ECF No. 383. Trial Tr. 215–19, 296, ECF No. 396; D-261; Trial Tr. 141:4–7, ECF
No. 351.
131 Trial Tr. 156:2–58:19, ECF No. 321; Day 6, 75:14-77:1.
132 Trial Tr. 182:8–17, ECF No. 335; Trial Tr. 50:22–51:6, ECF No. 383.
133 Trial Tr. 178, 284, ECF No. 335; Trial Tr. 17–18, 54, 92–93, ECF No. 383; Trial Tr. 171–72, ECF No. 321; T-
0021.
134 Trial Tr. 61–63, ECF No. 327.
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to him on February 13, 2019.135 Dundon elected not to conduct any other due diligence during
the term sheet negotiations.
107. 	On February 14, 2019, the parties exchanged drafts of several proposed term
sheets, the first of which was drafted by ESMG’s counsel. Zutter handled the negotiations for
DCP and sent redlined changes back to Ebersol and the Fenwick lawyers. Zutter, however,
directed that the Term Sheet be between DCP and ESMG, rather than between Dundon and
ESMG, and cover only $70 million of investment over several months, rather than $250 million
and multiple years as Ebersol and Dundon had agreed.136
108. 	Farrell was in the room with Ebersol during at least one of the calls about the
Term Sheet. Farrell’s memory of those calls was that he did not recall any definitive statement
of an agreement being discussed, other than that there would be a one-page deal for a quick
investment, “that then may lead to an additional tranche of funding or financing.”137 None of the
draft term sheets referenced an investment or potential investment in the amount of $250 million.
109. 	Fenwick lawyers Jordan Roberts and Dawn Belt represented ESMG in connection
with the negotiations of the Term Sheet. Roberts did not testify. Belt did not recall any
discussions with DCP’s representatives regarding an investment in the amount of $250 million
by Dundon or any of his entities. Ebersol testified that he, Roberts, and Freedman had a call with
Zutter about the Term Sheet. During that call, Ebersol never mentioned that the deal was
$250 million, not $70 million. Freedman did not recall any internal discussions regarding a
$250 million investment by Dundon or his entities.138
135 D-75.
136 Trial Tr. 65, ECF No. 327; D-85; Trial Tr. 53:1–11, ECF No. 383.
137 Trial Tr. 19:11–20:22, ECF No. 413.
138 Trial Tr. 154–55, ECF No. 396; Trial Tr. 23–24, 219, ECF No. 412; Trial Tr. 180–81, ECF No. 321; Trial Tr. 190,
ECF No. 332; Trial Tr. 190, ECF No. 332.
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110. 	When Ebersol saw that the Term Sheet contained a 70% ownership figure instead
of the agreed 75%, he immediately called Zutter, who told him to address it with Dundon.
Ebersol then called Dundon about the Term Sheet discrepancies, and Dundon stated he had not
seen the document and that while the Term Sheet was part of the deal, it did not encompass the
entirety of their agreement, reaffirming that Ebersol had “a deal” directly with him.139
111. 	Except for Jordan Roberts, all other individuals involved in the negotiations
testified. Only Ebersol recalls a discussion of $250 million being the Dundon investment.
Besides Ebersol’s trial testimony, Trustee offered no evidence that anyone objected when the
Term Sheet reflected the $70 million maximum cumulative commitment language.140
112. 	Ultimately, negotiations culminated in the execution of a Term Sheet for Series 2
Preferred Stock Financing. Ebersol executed the Term Sheet on behalf of ESMG. Ebersol did
not disclose that he had not obtained authority from the ESMG board or stockholders (in the
form of a board vote at a meeting, a stockholder vote, or consent) to sign the Term Sheet on
behalf of ESMG. Ebersol did not disclose he had not obtained authority from ESMG’s other debt
holders. Ebersol did not disclose that the change of control transaction would trigger defaults on
millions of dollars of debt, that he lacked authority to consent to the issuance of a new series of
preferred shares, or that agreements with other preferred shareholders including the Fowler
agreement guaranteed the Series Seed shareholders and Fowler voting board seats, which would
make ESMG’s performance of the Term Sheet impossible given that Ebersol promised DCP the
only voting board seats.141 Notwithstanding these omissions or representations, Dundon did not
conduct any due diligence prior to his acquisition of AAF, nor did he ask any questions about
139 Trial Tr. 187:25–189:22, 192:11–194:5, ECF No. 321.
140 Trial Tr. 275–76, ECF No. 396.
141 T-0007; Trial Tr. 45, 66–67, 176–78, ECF No. 327; T-0022; D-136; Trial Tr. 175–78, 180–82, ECF No. 396; D-
237, Ex. A ¶¶ 3, 9; D-124; Trial Tr. 202–03, ECF No. 349; T-0007 at 007.0002.
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the financial condition of the league or request any financial documents from AAF personnel.
113. 	When the parties finalized the Term Sheet, DCP believed, based on Ebersol and
AAF legacy management’s representations, that the League had only $5.1 million in pre-existing
liabilities.142
114. 	The Term Sheet contains the only agreement that any of the parties reached for
an investment in the League.143
115. 	The Term Sheet is between ESMG, as the “Company,” and DCP, as “Investor,”
and it outlines “a summary of terms for a proposed financing of the company.”
116. 	The Term Sheet required: “[t]he Investor [to] invest $5,100,000 (the “Initial
Funding Amount”) by 1:30 pm PST on February 14, 2019.
117. 	The Term Sheet contained a maximum cumulative funding commitment of
$70 million:
Funding Commitment: June 30, 2019, the Company will have the right to submit
an equity funding request to the Investor, which shall state the amount of funding
requested and include a supporting budget, subject to a maximum cumulative
commitment of $70,000,000. Within 5 calendar days of receipt of each such
request, the Investor will invest into the Company the full funding amount listed on
such request.
The Term Sheet spelled out the ownership interest DCP would receive for its investment:
Investor Ownership: Upon the execution of this Agreement and Funding of the
Initial Funding Amount, the Company will issue the Investor a number of shares of
Series 2 such that immediately after the Closing, the Investor will own 75% of the
Company’s fully diluted capital stock.
The Term Sheet explained DCP’s rights concerning corporate governance:
Board of Directors and Governance: Upon the execution of this Agreement, the
authorized size of the Board shall immediately be set at four members, two of which
shall be voting members and two shall be non-voting members, consisting of
members two voting members designated by the holders of a majority of the Series
142 D-50; Trial Tr. 191–93, ECF No. 396.
143 D-90; D-268; D-269; Trial Tr. 188–90, ECF No. 349.
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2 (initially John Zutter and Tom Dundon) and two non-voting members designated
by Charlie Ebersol. The Board shall have full authority over all aspects of the
Company. The Investor shall have the right to make any and all day-to-day business
decisions for or on behalf of the Company, including but not limited to determining
capital required to be drawn under this Agreement, to bind the Company or to enter
into any agreement on behalf of the Company. The Investor shall have the further
right to define or limit any authorities of any employee, Director, advisor,
representative, vendor, consultant or officer of the Company, up to and including
terminating such individual or entity. To the maximum extent permissible under
Delaware law, the parties agree that the Investor, in its role as such or as a director,
officer or any other related role to the Company, shall have no fiduciaries
obligations to the Company or its owners.144
118. 	At trial, Ebersol admitted that he understood the key terms of the Term Sheet
when he signed it. He understood that, by signing the Term Sheet (even though he lacked
authority at the time), he obligated ESMG to issue Series 2 preferred stock to DCP, representing
75% of ESMG’s fully diluted stock. He also understood that the Term Sheet set out a maximum
cumulative commitment of $70 million and did not mention a $250 million commitment.145
119. 	The Term Sheet required the Investor to “provide definitive documentation” that
ESMG and its representatives would be “obligated to sign,” but it made clear that the agreement
was binding “upon [ESMG’s] . . . receipt of the Initial Funding Amount.” The Term Sheet
selected Delaware law as the governing law.146
120. 	On February 14, 2019, DCP caused DDFSP, an entity owned by Dundon, to fund
the Initial Funding Amount of $5.1 million. ESMG used the funds to pay payroll due that day.147
121. 	After ESMG received the $5.1 million, day-to-day management of the League
remained with Ebersol and league management. Dundon and Zutter became the sole voting board
members of ESMG on February 24, 2019; Ebersol continued to serve on the board of ESMG in
144 T-0007.
145 Trial Tr. 74–79, ECF No. 327.
146 T-0007.
147 Trial Tr. 82–83, ECF No. 327; Trial Tr. 374, ECF No. 412; Trial Tr. 135, ECF No. 380.
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a non-voting role, continued as CEO, and remained the manager and CEO of ESMG’s subsidiary
LLCs. All the other league executives and staff remained in place.148
122. 	Shortly 	after 	February 14, 	2019, 	league 	management 	met 	with 	DCP
representatives in Dallas for a series of all-hands meetings. During the meetings, which took
place over several days, the parties discussed operational matters and the process for the League
to submit funding requests to DCP. DCP also sought to understand the League’s processes,
systems, performance, and business metrics. After February 14, 2019, Dundon and Zutter wasted
no time—they acted, and were treated by ESMG personnel and former board members, as though
they were completely in charge of AAF. After finalizing the deal on February 14, 2019, Dundon
instructed Ebersol to book a flight to Dallas.149
123. 	The Term Sheet required funding requests to be submitted with a supporting
budget. DCP and league management agreed that, on a weekly basis, League management would
submit a funding request to DCP, outlining the proposed vendors to be paid. DCP and ESMG
would then agree on the budget, the amount of funds needed from DCP, the amount of a given
request to fund, and how league management would use the funds to pay vendors.150
124. 	Around the time of the Dallas meetings, League management provided DCP with
access to its virtual data room for the first time. Between viewing that room, which League
personnel updated with additional and new information, and the Dallas meetings, DCP began to
discover material delinquent obligations incurred by ESMG prior to the execution of the Term
Sheet that had not previously been disclosed. DCP also began to discover that several of the
148 Trial Tr. 207–09, ECF No. 434; Trial Tr. 79–80, ECF No. 327.
149 Trial Tr. 117–18, 123, ECF No. 412; Trial Tr. 223:17–227:12, ECF No. 396; D-147; Trial Tr. 177:1–178:5, ECF
No. 321; Trial Tr. 35:20–23, ECF No. 343.
150 T-0007; Trial Tr. 29–30, 109, ECF No. 413.
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representations Ebersol made before he signed the Term Sheet omitted material information.151
125. 	In addition to the $5.1 million that ESMG needed for payroll, ESMG had millions
of dollars in outstanding accounts payable at the time it entered the Term Sheet. The debts
included the critical vendors with whom Ebersol had been playing “chicken.”152
126. 	During the entire time DCP worked with the League, the League failed to
accurately report to DCP the true state of accounts payable. DCP implemented an accounts
payable tracker to attempt to identify the monies owed by ESMG. DCP also implemented a cash
flow tracker to identify invoices that needed to be paid to get football on the field each week.
Neither Ebersol nor AAF management objected to the implementation of the accounts payable
tracker or the cash flow tracker.153
127. 	DCP instructed League management to attempt to negotiate more favorable terms
for certain obligations incurred prior to the Term Sheet and implemented a vendor settlement
tracker to monitor this process. DCP alleges that, in directing management to renegotiate
obligations, DCP sought to increase the League’s long-term prospects for success by preserving
funds for the weeks ahead. Zutter testified that, from his prior business experience, he knew
professional service firms often accept discounts for pre-existing debts, and re-negotiation of
pre-existing debts can benefit both the debtor, who saves cash, and the counterparty, who
receives payment faster and is incentivized for the business to succeed by the prospect of a long-
term business relationship.154
151 Trial Tr. 72, 83 ECF No. 383; Trial Tr. 26, ECF No. 398; T-0841; D-237, Ex. A.
152 Trial Tr. 49, 179–86, ECF No. 434; Trial Tr. 129–30, ECF No. 383; Trial Tr. 191–95, 251, 253, ECF No. 396; D-
50; T-0278; D-237, Ex. A ¶ 6.
153 See ECF No. 413 (testifying about the implementation of financial trackers); Trial Tr. 210–17, ECF No. 434; D-
150 (discussing how to hold back payables from the DCP funding request to make the weekly burn rate look less
scary); D-156; T-1119; Trial Tr. 224–33, ECF No. 396; D-147.
154 Trial Tr. 135:8–18, ECF No. 412; Trial Tr. 76–77, ECF No. 413; T-0962; D-98; Trial Tr. 226–27, ECF No. 396;
Trial Tr. 164–66, ECF No. 383; T-0084.
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128. 	DCP prioritized spending to enable the League to put games on the field and make
it through the first season. DCP representatives Zutter and Jeff Vanderbilt created a triage system
for payments, dividing outstanding obligations into three tiers. The first and most important tier
consisted of expenses needed to put games on the field. The second tier consisted of expenses
that provided some flexibility in timing. The third tier included those past-due obligations that
no longer required any service. DCP directed league management to renegotiate preexisting
obligations to save funds. DCP controlled the board and had to approve the League’s weekly
contributions.155
129. 	DCP uncovered that ESMG had not accurately reported the state of its finances.
The League never gave DCP complete financial information or a complete picture of finances at
the team level. DCP had to make multiple requests to ESMG for complete details on stadium
contracts and related matters. Previously undisclosed accounts payable were uncovered. Due to
AAF’s financial mismanagement and its decentralized financial tracking system before DCP’s
investment, DCP took significant time to uncover the extent of Ebersol’s misrepresentations and
omissions.156
130. 	DCP 	also 	eventually 	discovered 	that 	Ebersol 	made 	several 	material
misrepresentations and failed to disclose material items prior to execution of the Term Sheet.
Ebersol represented that he had the authority to sign the Term Sheet on behalf of ESMG. Ebersol
was required to obtain approval from ESMG’s board and a majority of the shareholders. DCP
discovered after the Term Sheet that Ebersol had not conducted a board meeting or a shareholder
vote to approve the Term Sheet or any other transaction involving Dundon or his affiliates. DCP
155 Trial Tr. 73–82, ECF No. 413; Trial Tr. 129–57, ECF No. 383.
156 Trial Tr. 35–55, ECF No. 398; see Trial Tr. 23, ECF No. 413; Trial Tr. 76, ECF No. 383; D-147 (implementing a
project tracker).
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learned after the Term Sheet negotiations that a past associate of Ebersol’s had threatened the
League with litigation, claiming to own a 50% interest in the League. Ebersol failed to disclose,
and DCP was unaware of, the existence or nature of the threatened litigation before it executed
the Term Sheet. DCP also learned of the existence of outstanding debts the League owed to
David Pottruck, Dick Ebersol, and MGM, none of which Ebersol had disclosed before he
executed the Term Sheet. Ebersol did not tell DCP that the change-of-control transaction would
accelerate the Pottruck and Ebersol notes and trigger a default under the MGM note.157
131. 	During the ensuing weeks, DCP attempted to identify gaps between reporting and
expenses. DCP tasked Elisa Lee, a DCP analyst, with creating a financial model that provided
DCP and league leadership with a view of the League’s accounts payable and anticipated
revenue. Lee could not determine the League’s true financial condition. The League lacked a
coherent, consistent reporting structure between the League and the teams.158
132. 	Every week, DCP learned of new expenses and liabilities necessary just to get
games on the field, which was due in part to legacy League leadership withholding invoices to
avoid scaring DCP. DCP also learned that actual and anticipated revenues were far below what
the projections disclosed. As the season progressed, the situation compelled ESMG to tighten its
belt to preserve the limited $70 million in capital.159
T HE ESMG B OARD AND S HAREHOLDERS R ATIFIED THE T ERM S HEET
133. 	After ESMG signed the Term Sheet, Zutter conducted a gap analysis that
identified contractual and legal impediments to ESMG consummating the Term Sheet. The
transaction constituted a change of control that triggered a default under an MGM note, made
157 Trial Tr. 177:4–17, 198–99, 204, 275–76, ECF No. 396; T-0022; D-114; D-237, Ex. A ¶ 10; D-124; D-145.
158 Trial Tr. 24–25, 35–39, 63–64, ECF N O. 398.
159 Trial Tr. 215–17, ECF No. 434; D-125; Trial Tr. 56–60, 71–72, ECF No. 398; D-172; T-1343; Trial Tr. 78–86,
ECF No. 413.
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notes to David Pottruck and the Ebersol family trust due, and caused a breach of the Fowler
stock agreement.160
134. 	Because the Term Sheet contemplated a change of control, it required board and
shareholder approval. When DCP discovered that Ebersol had lacked the authority to enter the
Term Sheet on behalf of ESMG because it constituted a material transaction, DCP sought to
obtain ESMG’s board approval through retroactive ratification.161
135. 	On February 24, 2019, a majority of the ESMG directors at the time held a board
meeting. Ebersol, Jeff Moorad, Kevin Freedman, and Alan Kantowitz attended in person. Dick
Ebersol and Dawn Belt attended by phone. The board meeting minutes accurately reflect what
happened at the meeting. They show that Ebersol served as the chairman and Belt as the secretary
of the meeting, and that Belt kept the minutes.162
136. 	ESMG’s board formally approved and ratified the Term Sheet. The board
determined that the Term Sheet was in ESMG’s best interests. ESMG’s board also confirmed
that it had already received $12 million from DCP in fulfillment of the Term Sheet.163
137. 	Ebersol testified that he called Fenwick lawyer Jordan Roberts about the
$250 million deal with Dundon on February 14, 2019. Roberts did not testify in person or by
deposition to corroborate Ebersol’s testimony. Roberts’ Fenwick colleague Dawn Belt did
testify. She admitted attending the board meeting but did not recall any mention of a $250 million
agreement.164
138. 	No one presented ESMG’s board of directors with, nor did it consider, any
160 D-136 (“Change of Control–Gap Analysis”); Trial Tr. 180–82, ECF No. 396; D-269; Trial Tr. 193–97, ECF
No. 327; Trial Tr. 81:5–15, 83:2–22, ECF No. 383; Trial Tr. 165–66, 180–82, ECF No. 396.
161 D-22, Ex. A, Art. IV.
162 Trial Tr. 173–74, 181, ECF No. 327; D-135 at 11; D-269.
163 D-269; D-135 at 12.
164 Trial Tr. 159, ECF No. 321; Trial Tr. 35, 43, ECF No. 412.
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investment 	by 	Dundon 	or 	any 	entity 	owned 	or 	controlled 	by 	him 	in 	the 	amount 	of
$250 million.165
139. 	None of the ESMG board members, shareholders, or attorneys sent a demand
letter to Dundon stating or suggesting that Dundon breached a purported agreement to invest
$250 million in the League, nor did any of the board members reach out to Dundon to ask why
he did not fulfill a purported agreement to invest that amount.166
140. 	Fenwick lawyer Jordan Roberts drafted a waiver to cure the MGM, Pottruck, and
Ebersol family trust note defaults. In the waiver, Roberts described the transaction:
Dundon Capital Partners LLC, or one or more of its affiliates (including affiliates
of Thomas G. Dundon) (collectively, “Dundon”) . . . has committed to invest up
to $70,000,000 in the Company, in exchange for Dundon receiving, among other
things, 75% of the Company’s fully-diluted capital stock . . . (the “Dundon
Transaction”) and Dundon has already made certain payments to the Company in
connection with the Dundon Transaction.
The waiver does not refer to a $250 million transaction. Although the waiver was never signed,
it shows Roberts’s understanding of the transaction. Though Ebersol testified that he called
Roberts, among others, on February 14 to describe the alleged $250 million agreement, Ebersol
never objected in writing to Roberts that the waiver failed to mention a $250 million deal.167
141. 	ESMG 	could 	not 	enter 	a $250 million material 	transaction 	without board
approval. The board never approved a $250 million transaction.168
142. 	Charlie Ebersol, Dick Ebersol, Jeff Moorad, and Dawn Belt conducted a meeting
on February 24, 2019, to approve the Term Sheet. None of them brought up $250 million deal
at the board meeting.169
165 Trial Tr. 184–87, ECF No. 327; Trial Tr. 222, ECF No. 412.
166 Trial Tr. 89–90, 133–37, ECF No. 349.
167 D-145 at 000591; Trial Tr. 188–203, ECF No. 332.
168 Trial Tr. 43–44, ECF No. 412.
169 Trial Tr. 186–87, ECF No. 327.
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143. 	The board also approved a release agreement with FO2, LLC, and a voting
agreement that gave Ebersol power of attorney to vote FO2’s shares indefinitely. The approval
of the release agreement cured two major impediments to ESMG’s consummation of the Term
Sheet. First, Ebersol and ESMG could not consummate the Term Sheet because the majority
ownership would shift to DCP, diluting FO2’s shares. Second, ESMG could not keep Fowler on
the board (as required in the FO2 agreement) because the Term Sheet required DCP to have
exclusive voting rights on the board.170
144. 	Neither Dundon nor Zutter had been elected to the board at the time the board
approved the FO2 release. Neither Dundon nor Zutter participated in the ESMG board’s decision
to approve the FO2 release.171
145. 	There is no evidence that Dundon or Zutter received a material, non-ratable
benefit from the FO2 release, considering their respective financial circumstances, the fact that
all stockholders were released equally, and the fact that Fowler had made no claims against
Dundon or Zutter.172
146. 	Ebersol testified that he relied on Dundon’s statements that the Term Sheet merely
facilitated the initial wire transfer. Ebersol also testified that he believed the Term Sheet did not
displace the larger $250 million transaction and that Dundon assured him the larger agreement
remained in place. But by March 26, 2019, Dundon and Zutter made it clear that neither Dundon
nor DCP would fund any amount above the $70 million maximum cumulative commitment in
the Term Sheet. In those discussions, which included Dundon and Belt, Ebersol never claimed
the existence of a $250 million agreement or even mentioned $250 million.173
170 D-135 at 4–11, 17–23; D-16 at 5; T-0007; Trial Tr. 176–78, ECF No. 327; D-22, Ex. A, Art. IV.C.2.3.1(d).
171 D-182 at 4; D-135 at 11.
172 D-135 at 17.
173 Trial Tr. 142–43, ECF No. 349; D-182; D-269; Trial Tr. 182–83, 189–95, ECF No. 321; D-256; D-177; T-1171.
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147. 	After the board ratified the $70 million Term Sheet, the stockholders of ESMG
formally ratified the Term Sheet by duly executed written consent, expressly acknowledging that
the Term Sheet was binding and enforceable by DCP on March 27, 2019. In doing so, they
acknowledged that the board had approved the Term Sheet and that ESMG had received
approximately $50 million from DCP under its terms. In the consent, the stockholders authorized
the officers of ESMG to negotiate the definitive agreements reasonably necessary or advisable
to implement the transactions contemplated by the Term Sheet and to take the actions necessary
to carry into effect the resolutions concerning the Term Sheet. The stockholders also ratified the
directors’ actions regarding the investment. Notably, at the time of the shareholder’s ratification,
Ebersol, with the FO2 proxy, unilaterally controlled more than 71% of the League shares and
maintained that control to the end, as ESMG never issued equity to DCP. Ebersol never objected
that the shareholder consent failed to reference a $250 million agreement, even though he knew
neither Dundon nor DCP would fund any amount above $70 million.174
148. 	Dundon testified that, as of March 27, 2019, he and Ebersol had not had any
discussions concerning an additional investment of $180 million.175
NO O RAL AGREEMENT FOR $250 MILLION
149. 	The foregoing events transpired with no objection from Ebersol, his lawyers, the
ESMG board, or any other shareholder objecting that Dundon promised to invest $250 million
in the League.176
150. 	Ebersol testified to the existence of a $250 million agreement. League middle-
management testified that, even if they had heard discussions of the $250 million figure, they
174 Trial Tr. 208–12, ECF No. 327; D-182 at 2; Trial Tr. 239–40, 252 ECF No. 323; D-216; Trial Tr. 187–88, ECF
No. 396; T-1171.
175 Trial Tr. 143, ECF No. 349.
176 Id.
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had not seen such an agreement and were unaware of its terms. No other witness definitively
testified to an understanding that the parties reached an oral agreement on February 14, 2019.
While there are references to $250 million in emails involving Dundon or other DCP personnel,
none of those exhibits identify the agreement or any terms of that agreement. In a February 22
email relating to CBS, Dundon testified that the purpose of his reference to “250” was to make
sure that there was an open discussion with CBS about how future investment with Dundon
would likely involve additional dilution, which could impact the negotiations with CBS over the
term sheet it was negotiating with ESMG. None of the communications is between DCP or
Dundon and ESMG. None of the communications between the parties is contemporaneous with
the initial discussions, the negotiation of the term sheet, the minutes of the board meeting, or the
shareholder consent reference to $250 million.177
151. 	The only other evidence of the $250 million deal was statements Dundon made
to the press after Ebersol had signed the Term Sheet. The press statements all occurred between
February 17 and 24, 2019 (with later-dated emails or articles that refer to statements in that
window). While the amount of $250 million as a commitment or commitment to invest is stated,
there are no statements to the media that corroborate any terms of an agreement or provide any
other circumstantial support for a $250 million oral contract other than the amount.
152. 	At 	trial, 	Dundon 	testified 	that 	he 	made 	statements 	to 	the 	press 	about 	a
$250 million commitment to make a big impression on the market and calm down the media
furor caused by the suggestion that the league missed payroll. Ebersol was concerned at the time
about the XFL potentially taking market share, and Dundon and Ebersol wanted AAF’s media
messaging to project financial stability. While Dundon mentioned the $250 million figure in
177 Trial Tr. 43, ECF No. 412. T-0917; T-0266; Trial Tr. 162–63, ECF No. 343.
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media messaging, it is unclear whether he and Ebersol discussed, let alone reached an agreement,
on Dundon or any entity under his control investing $250 million in the League. Nor did Ebersol
and Dundon ever discuss or agree upon any specific terms or conditions for any hypothetical
investment of $250 million in the League.178
153. 	At trial, Trustee argued that Dundon had previously not explained his motivation
for the $250 media blitz. The Court agrees with Trustee that the trial was the first instance about
the alleged “$250 million media blitz.”179 The Court finds that the Dundon “media blitz”
occurred as follows.
154. 	On February 18, 2019, Dundon leaked a story to the press by telling David Glenn
that he had invested $250 million to save AAF. Glenn was a reporter for the Athletic and
someone that Dundon called “kind of a friend.”180
155. 	Dundon personally insisted and directed Hanson to describe his investment
commitment as “$250 million” in the official press release announcing the agreement.181
156. 	On February 19, 2019, CBS Sports quoted Dundon as saying: “There’s a big
difference between continuing to raise capital as every startup does, right . . . Series A, series
B. Where, you know, I told Charlie you just raised series infinity, right? Like it’s done now,
so . . . .”182
157. 	During the same interview, Dundon stated, among other things:
“So this—my—my investment will keep this thing years and years to come and
it’s—it’s not a viability issue. It’s—it’s just, you know, how good can it be now.
. . .
178 Trial Tr. 92–93, 108–10, 273:6–12, ECF No. 349; T-0034; T-0016; D-128; D-131; D-381.
179 Trial Tr. 274:23–276:1, ECF No. 349; Trial Tr. 247–248:3–4, ECF No. 434.
180 Trial Tr. 72:17–75:19, ECF No. 343; T-008 at 0003–04; Trial Tr. 46:19–47:4, ECF No. 335.
181 Trial Tr. 261:24–262:11, ECF No. 321; T-1317; Trial Tr. 223:16–224:19, 256:2–12, ECF No. 332.
182 Trial Tr. 252:20–253:2, ECF No. 335; T-0859; T-0860.
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My money is in my bank; I’m sure of it.
. . .
I just know when—when they came to me, the football was good, the numbers
were good, and, you know, the terms that I could—the terms that I was wanting
to invest in, they were willing to do.
. . .
I could care less how they got there, right? I just knew the football was good and
the numbers were good and I liked it.
. . .
Well, you know, I think they had other people they were talking to.
. . .
I told Charlie you just raised series infinity, right? Like it’s done now, so
. . .
[O]ne thing on the $250 that—that’s enough money to run this league for a long
time”183
158. 	At Dundon’s direction, AAF distributed the press release around 9 a.m. on
February 19, 	2019. 	Dundon 	personally 	reviewed 	the 	final 	press 	release 	referencing 	his
$250 million commitment on February 19, 2019.184
159. 	On February 20, 2019, in response to inquiries from Sports Business Journal’s
Dan Kaplan regarding Dundon’s investment, Hanson drafted responses for Dundon’s review and
approval. Dundon edited the talking points and emailed them to Megan Hanson—copying
Charlie Ebersol—making statements such as, “The money is in the bank. I’m committed” and “I
have committed to investing $250 million into The Alliance of American Football.” Dundon
directed that the media be told he had committed $250 million, the funds were available, and he
183 T-0859; T-0860.
184 Trial Tr. 94:16–95:1, 117:19–118:7, ECF No. 349; T-1317; T-1419.
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intended to make AAF sustainable.185
160. 	During these review opportunities, Dundon made edits and comments to the press
release, including adding partnership language references to CBS, Turner, and NFL; enhancing
biographical details about Santander founding; adding quotes about player/referee development;
requesting to be called “majority owner”; and modifying corporate partnership messaging.186
161. 	Also on February 19, 2019, the Carolina Hurricanes issued their own press release
announcing that Dundon had invested $250 million in AAF. Dundon approved the form and
content of the Hurricanes’ press release.187
162. 	On February 22, 2019, Dundon dismissed concerns about AAF’s financial issues,
telling USA TODAY Sports, “There is no story here about the money it takes, and I can fund
this league.”188
163. 	On February 28, 2019, in a televised interview, Dundon told Rich Eisen: “So,
once I put my name on this, we’re going to make this work, right? This is what I’m committed
to doing.”189
164. 	Dundon further stated in the interview: “I took control of the League”; “I’ll put
up the money, and I get to make the decisions”; and “Like we don’t have to talk about the money
anymore.”190
165. 	Dundon also inconsistently testified that (1) he was speaking the truth when
speaking to the media, and (2) that he “wasn’t trying to tell the truth to the media.”191
166. 	Dundon’s trial testimony was the first time that anyone had heard “that
185 T-0059; Trial Tr. 58:3–5, 59:2–10, ECF No. 335; T-0052; Trial Tr. 205:5–25, 206:19–207:15, ECF No. 343.
186 T-0034; T-0276; T-1418; T-1417; T-0043; T-0046.
187 Trial Tr. 283:17–284:12, ECF No. 349; T-0506; Trial Tr. 186:8–187:13, 192:12–193:6, 194:8–9, T-0502, T-0503.
188 Trial Tr. 265:17–20, ECF No. 343; T-0380 at 0004.
189 Trial Tr. 203:18–204:6, ECF No. 343; T-1002 at 0013; T-1003.
190 T-1002 at 0012–20.
191 Trial Tr. 129:2–4, ECF No. 335; Trial Tr. 257:19–258:1, ECF No. 349.
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Mr. Dundon was in league . . . with Mr. Ebersol to promote the $250 million” to the public.
