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

> United States Bankruptcy Court, W.D. Texas · March 3, 2025

URL: https://www.frixlaw.com/law-library/cases/10815484

## Case

- **Court:** United States Bankruptcy Court, W.D. Texas
- **Decided:** March 3, 2025
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

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below described is SO ORDERED. ac &.

Dated: March 03, 2025. Cacy tt
CRAIG A. oh
CHIEF UNITED STATES BANKRUPTCY JUDGE

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 §
Debtor. § CHAPTER 7

RANDOLPH N. OSHEROW, Chapter 7 §
Trustee and the Bankruptcy Estates of §
Legendary Field Exhibits, LLC; AAF §
Players, LLC; AAF Properties, LLC; Ebersol §
Sports Media Group, Inc.; LFE2,LLC; and = §
We are Realtime, LLC §
Plaintiff, §
v. § ADV. NO. 22-05078-CAG
§
THOMAS DUNDON; JOHN ZUTTER; and §
DUNDON CAPITAL PARTNERS, LLC, §
Defendant. §
ORDER DENYING DEFENDANT ZUTTER’S MOTION FOR SUMMARY JUDGMENT
(ECF No. 175)
Before the Court is Randolph Osherow in his capacity as the chapter 11 trustee’s
(‘Plaintiff’) First Amended Complaint (ECF No. 56),' Zutter’s (“Defendant”) Motion for

1 “ECF” denotes electronic case number.

Summary Judgment (ECF No. 175), Plaintiff’s Response to Defendant’s Motion for Summary
Judgment (ECF No. 187), and Defendant’s Reply in Support of Motion for Summary Judgment
(ECF No. 197). The Court set the matter for a hearing, heard oral argument, and ultimately took
the matter under advisement for a memorandum order. After considering the arguments made and
counsels’ pleadings, for the reasons stated in this memorandum order, Defendant’s Motion for

Summary Judgment is DENIED.
JURISDICTION
This Court has jurisdiction over this Motion to Dismiss pursuant to 28 U.S.C. §§ 1334(b)
and 157(b)(2)(A), (B), (C), (H), and (K). Venue in this district is proper under 28 U.S.C. §§ 1408
and 1409. The statutory predicate for relief is Fed. R. Civ. P. 56, made applicable to this proceeding
through Fed. R. Bankr. P. 7012 and Local Rule 7012.

LEGAL STANDARD

Federal Rule of Bankruptcy Procedure 7056 incorporates Federal Rule of Civil
Procedure 56 into adversary proceedings. Rule 56 allows parties to move for summary judgment
“identifying each claim or defense—or the part of each claim or defense—on which summary
judgment is sought.” Fed. R. Civ. P. 56(a). Summary judgment may be granted when there is no
genuine issue of material fact, and the movant is entitled to judgment as a matter of law. Id. To
establish that there is no genuine issue as to any material fact, the movant must either submit
evidence that negates the existence of some element of the non-moving party’s claim or defense,
or, if the crucial issue is one for which the non-moving party will bear the burden of proof at trial,
merely point out that the evidence in the record is insufficient to support an essential element of
the non-movant’s claim or defense. Little v. Liquid Air Corp., 952 F.2d 841, 847 (5th Cir. 1992)
(en banc).

Once the movant carries its initial burden, the burden shifts to the nonmovant to show that
summary judgment is inappropriate. Fields v. City of S. Hous., 922 F.2d 1183, 1187 (5th Cir.
1991). Any “[u]nsubstantiated assertions, improbable inferences, and unsupported speculation are
not sufficient to defeat a motion for summary judgment.” Brown v. City of Houston, 337 F.3d
539, 541 (5th Cir. 2003). Neither will “only a scintilla of evidence” meet the nonmovant’s burden.
Liquid Air Corp., 37 F.3d at 1075. Rather, the nonmovant must “set forth specific facts showing
the existence of a ‘genuine’ issue concerning every essential component of its case.” Morris v.

Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998).
For a court to conclude that there are no genuine issues of material fact, the court must be
satisfied that no reasonable trier of fact could have found for the nonmovant, or, in other words,
that the evidence favoring the nonmovant is insufficient to enable a reasonable jury to return a

verdict for the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In making
this determination, a court should review all the evidence in the record, giving credence to the
evidence favoring the nonmovant as well as the “evidence supporting the moving party that is
uncontradicted and unimpeached, at least to the extent that evidence comes from disinterested
witnesses.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 151 (2000). The court
“may not make credibility determinations or weigh the evidence” in ruling on a motion for
summary judgment and must review all facts in the light most favorable to the nonmoving party.
Id. at 150; First Colony Life Ins. Co. v. Sanford, 555 F.3d 177, 181 (5th Cir. 2009).
BACKGROUND
The remaining claims for the Court’s consideration in this adversary proceeding are (1)

breach of fiduciary duty and (2) unjust enrichment. This case arises from the creation and
dissolution of an alternative professional football league called the Alliance of American Football
(“AAF”), a developmental league conceptualized by individuals with close ties to the sport of
American football for highly touted collegiate players and former NFL players to gain exposure
and garner interest from NFL teams. In its early stage, the AAF was set to be financed by Reggie
Fowler, a former part owner of the Minnesota Vikings. The AAF founders were unaware that
Fowler engaged in criminal activity that resulted in the League’s deprivation of liquidity as it
entered its inaugural season in 2019. One week into its first season, AAF leadership recognized it
lacked the sufficient funds necessary to maintain league operations, including making player

payroll. To remedy this, Charles Ebersol, one of the AAF founders, engaged Thomas Dundon, an
alleged millionaire investor who owned Top Golf and a hockey team, in a series of phone calls to
discuss financial aid scenarios. In a separate adversary, DCP alleges that Ebersol fraudulently
induced DCP to make an investment.2
The parties disagree as to what happened next. In Trustee’s view, subsequently, Dundon
allegedly sent Ebersol a term sheet providing that Dundon would send the AAF an investment of
$5.1 million immediately and up to $70 million upon request. Ebersol purportedly inquired about

the discrepancy between the term sheet and the $250 million investment. The Complaint further
alleges that Ebersol received assurances from Dundon that the deal had not materially changed
and Dundon still intended to invest $250 million. The parties later discovered that the term sheet,

2 Adv. Case No. 22-05077.
which included series 2 preferred stock and outlined the $70 million cap on capital contributions,
lacked signatures. DCP ultimately provided an approximate $70 million investment prior to the
AAF’s bankruptcy. The parties agree that had this funding not been provided, the AAF would not
have survived more than a few days. Prior to the AAF’s bankruptcy petition, Defendant and
Dundon entered into a document titled a “Release Agreement” in which the AAF and its former

majority shareholder Fowler agreed to release each other from any claims related to the Series One
Term Sheet and requiring Fowler to support the DCP Term sheet and related change in ownership
and control of the AAF to Dundon. During this time, one of the AAF’s most valuable assets were
the football player contracts, titled “Standard Player Agreement,” which obligated players to
remain in the AAF for three seasons to the exclusion of playing in any other spring football league
without being released.

In this adversary, the focus is on Dundon’s alleged “righthand man”—Zutter. Through its
allegations, as further parsed below, Trustee argues that Defendant worked alongside Dundon to
“takeover” the AAF as sole directors and decisionmakers, infiltrating the AAF from the inside out
before sabotaging the league’s contracts, running the AAF as leanly as possible, all with the
intention of turning the company into a prepackaged bankruptcy option for Dundon to acquire.
Trustee alleges Defendant, alongside Dundon, failed to maximize the value of the player contracts,
gave free advertising to Dundon-affiliated entities, and engaged in other instances of self-dealing
to benefit Defendant as a DCP partner and Dundon.