Before trial, Dundon never disclosed (in his deposition testimony, initial disclosures, answer,
motion for summary judgment, or otherwise) that either he or Ebersol had deployed a media
scheme to allege $250 million, even though $250 million was not the deal.192
167. 	After February 24, 2019, there were no new statements from Dundon or Ebersol
about a $250 million deal. Between the petition date, April 17, 2019, and the day Trustee filed
the complaint in this case, November 14, 2022, the players filed a $700 million class action
lawsuit against Dundon, Ebersol, and the Debtors. Trustee settled the players’ case by obtaining
an assignment of the players’ claims against Ebersol. Ebersol avoided the players’ claims and a
potential claim for breach of fiduciary duty by the Trustee by settling with the Trustee. In the
settlement, Trustee released the claims against Ebersol in exchange for Ebersol’s cooperation in
this case. After that settlement, Trustee claimed that Ebersol had made a $250 million agreement
with Dundon. Dundon first learned of Ebersol’s contention that Dundon had entered into a
contract to invest $250 million in the League when Trustee filed this lawsuit, which happened
after Ebersol agreed with Trustee to provide testimony in exchange for a release of the players’
and Trustee’s claims against him.193
168. 	Dundon’s explanation that his statements to the press and, allegedly, to AAF
employees about investing or committing $250 million in AAF are “puffery” is incredulous and
lacks credibility. Dundon’s public statements that he was either “committed” or “willing to make
an investment” of $250 million in ESMG are contradicted by the more probative evidence of
what the Term Sheet stated. No one involved in the negotiations, other than Ebersol, stated that
Dundon was committing or investing more than $70 million in AAF.
192 Trial Tr. 275:2–15, ECF No. 349.
193 D-269; D-217 at 16; Trial Tr. 175-179, ECF No. 323; Trial Tr. 148–149, 152–153, ECF No. 349.
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169. 	Both Ebersol and Ken Schanzer, a 24-year high-level veteran of NBC Sports and
a one-time consultant with AAF, testified that handshake deals, oral agreements of the magnitude
of $250 million, are common in the sports entertainment business. Given the circumstances and
the actors involved, that testimony lacked credibility. This was the biggest deal of Ebersol’s
life.194
170. 	The Term Sheet is the only proposed written agreement between the parties
regarding an investment by Dundon or DCP in ESMG or the League. Any agreement for future
investment would require the parties to agree to terms.
171. 	Neither ESMG nor DCP instructed or requested that Zutter paper an agreement
for a $250 million investment in or loan to ESMG.195
172. 	Dundon and Ebersol did not reach an oral agreement regarding a $250 million
investment by Dundon or any entity that Dundon owned or controlled. All discussions between
Ebersol and Dundon prior to the execution of the Term Sheet constituted negotiations.
173. 	During those negotiations, the parties never agreed upon: (a) the parties to an
alleged $250 million agreement; (b) the timeframe during which the alleged $250 million would
be invested; (c) the mechanisms, requirements, and conditions for drawing on the funding
commitment; (d) whether the investment would take the form of equity or debt or both; (e) if
equity, the price per share, quantity of shares, or any mechanism for valuing the shares, the
features of the shares (e.g., preferred payment rights, protective provisions, conversion rights, or
whether the league would be issuing common shares, a new category of shares, or extending the
offering of previous shares); and (f) if debt, the interest rate, maturity date, payment schedule,
conditions to fund (e.g., performance in line with the budget), or any other terms of debt
194 Trial Tr. 238–239, 245, ECF No. 397; Trial Tr. 84-85, ECF No. 327.
195 Trial Tr. 274, ECF No. 396.
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repayment.
174. 	The League’s governing documents, the Fowler Term Sheet, and the DCP Term
Sheet (both of which were structured by ESMG’s counsel) demonstrate an intention by ESMG
to structure financing deals to address the terms an investor in the League would be expected to
agree. The Series Seed and Series 1 shareholders, along with all the details and features of their
equity, are identified in the agreements. Both the Fowler and DCP term sheets similarly identify
the parties to the investments, the timeframe for making the investments, and the specific
procedures and prerequisites for ESMG to request a disbursement of investment funds (or to
borrow funds in the case of the Fowler line of credit).196
175. 	The DCP Term Sheet states that the investment would take the form of equity;
the Fowler Term Sheet, on the other hand, calls for a combination of equity and debt, specifically
a line of credit. Both term sheets specify the features of the shares (the equity) by providing
details on liquidation preferences, preferential distributions, conversion rights, and anti-dilution
provisions.
176. 	Regarding the debt component of the Fowler Term Sheet, the parties agreed on
repayment terms and conditions for funding (e.g., the creation of a finance committee,
preparation of budgets, performance consistent with the budget, review sharing, and other
terms). The Trustee has admitted in his complaint that the parties kept “as an open item” the
“form the funding would take (debt, equity, or some combination).”197
177. 	In the case of the equity component, Ebersol never claimed that he and Dundon
had agreed to repayment terms in the form of preferred distributions and annual dividends. The
Term Sheet entitled DCP to receive the first dollars of any distributions totaling the full amount
196 D-22; T-0709; T-0757.
197 ECF No. 56 at 18–19.
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of the investment, plus a preferred return of 20% per year. The Term Sheet also entitled DCP to
a 20% annual PIK (payment-in-kind) dividend ahead of payment of any other dividends,
redemptions, or other distributions. Trustee presented no evidence that the ESMG shareholders
would have agreed to a $250 million deal with those terms.198
178. 	No one testified that Dundon and Ebersol reached an agreement regarding a
$250 million deal.
179. 	Walter Ballard of PwC, a tax and accounting consultant for Dundon and DCP,
testified about work his firm did for Dundon and his family office. Ballard testified that Zutter
sent him the Term Sheet after it was done and that PwC was asked to address the tax
ramifications after the fact. He had no discussions about the ramifications of a $250 million deal;
the only deal PwC worked on was the Term Sheet (for a maximum cumulative commitment of
$70 million).199
180. 	Other than Dundon, or an entity owned or controlled by him, ESMG had no other
material funding commitments at the time Ebersol signed the Term Sheet. Ebersol had been
seeking investment from WestRiver Group (Anderson’s investment firm) for more than a year
without success. Absent an investment by Dundon or an entity owned or controlled by him, the
League likely would have failed on February 14, 2019, or shortly thereafter, when it missed
payroll.200
181. 	Regardless of what Ebersol may have intended, neither the ESMG stockholders
nor the ESMG board authorized Ebersol to make an agreement whereby Dundon or one of his
entities would invest $250 million in the league.201
198 T-0007
199 Trial Tr. 67–69, ECF No. 351.
200 Trial Tr. 177, ECF No. 332.
201 Trial Tr. 83–86, 212–13, ECF No. 327.
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182. 	ESMG and DCP partially performed the Term Sheet. DDFSP sent approximately
$70 million in funds to the League after Ebersol signed the Term Sheet, and ESMG turned over
control and two board seats to Dundon and Zutter.
183. 	Between February 14 and April 16, 2019, ESMG submitted equity funding
requests to DCP, and DDFSP provided funds in response to the requests.202
184. 	The League agreed with the final accounting sent by DCP and did not receive any
additional funds after receiving $69,719,190.203
185. 	DCP complied with the Term Sheet by providing funds to fulfill requests made
by the League.204
186. 	The League exhausted DCP’s $70 million before the end of its first season.205
187. 	ESMG failed to transfer stock to DCP or Dundon as agreed in the Term Sheet.206
188. 	Dundon had no special relationship with the Debtors at the time the alleged oral
agreement was entered.
189. 	In mid-February, after Ebersol signed the Term Sheet, ESMG sent a notice of
default to Fowler. ESMG never sent a notice of default to Dundon, referring to a failure to invest
$250 million or anything else.207
DUNDON B REACHED H IS FIDUCIARY DUTY
190. 	Dundon testified he had a fiduciary duty to AAF. He further testified that he had
fiduciary duties to the AAF shareholders beginning on February 14, 2019. He was one of two
voting board members of the ESMG board of directors.208
202 Trial Tr. 108–09, ECF No. 413; T-0962; D-172; T-1343; D-206.1; D-206.2.
203 D-206.1; D-206.2.
204 Trial Tr. 247, ECF No. 412; T-0962, T-1343, D-172, D-206.1; D-206.2.
205 T-0104; T-0962; T-1343; D-172; D-206.2; D-271.
206 Trial Tr. 142, ECF No. 331.
207 Trial Tr. 48, ECF No. 331; D-100.
208 Trial Tr. 253:23–24, 276:6–8, ECF No. 335; Trial Tr. 23:2–12, ECF No. 343.
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191. 	Zutter acted as the second of the two voting members of the ESMG board of
directors and had a fiduciary duty to AAF beginning on February 14, 2019.209
192. 	Dundon and Zutter also had fiduciary duties to DCP. Dundon testified that he was
not aware of anything he may have needed to do to address his overlapping fiduciary duties to
both DCP and the AAF.210
193. 	Dundon admitted that AAF’s counsel, Ms. Belt, technically worked for him after
he took control of AAF on February 14, 2019.211
194. 	DCP was never an AAF board member; Dundon and Zutter were, individually.212
195. 	After finalizing the deal, Ebersol and key AAF executives convened in Dallas to
discuss AAF’s operations; outline its needs with Dundon, Zutter, Vanderbilt (chief financial
officer of DCP in February 2019), Kulas; and three DCP analysts, and receive direction from
Dundon.213
196. 	On February 14, 2019, Zutter emailed DCP representatives Elisa Lee, Jeff
Vanderbilt, Ryan Rostenkowski, James Fugitt, and Jason Kulas regarding its “deal to take over
control of the AAF.” Zutter told the DCP team that the deal would be structured like DCP’s
EDHC (Employer Direct Health Care) model.214
197. 	Beginning on February 14, 2019, and continuing forward, Zutter and the rest of
the DCP team controlled both the submission of funding requests from AAF and the approval of
those requests by DCP, resulting in drastic cuts in spending for operations, breaches of
agreements, and a vendor “settlement” program (with which Zutter then directed AAF not to
209 Trial Tr. 118:20–119:7, ECF No. 383.
210 Trial Tr. 23–24, ECF No. 343; Trial Tr. 10:18–25, ECF No. 383.
211 Trial Tr. 267–268; ECF No. 349.
212 Trial Tr. 88:5–15, ECF No. 396.
213 Trial Tr. 37:3–11, ECF No. 343; Trial Tr. 118:14–119:19, ECF No. 412; Trial Tr. 22, ECF No. 413; Trial Tr.
27:25–28:14, ECF No. 398; T-0841.
214 T-0256.
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comply).215
198. 	As of February 14, 2019, and continuing until the bankruptcy filing, Dundon was
a director of ESMG who owed ESMG formal fiduciary duties.216
199. 	While Dundon later directed the former board of ESMG to confirm his (and
Zutter’s) board position, as described above, all parties were already behaving as though Dundon
and Zutter were the only voting board members after February 14, 2019.
200. 	Dundon (himself and through his agents, including Zutter) had actual control over
ESMG and AAF after February 14, 2019, regardless of his formal title.
201. 	From February 14, 2019, through the bankruptcy filing, Dundon failed to hold
any formal board of directors meetings for ESMG.217
202. 	At a February 18, 2019 meeting, Dundon and Zutter instructed AAF senior staff
to obtain discounts from vendors to which AAF had accounts payable. Dundon reserved the right
to personally approve or deny any budget item he deemed nonessential. This practice continued
even when Dundon and Zutter knew they would not fund payments, even where discounts were
negotiated.218
203. 	On February 20, 2019, Zutter issued a directive that all new AAF contracts must
have DCP approval.219
204. 	On March 15, 2019, Dundon ordered Zutter to “[g]et controls in place” regarding
AAF’s expenses. Ebersol responded, “There are controls in place. That are [DCP] approved.”
Zutter testified that one such control DCP instituted was reimbursing personal credit card
215 See infra ¶ 202 [hereinafter “FOF ¶ __”].
216 See FOF ¶¶ 190, 192.
217 Trial Tr. 277:14–24, ECF No. 335.
218 Trial Tr. 231:25–232:7, 233:24–234:3, ECF No. 321; Trial Tr. 32:13–25, ECF No. 323; Trial Tr. 132:20–22, ECF
No. 383; T-0912, T-1105.
219 T-0274.
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expenses rather than using corporate credit cards. Employees were directed to use personal credit
cards even after Dundon and Zutter knew DCP would not approve additional funding to AAF.220
205. 	As of March 18, 2019, Zutter’s direction to DCP in its control of AAF was to
“pay nothing that doesn’t keep the lights on.”221
206. 	From March 18 through April 2, 2019, Dundon permitted AAF to continue
incurring new accounts payable obligations despite internal acknowledgment that the company
could not pay existing or future vendor obligations.222
207. 	Zutter was aware of the conflicting interests between DCP and AAF and was
conscious of the need for him and Dundon to keep careful track of which “hat” they were wearing
at any time.223
208. 	Dundon and Zutter required AAF staff to submit weekly funding requests and
cash flow reports for their approval to obtain operating funds, following a tiered system. DCP
prioritized certain vendors over others.224
209. 	AAF was not allowed to make any significant payment or sign contracts without
approval from Dundon, Zutter, or Vanderbilt.225
210. 	Eventually, by mid-March, Zutter’s tactic of “holding [certain] payment[s]
hostage” threatened AAF’s ability to broadcast and conduct games. In the case of SkyCam,
which provided cameras necessary to broadcast games, it threatened not to provide further
services after a negotiated settlement payment was not made. The same occurred with SIS
Security, who provided stadium security for AAF’s games, after DCP refused to pay a settlement
220 T-0423; Trial Tr. 173:25–176:23, ECF No. 383.
221 T-0084; Trial Tr. 164:15–18, ECF No. 383; T-1048.
222 Trial Tr. 73–74, ECF No. 413.
223 Trial Tr. 96:1–14, ECF No. 396; T-0298.
224 Trial Tr. 140:20–143:1, 143:10–146:8, 193:9–199:3, ECF No. 383. T-0104; T-0120; T-0955; T-1077.
225 Trial Tr. 37:3–7, 17–19, ECF No. 323; T-0274; Trial Tr. 25:19–22, ECF No. 349; T-0963; T-1114.
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that SIS had agreed to with AAF.226
211. 	Both Dundon and Zutter, in separate conversations, warned Ebersol that if he
could not get MGM to agree to renegotiate their deal, they would withhold additional funding,
cut off financial support, and shut down AAF.227
212. 	Kevin Farrell understood that Dundon’s group “was in complete control of [the
AAF’s] expense decisions.” Kelly Vugrincic, former Head of People for AAF, understood that
she, Farrell, Freedman, and Ebersol all “took direction from the Dundon Group as to how we
could operate our finances, and they dictated which vendors were paid and when.” Hanson
testified that she was aware that Dundon was in control of AAF.228
213. 	Dundon stated the bills would not be paid in full and must be negotiated down to
approximately 10, 15, or 20 cents on the dollar.229
214. 	Once a vendor agreed to a reduced payment, the approval had to come from
Dundon or Zutter, who often rejected initial agreements and instructed the team to negotiate an
even lower payment before finalizing the deal.230
215. 	On March 15, 2019, Zutter and Dundon responded to Vanderbilt’s summary of
AAF’s request to pay its vendors negotiated amounts immediately by discussing among
themselves whether a “legal recap” or a “prepackaged [bankruptcy]” would better serve DCP’s
interests in the League.231
216. 	On March 18, 2019, Zutter, Vanderbilt, Zutter, and Kulas exchanged emails
regarding DCP’s approval of funding requests submitted by AAF, where Zutter noted that he
226 T-1119; T-1118 at 0001; T-1152; T-1155.
227 Trial Tr. 93:7–15, ECF No. 323; T-0383; T-0967.
228 Trial Tr. 37, ECF No. 413; Trial Tr. 14:25–15:17, ECF No. 354; Trial Tr. 220:18–22, 223:2–15, ECF No. 332.
229 Trial Tr. 230:25–232:15, ECF No. 321.
230 Trial Tr. 232:16–234:10, ECF No. 321; Trial Tr. 74–75, ECF No. 413.
231 T-1116; Trial Tr. 199:3–200:6, ECF No. 383.
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preferred to keep the AAF in a “fire drill” with respect to funding requests. The email exchanges
also identified Zutter was “avoiding the prefund (not giving AAF cash to use)” and intended to
“leave their cash balance real low.”232
217. 	On March 27, 2019, Ebersol circulated an internal email to Dundon and Zutter
calling the player contracts AAF’s “most valuable asset,” underscoring their importance in
attracting NFL-caliber talent.233
218. 	On March 27, 2019, Ebersol also warned Dundon that if AAF did not play the
entire regular season, AAF would be in breach of the players’ contracts and could lose leverage
in selling the contracts to a future spring league such as the XFL.234
219. 	On March 27, 2019, Ebersol and other AAF executives warned Dundon that
failing to complete the season would result in a total loss of investment, bad publicity, loss of all
national sponsorship revenue due to not fulfilling contract obligations, and likely would cause
AAF football players to be released from their contracts and non-competes, devaluing the
AAF.235
220. 	Dundon did not believe AAF needed money at the time he took control, nor could
it later take money in good faith.236
221. 	Dundon did not make a capital call to existing shareholders.237
222. 	Dundon testified that potential tax benefits were not the impetus behind his
decision to invest in the league. Trustee argued that the purpose of Dundon acquiring AAF was
at least two-fold: (1) to take advantage of tax benefits with Dundon utilizing any benefits from
232 T-1127.
233 Trial Tr. 133:11–14, ECF No. 323; T-0418; Trial Tr. 211:16–25, ECF No. 343.
234 Trial Tr. 67:11–68:19, ECF No. 396; T-0027.
235 Trial Tr. 64:1–65:14, 67:11–69:6, 70:18–71:7, ECF No. 396; T-0027.
236 Trial Tr. 144:16–145:8, ECF No. 343.
237 Trial Tr. 129:14–21, 130:12–17, ECF No. 343.
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“economic opportunity zones”, and (2) to facilitate a bankruptcy filing in which Dundon would
strip AAF of its two most valuable assets: the SPAs and the AAF technology.238
223. 	The Court examined the evidence regarding Dundon’s alleged impetus for
acquiring AAF and found insufficient evidence to support Trustee’s contention that Dundon was
looking to obtain tax benefits through economic opportunity zones. Trustee questioned Walter
Ballard of PwC on the alleged tax attributes from Dundon acquiring AAF, and Ballard’s
testimony did not demonstrate that Dundon or Zutter premised the acquisition of AAF for tax
benefits. PwC was asked to explore the tax attributes of using opportunity zone funds and
opportunity investments, but Ballard’s testimony showed Dundon’s acquisition of AAF was not
for this purpose.
224. 	While there is evidence that Dundon and Zutter were interested in putting AAF
in a chapter 11 bankruptcy, that was not Dundon and Zutter’s original intent.
225. 	Trustee did not show that Zutter received any benefit because of his service to the
League. Zutter did not benefit financially from his work for the League. Zutter was a non-equity
partner of DCP and never had an ownership interest in DCP or in DDFSP. Neither Zutter nor
any entity in which Zutter had an ownership interest ever obtained any interest in the League.
Zutter received no compensation, monetary or non-monetary, for his work for the League. Zutter
did not receive a tax write-off or other tax benefit because of his work for the League. Zutter
received no financial benefit for his service as a board member. Zutter received no financial
benefit from any advertising arrangement between DCP and third parties.239
226. 	Dundon engaged in self-dealing by providing free or discounted advertising to
friends or affiliates, notwithstanding that Dundon testified that his advertising strategy was to
238 Trial Tr. 181–82, ECF No. 349.
239 Trial Tr. 60, 129:4–131:24, 147–148, 226–227, 273–274, ECF No. 396.
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get big brands associated with the League by offering them advertising slots, which would, in
turn, create buzz around the League and increase the League’s perceived prestige due to its
association with major brands. Free advertising may have exacerbated AAF’s financial
condition. By March 4, 2019, Dundon had supplied multiple entities with which he was affiliated
with “no charge” advertising slots during AAF games, including AT&T, Invisalign, SAP, Sony
Pictures, Carvana, and TopGolf. Dundon owned AT&T stock and was friends with AT&T’s
CEO. Dundon owned Carvana stock. Dundon was a substantial investor in TopGolf.240
227. 	Trustee did not identify any specific dollar figure for any of the alleged harms he
claims Dundon and Zutter caused by allegedly breaching their fiduciary duties.241
B REACH OF FIDUCIARY DUTY
228. 	Dundon and Zutter were acting in good faith and within their informed business
judgment when they cut spending, negotiated with critical partners, declined to aggressively
pursue outside investors, filed for bankruptcy, and ultimately breached player contracts.
229. 	Dundon breached his fiduciary duty of loyalty by engaging in self-dealing and/or
benefiting his friends with ESMG assets, including by providing free advertising to entities
related to him (like AT&T, Carvana, and TopGolf) and to entities owned by friends.
230. 	Dundon had competing duties of loyalty as a fiduciary of DCP, ESMG, and AAF.
Dundon had an actual conflict of interest because Dundon or DCP was on opposite sides of
various transactions related to funding AAF, AAF’s operations, and the use of AAF’s funds and
other resources.
UNJUST E NRICHMENT
231. 	Advertisement slots are preferably sold for cash but are sometimes sold or given
240 T-0433; T-0426; Trial Tr. 52:14–55:8; T-0427; T-0428; T-0429; T-0430; T-0432; Trial Tr. 46, ECF No. 349.
241 D-273; Trial Tr. 151, 156–165, ECF No. 380.
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away for a variety of benefits.242
232. 	Advertising is perishable. If you do not sell advertising before a broadcast, you
have lost a revenue opportunity. The vast majority of advertising inventory is sold over the
12 months leading up to the first game. Once the season starts, it is difficult and rare to sell
advertising for cash. This is primarily because companies plan ahead and put advertising budgets
together in advance.243
233. 	AAF had sold little of its advertising inventory by the start of its inaugural season,
which was before Dundon joined ESMG. Over half of what AAF had sold was a barter
arrangement.244
234. 	Some of the no-charge advertisers later considered a potential barter arrangement
with AAF.245
235. 	Trustee does not provide adequate evidence as to what the advertisements would
have sold for, if they could have been sold at all.
236. 	Trustee did not provide a calculation of any dollar amount by which Defendants
were unjustly enriched.
237. 	Trustee did not offer evidence of any out-of-pocket or reliance damages.
T HE L EAGUE FAILED
238. 	DCP entered the ESMG investment, anticipating the League would spend
approximately $5–7 million of DCP’s capital each week. DCP soon realized the League’s
funding needs were drastically more than expected.246
242 Trial Tr. 131:9–132:20, 136, ECF No. 397.
243 Id. at 136, 138–139.
244 Id. at 141:21–142:9.
245 Id. at 141:4–20.
246 T-0254; Trial Day 13, Audio 3:40:30–3:43:12, May 29, 2025.
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239. 	ESMG received the following wires in response to requests for funding to DCP:247
Date 	Amount
02/14/2019 	$5,100,000
02/19/2019 	8,500,000
02/26/2019 	6,250,000
02/28/2019 	1,500,000
03/04/2019 	5,000,000
03/07/2019 	4,000,000
03/13/2019 	6,800,000
03/13/2019 	4,000,000
03/15/2019 	2,300,000
03/19/2019 	7,800,000
03/27/2019 	7,200,000
03/29/2019 	2,850,000
04/02/2019 	6,950,000
04/10/2019 	550,000
04/12/2019 	445,000
04/16/2019 	474,190
Total 	$69,719,190
240. 	ESMG spent the funds it identified as having been received in fulfilment of DCP’s
obligations in the Term Sheet.248
241. 	Despite the funding provided by DCP, the League was unable to pay its debts as
they became due, leaving significant outstanding payables.249
242. 	By mid-March, despite efforts to cut costs and negotiate with vendors, it looked
unlikely that the $70 million would AAF get to the end of the season.250
243. 	Vanderbilt and Lee attempted to determine the revenue picture of AAF during
247 T-0104; T-0962; T-1343; D-172; D-206.1; D-271; Trial Day 13, Audio 7:09:08–7:10:00, May 29, 2025.
248 Trial Tr. 195, ECF No. 412.
249 Trial Tr. 10–11, ECF No. 413; T-1343.
250 T-0104; T-0962; T-1343; D-172; D-206.1; D-206.2; D-271.
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February–March 2018. They could not determine the true weekly cost to run the League despite
their best efforts to collect that information. Given that weekly cash requests were reaching
above $10 million, the money would not last. Testimony in this case indicated that Farrell and
Kantowitz had been manipulating the amounts requested from DCP and withholding invoices to
keep the funding requests artificially low so as not to scare DCP.251
244. 	Dundon and Ebersol discussed that the $70 million was running out and that
Ebersol and his team needed to come up with options about how to proceed forward.252
245. 	Dundon said he encouraged Ebersol to seek outside investment interest. Prior to
the end of March, Dundon expressed reservations about introducing outside capital because
ESMG had no clear understanding of the League’s true financial condition. Dundon wanted to
avoid potential fraud allegations arising from his inadvertent misrepresentation to interested
investors, similar to how Dundon had discovered that Ebersol had done so.253
246. 	By the end of March, Dundon believed he was likely going to lose the $70 million
investment in any event, and he told Ebersol that DCP was willing to hand the League over to a
new investor if Ebersol could identify someone comfortable with accepting the League as-is and
willing to accept its obligations. Ebersol did not identify an investor who was able and willing
to do so.254
247. 	Dundon asked Ebersol to find someone who would at least be willing to come in
and fund the League through the end of the season. Dundon also asked Ebersol to provide an
analysis of “how long the 70 buys us.” Based on the financial analysis that DCP had been
attempting to perform since the time of the investment and the assessment of the League’s
251 Trial Tr. 35–36, 38–39, 44, 46, 56–57, 63, 70, ECF No. 398; D-147; D-271.
252 D-255 at 3; D-256.
253 Trial Tr. 143–44, 240–242, ECF No. 349; D-177.
254 Trial Tr. 36, 40, ECF No. 349; Trial Tr. 268–69, 272, ECF No. 396.
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viability, Dundon made it clear that DCP was not interested in additional investment in
ESMG.255
248. 	Factors supporting the conclusion that the League was not viable included the fact
that none of the projections from the pro forma or any version of it had any basis. Ticket sales
were dramatically lower than anticipated. The League received $0 in revenue from the
technology application that had generated much fanfare. Although one PAL agreement had been
signed, the League received no money from it. While initial TV ratings, app downloads, and in-
person attendance seemed promising, interest in AAF quickly waned. TV ratings quickly fell
significantly. Stadium attendance was low. The TV deals and player contracts saddled AAF with
contractual expenses for years to come, which would only skyrocket if the League added two
teams every year.256
249. 	Following Dundon’s directive, on March 26, 2019, Kantowitz, Freedman, Farrell,
and Ebersol each ran an analysis that revealed the League would need an additional $65 million
from that point to get through the end of May and close out the first year of the League.257
250. 	Ebersol prepared four end-game strategies. Each strategy was tethered to the
$70 million figure agreed to in the Term Sheet and was contemplated by all those who had actual
knowledge and leadership roles within the League related to investment, both before and after
the entry of the Term Sheet. Nowhere in any contemporaneous texts or communications did
Ebersol reference a $250 million agreement. Ebersol did not disclose in the analysis that his team
had done the day before that the actual expenses through the end of May 2019 would exceed
255 D-0256; Trial Tr. 143–144, ECF No. 349; T-1117.
256 Trial Tr. 93–101, ECF No. 331; Trial Tr. 49–50, 52–53, 70–72, ECF No. 398; D-188; Trial Tr. 93–100, ECF
No. 331; Trial Tr. 59, ECF No. 398. Trial Tr. 111–12, ECF No. 354; Trial Tr. 108–109, ECF No. 434.
257 D-176; Trial Tr. 242–45, ECF No. 398.
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$65 million.258
251. 	All four options Ebersol and his team contemplated were an imminent shutdown
in the absence of new capital. Ebersol and his team knew, based on their own analysis, that the
League required a minimum of $65 million in outside capital to get through May 2019. At that
point, DCP had invested $51.25 million. This meant the League needed $46.25 million to get
through May 2019, not the $20 million more that Ebersol told Dundon.259
252. 	Ebersol told Dundon in an email that any option other than immediate shutdown
would require the League to incur substantial additional vendor and salary obligations after the
league spent the $70 million without any capital source to pay them. None of Ebersol’s options
included paying off existing obligations to vendors and lenders. Ebersol did not volunteer his
family’s money, and he did not find an investor willing to jump in and spend $46 million to get
to May 2019. In the risk factors identified in options two through four, Ebersol contemplated
that the League would burn through all available cash and run up accounts payable. In essence,
Ebersol encouraged Dundon and Zutter to continue incurring vendor debt and putting players on
the field without capital to pay them and hoped that there was one more Dundon or Fowler that
would show up hours before the players quit.260
253. 	The only viable option Ebersol and his team presented was immediate shutdown,
which, as Ebersol admitted, would preserve sufficient capital to initiate bankruptcy, pay all
player and non-player salaries, and retain some capital to pay down debts.261
254. 	One hope Dundon had to entice additional substantial investment in the League
and increase its odds of survival was a deal with the NFLPA.
258 D-176; D-177.
259 D-177.
260 D-177.
261 Id.; Trial Tr. 247–250, ECF No. 396.
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255. 	Dating back to the League’s inception, Ebersol and his inner circle determined
that a positive relationship with the NFL would distinguish the XFL from its antagonistic
approach toward the NFL. Ebersol thought AAF would benefit if it became a minor league
equivalent for the NFL. To make his plan work, Ebersol tried to forge a partnership with the
NFLPA. AAF needed the NFLPA deal to form any partnership with the NFL as it pertained to
its players playing in the League.262
256. 	Even though an NFL link was a crucial part of the business plan, Ebersol failed
to initiate confidential negotiations with the NFLPA until December 2018, just two months
before AAF’s kickoff. No one in AAF leadership had an explanation for the delay. Because
Ebersol delayed the negotiations but then raced to launch the League to beat the XFL to market,
the League launched with no relationship with the NFLPA and no ability to field NFL practice
squad players on its teams during its inaugural season.263
257. 	When Dundon entered the picture, he joined Ebersol in an aggressive pursuit of a
relationship with NFLPA President DeMaurice Smith. Dundon first met Smith on February 19,
2019, and spoke with him frequently over the ensuing months. Dundon and Ebersol had multiple
meetings with the NFLPA, trying to secure a deal akin to the two-way contracts the NBA has
with certain G League players. Smith repeatedly communicated to Dundon that the NFLPA
lacked interest in a relationship with AAF because NFL players had concerns about being forced
to play both the NFL and AAF seasons. One of the major issues preventing a deal between AAF
and the NFLPA was the NFLPA’s concerns about player safety and the potential for player
injury. Dundon attempted to develop a solution to address the concerns expressed by the NFLPA
262 Trial Tr. 98–99, ECF No. 323.
263 D-24; Trial Tr. 270–71, 275–76, ECF No. 398.
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but was ultimately unsuccessful.264
258. 	By the end of March 2019, Smith informed Dundon that he could not get the
NFLPA to agree on a partnership, and there would be no partnership at that time.265
ESMG (DUNDON AND Z UTTER) AND ITS RELATED E NTITIES E LECT TO FILE CHAPTER 7
B ANKRUPTCY
259. 	Once the immediate shutdown scenario outlined by Ebersol (Option 1) became
the only responsible option and it was clear the NFLPA deal was unlikely, ESMG’s board sought
guidance from bankruptcy counsel. ESMG sought advice on whether seeking bankruptcy
protection for the Debtors was advisable and whether a chapter 11 bankruptcy was feasible.
Counsel advised the board to proceed with a bankruptcy filing but advised that chapter 7 was the
only option, given the lack of capital to maintain a chapter 11.266
260. 	Ebersol was involved in the bankruptcy process after Zutter’s first discussion with
Bracewell. Ebersol was Zutter’s first call after his initial consultation with bankruptcy counsel.
Ebersol and his team were essential in selecting key personnel to retain to assist with the
bankruptcy process, preparing a business plan and schedules, and managing the remainder of the
$70 million for payment of salaries and expenses post-filing. Given the history of spring football
leagues, the League had a slim chance of survival. DCP funds and the DCP team’s efforts could
not help the League recover.267
261. 	Before filing for chapter 7 bankruptcy, Dundon did not have time to market
AAF’s assets.268
262. 	Dundon did not get anyone to opine on the value of the assets before deciding to
264 D-270; Trial Tr. 220–21, 231–33, ECF No. 349; T-1104.
265 D-268; Trial Tr. 231–33, ECF No. 349.
266 Trial Tr. 180–83, ECF No. 332; D-182.1; D-203.
267 D-182.1; Trial Tr. 181–82, ECF No. 332; D-187; Trial Tr. 182–83, ECF No. 332; D-200; Trial Tr. 150, ECF No.
319.
268 Trial Tr. 131:6–10, ECF No. 343.
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put them into chapter 7 bankruptcy.269
263. 	Dundon did not conduct any valuation of AAF’s technology assets before
deciding to dispose of them.270
264. 	Dundon did not reach out to the NFL regarding the value of technology they were
licensing and does not recall talking to MGM who had lent $7 million against the technology’s
value.271
265. 	Dundon never spoke to Brian Singerman, the lead investor for Founders Fund (an
existing shareholder), when AAF needed additional funds.272
266. 	Dundon never spoke to former ESMG directors Keith Rabois, Dick Ebersol, or
Jeff Moorad about the need for additional funds.273
267. 	Ebersol opposed bankruptcy and advocated for completing the season, but he held
no control or authority.274
268. 	The Court finds that the League failed and shut down because it was insolvent
and was not a viable business.
269. 	The League suspended operations on April 2, 2019, and subsequently filed
bankruptcy on April 17, 2019.
270. 	Notably, after the League collapsed, Ebersol sent a draft thank-you email to
Dundon in which he recognized and expressed appreciation for Dundon’s efforts to save the
League. Ebersol did not mention the alleged $250 million oral agreement or make any suggestion
that Dundon and Zutter’s actions had harmed the League or that they had engaged in self-
269 Id. at 34:20–35:7.
270 Id. at 131:23–132:6.
271 Id. at 219:3–9.
272 Id. at 141:2–6.
273 Id.at 140:18–141:14.
274 Trial Tr. 129–30, ECF No. 323; Trial Tr. 73:17–74:8, ECF No. 396; T-1225.
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dealing.275
271. 	Ebersol waited until after the League filed bankruptcy to get control of the
League’s intellectual property assets. MGM bought all the IP assets in a sale in exchange for
$125,000 and forgiveness of $2 million of debt. Then MGM invested the League assets into
Ebersol’s companies Infinite Athlete and Tempus Ex Machina. MGM and Ebersol’s companies
coordinated in obtaining patents on the League’s technology.276
272. 	On or about March 27, 2019, Dundon instructed Zutter to engage the law firm
Bracewell, LLP to assist in preparing a bankruptcy petition and paid $400,000 to Bracewell,
which amount was counted against Dundon’s contributions to AAF.277
273. 	On April 2, 2019, Dundon and Zutter forced AAF to suspend operations
immediately and terminate all vendor relationships, including consulting agreements and player
agreements.278
274. 	On April 2, 2019, Zutter sent an email to Dundon, Kulas, Vanderbilt, and Trey
Wood of Bracewell saying that he and Dundon need to send a message to the company informing
it of the suspension of operations.279
275. 	Initially, Dundon and Zutter contemplated chapter 11 bankruptcy.280
276. 	On April 2, 2019, Zutter responded to an email from Alan Kantowitz that included
a draft budget for a 12-week plan that would get AAF through a chapter 11 bankruptcy. The
email indicated that a total of $71 million would be required to complete the 12-week plan, but
Zutter responded by saying that only $70 million was available.281
275 D-202.
276 Trial Tr. 137–38, ECF No. 331.
277 D-204 at 3; T-1185; T-1194.
278 Trial Tr. 77:18–78:6, ECF No. 335; T-0054; Trial Tr. 86:6–88:15, ECF No. 396. T-1234.
279 T-1232.
280 T-0178; T-1207.
281 T-0126; T-1236; Trial Tr. 81:11–83:9, ECF No. 396.
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277. 	After receiving the 12-week plan budget of approximately $71 million, Zutter
sent an email to Dundon, Vanderbilt, Kulas, and a Bracewell attorney stating that “it is
imperative to do the layoff immediately.”282
278. 	When Dundon and DCP determined neither would provide the additional
$1.09 million needed for a 12-week plan to complete the season, Dundon did not seek alternative
sources for this relatively small amount.283
279. 	Dundon ultimately decided to put ESMG and its subsidiaries in a chapter 7
liquidation proceeding and not a chapter 11 reorganization. Dundon decided to liquidate the
League rather than invest more money or seek additional funding from another source. Both
Dundon and Zutter executed the Written Consent of the Board of Directors of ESMG authorizing
the chapter 7 bankruptcy.284
280. 	Dundon decided to file for bankruptcy without holding a board of directors
meeting or notifying any other directors of an intent to hold such a meeting. Ebersol was a non-
voting director at the time.285
281. 	A “resolution of the Board of Directors” document being signed by Dundon and
Zutter.286
282. 	Trustee’s expert testified that the League was worth $63.3 million on the day it
was finally shuttered, April 2, 2019.287
283. 	Debtors were put into bankruptcy at the direction of Defendants Dundon and
Zutter through the filing of chapter 7 petitions. Debtors’ estates were substantively consolidated
282 T-1236.
283 Trial Tr. 82:20–83:23, ECF No. 396.
284 T-1415; Trial Tr. 55:10–21, ECF No. 349.
285 Trial Tr. 18:2–20:3, ECF No. 349.
286 Id. at 55:20–57:13.
287 Trial Tr. 67:20–24, ECF No. 380.
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and are being jointly administered in this Court under Case No. 19-50900-cag.
DUNDON PROOF OF CLAIM
284. 	Between February 14 and April 16, 2019, DDFS Limited Partnership LP made
sixteen wire transfers totaling $69,719,190 to AAF.288
285. 	All payments to ESMG originated from accounts and funds owned by DDFSP, a
distinct Delaware limited partnership.289
286. 	DCP made no direct transfers or payments to AAF.290
287. 	Dundon made no direct transfers or payments to AAF.291
288. 	Dundon filed a Proof of Claim, No. 188 (“Dundon Claim”) in the core bankruptcy
proceeding (Case No. 19-50900). Dundon filed an identical proof of claim in each of the
consolidated cases.292
289. 	The Dundon Claim asserts an unliquidated claim for indemnification and “any
other harm or damages suffered by him in connection with his relationship with the debtor.”293
290. 	Dundon did not assert any counterclaims against any of Debtors, whether based
on a claim of indemnity, offset, or otherwise.
291. 	The Trustee generally objected to the Dundon Claim. Therefore, Dundon was
required to demonstrate at trial a proper basis for and the liquidated amount of any claim for it
to be allowed. Dundon failed to do so. The Dundon Claim fails to elaborate any basis for its
indemnity and general damages claim (by description or documentary evidence) and Dundon
offered no evidence in support of the same at trial.294
288 T-0104; T-0962; T-1343; D-172; D-206.1; D-271; Trial Day 13, Audio 7:09:08–7:10:00, May 29, 2025.
289 Trial Tr. 24, ECF No. 343
290 Id.
291 Trial Day 13, Audio 7:40:10–7:40:45, May 29, 2025.
292 The Court can take judicial notice of the Dundon Claim pursuant to Federal Rule of Evidence 201.
293 Case No. 19-50900, Claim No. 188 at 3.
294 ECF No. 56 at 63; Case No. 19-50900, Claim No. 188.
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292. 	The Dundon Claim also asserts a claim against Debtors’ Estate in the amount of
$70 million on identical or substantially the same grounds as the DCP Claim (defined below).
For the same reasons as stated regarding the DCP Claim, the Dundon Claim for $70 million or
any other amount was not supported at trial.295
293. 	DCP filed a Proof of Claim, No. 187 (“DCP Claim”) in the core bankruptcy
proceeding (Case No. 19-50900).296
294. 	The DCP Claim alleges that AAF told DCP it would need only up to $70 million
for the first season and requested a commitment for that amount. The DCP Claim also asserts a
claim for rescission of its $70 million investment but fails to support that claim with anything
other than conclusory statements in Exhibit “A” to the DCP Claim.297
295. 	The DCP Claim alleges that unnamed AAF executives allegedly misrepresented
or omitted material facts to Dundon and “misrepresented to the public, employees, and players
the details of DCP’s financial commitment to the League.” DCP asserts a claim against Debtors’
Estate for $70 million.298
296. 	Neither DCP nor Dundon provided any funding to AAF (all funds having been
transferred by or through DDFSP), so neither has supported a claim for return of funds invested
in any amount. Moreover, all funds that came into AAF were ostensibly in furtherance of
Dundon’s investment in AAF and thus related to the purchase or sale of a security. Dundon and
DCP 	failed 	to 	offer 	any 	testimony 	or 	other 	evidence 	that 	supported 	any 	claims 	of
misrepresentation during the trial.299
295 Case No. 19-50900, Claim No. 188.
296 Id. at Claim No. 187.
297 Case No. 19-50900, Claim No. 187, Ex. A.; Trial Tr. 216:15–23, ECF No. 335.
298 Case No. 19-50900, Claim No. 187 at 6; Trial Tr. 228:20–23, ECF No. 335.
299 FOF ¶¶ 284–287; Trial Tr. 228:24–229:16, ECF No. 335.
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DAMAGES
297. 	Trustee pleaded four categories of damages tied to tort claims: (i) destruction of
the League’s enterprise value; (ii) contracts/letters of intent breached or not pursued; (iii) assets
and resources of the Debtors that Dundon and Zutter usurped; and (iv) lost opportunities and
profits. In his disclosures, Trustee stated “in total for all breaches” relating to his claims for
breach of fiduciary duty, fraud, negligent misrepresentation against Dundon and Zutter, and
fraudulent inducement against DCP, Debtors’ damages are the full market value of the League
at the time Dundon, Zutter, and DCP forced it to suspend operations, as set out in Desai’s
report.300
298. 	As Trustee’s sole source of disclosed damages, Desai did not provide any
calculation of damages relating to: (ii) contracts/letters of intent breached or not pursued;
(iii) assets and resources of Debtors that Dundon and Zutter usurped; or (iv) lost opportunities
and profits.301
299. 	Desai weighted, or relied upon in her analysis, two subject-company transactions:
(1) the ESMG Series 1 Preferred Stock Purchase Agreement, which set the value of ESMG at
$115 million; and (2) the ESMG Binding Term Sheet for the Techco and ESMG Warrants.302
300. 	The only category of damages Desai addressed was the enterprise value of the
League on February 13, 2019 (the day before the DCP investment) and April 2 (the day of the
shutdown). 	Desai did not opine that the values on those dates were damages or that Dundon,
Zutter, or DCP caused the loss of the values on either of those dates. Because she failed to
consider causation, Desai’s valuation numbers are suspect. Desai should have considered all the
300 ECF No. 56 at 49–50; D-272 at 91–92.
301 D-273.
302 T-0757; T-1288; see also T-600D at 0004; Trial Tr. 269:17–270:9, ECF No. 321; Trial Tr. 112:22–113:21, ECF
No. 331; Trial Tr. 12:2–8, ECF No. 332; T-0016.
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issues the League faced to determine the impact of the alleged conduct relative to other factors
but did not. Desai’s values are not useful because she did not consider whether, if Defendants
were removed from the picture, the League would have been better off.303
301. 	Desai premised her valuation on the League’s going concern value, which
presumed a hypothetical world in the absence of the alleged breaches. In the hypothetical world,
Desai assumed the League would be the first successful spring football league and a thriving
digital and sports start-up business. She also assumed the League would continue to operate for
at least 10 years, that the NFL would fund at least $20 million per year of player and staff salaries,
broadcasters would pay for broadcast and production starting in 2020, that ticket sales would
more than double in number and price immediately, that digital revenue would grow to
$150 million annually even though there was no history of digital revenue, and that there would
be more than 1700% growth in revenue and only a 45% growth in expenses.304
302. 	Desai admits that she did not allocate or consider causes other than Defendants.
She did not allocate the loss between the 14 to 16 months when Ebersol was in charge and the
46 days during which Defendants were involved. She did not calculate the impact of Ebersol’s
decision to delay marketing, cut expenses, or cancel local and national marketing; failure to
obtain local and national sponsorships; failure to fill advertising space; and failure to sell tickets
before the league started. She did not consider the impact of Fowler’s failure to fulfill his funding
commitment, which was adjudged to have caused $53 million in loss to the league. Desai failed
to consider that Ebersol had brought the League to the brink of shutdown at least three times
prior to DCP’s investment, and the long-term impact this had on the League’s financial condition
303 Trial Tr. 151, 153, ECF No. 380; Trial Tr. 79–83, ECF No. 434.
304 Trial Tr. 248–49, 253–57, ECF No. 380; Trial Tr. 112–17, ECF No. 434.
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and its relationship with critical vendors.305
303. 	Desai failed to consider any of the actual circumstances the League faced just
prior to Dundon’s investment or as the League neared shutdown. On February 13, the League
had $1.1 million in the bank, and Ebersol was seeking a $10 million bridge loan from Dundon
and others, while considering contributing $5 million in trust money to hopefully get through
week two. Desai did no valuation of the League under that scenario, where the League would
have burned through the bridge loan or trust money by week two.306
304. 	With respect to the April 2 valuation, Desai failed to consider the actual futures
the League had considered as set out in Ebersol’s four options email, all of which contemplated
a League shutdown in the absence of additional capital, but she admitted that the options from
Ebersol are not going-concern options. Desai admitted that Dundon had made it clear that no
more than $70 million would be funded. Therefore, the hypothetical future depended on new
investors putting hundreds of millions more into the League to achieve the future profits she
calculated. Outside of DCP and Fowler, the League had raised only about $15 million from
outside investors in its entire history.307
305. 	Desai also admitted that she did no valuation of the Debtors or their assets post-
filing.308
306. 	Desai’s valuations were flawed. Desai did a market approach valuation for
February 13, 2019. She looked at other transactions within the company to determine what a
willing buyer and willing seller would have paid for the equity of ESMG on February 13. She
relied entirely on the valuation in the Fowler term sheet from November 2018 and the agreement
305 Trial Tr. 152, 154–55, 162–63, 165–69, ECF No. 380; D-273; D-208.1; D-29; D-33; D-36; D-41; D-50.
306 Trial Tr. 175–76, ECF No. 380.
307 T-0709, Ex. A; T-0757. Ex. A.
308 Trial Tr. 250, ECF No. 380.
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with 32 Equity in January 2019 to support her valuation. The 32 Equity deal was not relevant
because it was not a transaction. The agreement does not state an agreed value; it was merely an
option for 32 Equity to purchase shares in the future at the lower of a set price (same price Fowler
got) or a third-party fair market value at the time of the transaction. 32 Equity never bought a
single share at any price. Fowler was the only one who ever purchased shares at the $115 million
valuation. The Fowler agreement is not a reliable source of value because the League underwent
fundamental changes between November 2018 and February 2019. The League Fowler invested
in predicted future profits to be double what the predictions were in February 2019. Desai did
not consider the Term Sheet, which is the most relevant transaction because it was by far the
closest in time and shows that ESMG was a willing seller on February 14, 2019, at a value of
$23.3 million.309
307. 	Desai also added $37.8 million in debt to the February 13, 2019, value, but
admitted she did no investigation of that figure and that it included Fowler’s equity investments,
which are not debt. She made no effort to correct that number.310
308. 	Desai’s April 2, 2019, valuation is unreliable. Desai used the income approach
and relied entirely on a single pro forma prepared by Kantowitz on March 26, 2019. She did no
independent analysis to determine the reliability of the pro forma. She had no knowledge of
whether Dundon and Zutter approved the drastic changes in the pro forma, including the changes
in how the League would grow. She did not compare the projection for 2019 to the League’s
actual revenue and expenses. She did not consider the drastic swings in projections over time
and the fact that the league had never met prior projections. She did not correct the pro forma to
309 Trial Tr. 170–72, 194–95, 203, 209–13, ECF No. 380; Trial Tr. 89–94, ECF No. 433. The Court received evidence
from Ebersol about the alleged 32 Equity deal, but it did not result in a fully executed deal that would have supported
the League with revenue at the time the League needed cash.
310 Trial Tr. 213–17, ECF No. 380.
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remove Kantowitz’s unrealistic assumptions, like the NFL contributing $20 million per year and
broadcasters paying for broadcast and production starting in 2020, unrealistic revenue growth,
drastic expense cuts, and all the other flaws described above. When adjusted for reality, Bramer
determined that the projections revealed that the League would continue to lose money for at
least ten years and would need more than $500 million in addition to the $250 million to get
through that period and would have a negative value.311
DISCUSSION
I. 	The Court Declines to Reconsider Defendants’ Arguments Regarding the
Term Sheet.
At the outset, the Court will address Defendants’ arguments regarding Count II of Trustee’s
Complaint, which the Court previously dismissed as moot because of the Court’s ruling in No. 22-
05077 (“Ebersol Adversary”). Defendants attempt to resurrect the same argument the Court
dismissed at the summary judgment stage, arguing that the Term Sheet was a binding written
contract. In support of their argument, Defendants point to the Court’s ruling in the Ebersol
Adversary, where the Court noted that Dundon failed to allege a defense or alternative argument
that would allow the Court to find a binding written contract. According to Defendants, the Court
is not precluded from revisiting its decision by the law of the case doctrine. As such, Defendants
claim that because they allege defenses in this adversary, the Court can find the Term Sheet is a
binding contract in direct contradiction to its previous order.
The law of the case doctrine “is a judicial doctrine that promotes finality and efficiency in
the judicial process by encouraging courts to follow their own decisions within any given case.”
In re Pilgrim’s Pride Corp., 442 B.R. 522, 529 (Bankr. N.D. Tex. 2010); Montco Oilfield Contrs.,
311 Trial Tr. 216–17, 219, 219–20, 224–25, 227–230, 232–47, 253–57, ECF No. 380. D-188; Trial Tr. 48–50, ECF
No. 398; D-275; Trial Tr. 132–35, ECF No. 433.
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LLC v. Black Elk Energy Offshore Operations, LLC (In re Montco Offshore, Inc.), 595 B.R.
524, 546 (Bankr. S.D. Tex. 2018) (quoting Christianson v. Colt Indus. Operating Corp., 486 U.S.
800, 817 (1988)) (“The doctrine ‘merely expresses the practice of courts generally to refuse to
reopen what has been decided.’”). The doctrine “posits that when a court decides upon a rule of
law, that decision should continue to govern the same issues in subsequent stages in the same case.”
Christianson, 486 U.S. at 816. “In the bankruptcy context, the law of the case doctrine should be
applied to disputes arising in the main bankruptcy case as well as all of its related adversary
proceedings.” In re Pilgrim’s Pride Corp., 442 B.R. at 530. One thing that frustrates the purpose
of the Bankruptcy Code and the certainty of bankruptcy proceedings is differing court rulings
based on identical or substantially similar facts and identical legal theories. Id.
The law of the case doctrine serves as a guide for how a court should exercise its discretion.
Id. Thus, a court is free to revisit its own decisions, though it should “loathe to do so in the absence
of extraordinary circumstances.” Christianson, 486 U.S. at 817. The Fifth Circuit has directed that
courts generally refuse to revisit decisions unless “(i) the evidence on a subsequent trial was
substantially different; (ii) controlling authority has since made a contrary decision of the law
applicable to such issues, or (iii) the decision was clearly erroneous and would work a manifest
injustice.” Royal Ins. Co. v. Quinn-L Cap. Corp., 3 F.3d 877, 880 (5th Cir. 1993) (citing North
Miss. Commc’ns v. Jones, 951 F.2d 652, 656 (5th Cir. 1993), cert. denied, 506 U.S. 863 (1994)).
The Court is unpersuaded by Defendants’ attempt to take a second bite at the apple.
Defendants knew that both adversaries were scheduled for a joint trial because the cases revolved
around the same transaction. The signature issue was present in both cases at the summary
judgment stage.312 In fact, Defendants admitted that the result in the Ebersol Adversary did not
312 See Adv. Case No. 22-05077, ECF No. 101 at 18.
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change their preparation for trial in this case.313 As such, Defendants could have easily included
the alternative contract theories, such as waiver, estoppel, and ratification, in their response to
Ebersol’s Motion for Summary Judgment.314 Defendants failed to include any of those arguments
and argued the wrong state law at the summary judgment hearing in support of their position,
despite the Term Sheet explicitly providing that Delaware law would govern the validity of the
document.315 Notably, this controlling law has not produced a contrary decision applicable to the
issues in this case. See Astellas Pharma Inc. v. MSN Pharm. Inc., No. 23-689, 2025 WL 254577,
at *8 (D. Del. Jan. 21, 2025) (applying the general rules to determine the existence of a positive
agreement to require a signature). Ultimately, Defendants point to law regarding defenses and
alternative contract theories that could have been raised in the Ebersol Adversary but were not.
If Defendants disagreed with the Court’s decision in the Ebersol Adversary, their best
course of action was a motion to reconsider or a direct appeal.316 Thus, the Court will not use this
adversary to reconsider its decision in the Ebersol Adversary. There is no question that a contract
exists in this case, but the Term Sheet is not the ultimate governing document. Nevertheless, the
Court’s previous ruling does not preclude the Court from considering the Term Sheet as evidence
of the alleged oral contract here.
II. 	Valid and Enforceable Oral Contract
Turning to the remaining breach of contract claim, Trustee alleges that the parties entered
into an oral contract whereby Dundon would invest $250 million in exchange for 75% ownership
of ESMG and majority control of the company. Trustee argues that Dundon breached this contract
313 Trial Tr. 71:4–13, ECF No. 327.
314 Delaware courts hold that “[i]ssues not raised are deemed waived.” Intertek Testing Servs. NA v. Eastman,
No. 2022-0853, 2023 WL 2544236, at *10 (Del. Ch. 2023).
315 The Court also found law in its Order Denying in Part and Granting in Part Defendants’ Motion to Dismiss that the
applicable law for determining the validity and applicability of the Term Sheet is Delaware law. ECF No. 54 at 15.
316 The Court notes that DCP has filed an appeal in the Ebersol Adversary.
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by (1) failing to provide additional needed funds in April of 2019 to keep AAF in operation, and
(2) frustrating and/or repudiating the Oral Agreement by putting ESMG (and other AAF entities)
into chapter 7 bankruptcy.
Under Texas law, to succeed on a claim for breach of contract, a plaintiff must prove “1) a
valid contract exists, 2) its performance by the claimant, 3) its breach by the defendant, and
4) damages as a result of the breach.” Soap Eng’g, LLC v. Infiniti Integration Servs. Corp.,
No. 07-24-00304-CV, 2025 WL 1646333, at *5 (Tex. App.—Amarillo June 10, 2025, no pet.)
(mem. op.). To prove that a valid contract exists, a plaintiff must show (a) an offer, (b) an
acceptance, (c) a meeting of the minds, (d) each party’s consent to the terms, and (e) execution
and delivery of a contract317 “with the intent that it be mutual and binding.” Prime Prods., Inc. v.
S.S.I. Plastics, Inc., 97 S.W.3d 631, 636 (Tex. App.—Houston [1st Dist.] 2002, pet. denied)
(citing Angelou v. Afr. Overseas Union, 33 S.W.3d 269, 278 (Tex. App.—Houston [14th Dist.]
2000, no pet.)). “In determining the existence of an oral contract, the court looks to the
communications between the parties and to the acts and circumstances surrounding those
communications.” Id. at 636 (citing Copeland v. Alsobrook, 3 S.W.3d 598, 605 (Tex. App.—San
Antonio 1999, pet. denied)). “The terms must be expressed with sufficient certainty so that there
will be no doubt as to what the parties intended.” Copeland, 3 S.W.3d at 605. “The elements of an
oral contract ‘may be proved by either circumstantial or direct evidence.’” Garcia, 2023 WL
8467664 at *3; see also Hui Ye v. Xiang Zhang, No. 22-20026, 2023 WL 3888160, at *4 (5th Cir.
2023) (per curiam) (“Courts may rely on the parties’ testimony to determine the existence of an
agreement.”).
317 “Although, in most cases, courts have held that the elements of proof [as listed above] are the same for oral contracts
as for written contracts, we assume those holdings to exclude the fifth element that deals with execution and delivery.”
Garcia v. Garza, No. 13-22-00431-CV, 2023 WL 8467664, at *3 (Tex. App.—Corpus Christi Dec. 7, 2023, no pet.)
(mem. op.).
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Dundon argues that the alleged oral contract lacked specificity as to the following terms:
(1) the identity of the investor; (2) the consideration to be given in exchange for $250 million;
(3) the structure of the investment; and (4) the timing of the investment.318 In support of this
argument, Dundon points to ESMG’s previous investment agreement with Fowler and the Term
Sheet to suggest the above terms were material to the parties. According to Dundon, because the
alleged oral contract was devoid of the above material terms, the parties lacked a meeting of the
minds.
“Whether an agreement fails for indefiniteness is a question of law.” Coe v. Chesapeake
Expl., LLC, 695 F.3d 311, 320 (5th Cir. 2012). An oral contract must be “sufficiently definite to
confirm that both parties actually intended to be contractually bound,” and contain “terms that are
‘material and essential’ to the parties’ agreement.” Fischer v. CTMI, LLC, 479 S.W.3d 231, 237
(Tex. 2016) (first quoting Fort Worth Indep. Sch. Dist. V. City of Fort Worth, 22 S.W.3d 831,
846 (Tex. 2000); and then quoting Radford v. McNeny, 104 S.W.2d 472, 475 (1937)). “‘Essential’
or ‘material’ terms to a contract are those ‘that parties would reasonably regard as vitally important
elements of their bargain.’” Thoroughbred Ventures, LLC v. Disman, No. 4:18-CV-00318,
2019 WL 1331738, at *7 (E.D. Tex. Mar. 25, 2019) (quoting Heartland Holdings, Inc. v. U.S. Tr.
Co. of Tex. N.A., 316 S.W.3d 1, 9 (Tex. App.—Houston [14th Dist.] 2010, no pet.)). “Although
the parties must agree to all material terms, they may choose to leave non-essential terms open for
later negotiation without rendering the agreement unenforceable.” Coe, 695 F.3d at 320. “The
material terms of a contract are determined on a case-by-case basis.” McCalla v. Baker’s
Campground, Inc., 416 S.W.3d 416, 418 (Tex. 2013) (per curiam). As such, “Each contract should
318 ECF No. 300 at 8.
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be considered separately to determine its material terms.” T.O. Stanley Boot Co. v. Bank of El
Paso, 847 S.W.2d 218, 221 (Tex. 1992).
Because Dundon claims each of the above terms is material, if the alleged oral contract
lacks evidence for any one term, the contract will fail as a matter of law. Accordingly, the Court
will review each term in turn below to (1) determine if it is material and (2) if the parties
sufficiently reached a meeting of the minds on the terms.
A. 	DCP and DDFSP were the investors in the oral contract.
Dundon first claims that the alleged oral contract lacks the identity of the parties to the
contract. Specifically, Dundon argues the record is silent regarding whether Dundon would invest
individually or whether some other Dundon-related entity would perform under the oral contract.
Trustee maintains that Dundon, individually, and Ebersol, as a representative of ESMG, created
the oral contract. As a result, Trustee claims that Dundon is the investor in his individual capacity.
At the outset, the identity of the investor is undoubtedly a material term because it enables
the “[C]ourt to understand the parties’ obligations” under the alleged oral contract. Khubchandani
v. State Farm Lloyds, No. 4:22-cv-00488, 2024 WL 4634068, at *7 (N.D. Tex. Mar. 7, 2024).
Thus, when parties enter a contract to invest, it is reasonable to find that the parties regard the
identity of the investor as “vitally” important to their bargain. Thoroughbred Ventures, LLC,
2019 WL 1331738, at *7. Because the term is material, the Court must determine whether the oral
contract was sufficiently definite enough for the Court to ascertain who the investor is under the
alleged oral contract.
Here, Ebersol’s testimony was the only testimony that reflected Trustee’s position that
Dundon entered the contract in his individual capacity. While self-serving, both Dundon and Zutter
denied such facts. Trustee points, however, to several news articles and media interviews where
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Dundon said he was “committed” to investing in AAF and that his investment would sustain the
League for years to come.319 Based on these public statements, Trustee posits that Dundon was the
primary investor under the oral contract. While these public statements certainly support the idea
that Dundon made the deal on behalf of himself, the Term Sheet provides evidence that Dundon
was negotiating on behalf of DCP. This is further supported by ESMG recognizing DCP as an
investor and DCP’s exerted control over ESMG’s operations post-investment.320 Additionally, all
payments accepted by ESMG came from DDFSP, another Dundon-related entity, revealing that
negotiations between Dundon and Ebersol were conducted in their representative capacities for
their respective entities.321 While Dundon repeatedly and publicly stated that he was “saving the
league,” the circumstantial evidence shows that Dundon was making such statements as a
spokesperson of DCP and his other related entities.