TRUSTEE’S FACTUAL ALLEGATIONS
In its First Amended Complaint, Trustee alleged that Defendant breached his fiduciary
duties of loyalty, care, and fair dealing and unjustly enriched himself through his position at the
AAF and partnership with Dundon Capital Partners, LLC (“DCP”). (ECF No. 56 at 47–48,
¶¶ 173(a)–(f)). Trustee alleges that Defendant (1) failed to “paper up” Dundon’s $250 million
commitment, (2) knew Dundon would not provide funding and failed to disclose this information
and made self-interested decisions regarding AAF operations, (3) voted to enter into contracts in
the best interest of himself, (4) failed to employ a rational decision-making process, and (5) failed
to act prudently in carrying out his fiduciary duties. Id.

Trustee directed the Court’s attention to the following pieces of summary judgment
evidence to demonstrate the significant extent of Dundon’s control over AAF operations:
(1) the term sheet stating that Dundon intended to invest $5,100,000 by February
14, 20193
(2) Kevin Freedman’s deposition testimony that he recalled Dundon stating he
would invest $250,000,0004
(3) Defendant’s email stating that “all new contracts have to run through DCP prior
to execution” and carbon copying Dundon’s AAF email address5
(4) Defendant’s testimony confirming that the final determination of whether a
vendor would or would not be paid ultimately fell to management6
(5) DCP CFO Jeff Vanderbilt’s email to Dundon and Defendant stating that
Vanderbilt confirmed Ebersol was scheduled to make payments up to
$7,158,724 to ensure games could play that weekend without interruption7
(6) Defendant’s email to Ebersol, in which Dundon was carbon copied, stating that
in the absence of a subordination agreement and MGM Resorts International
agreeing to the deal as exactly presented, Defendant and Dundon would refuse
to fund the League any further. This email was in response to Ebersol’s email
flagging the MGM deal as “more political than practical” and requiring a “larger
discussion with Tom.”8
(7) AAF employee Kevin Farrell’s email to Defendant and Vanderbilt seeking their
approval for an incremental payment for the week9;
(8) Defendant receives an email from AAF employee Eric Blanc in which Blanc
stated he would “run” the “Week 6 specs” by Zutter before asking for
contracts10
(9) Defendant emails AAF employee Jason Kulas to inform him that the DCP team
was purposefully “avoiding the prefund” to leave AAF’s “cash balance real

3 ECF No. 198 at 11; App. 0011.
4 ECF No. 209 at 291, App. 1839, lns. 16–25.
5 Conf. App. 0088, Ex. 10.
6 ECF No. 209 at 992–93, App. 1910–11, lns. 1–9.
7 Conf. App. 0407, Ex. 61.
8 Conf. App. 0364, Ex. 54.
9 Conf. App. 0244, Ex. 30.
10 Conf. App. 0253, Ex. 35.
low.” On March 18, 2019, Defendant questions whether DCP should prefund
the league, highlighting “we would lose control” despite doing so being
“administratively easier.”11
(10) Farrell’s deposition statements reflect that he was authorized to make “very
little” day-to day decisions “without Dundon team’s involvement.”12
Trustee further argues that Defendant had actual control at the time of the ESMG Board’s
resolution of the Fowler Release Agreement to demonstrate that Defendant breached his fiduciary
duty as a director. Trustee argues that Dundon had control of the league by February 15, prior to
when the Fowler Release Agreement became effective, and Defendant operated as Dundon’s “right
hand man.” (ECF No. 244 at 78, lns. 8–9). While the official board resolution occurred on
February 24, Trustee argues that “what matters for the purpose of establishing fiduciary duty is
control, which can be shown by any of: board control, shareholder voting control, or evidence that
defendant had actual control over the operations of the business.” Id. (citing Tornetta v. Musk, 310
A.3d 430, 497–99 (Del. Ch. 2024)).
In Trustee’s First Amended Complaint, Trustee alleges that “on February 14, 2019, Dundon
and Zutter took over effective control of the AAF. Dundon and Zutter, each in his individual
capacity, became ESMG’s only voting directors.” (ECF No. 56 at 20). Trustee’s First Amended
Complaint also contends that, contemporaneous with the execution of the Term Sheet, ESMG’s
board of directors was reduced to three members, with Dundon and Zutter appointed as the two
voting members of the board . . . Dundon and Zutter also each maintained their roles as Chief
Executive Officer and Partner for DCP, respectively.” Id. Once Defendant and Dundon gained
alleged control, Defendant purportedly made “demands to Ebersol and AAF personnel to ‘cut burn
anywhere possible’ including by ‘offering ten cents on the dollar on contracts that had already been
completed.’” Id. (citing Conf. App. 1026, lns. 15–24). Trustee alleges Defendant purposefully