Accordingly, the identity of the investor is a material term, and the conduct of the parties
reveals that the parties reached a meeting of the minds that DCP and DDFSP were the investors
under the alleged oral contract. As such, this term is sufficiently definite enough for the Court to
consider Trustee’s oral contract claim.
B. 	Consideration is proper and sufficiently definite.
Dundon next argues that the alleged oral contract lacks consideration and, therefore, cannot
constitute a contract. Essentially, Dundon argues that the alleged oral contract and Term Sheet
both purportedly grant identical consideration (majority ownership and control of ESMG), which
is prohibited under Texas law. Thus, Dundon reasons that the parties failed to reach a meeting of
the minds concerning new consideration under the alleged oral contract. Conversely, Trustee
319 T-0142; T-0381.
320 See T-1317 at 2 (recognizing DCP as part of the investment and explaining Dundon’s roll in the company as a
chairman and managing partner).
321 FOF ¶ 284.
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maintains that the Term Sheet is legally ineffective and, therefore, the two agreements do not
improperly convey the same consideration.
Consideration, a requirement for all enforceable contracts, is “a present exchange
bargained for in return for a promise” and “consists of either a benefit to the promisor or a
detriment to the promisee.” Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 496 (Tex. 1991).
Any modification to an existing contract or creation of a new contract must be supported by new
consideration. See McCallum Highlands, Ltd. v. Wash. Cap. Dus, Inc., 66 F.3d 89, 93 (5th Cir.
1995) (noting that consideration from an original contract cannot constitute consideration for a
subsequent modification). This concept, known as the “pre-existing duty rule,” applies to all
modifications, supplements, and new contracts. Id. In such cases, “merely offering the pre-existing
duty [a party] already contracted to perform cannot serve as consideration for the change.” Id.
Modern jurisprudence urges courts to disfavor solely relying upon the pre-existing duty rule,
particularly “if even minimal consideration supports the contract.” Johnson v. Seacor Marine
Corp., 404 F.3d 871, 875 (5th Cir. 2005). As long as the parties involved “gain some legally
enforceable right . . . which they previously did not have, consideration is present.” Id. (emphasis
added) (citing Morrison Flying Serv. v. Deming Nat’l Bank, 404 F.2d 856, 861 (10th Cir. 1968)).
The Court views Dundon’s argument as two-fold: (1) the Term Sheet and the alleged oral
contract purportedly grant the same consideration, and (2) the parties agreed to a maximum
investment of $70 million. Both of Dundon’s arguments hinge on the reputed validity of the
Term Sheet; however, as the Court espoused above, the Term Sheet is not a binding document and
only serves as evidence of the alleged oral contract. Because the Term Sheet is not a legally
effective contract, it cannot grant consideration that is granted by the alleged oral contract.322 Thus,
322 See T-0821A (revealing no representative of DCP signed the Term Sheet).
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Dundon’s first argument is unavailing. As such, the bargained-for exchange under the oral contract
was a monetary investment paid by DCP or DDFSP in exchange for Dundon receiving majority
control and ownership of ESMG.
Turning to Dundon’s second argument, it is clear to the Court that the investment amount
is at the center of this contract dispute—Trustee maintains that it is $250 million while Dundon
vigorously argues that the investment was only $70 million. Trustee uses the Court’s previous
ruling to bolster his position that the investment amount is $250 million. In addition, Trustee relies
on the pre- and post-money valuations of ESMG to suggest that $250 million is the only logical
capital figure to support the number of shares proposed to be transferred.323
Ebersol, Dundon, and Zutter provided the only fact witness testimony regarding contract
formation, and they directly conflicted with one another.324 Dundon’s allegation that he and
Ebersol only discussed the $250 million for marketing purposes is not credible.325 The Court
believes the parties likely discussed $250 million as the total investment figure, but finds that
Ebersol and Dundon agreed only on $70 million.326 The conduct of the parties militates against
323 The Court found the following definitions of pre-money valuation instructive:
The pre-money valuation is the most important term in an equity venture financing because it
functions as the price of the deal and, in conjunction with the amount raised, determines the
percentage of the company that will be owned by the investors. The term gets its name because it
refers to the value the parties assign to the company before the investors put in their money.
Spencer Williams, Venture Capital Contract Design: An Empirical Analysis of The Connection Between
Bargaining Power and Venture Financing Contract Terms, 23 FORDHAM J. CORP. & FIN. L. 105, 125 (2017).
324 See Trial Tr. 419:7–24, ECF No. 412 (revealing no AAF employees knew the terms of the alleged oral contract for
$250 million). Ebersol testified that when Zutter returned a drafted version of the Term Sheet, Ebersol was shocked
that the unexecuted document stated a maximum investment of $70 million. Trial Tr. 192:16–23, ECF No. 321.
Thereafter, Ebersol claimed he called Dundon to question him about the amount, and, according to Ebersol, Dundon
reassured Ebersol that they only listed $70 million as a means to execute their supposed larger $250 million agreement.
See id. (explaining “the purpose of [the Term Sheet] was to figure out a mechanism to start moving funding”). On the
other hand, Dundon testified that he was only willing to invest $250 million under certain conditions, but he could not
clarify such conditions. Trial Tr. 255:7–22, ECF No. 335 (claiming Dundon’s commitment was to invest if “it was
appropriate”).
325 See Trial Tr. 244:25, ECF No. 335 (“They were really good marketing statements . . . .”).
326 See Trial Tr. 177:19–23, ECF No. 343 (revealing Dundon’s position that he and Zutter previously discussed that
the league would eventually need $250 million). But see Trial Tr. 96–97, ECF No. 383 (showing Zutter disagreed with
Dundon).
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finding that the parties reached a meeting of the minds for the entirety of the $250 million. In
particular, the pertinent individuals to the contract always operated under the belief that
$70 million was the maximum investment.327 It appears to the Court that Ebersol was the only
person who asked why the Term Sheet only listed $70 million.328 No one else questioned Dundon
about the larger number when ESMG’s board and shareholders both recognized $70 million as the
price under the contract, especially after Dundon repeatedly announced to the public that he was
investing 	$250 million.329 In 	fact, 	ESMG’s 	lawyers 	drafted 	amendments 	and 	waivers 	to
outstanding promissory notes and, although these documents were not executed, they only
referenced a default relating to a $70 million contract.330
Furthermore, Ebersol’s actions buttress the existence of an oral contract at $70 million.
Roughly three days before Dundon’s involvement with the League, Ebersol elicited investment
from other individuals, stating he needed “$10 [million] to get through the next two weeks and an
additional $60 [million] to get through the end of the season.”331 At that time, the representation
was supported by League projections that showed ESMG needed around $70 million for the first
season.332 Thereafter, Ebersol provided “go forward” options to Dundon and the DCP team in
response to the League’s advanced cash burn rate.333 None of the options referenced $250 million
or demanded that Dundon pay; rather, the options proposed by Ebersol revolved around
$70 million.334
327 See T-0311 (“As an AAF board member, DCP has not made any further commitment after 70.”).
328 Trial Tr. 10–20, ECF No. 332 (alleging Ebersol never saw a reference to a max commitment of $70 million until
he received the first draft of the Term Sheet).
329 D-135; T-1171.
330 D-145.
331 D-70.
332 D-75. The League’s projections were ever fluctuating and often indicated drastically different numbers for the
expected cost of the first season. Compare D-2 at 71 (showing a total loss of over $400 million by the end of 2025),
with D-26 at 20 (showing a total loss of close to $500 million by the end of 2025).
333 D-177; T-0027.
334 Id.
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Accordingly, the Court finds that the parties contemplated a potential total investment of
$250 million but only committed to the $70 million. Therefore, the consideration is proper and
sufficiently definite for the Court to enforce the oral contract.
C. The oral contract was for equity investment.
Dundon next argues that the oral contract fails for indefiniteness because the parties failed
to clarify whether the investment was in the form of equity, debt, or a combination of the two. If
the contract is one for debt or a combination of debt and equity, Dundon claims additional terms
must be present before the parties’ agreement can be enforceable. Trustee counters that the alleged
oral contract was for the purchase of ESMG, and, thus, no debt component was contemplated by
the parties. Accordingly, Trustee maintains that additional terms relating to a repayment are
unnecessary, making the parties’ agreement enforceable as is.
For a lending contract, Texas courts generally require evidence of the interest rate,
repayment terms, and collateral. See T.O. Stanley Boot Co., 847 S.W.2d at 221 (finding the only
material term present was the loan amount); Pine v. Gibraltar Sav. Asso., 519 S.W.2d 238, 243–
44 (Tex. Civ. App.—Houston [1st Dist.] 1974, writ ref’d n.r.e.) (holding a contract indefinite
because it lacked the loan amount, interest rate, and repayment schedule); Farah v. Mafrige &
Kormanik, P.C., 927 S.W.2d 663, 678 (Tex. App.—Houston [1st Dist.] 1996, no writ) (“In a
contract to loan money, the material terms are generally the amount to be loaned, the maturity date
of the loan, the interest rate, and repayment terms.”). “In the context of a stock sale, the material
terms are generally the identity of the issuer, the amount of stock to be sold, and the price to be
paid.” Givaudan SA v. Conagen Inc., 128 F.4th 485, 500 (2d Cir. 2025); see also Farone v. Bag’n
Baggage, Ltd., 165 S.W.3d 795, 802 (Tex. App.—Eastland 2005) (holding the material terms for
an oral contract in the context of a stock option include the method of payment and a mechanism
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for determining share value and which entity will grant equity shares if the payment method is an
equity interest).
Here, there is ample evidence revealing that Dundon purchased ESMG as a representative
of his related entities. Shortly after the parties reached an agreement on the terms of their contract,
Zutter emailed the DCP staff stating, “Today we signed a deal to take over control of the AAF.”335
Similarly, Dundon testified at trial that the deal he reached with Ebersol was an equity deal
whereby he “bought 75% of equity of AAF.”336 While the parties often referred to the League
interchangeably as AAF and ESMG, no one disputes that ESMG was the entity issuing stock
shares. Further, both parties argued about the pre-money valuation of ESMG and the impact it has
on the oral contract claim.337 Ebersol was the only party who testified to a specific number,
asserting that Ebersol and Dundon agreed to a pre-money value of $82.5 million. Trustee alleges
that, based on Ebersol’s pre-money valuation, $70 million cannot support the price per share for
75% of the company. ESMG can, however, certainly sell stock for less than the stock’s value,
which appears to be what the parties did here. The price for 75% of the company was $70 million.
Because the record provides evidence that reveals the oral contract was an equity
investment with no loan component, and because the terms are clear on the issuer of stock, the
price per share, and amount of shares sold, the structure of the parties’ agreement is sufficiently
definite for the Court to enforce. Accordingly, all the material terms complained of by Dundon are
sufficiently definite, rendering the oral contract valid.
335 T-0256.
336 Trial Tr. 269:17–21, ECF No. 335.
337 See Trial Tr. 76, ECF No. 332 (indicating the parties assigned different values to ESMG).
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D. Judicial admissions do not render the contract vague.
Defendants argue Trustee judicially admitted that ESMG and Dundon left open various
terms for the alleged oral $250 million contract, including the funding structure.338 Defendants
point to select portions of Trustee’s First Amended Complaint to support Defendants’ contention
that the parties failed to reach a meeting of the minds sufficient to form an oral contract.339
Accordingly, Defendants argue Trustee’s breach of oral contract claim fails.
“A judicial admission is a formal concession in the pleadings or stipulations by a party or
counsel that is binding on the other party making them.” Martinez v. Bally’s La., Inc., 244 F.3d
474, 476 (5th Cir. 2001). Judicial admissions are not evidence, but they have the “effect of
withdrawing a fact from contention.” Id. “For the doctrine of judicial admission to apply, the
purported admission ‘must be made intentionally as a waiver, releasing the opponent from proof
of fact.’” Angel v. Tauch (In re Chiron Equities, LLC), 552 B.R. 674, 692 (Bankr. S.D. Tex. 2016)
(quoting Martinez, 244 F.3d at 476). Thus, for a judicial admission to conclusively establish a fact,
the statement must be “(1) made in a judicial proceeding; (2) contrary to a fact essential to the
theory of recovery; (3) deliberate, clear, and unequivocal; (4) such that giving it conclusive effect
meets with public policy; and (5) about a fact on which a judgment for the opposing party can be
based.” Heritage Bank v. Redcom Labs., Inc., 250 F.3d 319, 329 (5th Cir. 2001), cert. denied,
534 U.S. 997.
Nevertheless, the Court has discretion to treat prior statements in briefs as binding judicial
admissions of fact. Angel v. Tauch (In re Chiron Equities, LLC), 552 B.R. 674, 692 (Bankr. S.D.
Tex. 2016); see also City Nat’l Bank v. United States, 907 F.2d 536, 544 (5th Cir. 1990) (“We can
338 ECF No. 289 at 14, 16, 19. At the close of trial, Defendants requested the Court take judicial notice of paragraphs
65, 148, and 150 in Trustee’s First Amended Complaint. The Court granted the Motion but made clear that it was not
making a factual finding.
339 Id.
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appropriately treat statements in briefs as binding judicial admissions of fact. Whether we do so,
however, is within our discretion.”). Additionally, the Court may allow parties to withdraw
statements that constitute judicial admissions. Wyatt v. Hunt Plywood Co., 297 F.3d 405, 412 n.18
(5th Cir. 2002).
Defendants point to three statements in Trustee’s First Amended Complaint: (1) “Dundon
again assured Ebersol of his promise and commitment to fund a total of $250 million, keeping as
an open item only the form such funding would take”;340 (2) “The Term Sheet included an offer,
acceptance of the offer, consideration, mutual assent, and an intent to be bound sufficient to find a
meeting of the minds”;341 and (3) “Under the Term sheet, DCP was required to, upon the
submission of funding requests, provide $70 million to ESMG.”342 Based on these purported
judicial admissions, Defendants suggest Trustee’s breach of oral contract claim fails by way of
Trustee’s own pleading. Trustee counters that the factual contentions in the First Amended
Complaint are based on a lack of information available to Trustee when the amendment was filed.
Further, Trustee’s counsel asserts that they attempted to amend the Complaint for a second time
shortly before trial to conform the Complaint to facts subsequently discovered. The Court,
however, declined to permit leave for Trustee to amend the Complaint for a second time because
of the looming trial date. According to Trustee, these actions show the paragraphs in question were
not deliberate, clear, and unequivocal judicial admissions of fact.
The Court agrees with Trustee—the three statements do not amount to judicial admissions
sufficient to entitle Defendants to judgment on Trustee’s oral contract claim. The statements were
made during a judicial proceeding through pleadings in this adversary proceeding and are facts
340 ECF No. 56 at 18–19, ¶ 65.
341 Id. at 41 ¶ 148.
342 Id. at 42 ¶ 150.
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that would be conclusive of Trustee’s oral contract claim if deemed admitted. Nevertheless, the
Court finds that Trustee’s attempts to correct the pleadings reveal that the statements were not
unequivocal and deliberate. Trustees often operate from a deficit of information. A few months
before trial, Trustee learned the Term Sheet was never executed by both parties. Thereafter, the
Trustee sought to correct the error, but due to the timing of the proposed amendment, the Court
declined to grant leave. Additionally, the Court later ruled in the Ebersol Adversary that the
Term Sheet does not constitute a binding written contract. Based on when Trustee confirmed that
the Term Sheet lacked a signature and when the Court ruled in the Ebersol Adversary, the Court
finds it inappropriate to deem Trustee’s statements in the First Amended Complaint as judicial
admissions.
III. 	Dundon’s Contract Formation Defenses
A. 	ESMG ratified the parties’ oral contract.
In Dundon’s first oral contract defense, Dundon claims Ebersol lacked the authority to enter
an oral contract on behalf of ESMG without board and shareholder approval. Additionally, Dundon
contends that Ebersol failed to similarly seek ratification from ESMG’s shareholders and board
after creating an investment contract with Dundon. Conversely, Trustee asserts Ebersol polled
board members for approval before reaching an agreement with Dundon. Further, Trustee reasons
that when ESMG gave control to Dundon, the League tendered majority ownership to Dundon. As
such, Trustee maintains that any failure to finalize documentation or transfer/issue stock is
attributable to Dundon’s team alone.
Authority and ratification concern ESMG’s internal corporate affairs, which implicates the
“internal affairs doctrine.”343 This doctrine requires that Delaware law govern issues that fall
343 The Supreme Court has described the internal affairs doctrine as follows:
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within the traditional notion of “internal affairs” for formal entities, including: the election or
appointment of directors and officers; the issuance of corporate shares; preemptive rights; and
directors’ and stockholders’ meetings. Restatement (Second) of Conflicts of Laws § 302 cmt. a
(A.L.I. 1971); see also Sagarra Inversiones, S.L. v. Cementos Portland Valderrivas, S.A.,
No. 6179, 2011 WL 3371493, at *13 (Del. Ch. Aug. 5, 2011) (explaining the law of the state of
corporation also determines the showing a plaintiff must make to satisfy standing in a derivative
action). Stockholder approval may only occur by a meeting with a quorum present or by written
consent of a sufficient number of stockholders.344 Del. Code Ann. tit. 8, § 216 (2009) (requiring a
quorum of shareholders to vote on a specified action); id. § 211 (requiring a quorum of
shareholders to elect a new director). Similarly, a board of directors’ approval may occur through
a telephonic meeting so long as the meeting is conducted “by means of which all persons
participating in the meeting can hear each other.” id. § 141(i). A board cannot act without the
collective sharing of business knowledge that comes from participation in a meeting and
deliberation with others present at the meeting. Lippman v. Kehoe Stenograph Co., 95 A. 895,
899 (Del. Ch. 1915).
Dundon’s defense and Trustee’s response center on the investment figure of $250 million.
As noted above, the Court believes $250 million was discussed, but the parties ultimately reached
a meeting of the minds on $70 million. There is evidence that ESMG’s board and shareholders
approved an investment amount of $70 million.345 Nevertheless, Trustee asserts that Dundon
The internal affairs doctrine is a conflict of laws principle which recognizes that only one State
should have the authority to regulate a corporation’s internal affairs—matters peculiar to the
relations among or between the corporation and its current officers, directors, and shareholders—
because otherwise a corporation could be faced with conflicting demands.
Edgar v. Mite Corp., 457 U.S. 624, 645 (1982) (emphasis added).
344 A meeting may also occur through a remote meeting; however, “if any stockholder or proxyholder votes or takes
other action at the meeting by means of remote communication, a record of such vote or other action shall be
maintained by the corporation.” Del. Code Ann. tit. 8, § 211(a)(2).
345 D-135 at 241, 250–51; D-182.
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orchestrated and directed approval of the parties’ $70 million because the board and shareholder
meetings occurred after Dundon and Zutter assumed actual control of the League. Trustee’s
argument insinuates that the approval of $70 million was somehow wrongful or tainted. Ebersol,
however, convened a meeting of the ESMG board to the exclusion of Dundon and Zutter to ratify
$70 million.346
Similarly, Ebersol owned or controlled 71% of the shareholders’ vote and had the sole
power to consummate a deal if one existed.347 Prior to the parties’ oral contract, Teddy Bright
Pictures, Ebersol’s entity, owned much of ESMG’s common stock and approximately two million
preferred shares of ESMG.348 Additionally, Ebersol executed a holder voting agreement with
Fowler, under which Fowler named Ebersol as proxyholder for Fowler’s company voting stock,
which amounted to roughly 30% of ESMG’s fully diluted stock.349 With these rights in hand,
Ebersol ratified a contract for $70 million.350 If anyone orchestrated the approvals, it was Ebersol.
Accordingly, even if Ebersol lacked authority to enter an investment deal with Dundon and his
related entities, there is ample evidence to support that ESMG’s board and shareholders approved
a $70 million investment, which supports the Court’s finding of an oral contract for that amount.
Because the Court finds that the board of directors and stockholders ratified Ebersol’s
actions with respect to the oral contract for $70 million, Dundon’s alternative argument that
Ebersol lacked apparent authority to contract for ESMG is moot. Accordingly, neither defense—
lack of actual authority nor lack of apparent authority—is persuasive in disposing of Trustee’s oral
contract claim.
346 D-135 at 241, 250–51 (revealing minutes of the “Special Meeting of the Board of Directors,” which neither
Dundon nor Zutter attended).
347 D-182 at 5–8.
348 D-75 at 60.
349 D-135 at 243–49.
350 D-182. Ebersol’s father also signed the resolution on behalf of their family trust, which owned approximately
five percent of ESMG’s fully diluted company stock.
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B. 	Any alleged misrepresentations made by Ebersol do not prevent enforcement of
the parties’ contract.
Dundon asserts the Court cannot enforce the oral contract because Ebersol made false
representations and failed to disclose material information regarding the League’s debts and cash
requirements to DCP and Dundon. Furthermore, Dundon alleges Ebersol lied about his authority
to enter an oral contract. In response, Trustee points to the Court’s ruling in the Ebersol Adversary,
asserting that the Court previously ruled that Defendants did not justifiably rely on Ebersol’s
alleged fraudulent misrepresentations or nondisclosures.
Dundon’s defense appears to the Court as a wrongful inducement defense. Accordingly,
the Court will treat it as such. “Texas law has long imposed a duty to abstain from inducing another
to enter into a contract through the use of fraudulent misrepresentations.” Blue Gordon, C.V. v.
Quicksilver Jet Sales, Inc., 444 F. App’x 1, 10 (5th Cir. 2011) (quoting Formosa Plastics Corp.
USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998)). “A contract
defendant pleading the defense of wrongful inducement is asserting that it agreed to one or more
contractual provisions only because the plaintiff misled the defendant into believing untrue
statements.” United States v. Texarkana Trawlers, 846 F.2d 297, 304 (5th Cir. 1988). Under
common law, a party cannot give their informed consent when they are wrongfully induced to
accept 	objectionable 	contractual 	terms 	through 	misrepresentations 	or 	nondisclosures. 	Id.
Consequently, a defendant may choose to avoid the objectionable portions of such contract or
rescind the entire contract where the plaintiff has “wrongfully induced the defendant to consent to
the contract itself.” Id. Recission, however, will only be granted where a defendant seeks the
remedy shortly after discovering the misrepresentation. Reg’l Props., Inc. v. Fin. & Real Estate
Consulting Co., 752 F.2d 178, 182 (5th Cir. 1985) (“[T]he right to rescind a contract may be lost
by failure to assert the right . . . .”).
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Here, the Court finds Dundon’s defense of wrongful inducement unavailing for several
reasons. First, and most persuasively, Dundon admitted at trial that he simply relied on Ebersol’s
word without inquiring into the status of the League’s accounts payable.351 It was evident to the
Court that Dundon wanted to be a part of ESMG’s effort to create a new spring football league and
that Dundon understood the risk he undertook when he made his investment without performing
due diligence.352 As a result, the Court found in the Ebersol Adversary that Dundon, as a
representative of DCP, could not justifiably rely on any alleged misrepresentations made by
Ebersol.353 Second, Dundon failed to put on evidence to show that Ebersol intentionally misled
Dundon in making the parties’ contract. The company’s mode of operations for tracking accounts
payable 	were 	certainly 	inefficient 	but 	appeared 	to 	the 	Court 	to 	be 	nothing 	more 	than
disorganization.354 Finally, Dundon, through his related entities, continued to fund payment
requests by ESMG after discovering that ESMG’s accounting methods were unreliable.355 In fact,
Dundon almost funded the entire $70 million required by the parties’ oral contract without seeking
rescission, which is required before Dundon can assert the defense of wrongful inducement.356
Accordingly, Dundon’s wrongful inducement defense is unpersuasive.
C. The parties’ contract was not impossible to perform.
Next, Dundon raises the defense of impossibility, arguing that even if Dundon and Ebersol
entered into an oral agreement, the agreement did not address the contingency of the League
shutting down before the first season ended. According to Dundon, supervening factors frustrated
the parties’ contract because there is no evidence that the parties agreed to fund a shutdown of the
351 See Trial Tr. 99:15–33, ECF No. 343 (“I was taking someone’s word.”).
352 Id. at 113:10–13.
353 Adv. No. 22-05077, ECF No. 171 at 18–20.
354 Trial Tr. ECF No. 412, 413.
355 Trial Tr. 135:5–11, ECF No. 413.
356 Id. at 135:19–21.
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League. Trustee asserts that the oral contract was not impossible because the projections provided
to Dundon disclosed heavy losses for the first five years of the team. In addition, Trustee alleges
that Dundon had the ability to pay the remainder of the $70 million, which could have allowed the
League to reorganize under chapter 11 of the bankruptcy code.
Dundon relies on Alabama Football, Inc. v. Wright to support his argument that Dundon’s
decision, through DCP, to place AAF into bankruptcy excused any further performance of Dundon
under the oral contract. Ala. Football, Inc. v. Wright, 452 F. Supp. 182 (N.D. Tex. 1977). There, a
player sued a defunct football team for breach of contract, alleging that the team failed to provide
a forum for the player to perform services pursuant to their contract. Id. at 185. According to the
player, the team was not excused from allowing the player to play, despite having filed for
bankruptcy and ceased operations. Id. The Court explained that “[i]mpossibility occurs where
(1) an unexpected contingency occurs, (2) the risk of which was not allocated either by agreement
or custom, and (3) the occurrence of the contingency has made performance impossible.” Id. After
reviewing the parties’ contract, the court determined that the parties did not allocate the risk of the
team shutting down or filing for bankruptcy. Id. Because of this lack of allocation, the court found
the unexpected dissolution of the team made performance under the parties’ contract impossible
and declined to award summary judgment to the player on his claim. Id.
The breach complained of in Alabama Football is materially different than the breach
complained of in this case. There, the player complained about the team’s failure to give the player
an opportunity to perform. Here, the League complains that the investor has failed to fulfill its
investment. The contract here was made for the purpose of allowing ESMG to operate. It was
created at a time when funding was undoubtedly needed, a fact known by Dundon when the
contract was created. Dundon cannot claim that filing for bankruptcy and shutting down the
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League was so unexpected that his further performance is excused, given that he, through his
entities, made the decision to place ESMG in bankruptcy.
Accordingly, the Court finds Dundon’s defense of impossibility is inapplicable to defeat
Trustee’s breach of oral contract claim. Whether Trustee can recover the remainder of the
$70 million will be addressed below.
IV. 	Breach of Contract
Because there is a valid and enforceable contract, the Court must review whether ESMG
performed its obligations thereunder and whether Dundon, through his entities, breached the
contract. In Texas, a “breach of contract is defined as ‘a failure, without legal excuse, to perform
a promise that forms the whole or part of a contract.’” Raybourne & Dean Consulting, Ltd. v.
Metrica, Inc., No. SA-14-CA-918, 2016 WL 7497587, at *18 (W.D. Tex. Feb. 19, 2016) (quoting
Gilmore v. SCI Tex. Funeral Servs., Inc., 234 S.W.3d 251, 259 (Tex. App.—Waco 2007, pet.
denied)). “Any breach, even a nonmaterial breach, may give rise to a claim for damages.”
Lavender v. Bortz (In re Bortz), Ch. 7 Case No. 22-33772, Adv. No. 23-3052, 2025 WL 1428161,
at *17 (Bankr. S.D. Tex. May 16, 2025) (citing Bartush-Schnitzius Foods Co. v. Cimco
Refrigeration, Inc., 518 S.W.3d 432, 436 (Tex. 2017) (per curiam)). “[W]hether a party has
breached a contract is a question of law for the court.” Willis v. Donnelly, 118 S.W.3d 10, 25 (Tex.
App.—Houston [14th Dist.] 2003, no pet.).
Trustee argues that ESMG fully performed its obligations under the contract and that
Dundon breached by failing to continue funding the remainder of the investment funds or, at a
minimum, supply additional money to allow ESMG to reorganize. Conversely, Dundon asserts
that ESMG failed to provide sufficient evidence to show that ESMG fulfilled its obligation to
tender majority stock ownership to DCP and pay a preferential return. As a result, Dundon
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contends that ESMG breached the parties’ oral contract first, and any action or inaction on the part
of DCP is inconsequential.357
The parties’ arguments concern the timing of their obligations under the oral contract.
Beginning with ESMG’s required performance to issue company stock, the Court will review when
and how ESMG was required to issue stock according to Delaware law because the issuance of
stock concerns internal affairs. See Beard v. Elster, 160 A.2d 731, 735 (Del. 1960). Under general
Delaware corporate law, the issuance of stock “shall be paid in the manner that the board of
directors shall determine.” Del. Code Ann. tit. 8, § 152(a); see also id. § 153(b) (“Shares of stock
without par value may be issued for such consideration as is determined from time to time in
accordance with § 152 of this title, or by stockholders if the certificate of incorporation so
provides.”).358 This procedure is necessary because “an issuance of stock without receipt by the
company of valid consideration is void.” Fonds de Regulation et de Controle Cafe Cacao v. Lion
Cap. Mgmt., LLC, No. 1509-N, 2007 WL 315863, at *12 (Del. Ch. 2007).
Here, the Term Sheet provides evidence regarding when ESMG was obligated to issue
stock to DCP. It provides that upon DCP’s initial funding of $5.1 million, ESMG was required to
issue several shares of Series 2 stock such that DCP would own 75% of ESMG.359 There is no
dispute that DDFSP sent the initial $5.1 million to ESMG by the end of the day on February 14,
2019. Ebersol testified that he believed Dundon was the majority owner by the morning of
357 Dundon raised a similar argument, alleging that because ESMG breached the parties’ contract first, there is no
breach of contract claim for the estate, rendering the contract executory in nature. According to Dundon, because
Trustee failed to assume this executory contract, Trustee rejected it and cannot attempt to enforce it through this
lawsuit. The Court need not address this argument because whether the contract is a claim of the estate depends on
whether ESMG fully performed its obligations and whether Dundon breached the contract—two of the core elements
for a breach of contract claim.
358 Similarly, in Texas, “Shares may not be issued until the consideration, determined in accordance with [the Code],
has been paid or delivered as required in connection with the authorization of the shares.” Tex. Bus. Org. Code
§ 21.157.
359 T-0007 at 1.
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February 19, 2019, revealing the parties indeed intended for ESMG to be obligated to issue stock
shortly after DCP provided the initial funding amount.360 There is also no dispute that ESMG failed
to issue any stock to DCP or any other Dundon entity. Trustee alleges that it was Dundon and
Zutter’s duty to issue the stock and, as a result, Dundon cannot complain of ESMG’s failure to
comply with the parties’ contract. This argument is not persuasive. While Dundon took actual
control of ESMG on February 14, 2019, the original board and shareholders did not ratify the
agreement until ten days later. ESMG could have issued 75% of fully diluted stock to DCP before
or at the same time the board signed its resolution concerning Dundon and Zutter’s majority control
of the company. As a result, ESMG did not fully perform its obligations under the parties’ contract.
Because ESMG did not fulfill its portion of the contract, ESMG was in breach when the
bankruptcy petition was filed. Accordingly, Trustee, who is in the shoes of ESMG, cannot satisfy
the third element—contract performance by claimant—to maintain its breach of contract claim.
See Soap Eng’g, LLC, 2025 WL 1646333, at *5 (listing the elements for a breach of contract).
V. 	Covenant of Good Faith and Fair Dealing
Trustee alleges Dundon breached the covenant of good faith and fair dealing. An implied
covenant of good faith and fair dealing did not exist in the oral contract. The Texas Supreme Court
has “not recognized that an implied covenant of good faith and fair dealing exists in every contract
but, instead, has recognized that such duty ‘may arise as a result of a special relationship between
the parties governed or created by a contract.’” Texas Champps Americana, Inc. v. Comerica
Bank, 643 S.W.3d 738, 747–48 (Tex. App.—Dallas 2022, no pet.) (quoting Arnold v. Nat’l Cty.
Mut. Fire Ins. Co., 725 S.W.2d 165, 167 (Tex. 1987)). “Special relationships arise where there is
an element of trust necessary to accomplish the goals of the undertaking or when the courts have
360 ECF No. 332.
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declared the existence of a special relationship because of imbalance of bargaining power.” Cent.
Sav. & Loan Ass’n v. Stemmons Nw. Bank, 848 S.W.2d 232, 239–40 (Tex. App.—Dallas 1992,
no writ); see also Laredo Med. Grp. v. Lightner, 153 S.W.3d 70, 72–73 (Tex. App.—San Antonio
2004) (“A ‘special relationship’ has been recognized where there is unequal bargaining power
between the parties and a risk exists that one of the parties may take advantage of the other based
upon the imbalance of power. . . .”). But “[t]here is no general duty of good faith and fair dealing
in ordinary, arms-length commercial transactions.” Formosa Plastics Corp. USA v. Presidio
Eng’rs & Contractors, Inc., 960 S.W.2d 41, 52 (Tex. 1998).
Here, there was no special relationship that arose from an element of trust necessary to
accomplish the goal of the contract. The bargained-for exchange under the oral contract was a
monetary investment paid by DCP or DDFSP361 in exchange for Dundon receiving majority
control and ownership of ESMG.362 The goal of the contract was to ensure Dundon received
control and ESMG received the investment. While the fulfillment of the goal of any contract may
require at least some element of trust between the parties, there is no special element of trust
required here that would create a special relationship. See Cent. Sav. & Loan Ass’n, 848 S.W.2d
at 240 (“Because one business entity trusts another and relies on their contractual promise to
perform the contract does not cause a special relationship.”).
There was also no unequal bargaining power between DCP and ESMG that would risk one
party taking advantage of the other. Rather, Dundon and Ebersol’s dealings reflected an ordinary,
arms-length commercial transaction. Dundon and Ebersol discussed various scenarios, investment
361 The Joint Proposed Pre-Trial Order states, “Plaintiffs are not proceeding to trial on Count III [Breach of Covenant
of Good Faith and Fair Dealing] as to Defendant DCP.” (ECF No. 300 ¶ 28). Because the Court found the parties to
the oral contract were DCP and DDFSP, not Dundon, the Court examines whether DCP or DDFSP violated the
covenant of good faith and fair dealing.
362 See supra Section II.B.
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amounts, and structures during multiple calls within the 24 hours between their initial introduction
and when DCP transferred the initial $5.1 million to ESMG.363 During their February 14, 2019
morning call, Dundon and Ebersol discussed how to value a potential deal, with Dundon initially
claiming ESMG was worth $90 million.364 Ebersol stated that they were worth more than
$90 million, referencing the $115 million valuation at which other investors had invested.365
Dundon stated he valued them at $75 million, so the two sides split the difference and agreed at a
$82.5 million valuation.366 At the time, Dundon was aware ESMG needed funding but was also
aware ESMG was actively negotiating with multiple potential investors as alternative sources of
funding to Dundon.367
The parties later exchanged drafts of several proposed term sheets and continued to
negotiate, ultimately agreeing on the Term Sheet.368 Fenwick lawyers Jordan Roberts and Dawn
Belt represented ESMG in connection with the negotiations of the Term Sheet.369 The dealing
between Dundon and Ebersol does not represent the imbalance of bargaining power courts
reference when finding a special relationship. See, e.g., Arnold, 725 S.W.2d 165, 167 (“In the
insurance context a special relationship arises out of the parties’ unequal bargaining power and the
nature of insurance contracts which would allow unscrupulous insurers to take advantage of their
insureds’ misfortunes in bargaining for settlement or resolution of claims.”); see also In re Lyon
Fin. Servs., Inc., 257 S.W.3d 228, 232 (Tex. 2008) (describing “disparity in bargaining power” as
a situation where one party has no choice but to accept an agreement). Therefore, there was no
363 FOF ¶ 100.
364 FOF ¶ 102.
365 FOF ¶ 102.
366 Id.
367 FOF ¶ 103.
368 FOF ¶ 107–12.
369 FOF ¶ 109.
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special relationship based on an imbalance of bargaining power. Accordingly, there was no
covenant of good faith and fair dealing.
VI. 	Breach of Fiduciary Duty
Trustee alleges that Dundon and Zutter breached their duties of care, loyalty, and good
faith to ESMG.370 The Court concludes that Dundon breached his fiduciary duty of loyalty to
ESMG. The following analysis details the applicable legal framework and the Court’s reasoning.
A. 	Dundon and Zutter owed fiduciary duties to ESMG and its subsidiaries.
“The elements of a breach of fiduciary duty claim are (1) that a fiduciary duty exists and
(2) that the fiduciary breached that duty.” Off. Comm. of Unsecured Creditors. v. Bay Harbour
Master Ltd., (In re BH S& B Holdings LLC), 420 B.R. 112, 143 (Bankr. S.D.N.Y. 2009)
(applying Delaware law).
Dundon and Zutter owed fiduciary duties to ESMG. Directors owe fiduciary duties to the
corporation and its shareholders. Balasiano v. Borell (In re Furniture Factory Ultimate Holding,
L.P.), No. 20-12816, 2023 WL 5662747, at *11 (Bankr. D. Del. Aug. 31, 2023). Dundon and
Zutter were directors of ESMG. Thus, they owed fiduciary duties to ESMG.
Dundon and Zutter also owed fiduciary duties to We Are Realtime, LLC, AAF Properties,
LLC, Legendary Field Exhibitions, LLC, LFE 2, LLC, and AAF Players, LLC. “Delaware law
imposes fiduciary duties on a person who controls an entity.” Ban v. Manheim, 339 A.3d 41, 61
(Del. Ch. May 19, 2025). A “controller” does not have to hold the majority stock. Kahn v. Lynch
Commc’n Sys., Inc., 638 A.2d 1110, 1113 (Del. 1994); In re Cysive, Inc. v. S’holders Litig.,
836 A.2d 531, 551–53 (Del. Ch. 2003). The default rule, however, has always been that controller
status usually requires some stock ownership. Lynch, 638 A.2d at 1113; see also In re Tesla
370 The Court refers to ESMG and its subsidiaries collectively as “AAF.”
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Motors, Inc. S’holders Litig., No. 12711, 2018 WL 1560293, at *19 (Del. Ch. Mar. 28, 2018)
(suggesting Elon Musk, as minority shareholder, may be a controller because of his “managerial
power” and outside influence of Tesla’s board, public persona, and economic ties).
But in Pattern Energy, the Chancery addressed the issue of whether “nonstockholders”
could yield significant control over the company, thereby implicating their status as controllers. In
re Pattern Energy Grp. Inc. S’holders Litig., No. 2020-0357, 2021 WL 1812674, at *36 (Del. Ch.
May 6, 2021). The court distinguished two cases where the Chancery dismissed fiduciary duty
claims against alleged controllers because they held no stock in the company. Id. at 38. First, Klein
v. H.I.G. Capital, L.C.C. considered a control group theory where the alleged controllers did not
own stock at the time the challenged transaction occurred. Id. The Chancery, in that case, noted
that it declined to impose fiduciary status on the defendants who neither owned stock nor were “a
party to any agreement or arrangement that controlled the votes of any shares” of the company’s
stock, nor “took any action to exercise control.” Id. Notably, Klein emphasized that the alleged
control must have existed at the time the alleged breach occurred—it is not enough that the
nonstockholder had the potential to exercise control later. Id. Second, Skye Mineral Investors,
LLC v. DXS Capital (U.S.) Ltd. declined to extend controller status to nonstockholders who owned
no shares, appointed no board members, and held no contractual blocking rights. Id. Thus, Klein
and Skye Mineral Investors “both looked beyond the bounds of stock ownership to other sources
of soft power” to imply that fiduciary duties may extend to a nonstockholder. Id. Noting that
“Delaware law looks to substance rather than form when considering who wields control sufficient
to impose fiduciary duties,” the Chancery in Pattern Energy held that controller status and
fiduciary duties may be imposed upon a nonstockholder that holds and exercises power to displace
the will of the board with respect to decisions and transactions. Id. at 40. In other words, a director
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who owns no stock is not a controlling stockholder but could be described as having de facto
control or domination over corporate governance. See Tornetta v. Musk, 310 A.3d 430, 497–500,
503–06 (Del. Ch. 2024) (imposing fiduciary duties on Musk because his “influence over
managerial decisions, decision makers, and the process” constituted control over the company
even though he was a minority shareholder).
Under Delaware law, parent corporations do not owe fiduciary duties to their subsidiaries.
In re Essar Steel Minn. LLC, 602 B.R. 600, 607 (Bankr. D. Del. 2019). A director of the parent,
however, can be its subsidiary’s controller in the unconventional sense by dominating the board
or corporate decisions without owning stock. In re Pattern Energy, 2021 WL 1812674, at *36.
“To show that the requisite degree of control exists generally, a plaintiff may establish that a
defendant or group of defendants exercised sufficient influence” over corporate decisions. Basho
Techs. Holdco B, LLC v. Georgetown Basho Investors, LLC, No. 11802, 2018 WL 3326693,
at *25 (Del. Ch. July 6, 2018).
Examples include, but are not limited to: (i) relationships with particular directors
that compromise their disinterestedness or independence, (ii) relationships with key
managers or advisors who play a critical role in presenting options, providing
information, and making recommendations, (iii) the exercise of contractual rights
to channel the corporation into a particular outcome by blocking or restricting other
paths, and (iv) the existence of commercial relationships that provide the defendant
with leverage over the corporation, such as status as a key customer or supplier.
Id. at *26 (footnotes omitted) (quoting NVent, LLC v. Hortonworks, Inc., No. 05-148, 2017 WL
449585, at *9 (Del. Super. Ct. Feb. 1, 2017)). Lastly, “Delaware law expressly rejects the notion
that directors of a corporation owe no fiduciary duties to a limited partnership or LLC controlled
by that corporation.” Off. Comm. of Unsecured Creditors v. Tech. Olympic, S.A. (In re TOUSA,
Inc.), 437 B.R. 447, 460 (Bankr. S.D. Fla. 2010) (applying Delaware law and collecting cases);
see also Tow v. Amega Bank N.A., 505 B.R. 455, 467 (S.D. Tex. 2014) (explaining TOUSA
applies to situations when the parent fiduciary injures the subsidiary to benefit another corporate
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entity that the fiduciary owns or controls).
Because this case has its own unique set of facts and circumstances that dictate the analysis,
the Court examines the sources of influence and control holistically. In doing so, the Court finds
that Trustee produced sufficient evidence to establish a valid fiduciary relationship between
Dundon, Zutter, ESMG, and its subsidiaries. Dundon and Zutter do not dispute that they owed
fiduciary duties to AAF. Dundon and Zutter were controllers of AAF immediately upon their
election to ESMG’s board of directors.371 At trial, Zutter agreed that he owed a fiduciary duty to
both DCP and AAF from February 14, 2019, until bankruptcy.372 Dundon similarly understood his
obligations to AAF once he was elected to ESMG’s board.373 On February 14, 2019, Zutter sent
an email stating that he and Dundon “signed a deal to take over control of the AAF” through
“fund[ing] a small equity amount today” to “have control over the vehicle similar to our structure
for EDHD” (referring to Employer Direct Healthcare).374 Zutter also admitted that DCP controlled
whether capital would be injected into AAF after February 14, 2019.375
Dundon instructed Zutter to get AAF’s expenses under DCP’s control.376 Several witnesses
testified to their understanding of Dundon and Zutter’s controlling relationship with AAF. Kevin
Farrell—who authorized bankruptcy for ESMG subsidiaries and served as AAF’s operating
consultant—testified that Dundon and Zutter were “in complete control of [AAF’s] expense
decisions.377 Kelly Vugrincic, former Head of People for AAF, also testified that she understood
that “the Dundon Group” directed Farrell and other AAF agents about how to operate their
371 See FOF ¶ 14 (finding ESMG controlled AAF).
372 Trial Tr. 10:15–21, 119:4–7 ECF No. 383.
373 Trial Tr. 253:23–24, ECF No. 335.
374 Trial Tr. 120:5–11, ECF No. 383; T-0256.
375 Trial Tr. 144:8–11, ECF No. 383.
376 FOF ¶ 203.
377 Trial Tr. 37:14–16, ECF No. 413.
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finances.378 Additionally, Jeffrey Vanderbilt held no position at either ESMG or AAF, but he
worked closely with Zutter, who both reported directly to Dundon.379 Yet, he testified that AAF
was not allowed to make any payments or sign contracts without his approval (along with Dundon
and Zutter’s).
Dundon and Zutter exercised effective control over ESMG and its subsidiaries as a result
of a combination of factors: (i) Dundon’s use of his contractual rights to “make any and all day-
to-day business decisions for or on behalf of the Company, including but not limited to determining
capital required to be drawn” and “define or limit any authorities of any employee, Director,
advisor, representative, vendor, consultant or officer of the Company”;380 (ii) Dundon’s influence
over Zutter; and (iii) Dundon and Zutter, together, representing the only voting members of the
Board.381 Although Dundon and Zutter were not traditional controlling shareholders because they
never owned stock, they had de facto control, dominated business decisions, and held managerial
superiority. They exercised control pervasively over ESMG—and ultimately AAF’s—business
and affairs. Both under Trustee’s controller theory and under TOUSA, Dundon and Zutter owed
fiduciary duties to AAF.
B. 	The Court reviews Dundon’s self-dealing under the entire fairness standard.
Delaware law distinguishes between the standard of conduct and the standard of review.
Chen v. Howard-Anderson, 87 A.3d 648, 666 (Del. Ch. 2014). The standard of conduct “describes
what directors are expected to do” and is bifurcated into the duties of loyalty and care. Id. The
duty of care requires fiduciaries “to inform themselves fully and in a deliberate manner.” Burtch
378 Trial Tr. 242:7–18, ECF No. 351.
379 FOF ¶ 127.
380 T-0007. Although the Court finds the Term Sheet unenforceable, it considers the Term Sheet as evidence of the
oral contract. See supra Part I.
381 FOF ¶ 191.
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v. Opus, LLC (In re Opus E., LLC), 528 B.R. 30, 66 (Bankr. D. Del. 2015) (quoting Off. Comm.
Of Unsecured Creditors v. Goldman Sachs Credit Partners L.P. (In re Fedders N. Am., Inc.),
405 B.R. 527, 539 (Bankr. D. Del. 2009)). The duty of loyalty “mandates that the best interest of
the corporation and its shareholders take precedence over any interest possessed by a director,
officer or controlling shareholder and not shared by the stockholders generally.” Cede & Co., v.
Technicolor, Inc. (Cede II), 634 A.2d 345, 363 (Del. 1993). Traditionally, the triad of fiduciary
duties consisted of the duty of care, the duty of loyalty, and the duty to act in good faith. Hurwitz
v. Mahoney (In re Space Case), No. 23-50748, 2024 WL 1628440, at *5 (Bankr. D. Del. Apr. 15,
2024). Although Trustee invokes the duty of good faith as separate from the duty of loyalty, under
Delaware law, the duty of good faith is now subsumed within the duty of loyalty. Stone ex rel.
AmSouth Bancorporation v. Ritter, 911 A.2d 362, 370 (Del. 2006).382 Fiduciaries “breach their
duty of loyalty by failing to discharge that fiduciary obligation in good faith.” Id. Good faith
“requires ‘true faithfulness and devotion to the interests of the corporation and its shareholders.’”
Id. at 67 (quoting In re Walt Disney Co. Derivative Litig. (Disney II), 906 A.2d 27, 67
(Del. 2006)).
The standard of review is how the Court evaluates “whether directors have met the standard
of conduct.” Chen, 87 A.3d at 666. “To determine whether a fiduciary has breached [their] duties,
the court must identify the applicable standard of review.” In re Dura Medic Holdings, Inc. v.
Consolidated Litig., 331 A.3d 796, 821 (Del. Ch. 2025). The standard of review is divided into
382 The Delaware Supreme Court has previously examined the spectrum of “bad faith” conduct sufficient to create
liability. See In re Walt Disney Co. Derivative Litig. (Disney II), 906 A.2d 27, 66 (Del. 2006) (“Cases have arisen
where corporate directors have no conflicting self-interest in a decision, yet engage in misconduct that is more culpable
than simple inattention or failure to be informed of all facts material to the decision.”). On one end, “subjective bad
faith” is “fiduciary conduct motivated by an actual intent to do harm,” which constitutes “classic, quintessential bad
faith.” Id. at 64. On the other end of the spectrum, conduct involved is a “lack of due care,” which is “fiduciary action
taken solely by reason of gross negligence and without any malevolent intent.” Id. The third category, which “falls in
between the first two categories,” is an “intentional dereliction of duty, a conscious disregard for one’s
responsibilities.” Id.
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three tiers: the business judgment rule, enhanced scrutiny, and entire fairness. Id.
The business judgment rule is the default standard of review. Id. at 820. The rule presumes
“that in making a business decision, the directors of a corporation acted on an informed basis, in
good faith and in the honest belief that the action taken was in the best interests of the company.”
Firefighters’ Pension Sys. of Kansas City v. Found. Bldg. Materials, Inc., 318 A.3d 1105, 1136
(Del. Ch. 2024); Gagliardi v. TriFoods Int’l, Inc., 683 A.2d 1049, 1051 (Del Ch. 1996) (“[I]n the
absence of facts showing self-dealing or improper motive, a corporate officer or director is not
legally responsible for the corporation for losses that may be suffered as a result of a decision that
an officer made or that directors authorized in good faith.”). If these elements are unrebutted, then
the Court’s only role is to see “whether the business decision made was rational in the sense of
being one logical approach to advancing the corporation’s objectives.” Id. (quoting In re Dollar
Thrifty S’holder Litig., 14 A.3d 573, 598 (Del. Ch. 2010)). “Only when a decision lacks any
rationally conceivable basis will a court infer bad faith and a breach of duty.” Id. at 1139 (quoting
Trados II, 73 A.3d at 43). The business judgment rule “prevents courts from injecting themselves
into a management role for which they were neither trained nor competent” and encourages
entrepreneurial “risk-taking activities” by shielding personal liability arising out of good-faith and
due care, “however unfortunate the consequence[s].” Continuing Creditors’ Comm. Of Star
Telecomms., Inc. v. Edgecomb, 385 F. Supp. 449, 458 (D. Del. 2004). If the plaintiff successfully
rebuts one of the elements of the rule, entire fairness applies. Dollar Thrifty, 14 A.3d at 598.
“Absent a conflict of interest, the business judgment rule applies to the managerial
decisions.” In re Dura Medic, 331 A.3d at 821. A conflict of financial interest does not have to be
direct. See, e.g., Orman v. Cullman, 794 A.2d 5, 23 (Del. Ch. 2002) (“[D]irectoral interest also
exists where a corporate decision will have a materially detrimental impact on a director, but not
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on the corporation and the stockholders.”). When a director is not engaged in direct self-dealing,
the benefit received from the interested transaction must be material; it must be of a “sufficiently
material importance, in the context of the director’s economic circumstances, as to have made it
improbable that the director could perform her fiduciary duties to the [corporation’s] shareholders
without being influenced by her overriding personal interest.” In re Gen. Motors Class H
S’holders Litig., 734 A.2d 611, 617 (Del. Ch. 1999) (emphasis added). The analysis is a
“subjective ‘actual person’ standard to determine whether a particular director’s interest is
material and debilitating.” Orman, 794 A.2d at 24 (quoting Cinerama, Inc. v. Technicolor, Inc.
(Technicolor Plenary III), 663 A.2d 1156, 1167 (Del. 1995)).383 To determine materiality, the
Court must find that there is a reasonable likelihood that the interest would “affect the decision-
making process of a reasonable person on a board composed of such persons.” Cede II, 634 A.2d
at 363.
Trustee alleged that Dundon breached his fiduciary duties by cutting critical elements of
the business, engaging in self-dealing, sabotaging existing deals or negotiations, directing Ebersol
to disengage from other investors for additional funding, failing to personally pursue additional
investors, filing for bankruptcy, using AAF funds to file for bankruptcy, and breaching contracts.
At trial, Trustee had to rebut the business judgment rule by demonstrating that a conflict of interest
existed sufficient to implicate an entire fairness review.
1. 	Spending Cuts
First, Trustee failed to prove that decisions to cut spending arose out of conflicts of interest.
383 Additionally, on March 25, 2025, the Delaware legislature passed the amendments to Delaware Code Section 144,
which codified doctrinal corporate law concepts developed by Delaware courts. Del. Code. Ann. tit. 8, § 144 (2025);
see generally Kahn v. M&F Worldwide Corp. (MFW), 88 A.3d 635 (Del. 2014) (collecting doctrinal cases that
developed Delaware corporate fiduciary duty law). Under the newly added Section 144(e), “Material interest” is
defined as an “actual or potential benefit, including avoidance of a detriment” that “would reasonably be expected to
impair the objectivity of [a] director’s judgment when participating in the negotiation, authorization, or approval of
the act or transaction at issue.” Del. Code. Ann. tit. 8, § 144(e)(7).
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Dundon gained complete control over the business and its operational decisions.384 Dundon denied
having the intention to sabotage ESMG, whether in the short term or otherwise.385 The evidence
at trial showed that Dundon took thoughtful and innovative approaches to AAF’s situation,
including implementing strict oversight of all funding requests and weekly cash flow reports, in
accordance with the tiered system of prioritized vendors.386 Additionally, Zutter and Vanderbilt
created an emergency payment system, dividing outstanding obligations into hierarchical
categories.387 Zutter placed expenses needed to put football games on the field in the highest and
most important tier for payment.388 The second tier was allocated for payments that were more
flexible in terms of timing, and the last tier included past-due obligations.389 Together, Dundon
and Zutter directed League management to vigorously renegotiate existing debts in an effort to
save funds.390 The Court determines that Dundon and Zutter’s decisions to drastically cut spending
to salvage the league and prioritize operating expenses were within their business judgment. For
the reasons discussed above, the Court finds that these acts were made within the scope of their
business judgment and constitute rational business decisions.
2. 	Contracts
Next, Trustee argues that Dundon breached his fiduciary duties by breaching contracts with
players, key vendors, media companies, and others. Dundon aggressively pursued an NFLPA
contract and sought to resolve disagreements throughout the negotiation process.391 Additionally,
Dundon maintained, and the evidence shows, that he issued directives to negotiate vendor claims
384 FOF ¶ 96.
385 FOF ¶¶ 223–24.
386 FOF ¶ 128.
387 Id.
388 Id.
389 Id.
390 Id.
391 FOF ¶ 358.
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to stop the bleeding.392 Defendants’ expert Robert Whitsitt opined on why AAF failed in 2019 and
whether or not he believed Dundon used good business judgment.393 First, Whitsitt stated that the
League failed because the business model was “flawed” from the start, because the business plan
results in one party losing “over a quarter of a billion dollars of cash in three years, with no real
horizon to make that back.”394 Whitsitt also explained that his view of the revenue projections for
ticket and sponsorship sales led to a higher number than the model anticipated (another “flaw”).395
Another issue Whitsitt cited was the fact that the business was paying millions of dollars to
broadcast its games, which he considered a “huge guaranteed financial risk to a business that really
was not in a position to drive any revenue,” resulting in a “giant cash flow drain.”396
The League, under Ebersol’s direction, had already incurred millions in liabilities without
a committed source of capital before DCP became involved.397 Ebersol’s decisions rendered the
League’s business model unsustainable before Dundon and Zutter even entered the picture, and
Kantowitz described Ebersol’s approach as “playing a game of chicken” with critical vendors.398
Dundon and Zutter, either due to misrepresentations by Ebersol or their own lack of due diligence,
or both, were operating under the assumption that DCP’s investment would help stabilize the
condition of AAF, particularly regarding the vendor contracts.399 Once DCP gained access to the
data room, it began to discover the significant delinquent obligations incurred by ESMG prior to
DCP’s involvement.400
Even after Defendants began working with the League, AAF failed to accurately report the
392 FOF ¶¶ 127–28.
393 Trial Tr. 151, ECF No. 397.
394 Id.
395 Id.
396 Id.
397 FOF ¶¶ 56–64
398 FOF ¶¶ 64, 125.
399 FOF ¶¶ 129–32.
400 FOF ¶ 124.
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actual condition of its accounts payable.401 DCP implemented cash flow and accounts payable
trackers in an effort to mitigate the financial distress of AAF.402 Zutter testified that he utilized his
prior business experience and knowledge in attempting to renegotiate contracts, as he believed it
could benefit both parties, save money, and foster a long-term business relationship with the
creditor.403 Further, DCP learned that Ebersol had concealed prior threats of litigation, in which a
prior associate claimed he owned 50% of the league.404 As for the player contracts, AAF would
be in breach if it did not play its entire regular season. Based on the evidence at trial, it appears
that breach of the player contracts was inevitable. Again, the League was operating at a net
negative and would likely not have completed its first season even if Dundon and Zutter had not
become involved. In other words, Trustee did not offer any compelling evidence to demonstrate
that Dundon and Zutter intentionally, or in bad faith, breached player contracts. Dundon also
explained that he was concerned about putting the players on the field if he knew they could not
get paid.405 The League’s poor condition and operational deficiencies, which predated Dundon and
Zutter’s involvement, led to contractual defaults that were beyond the control of any individual.
Thus, the Court finds that Trustee also failed to rebut the business judgment rule regarding
contractual breaches. For the reasons discussed above, the Court finds that these acts were made
within the scope of their business judgment and constitute rational business decisions.
3. 	Bankruptcy Filing
Regarding the bankruptcy filing, Trustee’s theory hinged on the idea that Dundon diverted
ESMG resources to preserve capital for his ultimate intention to file bankruptcy and strip the
401 FOF ¶ 126.
402 Id.
403 FOF ¶ 128.
404 FOF ¶ 130.
405 Trial Tr. 188:10–12, ECF No. 343; FOF ¶ 128.
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company of its assets.
The duty of loyalty requires directors to “maximize the value of the corporation over the
long-term for the benefit of the providers of equity capital, as warranted for an entity with perpetual
life in which the residual claimants have locked in their investment.” Trados II, 73 A.3d at 37.
This standard of conduct requires that, when directors evaluate strategic alternatives that would
“end or fundamentally alter the stockholders’ ongoing investment in the corporation,” the return
value must exceed what the corporation would otherwise generate over the long term. Id. Notably,
stockholders may hold contractual rights with respect to a class or series of stock, which can alter
their desired outcomes in order to maximize the value of those rights. Id. at 38. Any class of stock
with special “voting powers, designations, preferences, rights and qualifications, limitations, or
restrictions” superior to the common stock is preferred stock. Del. Code. Ann. tit. 8, § 151(a);
Starring v. Am. Hair & Felt Co., 191 A. 887, 385 (Del. Ch. 1937) (“The term ‘preferred stock’ is
of fairly definite import. There is no difficulty in understanding its general concept. [I]t is of course
a stock which in relation to other classes enjoys certain defined rights and privileges.”). Thus, “the
degree to which directors own different classes or series of stock may affect the standard of
review.” Trados II, 73 A.3d at 40. Compare In re Tele-Commc’ns, Inc. S’holder Litig.,
No. 16470, 2005 WL 3642727, at *7 (Del. Ch. Dec. 21, 2005) (applying entire fairness to a
transaction involving a high-voting preferred class of stockholders almost entirely comprised of
the board), with In re Staples, Inc. S’holder Litig., 792 A.2d 934, 950–51 (Del. Ch. 2001)
(applying the business judgment rule because the directors’ interest was not material to the
decision).“[I]t is possible that a director could breach her duty by improperly favoring the interests
of the preferred stockholders over those of the common stockholders.” Trados II, 73 A.3d at 42
(quoting In re Trados Inc. S’holder Litig. (Trados I), No. 1512, 2009 WL 2225958, at *7 (Del.
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Ch. 2009)).
In this case, Dundon and Zutter decided to file under chapter 7 to liquidate the company,
which would have triggered the Series 2 Preferred Stock contractual liquidation preference.
Trustee contends that Dundon and Zutter should not have filed for bankruptcy but instead should
have sought further outside investments. At trial, Trustee failed to prove that Dundon and Zutter
were materially conflicted in the decision to file for bankruptcy. As the Court has noted, ESMG
was obligated to issue Series 2 Preferred Stock once DCP provided the initial funding. Despite
DCP providing the initial $5.1 million financing to ESMG on February 14, 2019, ESMG never
issued the stock. The Series 2 Preferred Stock carried preference upon liquidation, entitling its
owner to receive, in preference to the holders of Preferred and Common Stock, an aggregate
liquidation amount equal to the funded capital plus a preferred return of 20% per year.
Additionally, the holder would accrue dividends at a rate of 20% per annum and was entitled to
convert to Common Stock after the preferred stock’s liquidation preference was paid. See id. at 48–
49 (listing the same features of preferred stock as “economic incentives” the holder has that
“diverge from those of the common”). Pertinent to the Court’s analysis, the Series 2 Stock was
never formally transferred. Dundon and Zutter did not have a material financial interest in
liquidation. As equity holders, they understood their interests would be subordinated to those of
all creditors. Given the company’s limited assets and inability to satisfy even its creditors’ claims
in bankruptcy, Dundon and Zutter (DCP) stood to recover nothing in liquidation. If anything, their
financial incentive aligned with efforts to preserve and grow the League’s value, thereby
facilitating a potential return on their investment.
At the summary judgment stage, the Court found Trustee’s theory that Dundon exercised
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his control in bad faith to obtain a prepackaged bankruptcy compelling.406 The evidence at trial,
however, did not support that theory. Dundon stated in an interview on February 28, 2019, before
Trustee filed his original complaint alleging breaches of fiduciary duty, that his goal upon
acquiring the league was to “continu[e] to build the league and grow it.”407 Consistent with
Dundon’s stated intention, the evidence at trial established that Dundon acted consistently with
trying to keep the League afloat as long as possible. ESMG was insolvent before Dundon took
control, and Ebersol admitted bankruptcy was inevitable.408 The evidence also showed that
Dundon explored strategic alternatives. He instructed Ebersol, Kantowitz, Freedman, and Farrell
to each conduct a financial analysis of the League’s viability.409 Their assessments revealed that
AAF would need $65 million to finish its first year.410 The only viable option Ebersol’s team
presented was an immediate shutdown.411 Ebersol admitted that the shutdown was the only way
to preserve enough capital to initiate bankruptcy, pay salaries, and pay some debts.412 ESMG’s
operating and reporting conditions were in poor shape when Dundon took over.413 Inconsistent
financial records in the data room made ESMG’s financial health indiscernible.414 Additionally,
Dundon and Zutter, through Vanderbilt and Kantowitz, sought legal advice and accounting audits
as part of their exploration of bankruptcy.415 They explored the viability of a chapter 11 plan and
administrative expenses with bankruptcy counsel.416 Counsel advised them that chapter 7 was the
406 ECF No. 292.
407 T-1002.
408 FOF ¶ 269 (finding ESMG filed for bankruptcy because it was insolvent and no longer a viable business).
409 FOF ¶¶ 247–51.
410 FOF ¶¶ 249, 51.
411 FOF ¶ 253.
412 Id.
413 FOF ¶ 36.
414 Trial Tr. 35:5–2, ECF No. 398.
415 T-0531; Trial Tr. 220–22, ECF No. 434.
416 T-0531.
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only option because the company did not have the capital to maintain a chapter 11 plan.417 While
Dundon did not obtain a valuation of the assets before deciding to put them into bankruptcy, he
and the board acted on counsel’s advice that the League was not a viable business. Ebersol even
thanked Dundon and expressed his appreciation for the efforts Dundon made to save the League.418
Filing chapter 7 bankruptcy is generally protected by a business judgment standard, and
Dundon’s decision to file for bankruptcy was supported by evidence that the business was truly
insolvent, making the minority equity effectively worthless. The Court refrains from evaluating a
debtor’s pre-bankruptcy decisions with the benefit of hindsight.419 The Court is not convinced by
Trustee’s theory that Dundon and Zutter engaged with ESMG for the purpose of stripping its assets
and liquidating the company. Thus, the business judgment rule protects Defendants’ decision to
file for bankruptcy under chapter 7.
4. 	Outside Investments
In another theory, Trustee argues that Dundon breached his duties by refusing to consider
and seek additional investments or outside funding. Dundon instructed Ebersol to reject inquiries
about investments in AAF, stating he did not believe they could accept money in good faith.420 At
trial, Trustee delved into his theory that Dundon had sabotaged PAL agreement opportunities.421
But Dundon repeatedly explained that he felt uncomfortable with taking more investments because
“bills were piling up” and he “didn’t know where the end was.”422 He further explained that even
if he were to sell the preferred acquisition licenses at Trustee’s suggested value of $10 million, he
417 FOF ¶ 259.
418 FOF ¶ 270.
419 Trustee did not plead a “deepening insolvency” claim. Even if the Court were to construe the pleadings as such,
Trustee must have demonstrated fraud on behalf of the director to prevail on such a claim. Bruno v. Beacon Sales
Acquisition, Inc., 553 B.R. 280, 284 (Bankr. W.D. Penn. 2016) (consulting Delaware law).
420 FOF ¶ 220.
421 Trial Tr. 147:6–23, ECF No. 343.
422 Id. at 148:13–16.
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was not sure it would have saved the League. Dundon agreed that Ebersol offered him paths to
reach the end of the season for less than $10 million, but he did not trust Ebersol’s assessment
because Dundon’s team had conducted financial analyses that contradicted it. Dundon also
instructed Zutter to ensure that future investment offers contain protections and antidilution
provisions.423
While threatening to veto competing transactions can be evidence of bad faith, the Court
is not convinced that Dundon and Zutter demonstrated such behavior. Kahn v. Dairy Mart
Convenience Stores, Inc., No. 12489, 1996 WL 159628, at *8 (Del. Ch. Mar. 29, 1996). Both
Dundon and Zutter were interested in renegotiating the MGM deal because they viewed it as
unfavorable to the League.424 They both told Ebersol that if he could not renegotiate the MGM
deal, they would not contribute additional funds and warned him that the League was facing
bankruptcy.425 They wanted Ebersol to renegotiate the MGM deal aggressively. Ebersol, however,
lacked meaningful leverage in those negotiations, as he was the reason the deals had soured. His
sale of ESMG had triggered change-of-control defaults and constituted breaches under the existing
agreements.
Trustee failed to prove that either Dundon or Zutter acted with an actual intent to do harm.
See Disney II, 906 A.2d at 64 n.102 (quoting McGowan v. Ferro, 859 A.2d 1012, 1036 (Del. Ch.
2004) (“Bad faith is ‘not simply bad judgment or negligence,’ but rather ‘implies the conscious
doing of a wrong because of dishonest purpose or moral obliquity . . . it contemplates a state of
mind affirmatively operating with furtive design or ill will.’”). The record makes clear that Dundon
423 Id. at 174:15–24.
424 See Trial Tr. 240:10–18, ECF No. 396 (“So my understanding was that the MGM agreement was in direct
contradiction to our term sheet and so we were trying to rectify that by getting them to accept the term sheet through
some modification of their agreement. . . . [I]n the absence of resolving that, we might not be able to fund further
dollars because our term sheet itself may be deemed to be, you know, ineffective.”).
425 FOF ¶ 211.
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and Zutter focused on promoting ESMG’s welfare and preserving the value of DCP’s investment,
reflecting a balance between their investment interests and fiduciary duties.
The relationships between MGM, CBS, TNT, and the NFL Network were critical to the
League’s survival. Dundon and Zutter were concerned with preventing the dilution of their equity
and negotiating with these entities in good faith.426 Zutter understood that AAF had an immediate
short-term need for funds.427 By February 17, AAF personnel, including Alan Kantowitz, created
a list of topics for the “Dundon team” to address, including media deals, vendor tracking, business
opportunities, and player expenses.428 Zutter expressed his disapproval of the various deals AAF
had made and his wish to utilize DCP’s legal counsel to restructure AAF, rather than AAF’s
counsel, so that AAF could be restructured in accordance with DCP’s goals.429 The Court finds
that Trustee fails to establish a violation of bad faith beyond gross negligence. “[G]rossly negligent
conduct, without more, does not and cannot constitute a breach of the fiduciary duty to act in good
faith.” Id. at 65. Dundon and Zutter are therefore afforded the business judgment presumption.
The company was in distress. There was meaningful financial risk, and Dundon and Zutter
both knew that the league was at risk of surviving its first season. Outside investor options
existed,430 and Dundon was aware that it would take more than his $70 million to survive.431
Dundon and his team began considering outside investment forty days after taking control of the
League.432
On March 25, Dundon realized that his $70 million was almost gone. At the same time, he
was unwilling to provide representations and warranties because he did not yet have a complete
426 FOF ¶¶ 149, 174.
427 FOF ¶¶ 88, 89.
428 T-0102.
429 Trial Tr. 144:8–11, ECF No. 383.
430 Trial Tr. 270:1–14, ECF No. 396.
431 Trial Tr. 126:13–22, ECF No. 335.
432 Trial Tr. 32:18–25, ECF No. 343.
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understanding of the league’s internal operations.433 Because due diligence was still ongoing, he
believed it would not comport with good faith and fair dealing to make such assurances to any
outside investors prematurely. Zutter expounded upon Dundon’s hesitancy to represent and
warrant the company’s liabilities and obligations to outside investors, but said that by the end, they
were willing to sell the company “as is.”434 At trial, there was some discussion about an outside
investment of $10 million.435 Zutter explained that it was conditioned on DCP (or another investor)
fully funding League operations, which it was unwilling to do. Dundon and Zutter did not believe
it was a credible offer because it was conditioned on an unrealistic precedent of DCP investing “a
billion” more into the League.436
On March 26, Dundon texted Ebersol to “find someone to help keep this going to end of
year so we have time.”437 In response, Ebersol said he would make calls to all “top potential
investors,” and asked Dundon if he had targets he would like to consider, to which Dundon
responded, “I don’t.”438 The next day, on March 27, Ebersol sent an email to Dundon, Zutter, and
Jason Kulas (all DCP representatives).439 The email contained Ebersol’s “4 go forward options for
the league.”440 The four options Ebersol presented to Dundon and Zutter were (1) winding down
the league; (2) accelerating the championship game and closing down the League afterwards;
(3) completing the regular season and winding down “if no new investor surfaces before then”;
and (4) finishing the regular and postseason, “as originally contemplated.”441 Under each option,
Ebersol outlined the risks and benefits associated with each option. While Dundon ultimately
433 Id. at 34:5–14.
434 Trial Tr. 269:3–14, ECF No. 396.
435 Id. at 270:1–14.
436 Id.
437 D-268 at 75.
438 Id.
439 D-177.
440 Id.
441 Id. (emphasis added).
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questioned Ebersol’s ability to clearly understand what the “burn rate” was, communications
between the two demonstrated Dundon’s willingness to accept outside investments to keep the
League going, at least until the end of its first season.
The Court is not persuaded that Trustee’s evidence sufficiently demonstrates bad faith,
either by Dundon purportedly sabotaging potential outside investments or wholly disregarding
efforts to secure them. Dundon delegated this responsibility for pursuing such opportunities to
Ebersol, who was unsuccessful.
5. 	Advertising
Trustee argues that Dundon used AAF resources to further his own personal interests,
particularly by providing free advertising to his other ventures and connections. Trustee also
claims that Zutter participated in these conflicted transactions.
First, “each director has a right to be considered individually when the directors face claims
for damages in a suit challenging board action.” In re Cornerstone Therapeutics Inc, S’holder
Litig., 115 A.3d 1173, 1182 (Del. 2015). Dundon and Zutter had an exceptional business and
personal relationship that blurred the boundaries of their independent judgment.442 Interestingly,
Zutter did not receive financial benefits from AAF, nor did he have an ownership interest in DCP
or DDFSP.443 But even without direct financial conflict between Dundon, Zutter, and affiliated
entities, including DCP, their institutional, relational, and social loyalties created indirect conflict
with their loyalties to AAF. See Aronson v. Lewis, 473 A.2d 805, 816 (Del. 1984), overruled on
other grounds by Brehm v. Eisner, 746 A.2d 244 (Del. 2000) (“Independence means that a
director’s decision is based on the corporate merits of the subject before the board rather than
extraneous considerations or influences.”). They approached the challenged decisions as aligned
442 FOF ¶ 5.
443 FOF ¶ 225.
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partners. The record, however, did not reflect Zutter’s participation or interest in advertisement
deals and negotiations with Dundon-affiliated entities.
Dundon, on the other hand, had a financial interest in the decision to order AAF to provide
free and discounted advertising to friends and brands with whom he was involved, including
AT&T, Invisalign, SAP, Sony Pictures, Carvana, and TopGolf.444 Dundon’s duty of loyalty
required him to use ESMG’s resources for its own benefit and refrain from using ESMG’s
resources for his own benefit or the benefit of affiliated third parties. See Metro Storage Int’l LLC
v. Harron, 275 A.3d 810, 848 (Del. Ch. 2022) (quoting Restatement (Third) of Agency § 8.05(1)
(A.L.I. 2024)) (“An agent has a duty ‘not to use property of the principal for the agent’s own
purposes or those of a third party.’”). The advertising spaces that AAF gave away to Dundon-
affiliated companies were a resource that Dundon was obligated to use for AAF’s benefit.
“The entire fairness standard applies to a transaction between an entity and its controller
[and] . . . when the board making the decisions lacks a majority of disinterested and independent
decision makers.” In re Dura Medic, 331 A.3d at 826. The Board did not implement any
procedural protections for these advertising transactions in which Dundon was unequivocally on
both sides. Thus, the Court will evaluate Dundon’s self-dealing advertisement transactions under
an entire fairness review.
C. Dundon failed to prove that the advertising transactions were entirely fair.
The Court must next determine whether Dundon met his burden of entire fairness regarding
his self-interested decisions. If the Court determines that Dundon did not meet that burden, the
Court must then decide which remedy is available.
Entire fairness review is Delaware’s most onerous standard of review that applies when the
444 FOF ¶ 226.
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fiduciary stands to benefit from both sides of a transaction or is not disinterested. In re Tesla
Motors, Inc. S’holder Litig., No. 12711, 2020 WL 553902, at *18 (Del. Ch. Feb. 4, 2020); see
Trados II, 73 A.3d at 44 (“[Entire fairness] applies when the board labors under actual conflicts
of interest”). Once entire fairness applies, the defendants bear the burden of proving to the Court
that the transaction was the result of fair dealing and a fair price. Trados II, 73 A.3d at 44.445 The
“transaction itself must be objectively fair, independent of the board’s beliefs” and “[n]ot even an
honest belief that the transaction was entirely fair will be sufficient to establish entire fairness.”
Gesoff v. IIC Indus., Inc., 902 A.2d 1130, 1145 (Del. Ch. 2006). Defendants prove entire fairness
only if they can “demonstrate their utmost good faith and the most scrupulous inherent fairness of
the bargain.” Valeant Pharms., 921 A.2d at 746 (quoting Weinberger v. UOP, Inc., 457 A.2d 701,
710 (Del. 1983)).
Entire fairness encompasses both fair dealing and fair price. Weinberger, 457 A.2d at 711.
The Court, however, “does not focus on the components individually, but determines entire
fairness based on all aspects of the entire transaction.” Valeant Pharms., 921 A.2d at 746; see
William Penn P’ship v. Saliba, 13 A.3d 749, 757 (Del. 2011); In re Dura Medic, 331 A.3d at 821
(“Entire fairness is a unitary standard that combines a substantive dimension (fair price) and a
procedural dimension (fair dealing).”). “The two dimensions of the entire fairness test interact: ‘A
strong record of fair dealing can influence the fair price inquiry, reinforcing the unitary nature of
the entire fairness test. The converse is equally true: process can infect price.’” In re Sears
Hometown & Outlet Stores, Inc. S’holder Litig., 309 A.3d 474, 520 (Del. Ch. 2024) (quoting Reis
445 But see In re S. Peru Copper Corp. S’holder Derivative Litig., 52 A.3d 761, 788 (Del. Ch. 2011), where the court
explained how the burden of persuasion shifts back to the plaintiff under the Lynch doctrine. Where controlling
shareholders demonstrate that the transaction was approved by an independent board majority or special committee,
or by requiring an informed vote of the majority of minority shareholders, the plaintiff then bears the burden of
persuasion. There is no Lynch burden-shifting available in this case because Defendants neither engaged with an
independent board majority nor required an informed vote of the majority of the minority shareholders.
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v. Hazelett Strip-Casting Corp., 28 A.3d 442, 467 (Del. Ch. 2011)), modified, 2024 WL 3555781
(Del. Ch. 2024). Lastly, while the entire fairness standard is the most demanding, the transaction
must be fair, not perfect. In re Dura Medic, 331 A.3d at 821.
“The procedural dimension of the entire fairness inquiry examines the process that
generated the result.” Id. at 827. This dimension, known as fair dealing, “focuses upon the conduct
of the corporate fiduciaries in effectuating the transaction.” Id. (quoting Kahn v. Tremont
Corp. (Tremont II), 694 A.2d 422, 430 (Del. 1997)). It addresses questions of timing, how the
transaction was “initiated, structured, negotiated, disclosed to the directors, and how the approvals
of the directors and the stockholders were obtained.” Weinberger, 457 A.2d at 711. A “cornerstone
of fair dealing is a process implemented by the board that reflects arm’s length bargaining and
provides protections for the interests of all shareholders.” In re Transcare Corp., 2020 WL
8021060, at *19. A fair dealing analysis is not technical; it “will inevitably constitute a judicial
judgment that in some respects is reflective of subjective reactions to the facts of a case.”
Technicolor Plenary III, 663 A.2d at 1140. “Traditional indicia” of a fair process include
“negotiations by a majority of disinterested and independent directors or appointment of a special
committee, actual negotiation over price, obtaining stockholder approval, receiving guidance from
qualified advisors, and testing the market.” In re Dura Medic, 331 A.3d at 828.
The substantive dimension, also known as “fair price,” considers whether the fiduciaries
considered market evidence, contemporaneously with expert and financial analysis, in their
decision. Id. at 829; see In re Sears, 309 A.3d at 507 (“To evaluate the fair price dimension of the
unitary entire fairness test, the court examines the economic and financial merits of the transaction,
taking into account all relevant factors.”). Typically, when a defendant fails to satisfy the fair
dealing element of the entire fairness test, the defendant is unlikely to demonstrate that the price
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was entirely fair. See Saliba, 13 A.3d at 758 (“The [defendant]s’ self-interest in the transaction
and their domination of the sales process tainted the entire transaction.”); In re Dole Food Co. v.
S’holder Litig., Nos. 8703, 9079, 2015 WL 5052214, at *34 (Del. Ch. Aug. 27, 2015) (quoting
Reis v. Hazelett Strip-Casting Corp., 28 A.3d 442, 467 (Del. Ch. 2011)) (“[P]rocess can infect
price.”). Fair dealing reflects the procedural fairness of the decision-making process, while fair
price represents the substantive fairness of the outcome—i.e., the economic consequences of the
decision.
It appears that Dundon and Zutter had a significant interest in the long-term success of
AAF, and the Court agrees that they were likely misled about ESMG’s condition, particularly
regarding anticipated revenues and the millions of dollars in preexisting obligations.446 DCP
encountered gaps between reported and actual expenses, leading to confusion about the company’s
financial condition.447
Bearing in mind that Dundon was acting under significant pressure to preserve both the
League and Dundon’s personal investment, he nonetheless offered free advertising to their
affiliated entities. He was fully aware that the advertising spaces constituted valuable sources of
revenue for the distressed company. Ebersol, having worked in the television business for more
than twenty years, explained the League’s business structure surrounding its ad space. AAF owned
all advertising time during its games, and it sold sponsorships before the season started.448 Before
the change of control, AAF sold ad space to various companies, such as At Home and Navy Federal
Credit Union, which received advertisements during the games and sponsorships on the field.449
When Dundon took control mid-season, he started running advertisements for Dundon-affiliated
446 FOF ¶¶ 92, 131, 132.
447 FOF ¶ 131.
448 Trial Tr. 62:15–22, ECF No. 323.
449 Id.
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companies, which created turmoil between AAF and potential sponsors with whom AAF was
actively negotiating ad placement. Dundon started giving away ad space to their competitors,
which spoiled the negotiation process.450
There is conflicting evidence about whether the price of the advertising deals between AAF
and Dundon-affiliated entities could be considered “fair.” Dundon attempted to meet his burden
to prove entire fairness by arguing that giving away the ad space was a reasonable and strategic
business decision. Although the Court believes that could be true, speculation overwhelms its fair
price analysis.
ESMG was in a dire situation. Defendants depicted AAF as a failing entity without cash.
One of the themes at trial was that ESMG could not fund the AAF business plan, would have run
out of money within eleven weeks, and that bankruptcy was inevitable. The company was out of
money. Yet, Dundon and Zutter’s expert suggested that the free advertising was a prudent business
decision to increase the League’s appeal and legitimacy. He argued that Dundon’s decision to give
away valuable ad space was because companies would not be willing to sell advertising for a game
a couple of days away. He stated that because some of those companies indicated they might
consider paying a discounted rate for advertising in the future, it was a solid business decision:
“They had some success, they got some traction, and d[id] the best they could do.”451
AAF advertising prices depended on the part of the game in which it was displayed, the
platform on which it was shown, and its duration.452 Ebersol explained that AAF was selling
advertisement slots for between $500 and $20,000 per unit, depending on when they appeared in
the game.453 Each game ran 48 units, which were ultimately given away as a purported “strategic
450 Id. at 63:8–13.
451 Trial Tr. 141:19–20, ECF No. 397.
452 See id. for expert testimony regarding ad space and pricing.
453 Trial Tr. 76:21–23, ECF No. 323.
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play.” Trustee offered no other evidence regarding the value or price of the advertisement slots
given away.454 Dundon, however, did not meet his burden under the entire fairness review because
he failed to convincingly establish that $0.00 was a fair price for major corporations to pay for
advertisement space on AAF’s broadcasting space.
Under Delaware law, even if the ultimate outcome did not change the stockholders’
residual value, an unfair process infects the entire fairness analysis and precludes a finding of
fairness. See In re Loral Space & Commc’ns Inc., Nos. 2808, 3022, 2008 WL 4293781, at *22
(Del. Ch. Sept. 19, 2008) (finding the process unfair because it did not replicate arms-length
bargaining). Although the common stockholders likely receive little to no value in liquidation,
given their subordination to all other claims in bankruptcy, and the challenged transactions did not
materially alter that economic reality, the process by which the transaction was conducted was
fundamentally unfair.
“When the process used involves no market check and the resulting transaction is . . .
impossible to compare with confidence to other arms-length transactions, the court is left with no
reasoned basis to conclude that the outcome was fair.” Id. at *22. Under the circumstances of this
case, the Court finds that Dundon’s self-interested and conflicted transactions and decisions were
not entirely fair to ESMG. Dundon breached his fiduciary duty of loyalty by using ESMG property
for the benefit of third parties. The unfair dealing did not replicate arms-length bargaining between
Dundon and his affiliated entities. The Court cannot find a fair price because Dundon unilaterally
gave away advertisement space to competitors of other entities with which AAF had active deals,
454 Trustee offered credible testimony from Mr. Schanzer regarding the advertising deals. Mr. Schanzer, however,
agreed that it was reasonable to give away ad space as part of bartering arrangements. Although this point lends
support to Dundon’s theory that the price was fair, the Court does not find the brief testimony, which touched on only
general business judgment and speculation of price, to be probative of the determination at hand. Trial Tr. 308–18,
ECF No. 397.
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thereby cutting off potential revenue streams. After a unitary analysis, taking into account both
factors, the Court finds that using AAF property for the benefit of Dundon-affiliated third parties
was a breach of Dundon’s fiduciary duty of loyalty. The Court will now evaluate which remedy is
available.
D. Trustee failed to prove monetary damages.
Defendants argue that Trustee failed to prove damages because they are purely economic,
barred by the economic loss rule, and the claims for breach of contract overlap with the breach of
fiduciary duty claims.
First, the breach of fiduciary duty claim is independent of the breach of contract claim. A
contractual claim would preclude a fiduciary claim “if the duty sought to be enforced arises from
the parties’ contractual relationship.” Solow v. Aspect Res., LLC, No. 20397, 2004 WL 2694916,
at *4 (Del. Ch. Oct. 19, 2004). Here, rights arise out of Dundon and Zutter’s fiduciary duties
independent from the contractual framework the parties created. The establishment of the fiduciary
relationship between Dundon, Zutter, ESMG, and its subsidiaries comes by way of their
directorship and control, where the breach thereof was not the source of Trustee’s breach of
contract claim involving funding ESMG.
Second, the economic loss rule is a judicially created doctrine that “prevents plaintiffs from
recovering in tort for losses suffered that are solely economic in nature.” Kuhn Const. Co. v. Ocean
& Coastal Consultants, Inc., 844 F. Supp. 2d 519, 526 (D. Del. 2012). Initially applied in products
liability actions, courts have now expanded the doctrine’s application to all disputes arising from
a commercial transaction where the alleged damages caused harm only to the bargained-for item.
McKenna v. Terminex Int’l Co., No. 04C-02-022, 2006 WL 1229674, at *2 (Del. Super. Ct.
Mar. 13, 2006). To determine whether the economic loss doctrine will apply to the present case,
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the Court must first analyze the contract and tort claims asserted. Id. at *2. Here, the Court has
found that the contract and tort claims coexist because Dundon breached a duty independent of the
contract’s obligations. The economic loss rule does not apply to the equitable tort of breach of
fiduciary duty. Id. at *3; Leo Invests. Hong Kong Ltd. v. Tomales Bay Cap. Anduril III, L.P.,
342 A.3d 1191 (Del. Ch. 2025). Additionally, different remedies may be available for each claim.
In re Mobilactive Media, LLC, No. 5725, 2013 WL 297950, at *20 n.219 (Del. Ch. Jan. 25, 2013).
Delaware courts do not apply the economic loss doctrine to fiduciary duty claims, and the Court
declines to do so now.
Next, plaintiffs need not always prove damages resulting from a breach of fiduciary duty.
In re Tri-Star Pictures, Inc., Litig., 634 A.2d 319, 334 (Del. 1993), overruled on other grounds
by Tooley, 845 A.2d 1031; see In re Fuqua Indus., Inc., No. 11974, 2005 WL 1138744, at *6
(Del. Ch. May 6, 2005) (“[D]efendants’ contention that the corporation did not suffer damages
from [the breach of fiduciary duty] is unavailing as plaintiffs needs not demonstrate damages.”).
Although a breach of fiduciary duty requires plaintiffs to prove only two formal elements, a
successful plaintiff cannot obtain a meaningful remedy without showing either (1) harm to the
plaintiff or (2) a benefit wrongly received by the fiduciary. Leo Invests., 342 A.3d at 1191. Courts
have broad discretion to impose equitable remedies for breach of fiduciary duty. See Bomarko,
Inc. v. Int’l Telecharge, Inc., 794 A.2d 1161, 1184 (Del. Ch. 1999) (quoting Thorpe v. CERBCO,
Inc., 676 A.2d 436, 445 (1996) (Del. 1996)) (“Delaware law dictates that the scope of recovery
for a breach of the duty of loyalty is not to be determined narrowly. . . . The strict imposition of
penalties under Delaware law [is] designed to discourage disloyalty.”). Because Delaware
fiduciary law is designed to discourage fiduciaries from profiting from disloyal conduct that causes
harm to the beneficiary, the plaintiff must demonstrate something akin to damages to be entitled
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to a monetary remedy. Henkel of Am., Inc. v. Bell, 825 F. App’x 243, 255 (6th Cir. 2020)
(applying Delaware law). Mathematical uncertainty relating to the calculation of damages is
permissible “so long as the Court has a basis to make a reasonable estimate of damages.” Red Sail
Easter Ltd. Partners, L.P. v. Radio City Music Hall Prods., Inc., No. 12036, 1992 WL 251380,
at *7 (Del. Ch. Sept. 29, 1992). “Speculation is an insufficient basis, however.” Id.
Trustee’s only claim for a monetary remedy is the $144.1 million sought in recovery for
“the substantial depreciation and ultimate destruction” of AAF’s enterprise value; contracts not
pursued; assets and resources Defendants “usurped and used for their own personal benefit”; and
lost opportunities and profits.455 The Court will address the monetary remedy first.
In Nobilis Health Corp., the Delaware bankruptcy court found that an expert’s analysis
was insufficient to demonstrate a causal link between the breach of fiduciary duty and the
company’s loss in market value because it relied on “conclusory allegations regarding financial
misstatements.” Guiliano v. Fleming (In re Nobilis Health Corp.), 661 B.R. 891, 919–20 (Bankr.
D. Del. 2024). Here, witnesses testified to ESMG’s financial condition before the change of
control. Whitsitt testified that consumers experience “football fatigue” by spring and are inclined
toward NFL-related events such as the NFL Draft.456 Whitsitt also noted that AAF rushed its start,
which hindered the teams and their potential fan base from adequate preparation.457 Additionally,
he testified that AAF was overpaying players, and the spring football league had too many
competitors.458
Most pertinent to the Court’s analysis is Trustee’s expert, Sonia Desai. In her valuation of
455 ECF No. 300 at 18–19.
456 Trial Tr. 123–24, ECF No. 397.
457 Id. at 130:6–19.
458 Id. at 150:4–8.
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AAF, Desai did not conduct any analysis of fraud or breach of fiduciary duty.459 Her determination
that AAF was worth $144.1 million on February 13, 2019, was based on the market transaction
approach, relying on other investor transactions to indicate value.460 She did not include either
DCP’s $70 million investment or the $82.5 million Term Sheet negotiations in her valuation
analysis.461 She also relied on returned investments and deals that never went through.462
Ultimately, the Court was unconvinced that Desai used reliable and accurate measurements for
any monetary damages relative to Dundon’s breach of fiduciary duty. The record does not provide
the Court with a basis to make a reasonable estimate of damages, either in terms of harm caused
or benefit received.463 Thus, Trustee failed to show by a preponderance of the evidence that “a
sufficient causal linkage exists between the breach of duty and the remedy sought to make the
remedy an apt means of addressing the breach.” Metro Storage, 275 A.2d at 859. The award would
be based on mere speculation.464 Additionally, Trustee alleged a general damages figure for all
asserted breaches of fiduciary duty, and the Court does not find that this amount sufficiently
correlates to the singular breach established at trial.465 The evidence presented did not allow the
Court to isolate or attribute that aggregate figure to the specific breach found. Thus, the Court
declines to adopt Trustee’s generalized damages calculation.
459 Trial Tr. 30:8–17, ECF No. 380.
460 Id. at 67:21–24.
461 Id. at 149.
462 Id. at 194:8–22.
463 Even if Trustee is entitled to receive the value of ESMG absent a breach of fiduciary duty, that value is “inherently
unknowable” because there is no way to determine what financing arrangements ESMG might have acquired in the
absence of Dundon and Zutter’s disloyal conduct. Bomarko, 794 A.2d at 1184.
464 Lost profits and lost business opportunities are likewise considered speculative damages and are generally
unrecoverable absent a reasonably certain evidentiary basis. See Metro Storage, 275 A.3d at 860 (declining to award
damages based on speculative lost profits from a new business because they were too uncertain and remote because
there was no history of prior profits).
465 Although remedies such as disgorgement of profits, rescission, and restitution are available for a duty of loyalty
breach, such remedies are grounded on unjust enrichment. D EBORAH A. D E M OTT , SHAREHOLDER D ERIVATIVE
A CTIONS: L AW AND PRACTICE § 7:6 (2025); see FOF ¶ 236 (finding Trustee did not provide evidence of unjust
enrichment amounts); FOF ¶ 235 (finding advertisement value indefinite and speculative). See Part XI for the Court’s
unjust enrichment analysis.
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Alternatively, or in addition to the monetary damages, Trustee seeks the “amount of all
outstanding creditor claims against the Debtors’ estates.”466 Dundon contends that directors are
not directly liable for creditors’ claims, and therefore, Trustee lacks standing to pursue such claims
against him.
Creditors of insolvent corporations hold derivative claims against the corporation and its
directors, under the “trust fund doctrine.” Id.; see In re Altaba, Inc., 264 A.3d 1138, 1154 n.2
(Del. Ch. 2021) (discussing the doctrine and collecting cases). “Insolvency is measured on the date
the action is filed, and will be adjudged by the balance sheet test, or by the cash flow test.” Id.
(citations omitted). The Delaware Supreme Court explained:
When a corporation is insolvent, . . . its creditors take the place of the shareholders
as the residual beneficiaries of any increase in value. Consequently, the creditors of
an insolvent corporation have standing to maintain derivative claims against
directors on behalf of the corporation for breaches of fiduciary duties. The
corporation’s insolvency makes the creditors the principal constituency injured by
any fiduciary breaches that diminish the [company]’s value. Therefore, equitable
considerations give creditors standing to pursue derivative claims against the
directors 	of 	an 	insolvent 	corporation. 	Individual 	creditors 	of 	an 	insolvent
corporation have the same incentive to pursue valid derivative claims on its behalf
that shareholders have when the corporation is solvent.
Gheewalla, 930 A.2d at 98; see Quadrant Structured Prods. Co. v. Vertin (Quadrant II),
115 A.3d 535, 546–47 (Del. Ch. 2015) (“[Directors] continue to owe fiduciary duties to the
corporation for the benefit of all of its residual claimants, a category which now includes
creditors.”). At the time AAF filed for chapter 7 bankruptcy, it was balance sheet insolvent and
was not paying its bills in the ordinary course of business.467 Courts recognize chapter 7 trustees’
authority to assert derivative claims for breach of fiduciary duty against members of the debtor
corporation’s board of directors. E.g., Crawford v. Zambrano (In re Zambrano Corp.), 478 B.R.
466 ECF No. 300, at 19.
467 ECF No. 300; D-150; Trial Tr. 17:16–18, ECF No. 331.
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670, 684–85 (Bankr. W.D. Penn. 2012) (finding the trustee could seek damages for breaches of
fiduciary duties owed to creditors once the corporation became insolvent). Trustee has standing to
assert derivative claims for breach of fiduciary duties as the representative of Debtors’ estate with
the capacity to sue and be sued. 11 U.S.C. § 323. Thus, Trustee has standing to pursue creditor
claims against Dundon.
Although Trustee has standing to pursue breach of fiduciary duty claims on behalf of the
creditors, Trustee’s reliance on the amount of creditor claims served only as a measure of alleged
damages, not as a basis for standing itself. Dundon, therefore, mischaracterizes the issue by
conflating Trustee’s derivative standing with the method presented to quantify harm. Dundon’s
argument conflates these distinct concepts by treating Trustee’s damages theory as if it were a
jurisdictional standing defect. Dundon’s contention that Trustee sought to recover on behalf of
creditors misstates the nature of the claim. Trustee did not pursue individual creditor rights but
used the aggregate value of their claims as a measure of the estate’s loss. Thus, while insolvency
conferred standing, Trustee still bore the burden to prove that Dundon’s conduct caused that loss—
a showing that the record does not support.
Trustee also requests punitive damages relating to Dundon’s breach of fiduciary duty. In
support of this request, Trustee cites In re Extended Stay, Inc., No. 09-13764, 2020 WL
10762310, at *121 (Bankr. S.D.N.Y. Aug. 8, 2020).468 Trustee’s reliance on that case is misplaced,
as that decision did not resolve the considerable uncertainty surrounding the availability of punitive
damages under Delaware law. See, e.g., Overwell Harvest Ltd. V. Widerhorn, 662 F. Supp. 3d
801, 803–04 (N.D. Ill. 2022) (collecting cases); Buschwald v. Renco Grp., 539 B.R. 31, 52–54
(S.D.N.Y. 2015) (applying Erie and concluding that punitive damages are unavailable under
468 ECF No. 300 at 108.
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Delaware law). Even if the Court were to find Extended Stay persuasive, the award for punitive
damages under its framework would only be possible upon proof that Dundon acted maliciously,
outrageously, or egregiously, and with evil motive. In re Extended Stay, 2020 WL 10762310,
at *121 (collecting cases). The Court does not find such behavior present here. Additionally, the
Delaware Court of Chancery, sitting in equity, has historically refrained from awarding punitive
damages involving breaches of fiduciary duty. Beals v. Washington Int’l, Inc., 386 A.2d 1156,
1159 (Del. Ch. 1978). This principle was reaffirmed in Metro Storage Int’l LLC v. Harron, where
the court held that it lacks statutory authority to assess punitive damages for a claim in equity.
Metro Storage, 275 A.3d at 886. Recently, the Delaware bankruptcy court declined to award the
trustee punitive damages for breach of fiduciary duty, finding that they “are not available under
Delaware law.” RPA Asset Mgmt. Servs., LLC v. Siffin (In re MTE Holdings LLC), No. 21-
51255, 2024 WL 3272224, at *10 (Bankr. D. Del. July 1, 2024). Thus, the Court does not find
punitive damages available, even under Trustee’s reliance on Extended Stay.
Finally, Trustee requests that the Court award attorney fees.469 Under the American Rule,
attorneys’ fees for breach of fiduciary duty are not warranted unless the fiduciary “engaged in an
‘egregious breach of the duty of loyalty,’ but the harm flowing from the breach was ‘not readily
capable of quantification.’” Metro Storage, 275 A.3d at 867 (quoting Cantor Fitzgerald, L.P. v.
Cantor, No. 16297, 2001 WL 536911, at *3 (Del. Ch. May 11, 2001)). Trustee cites Metro
Storage and this exact quote in its request for attorneys’ fees. Doing so, Trustee implicitly agrees
that the harm is not readily capable of quantification, while at the same time arguing the breach
was egregious. The fiduciary’s conduct in Metro Storage was malicious and persisted for years.
Id. at 867–68. The Chancery noted that the fiduciary in that case was secretive and attempted to
469 ECF No. 300.
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take confidential documents upon his departure. Id. at 868. The Court agrees with Trustee that the
harm in this case is not quantifiable at this point, but it does not agree that Dundon engaged in
egregious conduct comparable to that in Metro Storage. Therefore, the Court does not believe
awarding Trustee attorneys’ fees and costs is the appropriate remedy in this case.
“If a court finds that the defendant has breached his fiduciary duties, but the court is unable
to fashion an appropriate remedy, it may still award nominal damages.” Bell, 825 F. App’x at 254
(collecting cases); see, e.g., Leo Invests., 342 A.3d at 1193 (“A court may award nominal damages
when a breach does not warrant a meaningful remedy.”); Macrophage Therapeutics, Inc. v.
Goldberg, No. 2019-0137, 2021 WL 2582967, at *19 (Del. Ch. June 23, 2021) (collecting cases).
Trustee has failed to prove actual damages, punitive damages are not available in this case, and
attorneys’ fees are unwarranted. Nevertheless, the Court finds that Trustee proved a breach of duty,
and the breach warrants an award of nominal damages. Dundon derived no benefit beyond the
exercise of his (and DCP’s) proofs of claim in bankruptcy, which merely represents a valid exercise
of his preexisting creditor rights.
E. 	Conclusion
The Court finds that Dundon’s self-interested decisions and self-dealing implicated the
duty of loyalty and therefore required an entire fairness review. Because Dundon engaged in
conflicted decision-making and self-dealing transactions, his conduct fails to satisfy the strict
requirements of the entire fairness standard. The Court, however, finds that Trustee was unable to
prove any causally related harm. Given that Trustee failed to establish a causal link between its
claimed damages and the proven breaches of fiduciary duty, the Court awards Trustee nominal
damages in the amount of $1.00.
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VII. 	Promissory Estoppel
As an alternative argument to Trustee’s breach of oral contract claim, Trustee asserts a
claim for promissory estoppel. Trustee argues that Dundon made a promise to inject $250 million
into ESMG through tranches, which started at $70 million.470 Trustee alleges that ESMG relied to
its detriment on Dundon’s promise by foregoing additional investment inquiries after Dundon’s
involvement. As a result, Trustee claims injustice can only be avoided by enforcing Dundon’s
promise. On the other hand, Dundon asserts that Trustee’s promissory estoppel claim fails for three
reasons: (1) the alleged promise was too indefinite; (2) Trustee improperly seeks the benefit of the
bargain damages; and (3) the Trustee failed to identify or quantify alternative funding that was lost
as a result of Dundon’s acts.
To prevail on a promissory estoppel claim, a plaintiff must prove (1) the existence of a
promise; (2) that the promisor could foresee would be relied on by the promisee; and (3) the
promisee substantially relied on the promise to his detriment. G.D. Holdings, Inc. v. H.D.H. Land
& Timber, L.P., 407 S.W.3d 856, 861 (Tex. App.—Tyler 2013, no pet.) (citing English v. Fischer,
660 S.W.2d 521, 524 (Tex. 1983)). Additionally, “a plaintiff must show that injustice can be
avoided only by enforcing the promise.” Vinewood Cap., L.L.C. v. Dar al-Maal al-Islami Tr.,
No. 4:06-CV-316-Y, 2007 WL 2791876, at *31 (N.D. Tex. Sept. 26, 2007).
Promissory estoppel does not create liability for a noncontracting party where liability does
not otherwise exist. In re Weekley Homes, L.P., 180 S.W.3d 127, 134 (Tex. 2005) (finding a
promise to invest, without more, is not sufficient to maintain a claim for promissory estoppel).
Rather, the doctrine “prevents a party from insisting upon his strict legal rights when it would be
unjust to allow him to enforce them.” Id. (quoting Wheeler v. White, 398 S.W.2d 93, 96 (Tex.
470 ECF No. 300 at 12.
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1965)). Thus, “a party that has failed to prove a legally sufficient contract, but has acted in reliance
upon a promise to his detriment, may be compensated for his foreseeable, definite, and substantial
reliance.” Lucas v. Ryan, No. 02-18-00053-CV, 2019 WL 2635561, at *51 (Tex. App.—Fort
Worth June 27, 2019, no pet.) (mem. op.); Frost Crushed Stone Co. v. Odell Geer Const. Co.,
110 S.W.3d 41, 44 (Tex. App.—Waco 2002, no pet.) (explaining promissory estoppel is “an
available cause of action to a promisee who relied to his detriment on an otherwise unenforceable
promise”). Nevertheless, “a promissory estoppel claim may apply despite a contract between the
parties, if a promise was made outside the contract.” Raybourne & Dean Consulting, Ltd. v.
Metrica, Inc., No. SA-14-CA-918, 2016 WL 7497587, at *45 (W.D. Tex. Feb. 19, 2016). Thus,
while the Court found an enforceable oral contract for $70 million, that does not prevent the Court
from considering Trustee’s promissory estoppel claim for promises not covered by the parties’ oral
agreement—i.e., capital investment beyond $70 million.
For the first element of promissory estoppel, Texas courts require the claim be “based on
an actual promise.” Eaton v. Mazanec Constr. Co., Nos. 10-21-00107-CV, 10-21-00111-CV,
2022 WL 7211332, at *19 (Tex. App.—Waco Oct. 12, 2022, no pet.) (mem. op.). “A promise is a
manifestation of intention to act or refrain from acting in a specified way, so made as to justify a
promisee in understanding that a commitment471 has been made.” Restatement (Second) of
Contracts § 2 (A.L.I. 1981). “The asserted promise must be sufficiently specific and definite so
that it would be reasonable and justified for the promisee to rely on it as a commitment to future
action.” Eaton, 2022 WL 7211332, at *19. Additionally, the promise “must be more than mere
471 Dundon repeatedly differentiated between a commitment and an obligation or promise, intimating that a
commitment was not as formal or binding as a promise. See T-0860 at 1 (“I think there is a difference between
commitments and funding.”). The Court found these semantics woefully unavailing. Black’s Law Dictionary defines
commitment as “agreement to do something in the future, esp. to assume a financial obligation” and a “promise to do
something or to behave in a particular way.” Commitment, BLACK ’ S L AW D ICTIONARY (12th ed. 2024). Thus, the two
words are considered synonyms for one another.
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speculation concerning future events, a statement of hope, or an expression of opinion, expectation,
or assumption.” Jack in the Box Inc. v. San Tex Rests., Inc., No. SA-20-CV-00328, 2021 WL
148058, at *30 (W.D. Tex. 2021).
Here, Trustee alleges that Dundon made a promise to invest $250 million in ESMG which
included Dundon’s promise to cover the capital needs of ESMG over the course of five years and
until the league became cash flow positive. The evidence unequivocally shows that Dundon made
public statements through press releases and media interviews, asserting that he was “committed”
to investing $250 million, which he avowed would buy the League five years.472 There is evidence
that these declarations were potentially shared with other investors.473 Additionally, Dundon made
these assertions to employees of ESMG, including Ms. Hanson while she drafted ESMG’s press
release 	announcing 	Dundon’s 	investment.474 Further, 	Ebersol 	testified 	that 	Dundon 	gave
reassurances that he was investing $250 million. Dundon reflected this sentiment at trial, testifying
that he “had the money” and “was committed.”475
Nevertheless, Dundon alleges his promise was too vague and indefinite to sustain a claim
for promissory estoppel. To support his position, Dundon explained at trial that he did not wish to
delve into the conditions of his $250 million investment in the press, which is why he claims some
news articles are devoid of reference to conditions, reservations, or details.476 In one interview,
Dundon publicly stated, “So long as we get the rating and the demand then obviously [we will]
472 T-0380 at 1; see also T-0860 at 1 (“[M]y investment will keep this thing years and years to come.”).
473 Id. at 4 (revealing Dundon reported to interviewers that he told interested investors that the league didn’t “need any
capital”).
474 ECF No. 407 at 55–58. Dundon also spoke to Kelly Vugrincic and other executives in charge of the accounts
payable for ESMG. (ECF No. 354 at 7–8). Vugrincic testified that she did not recall exactly what Dundon told the
team, but that Dundon never discussed the details about his investment. Id. Additionally, Vugrincic explained that she
understood that it was common practice for press release to announce an investment commitment even if the investor
did not necessarily invest the entire amount up front. Id.
475 ECF No. 343 at 210.
476 Id. at 209.
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keep putting in capital . . . .”477 From Dundon’s perspective, he would only invest $250 million
once various conditions were met, and the parties clearly did not reach an agreement on those
conditions. Notably, there is no evidence that Dundon made his promise to invest $250 million
directly to any decision makers of ESMG—stockholders or board directors—besides Ebersol, who
the Court finds not credible.
The Court agrees with Dundon—the promise is too indefinite to show justifiable reliance
and does not support promissory estoppel.478 There is no record that ESMG’s stockholders or
directors ever heard directly from Dundon that he was investing $250 million over a five-year
period. ESMG’s corporate lawyer did not recall a total investment figure of $250 million despite
attending ESMG’s board meeting and drafting ESMG’s board and stockholder resolutions.479 Both
resolutions were signed after Dundon began publicly blasting word of a $250 million investment
in connection with his takeover of ESMG, revealing that the board members and shareholders of
ESMG who voted to approve a contract for $70 million either did not hear Dundon’s indirect
promise or did not rely on it. Even after it became clear to ESMG that $70 million would not cover
the league’s rapid cash burn, ESMG’s shareholders did not demand Dundon inject the $250 million
to sustain operations. While the Court believes that Ebersol and Dundon discussed the possibility
of a total investment of $250 million, it does not appear that such discussions reached other
decision makers of ESMG and merely represented an intent to negotiate about additional funding
tranches in the future.
477 T-0381 at 2.
478 Dundon also made allegations, for the first time during trial, that his public statements to invest $250 million were
part of a marketing scheme concocted by Ebersol. The Court finds Dundon’s allegation not credible. Prior to trial,
Dundon did not assert that he circulated talk of a $250 million investment at Ebersol’s direction as part of a marketing
scheme and there was no evidence to support his assertion.
479 FOF ¶ 109.
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Moreover, the record reflects that Ebersol, Dundon, and Zutter (who participated in the
latter half of the investment negotiations) are sophisticated businessmen with significant
experience negotiating business deals, often for millions of dollars. These parties were also
represented by competent legal counsel through their respective entities. ESMG could not have
justifiably relied on a promise of a $250 million investment made in an arm’s-length transaction
that occurred in roughly two days through telephone conversations when the commitment was not
reduced to writing or, at the very least, a resolution of ESMG’s board after Dundon began
publicizing his investment. “Similarly, an anticipated investment would be presumed by any
reasonable person to be contingent on future events.” Est. of Crescent Mach. v. Roberson (In re
Crescent Mach.), No. 03-04024, 2003 Bankr. LEXIS 546, at *26 (Bankr. N.D. Tex. 2003). “A
party to an arm’s-length transaction must exercise reasonable diligence in protecting his own
interest, and a failure to do so is not excused by mere confidence in the honesty and integrity of
the other party.” Comiskey v. FH Partners, LLC, 373 S.W.3d 620, 635 (Tex. App.—Houston
[14th Dist.] 2012, pet. denied). Trustee provides few arguments regarding ESMG’s reliance or the
reasonableness thereof. Instead, Trustee relies on the inference that because promises were made
publicly and Dundon, as the board director, declined funds from additional investors, ESMG must
have relied on Dundon’s promise to invest $250 million. This scenario, however, implicates
Dundon’s duties as a board member and is better characterized as a breach of his fiduciary duty,
not a claim for promissory estoppel.
VIII. 	Common Law Fraud; Fraudulent Misrepresentation; Constructive Fraud;
Fraudulent Non-disclosure
As another alternative argument to breach of contract, Trustee brought claims for common
law fraud, fraudulent non-disclosure, and constructive fraud. Trustee asserts that Dundon made
false statements to Ebersol regarding Dundon’s funding commitment and the longevity of AAF as
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a result of such funding. Additionally, Trustee claims Dundon had a duty to disclose the conditions
connected to a $250 million investment, and his failure to do so created a false impression in
ESMG that Dundon was investing more than he intended to. On the other hand, Dundon asserts
that Trustee cannot prove that ESMG’s reliance was actual or justified.
This district categorizes fraud claims into two similar but distinct classes:
Under Texas law, there are two types of common-law fraud: (1) simple fraud, also
known as fraudulent misrepresentation, and (2) fraudulent inducement,480 which is
when someone allegedly induces another to enter into a contract by using false
representations. These are separate causes of action, but they share the same
elements, which are: (1) defendant made a material misrepresentation that (2) was
false, (3) and was either known to be false when made or was asserted without
knowledge of its truth, (4) the defendant intended the representation to be acted
upon, (5) it was relied upon, and (6) it caused injury.
Holland v. CryptoZoo Inc., No. 1:23-CV-00110-ADA, 2025 WL 2493064, at *7 (W.D. Tex.
Aug. 25, 2025) (quoting Bates Energy Oil & Gas v. Complete Oilfield Servs., 361 F. Supp. 3d
633, 660 (W.D. Tex. 2019)). The elements for fraud by nondisclosure are similar to those above
but require that the defendant “deliberately failed to disclose material facts” even though the
defendant “had a duty to disclose such facts to the plaintiff.” CBE Grp., Inc. v. Lexington L. Firm,
993 F.3d 346, 353 (5th Cir. 2021). Lastly, constructive fraud is “the breach of a legal or equitable
duty that the law declares fraudulent because it violates a fiduciary relationship.” Jacked Up, LLC
v. Sara Lee Corp., 854 F.3d 797, 810 (5th Cir. 2017) (quoting Hubbard v. Shankle, 138 S.W.3d
474, 483 (Tex. App.—Fort Worth 2004, pet. denied)) (“It does not require an intent to defraud.”).
For all four causes of action, a plaintiff is required to show justifiable reliance. McLane
Champions, LLC v. Hous. Baseball Partners LLC, 671 S.W.3d 907, 926 (Tex. 2023) (Blacklock,
J., dissenting) (assessing justifiable reliance for fraud, fraud by nondisclosure, and negligent
480 Trustee brought a claim for fraudulent inducement in a separate count. As such, the Court will address fraudulent
inducement below.
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misrepresentation because the majority declined to do so in light of its holding); see also Vulcan
Cap. Corp. v. Miller Energy Res., Inc., No. 3:14-CV-3283-B, 2015 WL 293839, at *24 (N.D. Tex.
Jan. 22, 2015) (requiring justifiable reliance to sustain a constructive fraud claim).
As the Court noted above, ESMG could not have justifiably relied on Dundon’s oral
representations or public comments referring to an investment of $250 million. In the context of a
$250 million dollar arm’s-length transaction among sophisticated parties for the purchase of a
professional sports league, reliance on any representation or omission by the opposing party is not
justifiable. See McLane Champions, LLC, 671 S.W.3d at 926 (Blacklock, J., dissenting) (applying
well-settled principles of justifiable reliance). Accordingly, Trustee cannot recover on his common
law fraud, fraudulent misrepresentation, constructive fraud, or fraudulent non-disclosure claims.
IX. 	Fraudulent Inducement
Trustee’s next alternative contract theory is fraudulent inducement. Rather than pointing to
Dundon’s public statements, Trustee relies on Dundon’s alleged reassurances made to Ebersol
when the parties drafted the Term Sheet. Like the above claims, Dundon argues that ESMG lacked
justifiable reliance on any representation Dundon made.
“Fraudulent inducement is a ‘species of common-law fraud’ that ‘arises only in the context
of a contract.’” IBM v. Lufkin Indus., LLC, 573 S.W.3d 224, 228 (Tex. 2019). Thus, the elements
for fraudulent inducement are:
(1) the defendant made a material misrepresentation; (2) the defendant knew at the
time that the representation was false or lacked knowledge of its truth; (3) the
defendant intended that the plaintiff should rely or act on the misrepresentation; (4)
the plaintiff relied on the misrepresentation; and (5) the plaintiff’s reliance on the
misrepresentation caused injury.
Id. The misrepresentation for fraudulent inducement occurs when the defendant makes a promise
to perform in the future without the intent to do so. Id. When the plaintiff relies on the defendant’s
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promise, the plaintiff is induced to agree to a contract the plaintiff otherwise would not agree to in
the absence of the false promise. Id. Such reliance must also be justified to succeed on a fraudulent
inducement claim. Harrison v. Meritz Fire & Marine Ins. Co., No. 14-18-00336-CV, 2020 WL
2070660, at *7 (Tex. App.—Houston [14th Dist.] Apr. 30, 2020, pet. denied) (mem. op.) (requiring
a plaintiff show justifiable reliance).
Because the Court reached a determination on justifiable reliance under the circumstances
of this case, the Court need not determine whether the other elements of fraudulent inducement
are present. Again, any reliance ESMG had on Dundon’s representation that he would invest
$250 million was not justified. Accordingly, Trustee cannot recover on his fraudulent inducement
claim.
X. 	Negligent Representation
Trustee’s final alternative contract argument is that Dundon negligently misrepresented that
he intended to unconditionally invest a total of $250 million into AAF. Dundon again asserts the
same defense that he asserted against Trustee’s fraud claims—that ESMG lacked justifiable
reliance.481
To prevail on a cause of action for negligent misrepresentation, a plaintiff must prove,
among other things, that reliance was justified. JPMorgan Chase Bank, N.A. v. Orca Assets G.P.,
L.L.C., 546 S.W.3d 648, 653–54 (Tex. 2018). For the same reasons the Court finds ESMG lacked
justifiable reliance to succeed on its fraud claims, the Court also finds that ESMG lacked justifiable
reliance sufficient for Trustee to recover on his negligent misrepresentation claim.
481 Dundon also raised defenses about whether the Supreme Court of Texas recognizes a claim for negligent
misrepresentation. (ECF No. 300 at 40). Because the Court finds this claim fails for other reasons, the Court declines
to reach the merits of Dundon’s other defenses.
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XI. 	Unjust Enrichment
Trustee claims Defendants were unjustly enriched. There is a question of whether Texas or
Delaware law applies to the unjust enrichment claim. The Court implied that Texas law applied to
the unjust enrichment claim in Order Granting In Part, Denying In Part Defendants’ Motion to
Dismiss.482 But in Order Denying Defendant Zutter’s Motion for Summary Judgment, the Court
stated Delaware law applied to the claim, wrongly citing the fiduciary duty discussion in the
Court’s prior order on the motion to dismiss.483 The pleadings reflect a confusion on the applicable
law as well. In the Joint Proposed Pre-Trial Order, both parties agreed “[t]he law that applies to
unjust enrichment claims is determined by the object of the unjust enrichment.”484 But in the same
document, Trustee claimed Delaware law applies to the unjust enrichment claim without
identifying the object of the unjust enrichment.485 In Trustee’s Amended Proposed Findings of
Fact and Conclusions of Law, Trustee again claims Delaware law applies with no explanation, but
he also points to his legal arguments on unjust enrichment in earlier pleadings where he used Texas
law.486 In Defendants’ Amended Proposed Findings of Fact and Conclusions of Law, Defendants
now also apply Delaware law but provide no explanation as to why.487 The Court will therefore
first discuss whether Texas or Delaware law applies and then will examine whether Defendants
were unjustly enriched under the applicable law.
482 ECF No. 54 at 56.
483 ECF No. 281 at 12.
484 ECF No. 300 ¶ 512.
485 Id. ¶ 569.
486 ECF No. 427 ¶¶ 549, 553 (“The parties have already briefed the legal issues related to unjust enrichment, and the
Trustee’s prior briefing can be found at ECF No. 30 . . . .”).
487 ECF No. 428 ¶ 391
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A. 	Texas law applies to the unjust enrichment claim.
In determining the applicable law, the Court must first determine which choice of law rules
govern. A federal court sitting in diversity jurisdiction must apply the choice of law rules of the
forum state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941). This
Court, however, has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157,
1334(b). Therefore, the Court has federal question jurisdiction, not diversity jurisdiction. Neither
the Supreme Court nor the Fifth Circuit has addressed the question of what choice of law rules
bankruptcy courts should apply in such cases. Woods-Tucker Leasing Corp. of Georgia v.
Hutcheson-Ingram Dev. Co., 642 F.2d 744, 748 (5th Cir. 1981); Reed v. Carecentric Nat'l, LLC
(In re Soporex, Inc.), 446 B.R. 750, 761 (Bankr. N.D. Tex. 2011). Bankruptcy courts, however,
apply forum state choice-of-law rules when resolving state law issues that do not implicate federal
policy. See ASARCO LLC v. Americas Min. Corp., 382 B.R. 49, 60-61 (S.D. Tex. 2007)
(compiling cases). Here, the issue is whether Defendants were unjustly enriched. Unjust
enrichment is a state law cause of action and does not implicate federal policy. Wilmington
Savings Fund Soc’y v. iHeartCommunications, Inc. (In re iHeartMedia, Inc.), 597 B.R. 339,
350, 359 (Bankr. S.D. Tex. 2019). Therefore, the Court will apply Texas choice of law rules.
Based on Texas choice of law rules, Texas law applies to Trustee’s unjust enrichment
claim. In resolving choice of law issues, Texas courts apply the “most significant relationship” test
outlined in sections 6 and 145 of the Restatement (Second) Conflict of Laws. Grant Thornton
LLP v. Suntrust Bank, 133 S.W.3d 342, 358 (Tex. App.—Dallas 2004, pet. denied). But “the
Restatement contains sections for specific situations, and when these are applicable, the courts are
to apply them to resolve the conflict.” Id. Section 221 provides five factors to be considered when
determining choice of law issues for restitution:
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(a) the place where a relationship between the parties was centered . . . , (b) the
place where the benefit or enrichment was received, (c) the place where the act
conferring the benefit or enrichment was done, (d) the domicil residence,
nationality, place of incorporation and place of business of the parties, and (e) the
place where a physical thing, such as land or a chattel, which was substantially
related to the enrichment, was situated at the time of the enrichment.
Restatement (Second) of Conflict of Laws § 221 (A.L.I. 1971). Each factor shall be “evaluated
according to their relative importance with respect to the particular issue.” Id.
The factors favor Texas. The relationship between the parties was centered in Texas. DCP
has its principal place of business in Texas.488 Following the agreement between DCP and ESMG,
DCP representatives and AAF management held a series of key all-hands meetings in Texas for
several days.489 The alleged benefit or enrichment would be received primarily in Texas, as DCP
is headquartered in Texas, and Dundon is a Texas resident.490 While both DCP and ESMG are
incorporated in Delaware, Delaware otherwise has little relation to the unjust enrichment claim.
Therefore, the Court will apply Texas law, not Delaware law.
B. 	Defendants were not unjustly enriched under Texas law.
Defendants were not unjustly enriched. “The doctrine of unjust enrichment belongs to the
measure of damages known as quasi-contract or restitution.” First Union Nat. Bank v. Richmont
Cap. Partners I, L.P., 168 S.W.3d 917, 931 (Tex. App.—Dallas 2005, no pet.). Unjust enrichment
is an equitable doctrine. Houle v. Casillas, 594 S.W.3d 524, 555 (Tex. App.—El Paso 2019, no
pet.). It “applies to disputes where there is no actual contract and ‘characterizes the result of a
failure to make restitution of benefits either wrongfully or passively received under circumstances
that give rise to an implied or quasi-contractual obligation to repay.’” Picard v. Chase Home Fin.,
LLC, No. 3:11-CV-439, 2011 WL 5333060, at *4 (N.D. Tex. Nov. 3, 2011) (quoting Walker v.
488 FOF ¶ 6.
489 FOF ¶ 121.
490 FOF ¶¶ 78, 80.
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Cotter Props., Inc., 181 S.W.3d 895, 900 (Tex. App.—Dallas 2006, no pet.)). In other words, one
is unjustly enriched “when the person sought to be charged has wrongfully secured a benefit or
has passively received one which it would be unconscionable to retain.” Middaugh v. InterBank,
528 F. Supp. 3d 509, 551 (N.D. Tex. 2021) (citing Villareal v. Grant Geophysical, Inc.,
136 S.W.3d 265, 270 (Tex. App.—San Antonio 2004, pet. denied)). “When a valid, express
contract covers the subject matter of the parties’ dispute, there can generally be no recovery under
this theory, as allowing such recovery would be inconsistent with the parties’ express agreement.”
Houle, 594 S.W.3d at 554. “However, when a person has been unjustly enriched by the receipt of
benefits in a manner not governed by contract, the law implies a contractual obligation upon that
person to restore the benefits to the plaintiff.” Id. at 555.
The doctrine of unjust enrichment does not apply to this case. Trustee claims Defendants
were unjustly enriched by:
(1) not having to pay the required remaining amount of the $250 million
commitment; (2) the amounts that DCP received as payment from AAF for services
that benefitted DCP (and through it, Dundon and Zutter), in particular the DCP
“transaction costs” and the payments to PwC and Bracewell . . . ; and (3) the
advertising 	use 	to 	benefit 	DCP, 	Dundon, 	and 	Zutter’s 	other 	entities 	and
relationships . . . .491
First, a valid contract covers the subject matter of how much DCP was obligated to pay ESMG.
The Court found DCP was obligated to pay $70 million based on the oral contract, not
$250 million.492 Therefore, Trustee’s first claim fails. Second, Trustee fails to provide evidence
regarding what the $280,810 in “transaction costs” was for or whether it was a proper or improper
payment. The Court cannot find that a payment was an unjust enrichment with such a lack of
information. Regarding the payments to PwC and Bracewell, Trustee appears to claim DCP’s
491 ECF No. 427 ¶ 554.
492 See supra Section II.B.
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$70 million investment was wrongfully applied in paying PwC and Bracewell for services
rendered for the benefit of DCP. Based on Trustee’s theory, Defendants were unjustly enriched
because part of the $69,719,190 DCP invested in ESMG was wrongfully used and therefore does
not count towards the investment amount. If Trustee is correct, DCP invested less than
$69,719,190 of the promised $70 million in the contract. The contract covers this subject matter.
Trustee is essentially making a breach of contract claim. Therefore, Trustee’s claim fails.
Third, Trustee claims Defendants and their associates were unjustly enriched with free or
discounted advertising. Zutter was not enriched from the advertising arrangement between Dundon
and third parties.493 DCP, Dundon, and his third-party associates were enriched from free or
discounted advertising.494 But it would not be unjust for DCP, Dundon, and the third parties to
retain the advertising benefit.
According to Mr. Robert Whitsitt, there are generally four steps or categories when selling
advertising spots for sports broadcasting.495 First, and most preferably, advertisement slots are sold
for cash.496 Second, advertisements slots are sold at discounted rates.497 Third, advertising slots
are bartered for goods the advertised company can provide.498 Fourth, generally as a last resort,
advertisement slots are given away for free to garner interest in future paid advertising and to give
the broadcasting a “quality look.”499 Importantly, advertising is perishable. If you do not do any
of these four things before a broadcast, you have lost a revenue opportunity.500 The vast majority
of advertising inventory is sold over the 12 months leading up to the first game.501 Once the season
493 FOF ¶ 225.
494 FOF ¶ 226.
495 Trial Tr. 131:9–132:20, ECF No. 397.
496 Id. at 136.
497 Id.
498 Id.
499 Id.
500 Id.
501 Id. at 138.
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starts, it is difficult and rare to sell advertising for cash.502 This is primarily because companies
plan ahead and put advertising budgets together in advance.503
AAF had sold little of its advertising inventory by the start of its inaugural season, which
was before Dundon joined ESMG.504 Over half of what AAF had sold was a barter arrangement.505
Dundon states that of what AAF had sold, they had few “big brands.”506 Dundon argues his
advertising strategy was to associate big brands with AAF by offering them advertising slots,
which would, in turn, create buzz around AAF and increase its prestige due to its association with
major brands.507 Dundon claims that not only would this strategy give AAF brand recognition, but
it would also open doors to future advertising deals. He states:
I can tell you that to get someone involved with your brand committed to put their
stuff on your brand, companies like Morgan Stanley, is a benefit because it makes
other people take you more seriously, and it gets the people who make the decision
to spend money to think about you when they have all the other choices and all the
other networks and all the other media, and they get to think about that stuff, and
now they’re thinking about you. That lead that I provided to our people was in—
I’m going to say is impossible. I don’t know many other people in the world who
could have got those eight or ten great brand companies to participate for a week
or two with their brand with our brand and open up the possibility for a future
investment.508
In Mr. Whitsitt’s opinion, Dundon’s actions benefitted AAF. He reasons,
When you’re trying to sell advertising for a game that’s coming up in a few days,
it’s very, very difficult to get people to pay cash. . . . And at that time of the year, . . .
if you can even get an advertiser to put a spot in, you’ve done a pretty good job.509
Further, in a subsequent sales meeting, some of the no-charge advertisers were considering a
potential barter arrangement.510 On the other hand, Trustee provides no dollar estimate as to the
502 Id.
503 Id. at 138:21–139:5.
504 Id. at 141:21–142:9.
505 Id. at 142:4–9.
506 Trial Tr. 47:12–20, ECF No. 349.
507 FOF ¶ 226.
508 Trial Tr. 50, ECF No. 349.
509 Trial Tr. 141:4–10, ECF No. 397.
510 Id. at 141:10–20.
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value of the advertisement slots.511 Trustee does not provide adequate evidence as to what the
advertisements would have sold for, if they could have been sold at all.
With the current evidence, the Court cannot find that DCP, Dundon, or his associates were
unjustly enriched from the free or discounted advertising. AAF had failed to sell the vast majority
of its advertising inventory before the season began. It is difficult to sell advertising slots after the
start of a season. Under the circumstances, Trustee failed to prove that Dundon’s acts unjustly
enriched Dundon or DCP. Therefore, unjust enrichment does not apply here.512
C. Even if Delaware law applied, Defendants were not unjustly enriched.
Even if Delaware law applied, Defendants were not unjustly enriched. In Delaware,
“[u]njust enrichment is the unjust retention of a benefit to the loss of another, or the retention of
money or property of another against the fundamental principles of justice or equity and good
conscience.” Nemec v. Shrader, 991 A.2d 1120, 1130 (Del. 2010) (en banc) (citations omitted).
Unjust enrichment requires: “(1) an enrichment, (2) an impoverishment, (3) a relation between the
enrichment and impoverishment, and (4) the absence of justification, and (5) the absence of a
remedy provided by law.” Id. “A claim for unjust enrichment is not available if there is a contract
that governs the relationship between parties that gives rise to the unjust enrichment claim.”
Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872, 891 (Del. Ch. 2009). Put another way, when
“the contract is the measure of plaintiff’s rights, there can be no recovery under an unjust
enrichment theory independent of it.” Wood v. Coastal States Gas Corp., 401 A.2d 932, 942 (Del.
1979).
511 FOF ¶ 236.
512 The unjust enrichment discussion here has no bearing on the Court’s duty of loyalty analysis. A breach of a fiduciary
duty does not necessarily result in unjust enrichment. See discussion supra Part VI.
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First, Trustee claims Defendants were unjustly enriched by “not having to pay the required
remaining amount of the $250 million commitment.”513 This claim fails because the oral contract
governed how much DCP or DDFSP had to pay ESMG, and the Court found they did not have to
pay ESMG $250 million.514 Second, Trustee claims Defendants were unjustly enriched by “the
amounts that DCP received as payment from AAF for services that benefitted DCP (and through
it, Dundon and Zutter), in particular the DCP “transaction costs” and the payments to PwC and
Bracewell”515 Regarding the transaction costs, the Court lacks information to determine whether
the $280,810 in transaction costs were proper or improper. Regarding the payments to PwC and
Bracewell, Trustee is essentially making a breach of contract claim. Based on Trustee’s theory,
Defendants were unjustly enriched because a portion of the $69,719,190 DCP invested in ESMG
was wrongfully used in paying PwC and Bracewell and therefore does not count towards the
investment amount. If Trustee is correct, DCP invested less than $69,719,190 of the promised
$70 million in the contract. The contract covers this subject matter. Therefore, Trustee’s second
claim fails.
Third, Trustee claims Defendants were unjustly enriched by “the advertising use to benefit
DCP, Dundon, and Zutter’s other entities and relationships.”516 Zutter was not enriched by the free
or discounted advertising.517 DCP, Dundon, and his affiliates were enriched by the advertising.518
But, under the circumstances, Dundon’s actions may have benefitted AAF. The reasoning is the
same as above. The vast majority of advertising inventory is sold over the 12 months leading up
513 ECF No. 427 ¶ 554.
514 See supra Section II.B.
515 Id.
516 ECF No. 427 ¶ 554.
517 FOF ¶ 225.
518 FOF ¶ 226.
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to the first game.519 Once the season starts, it is difficult and rare to sell advertising for cash.520
AAF had sold little of its advertising inventory by the start of its inaugural season, which was
before Dundon joined AAF.521 Dundon states that of what AAF had sold, they had few “big
brands.”522 Dundon argues that his advertising strategy was to associate big brands with AAF by
offering them advertising slots, which would, in turn, create buzz around AAF and increase its
prestige due to its association with major brands.523 As discussed, in Mr. Whitsitt’s opinion,
Dundon’s actions benefited AAF. He reasons,
When you’re trying to sell advertising for a game that’s coming up in a few days,
it’s very, very difficult to get people to pay cash. . . . And at that time of the year, . . .
if you can even get an advertiser to put a spot in, you’ve done a pretty good job.524
Further, in a subsequent sales meeting, some of the no-charge advertisers were considering a
potential barter arrangement.525 On the other hand, Trustee does not provide adequate evidence as
to what the advertisements would have sold for, if they could have been sold at all. Therefore, the
Court finds Defendants were not unjustly enriched.
XII. 	Disallowance of Claims
Dundon and DCP each filed proof of claims in Legendary Field Exhibitions, LLC,
Bankruptcy Case No. 19-50900-cag. DDFSP did not file a proof of claim.
DCP filed Claim #187-1 in an unspecified amount as an unsecured nonpriority claim.
Exhibit “A” to the Claim #187-1 states that Dundon asserts a claim “arising from its indemnity
obligations and from any other harm or damages suffered by Dundon in connection with his
519 FOF ¶ 232.
520 Id.
521 Trial Tr. 141:21–142:9, ECF No. 349.
522 Id. at 47:12–20.
523 FOF ¶ 226.
524 Trial Tr. 141:4–10, ECF No. 397.
525 Id. at 141:10–20.
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relationship to the debtor herein.”526 In Exhibit “A” to the proof of claim, the $70 million paid to
ESMG is described as either commitment, rescue capital, cash infusion, and in paragraph 12 of
Exhibit “A”, a “$70,000,000 investment.” Nowhere in the proof of claim does the claimant assert
a loan.
Dundon filed proof of claim #188-1 in an unspecified amount as an unsecured nonpriority
claim. Exhibit “A” to Claim #187-1 states that Dundon asserts a claim “arising from its indemnity
obligations and from any other harm or damages suffered by Dundon in connection with his
relationship to the debtor herein.” In Exhibit “A” to the proof of claim, the $70 million paid to
ESMG is described as either commitment, rescue capital, cash infusion, and in paragraph 12 of
Exhibit “A,” a “$70,000,000 investment.” Nowhere in the proof of claim does the claimant assert
a loan. Dundon, through DDFSP, invested nearly $70 million in ESMG, and all the money was
spent on ESMG and its related entities’ operations, but for money that was used to pay PwC to
examine if a chapter 11 case was a viable option, and money that Dundon and/or Zutter caused to
be paid to Bracewell as bankruptcy counsel.
“Sections 501 and 502 of the Bankruptcy Code govern the substantive basis for allowance
of a claim, and Federal Rule of Bankruptcy Procedure Rule 3001 governs the procedure by which
the Court determines whether a filed Proof of Claim is allowed.” In re Ali, No. 13-50724,
2015 WL 4611343, at *30 (Bankr. W.D. Tex. July 23, 2015) (Gargotta, J.).
Objections made in adversary proceedings are expressly permitted by Federal Rule of
Bankruptcy Procedure 3007(b). Fed. R. Bankr. P. 3007(b) (“In objecting to a claim, a party in
interest must not include a demand for a type of relief specified in Rule 7001 but may include the
objection in an adversary proceeding.”).
526 Case No. 19-50900, Claim #187-1, Ex. A.
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The allegations for Trustee’s disallowance of claims are contained in paragraph 139 of the
First Amended Complaint:
On or about June 24, 2019, DCP filed a Proof of Claim, No. 187 (“DCP Claim”) in
the core bankruptcy proceeding (Case No. 19-50900). The DCP Claim alleges that
unnamed AAF executives allegedly misrepresented and/or omitted material facts
to Dundon and “misrepresented to the public, employees, and players the details of
DCP’s financial commitment to the League....” DCP asserts a claim against
Debtors’ Estate in the amount of $70 million. On the same day Dundon filed a Proof
of Claim, No. 188 (“Dundon Claim”) in the core bankruptcy proceeding (Case No.
19-50900). The Dundon Claim also asserts a claim against Debtors’ Estate in the
amount of $70 million on identical or substantially the same grounds as the DCP
Claim.527
In his Original Complaint, Trustee alleged that the Dundon and DCP claims should be
disallowed to the extent the claims are “voidable under section 544 or 547 of the Bankruptcy
Code.”528 The Court dismissed Trustee’s claims under 11 U.S.C. §§ 544 and 547 against DCP
and Dundon in November 2023.529 Trustee did not attempt to reassert those claims in the First
Amended Complaint.530 Because Trustee has no claim that any transfers are voidable under
11 U.S.C. §§ 544 or 547 against Dundon or DCP, he cannot claim DCP or Dundon’s claims
should be disallowed under 11 U.S.C. § 502(d).531 Trustee’s request under § 502(d) for
disallowance is denied.
Further, to the extent that Trustee alleges that DCP and Dundon’s proof of claims are
incorrectly based on Ebersol’s alleged omissions or misrepresentations, the objection is denied.
As detailed herein, the Court made specific findings of fact that Ebersol made misrepresentations
527 ECF No. 56 ¶ 139.
528 Id. at ¶ 219.
529 ECF No. 54 at 34–36.
530 ECF No. 56 at 53 (indicating the causes of action were removed pursuant to the Court’s order).
531 Section 502(d) states:
Notwithstanding subsections (a) and (b) of this section, the court shall disallow any claim of any
entity from which property is recoverable under section 542, 543, 550, or 553 of this title or that is
a transferee of a transfer avoidable under section 522(f), 522(h), 544, 545, 547, 548, 549, or 724(a)
of this title, unless such entity or transferee has paid the amount, or turned over any such property,
for which such entity or transferee is liable under section 522(i), 542, 543, 550, or 553 of this title.
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and omissions regarding the financial condition of AAF, its unpaid vendor bills, and the status
of its accounts payable. As such, Dundon and DCP had a basis in fact to assert that the
$70 million paid to ESMG was premised on or in part because of Ebersol’s erroneous statements.
Defendants’ claims are deemed allowed to the extent the claims are not objected to, and
the proofs of claim are prima facie evidence of the claims’ validity and amounts. 11 U.S.C.
§ 502(a); Fed. R. Bankr. P. 3001(f). Trustee bears the initial burden to present evidence to
overcome the claims’ validity. In re 1701 Commerce, LLC, 511 B.R. 812, 822 (N.D. Tex. Bankr.
2014). To put a claim at issue, Trustee must identify the specific bases for its claim objections.
Local R. 3007-1(b) (“All Objections to claims shall specifically set forth all bases for the
objection. General denials regarding the accuracy of the claim without specific contentions
regarding the disputed items may result in the Court denying the Objection.”).
In the Pre-Trial Order, Trustee for the first time asserted disallowance under 11 U.S.C.
§ 502(a).532 DCP and Dundon objected to Trustee’s attempt to assert a new basis for
disallowance for the first time in the Pre-Trial Order.533
The Joint Pre-Trial Order states:
The Trustee objects to the DCP Claim and Dundon Claim and therefore DCP and
Dundon must demonstrate at trial the basis for and amount of any claim to be
allowed. For instance, the Dundon Claim asserts a claim for indemnity but fails
to elaborate on the basis for such claim (by description or documentary evidence).
Dundon asserts no counterclaims against Plaintiffs and alleges neither indemnity
nor offset as an affirmative defense. Similarly, the DCP Claim asserts a claim for
rescission, but fails to support that claim with anything other than conclusory
statements in Exhibit “A” to the DCP Claim.534
Defendants argue that a pretrial order cannot add new claims. That is incorrect. The
532 ECF 300 at 42–43.
533 Id. at 43.
534 ECF No. 300 ¶ 122.
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Supreme Court has held that the final pretrial order supersedes all prior pleadings. See Rockwell
Int’l Corp. v. United States, 549 U.S. 457, 474 (2007) (holding that a final pretrial order
supersedes all prior pleadings and controls the course of action) (citations omitted); Syrie v.
Knoll Int’l, 748 F.2d 304, 308 (5th Cir. 1984) (finding that incorporation of a new claim in a
pretrial order amends the previous pleadings). Therefore, Trustee’s additional allegations as to
his claim objection to Dundon and DCP are proper.
“[T]he burden of persuasion under bankruptcy claims procedure always lies with the
claimant, who must comply with Bankruptcy Rule 3001 by alleging sufficient facts in the proof of
claim to support the proof of claim.” In re GDC Technics, LLC, 643 B.R. 417, 426 (Bankr. W.D.
Tex. 2022) (Gargotta, J.). A proof of claim constitutes prima facie evidence of the claim’s validity
and amount only if the claim complies with the Rules, including Rule 3001. Fed. R. Bankr.
P. 3001(f). Rule 3001(c)(1) requires that “[i]f a claim or an interest in the debtor’s property
securing the claim is based on a writing, the creditor must file a copy with the proof of claim.” Id.,
3001(c)(1). “Although there is an initial presumption of validity that attaches to all claims, claims
asserted by insiders or fiduciaries demand closer scrutiny.” In re Mid-American Waste Sys., Inc.,
284 B.R. 53, 69 (Bankr. D. Del. 2002)). “If the objecting party produces evidence to rebut the
claim, the burden of persuasion shifts back to the claimant to establish the validity and amount of
the claim by a preponderance of the evidence.” GDC Technics, 643 B.R. at 426.
The Court agrees with Trustee that the evidence adduced at trial does not support Dundon’s
assertion that he is entitled to indemnification or recission. There are no counterclaims regarding
indemnification or recission. Dundon further failed to establish any basis for his claimed indemnity
obligation (whether in the Dundon Claim or at trial) and further failed to allege or demonstrate any
harm or damage amount due to “any other harm or damages suffered by him in connection with
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his relationship with the debtor.” The Court notes that Dundon and DDFSP lost their investment
of roughly $70 million; that is not in dispute. Further, as noted in this Memorandum Opinion,
Dundon nor any of his entities ever received stock from ESMG. Therefore, the Court fails to
understand how a stock transaction can be rescinded if it never happened. As such, Dundon’s bald
assertions of indemnification and recission, without more, fail under § 502(a).
In addition, DCP does not have a claim in this case because, as the Court found in
Adversary No. 22-05077, DDFSP, and not DCP, provided the investment of monies to ESMG.535
Therefore, DCP’s proof of claim is disallowed because it provided no funds to ESMG. A claim
should be disallowed to the extent “such claim is unenforceable against the debtor and property of
the debtor, under any agreement or applicable law for a reason other than because such claim is
contingent or unmatured.” 11 U.S.C. § 502(b)(1). The Court finds that both the Dundon and DCP
Claims must be disallowed. The evidence establishes that the claim Dundon and DCP allege for
$70 million is owned, if by anyone, by DDFSP, which has not asserted a claim. Nonetheless, the
Court finds that Dundon has an investment of roughly $70 million in ESMG through DDFSP.
XIII. 	Equitable Subordination
In the Pre-Trial Order, Trustee asserted a new basis for subordination, referring for the
first time to subsection (b) of 11 U.S.C. § 510.536 Trustee previously relied on (and only pleaded
for subordination under) 11 U.S.C. § 510(c). Trustee’s new claim relies on § 510(b) and (c). As
explained herein, the Joint Pre-trial Order supersedes the First Amended Complaint.
Paragraph 126 of the Joint Pre-Trial Order states:
In the event either Dundon or DCP are determined to have an allowed “claim” in
some amount based on a “debt,” those claims must be subordinated under Section
510(b) and (c). Both the Dundon and DCP Claims appear to relate to the purchase
535 See Adv. No. 22-05077, ECF No. 171 at 16 (the uncontradicted evidence shows DDFSP paid ESMG and DDFSP
took the loss, not DCP).
536 ECF No. 300 at 44.
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and sale of a security, must be evaluated accordingly, and, to the extent found to
be so related, must be subordinated to all claims or interests that are senior to or
equal the claim or interests. Moreover, DCP and Dundon both engaged in
inequitable 	and 	fraudulent 	conduct 	towards 	the 	Debtors 	(as 	described 	in
paragraphs 148-373 herein and Plaintiffs’ First Amended Complaint) that resulted
in harm to the Debtors. Under principles of equitable subordination, such claims
should be subordinated for purposes of distribution so that all other creditors or
interest holders receive distributions prior to Dundon or DCP.537
Trustee argues that if the Court further finds, in the alternative, that to the extent Dundon
or DCP has a claim for $70 million, such claim must be mandatorily subordinated because such
claim relates to the rescission of the purchase or sale of a security in ESMG, or for reimbursement
or contribution on account of such a claim. 11 U.S.C. § 510(b).
Trustee 	argues 	that 	Defendants’ 	claims 	are 	subject 	to 	and 	must 	be 	mandatorily
subordinated pursuant to § 510(b), as any such claim necessarily relates to the purchase and sale
of a security (that being ownership of ESMG). Equity holder claims are subordinated in this matter
to prevent the equity holder from getting “the best of both worlds—the right to share in profits if
[the debtor] succeeded and the right to repayment as a creditor . . . if it failed.” In re Am. Hous.
Found., 499 B.R. 517, 539–40 (Bankr. N.D. Tex. 2013) (alteration in original) (quoting
Liquidating Trust Comm. of the Del Biaggio Liquidating Trust v. Freeman (In re Del Biaggio),
No. 12–3065, 2012 WL 5467754, at *6 (Bankr. N.D. Cal. Nov. 8, 2012)).
Although Trustee has asserted a new claim under § 510(b), Trustee has not sufficiently
alleged a basis for subordination under that subsection. Under subsection (b), the claim must
arise from “rescission of a purchase or sale of a security of the debtor or affiliate of the debtor,
for damages arising from the purchase or sale of such a security, or for reimbursement or
contribution allowed under section 502 on account of such a claim.” 11 U.S.C. § 510(b).538 The
537 ECF No. 300.
538 In Seaquest Diving, the court stated:
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Court previously observed “both parties agree that no stock of ESMG was transferred to
DCP,”539 and Trustee does not allege a transfer of stock to support its new claim. As such, it is
difficult to discern how § 510(b) is implicated if there was no purchase or sale of stock.540 The
Court recognizes that Dundon or DDFSP invested roughly $70 million for control of Debtor
(two controlling seats on the ESMG board), but ESMG did not convey or transfer any stock to
Dundon or DDFSP. Without more, Trustee has not demonstrated how § 510(b) applies to
Defendants’ claims. Moreover, Trustee’s vague allegations that paragraphs 148-373 of the Joint
Pre-Trial Order and Plaintiffs’ First Amended Complaint demonstrate a basis for equitable
subordination under § 510(b) are insufficient for the Court to order the extraordinary remedy of
equitable subordination. See In re Rhodium Encore LLC, No. 24-90448, 2025 WL 2501132
at *18 (Bankr. S.D. Tex. Aug. 30, 2025) (noting § 510(b) inapplicable where there is no recission
of stock); In re Think3, Inc., 529 B.R. 147, 206 (Bankr. W.D. Tex. 2015) (finding the complaint
failed to allege with specificity the basis for damages arising out of the recission or sale of stock).
Trustee also argues that Defendants’ claims should be subordinated under 11 U.S.C.
§ 510(c)(1). Section 501(c) states in relevant part that, notwithstanding § 510(a) and (b), a court
may, under the principle of equitable subordination, subordinate for purposes of distribution part
or all an allowed claim.
For purposes of § 510(b), “rescission” is not defined in the bankruptcy code. Black's Law Dictionary
defines the term as “[a] party's unilateral unmaking of a contract for a legally sufficient reason, such
as the other party's material breach, or a judgment rescinding the contract; voidance.” It defines
“legal rescission” as “[r]escission that is effected by the agreement of the parties.” The plain
language of § 510(b) does not distinguish between equitable rescission by a court as a remedy for
securities fraud and legal rescission by the parties as a remedy for irreconcilable differences.
In re Seaquest Diving, LP, 579 F.3d 411, 419 (5th Cir. 2009) (citations omitted) (quoting BLACK’ S L AW
D ICTIONARY 1332 (8th ed. 2004)).
539 Adv. No. 22-05077, ECF No. 171 at 21.
540 But see In re Linn Energy, 936 F.3d 334, 343 (5th Cir. 2019) (stating that the form of the equity interest is irrelevant
if the claimant’s interest enabled it to participate in the success of the enterprise and distribution of profits) (citation
omitted).
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Equitable subordination is a remedial, not penal, measure that should only be granted
sparingly. Matter of U.S. Abatement Corp., 39 F.3d 556, 561 (5th Cir. 1994). The Fifth Circuit
“established a three-prong test to identify those situations in which equitable subordination is
permitted: (1) the claimant must have engaged in some type of inequitable conduct; (2) the
conduct must have resulted in injury to the creditors or conferred an unfair advantage on the
claimant; and (3) the invocation of equitable subordination must not be inconsistent with the
provisions of the Bankruptcy Code.” Id. Though this three-pronged test appears broad, the
Fifth Circuit has largely confined equitable subordination to “three general paradigms: (1) when
a fiduciary of the debtor misuses his position to the disadvantage of other creditors; (2) when a
third party controls the debtor to the disadvantage of other creditors; and (3) when a third party
actually defrauds other creditors.” Id.
The Court found that Dundon engaged in inequitable conduct by granting free advertising
to Dundon-owned, controlled, or preferred entities. That said, Trustee has not established that
misconduct by Defendants resulted in an injury to the creditors of Debtors or conferred an unfair
advantage to Defendants. DDFSP paid $70 million into the League at a time when no other
investor was willing to make a substantial commitment to the League. DDFSP’s investment
enabled the players to be paid for every game played. If DDFSP had not made its investment,
the League would have collapsed earlier, and the creditors (including players) who did get paid
out of the $70 million would not have received those payments.
Additionally, the Fifth Circuit has determined that there are three generally recognized
categories of misconduct by an insider which may warrant subordination: (1) fraud, illegality, and
breach of fiduciary duties; (2) undercapitalization; or (3) claimant’s use of the debtor as a mere
instrumentality or alter ego. In the Matter of Fabricators, Inc., 926 F.2d 1458, 1467 (5th Cir.
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1991).
“A claim arising from the dealings between a debtor and an insider is to be rigorously
scrutinized by the courts.” Fabricators, Inc., 926 F.2d at 1465. If the claimant is “a sole director,
or one of a smaller number vested with certain powers, . . . his acts [are] subject to more severe
scrutiny, and their validity determined by more rigid principles of morality, and freedom from
motives of selfishness.” Pepper v. Litton, 308 U.S. 295, 307 n.14 (1939). Here, Dundon, Zutter,
and DCP were all insiders.541 After February 14, 2019, Dundon and Zutter were in complete
control of ESMG and were the only voting board members of ESMG.542
Trustee argues the Court should award the Debtors the equitable remedy of subordination
pursuant to 11 U.S.C. § 510(c)(1). Dundon is both an insider of and a fiduciary to Debtors. Trustee
alleges that Dundon’s proven conduct and misconduct meet all the elements courts have
considered in awarding such remedies.543 Trustee alleges Dundon had complete control of the
Debtors as of February 14, 2019, (at his insistence), and thereafter he used and abused such control
by, among other things, attempting to ready the League in a manner that was advantageous for his
long-term gain while he and Zutter denied duly earned vendors payments and required employees
to charge league expenses on personal credit cards.544 Trustee argues that, to the extent Dundon
now claims a refund is due for the monies DDFSP transferred to the League, any such refund
should be last in line.
The Court did not find that Dundon, who owned and controlled DCP, and Zutter, Dundon’s
partner in DCP, committed fraud or willful and egregious violations of their fiduciary duties to
541 11 U.S.C. § 101(31)(B)(iii) states that the term “insider” includes “if the debtor is a corporation” a person in control
of the debtor.
542 FOF ¶ 182.
543 See In re Cajun Elec. Power Co-op., Inc., 119 F.3d 349, 357 (5th Cir. 1997) (outlining the three preconditions to
equitable subordination).
544 FOF ¶ 204.
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ESMG. Rather, the Court found that Dundon and Zutter split their loyalties between ESMG and
DCP. More importantly, the Court specifically found that although Dundon breached his fiduciary
duties by awarding free advertising, such misconduct did not rise to the level of being malicious,
egregious, or motivated by an evil motive.
Also, Dundon and Zutter allegedly took actions that were detrimental to AAF’s survival,
but those actions were permitted under the Term Sheet, as ratified by the ESMG board.545 The
Term Sheet stated that Dundon and Zutter, as controlling members of the ESMG board, were
vested with the authority to make all financial decisions for ESMG.546 Cutting expenses is within
Dundon’s and Zutter’s discretion. While the Court acknowledges that negotiating vendor claims
to a reduced amount and then failing to pay them is wrong, the evidence did not show that doing
so affected or accelerated AAF’s demise. Further, Trustee argues Defendants knowingly denied
funding to the League (whether by Dundon, entities Dundon controlled, or third parties) even as
Dundon, Zutter, and DCP knew or should have known that the League required funding over and
above $70 million.
The Court agrees with Trustee that capital investment may have prolonged AAF, but the
evidence was clear that after Dundon’s investment of $70 million, it would have taken millions of
dollars of investment to prolong AAF. Even if Ebersol had been permitted to find further
investment, it would not have prevented AAF from collapsing. The Term Sheet provided that
Dundon and DCP were to have a preferred stock interest in ESMG (as agreed to by the board).
Dundon and Zutter had the authority not to dilute their equity in ESMG. Further, the Court
examined all allegations of breach of fiduciary duty and self-dealing and concluded, in all instances
but one, that the alleged misconduct was supported by the business judgment standard or was not
545 T-0007.
546 Id.
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actionable. Finally, there is no evidence of instrumentality or alter ego between Dundon, Zutter,
and Debtors. Accordingly, the Court finds no basis to subordinate Dundon’s investment under
11 U.S.C. § 510 (b) or (c).
CONCLUSION
The Court has presided over the jointly administered bankruptcy cases for roughly six years
and the instant adversary case for roughly three years. During that time, the Court has made
countless findings of fact and conclusions of law, culminating in this Memorandum Opinion. All
parties were well represented by competent counsel. Arguments were fully presented, and
evidence was fully developed. The credibility of all witnesses has been weighed, and all admitted
documents have been evaluated. This matter ultimately was decided on what the Trustee could
prove. In doing so, the evidence adduced only supported one claim for relief as discussed in this
Memorandum Opinion. Further, there was insufficient evidence to support an award of damages
or attorney’s fees in this case. The result may be viewed as harsh, but it is appropriate. Trustee was
afforded a full trial, and the merits of the Trustee’s claim fail but for Count V as noted in this
Memorandum Opinion. It is therefore
ORDERED, ADJUDGED, and DECREED that Plaintiff be awarded a take nothing
judgment on all counts but for Count V–Breach of Fiduciary Duty against Dundon. As discussed
herein, Trustee failed to meet his burden on damages and attorney’s fees, and therefore Trustee is
awarded nominal damages of $1.00. It is further
ORDERED that Defendants prepare a form of judgment consistent with this Court’s
Memorandum Opinion and file the judgment no later than December 4, 2025. It is further
ORDERED that Defendants may request their attorney’s fees and costs as permitted under
Fed. R. Bankr. P. 7054 and Local Rule 7054-1. It is further
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ORDERED, ADJUDGED, and DECREED that all other relief is DENIED.
# # #
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