11 Conf. App. 0402, Ex. 60.
12 ECF No. 209 at 1857, lns. 6–9.
slashed advertising spending, and the budget cuts made ultimately “undermined the value of the
ticket price and destroyed price integrity.” (ECF No. 209 at 1060, lns 20–25). Deposition testimony
reveals Defendant directed League staff to “cut all nonessential” which was later interpreted by
League staff to mean that “anything that would be needed to actually just produce the game was
either cut or frozen.” (Id. at 1061, lns. 15–19). One League member believed that this decision was

the main reason for the League’s failure. Id.
Trustee also notes that Defendant’s “instruct[ion of] their teams within DCP to run the
league as lean as possible”13 was the precedent to Defendant’s recommendation of bankruptcy for
the AAF.14 By February 21, 2019, Defendant had some AAF personnel “mak[e] funding requests
directly” to Defendant and seek Defendant’s approval for the weekly instrumental payment of
$50,000.00 per game and receive the stadium schedule for the teams. (ECF No. 197 at 17) (citing

Conf. App. 0244). Ebersol stated that Defendant instructed League personnel to not pay rent for
the Arizona football stadium despite multiple games remaining in the season, leading to a
disagreement that was so heated, one employee felt the need to “step in.” (ECF No. 197 at 17)
(citing Conf. App. 0884, lns. 3–11).
Trustee further alleges that Defendant breached his fiduciary duty and engaged in self-
dealing through his approval of free advertising to other Dundon-associated enterprises. (ECF No.
244 at 87, lns. 2–3). For example, Defendant arranged advertising deals with Carvana and Topgolf,

which Dundon had an “interest in” even though that airtime slot could have been used to generate
revenue for the AAF. (Id., lns. 3–11). Dundon admitted in his deposition testimony that every party
on the no-charge advertisement list was attributable to himself. (Id., lns. 11–13). In other instances,

13 Conf. App. 0127.
14 Conf. App. 0128.
Trustee alleges that Defendant sabotaged alternative funding opportunities, which startled
potential investors. Trustee points to one interested former investor’s email which stated, “There
was a deal to be made . . . but not with threats and trying to bully the guys who held the cards . . .
only a crazy person jumps in a flushes 58 million down the drain.” (ECF No. 196 at 24, nn. 87)
(citing ECF No. 209 at 234).

Trustee also alleges that Defendant did not act in good faith to preserve vendor contract
value and keep the league operational. (ECF No. 244 at 105, lns. 18–20). Trustee argues CBS also
planned to invest but was thwarted by Dundon’s disinterest, and Defendant’s complicity, in signing
the deal and diluting CBS’s investment. (Id. at 107, lns. 9–14). Trustee notes that Ebersol even
emphasized to Dundon the importance of the CBS partnership but Defendant stepped in to respond
that, in the absence of a subordination agreement and the parties’ agreeing to the deal exactly as

Defendant presented, Defendant would not fund the CBS deal. (Id., lns. 20–25). Trustee also
argued that Defendant and Dundon sought to “jettison” other shareholders and the deal with MGM
and its associated rights, in the hopes that these rights would be subordinated. (Id., lns. 14–17).
Finally, Trustee recently argued at the hearings held on January 31, 2025 and February 3,
2025 that Defendant directly conspired with Dundon to place the AAF into a chapter 7 bankruptcy
with two goals in mind: (1) wrestle control away from Ebersol and (2) ensure Dundon did not have
to fulfill the entirety of the $250M obligation. (Id. at 92, lns. 15–19). In Trustee’s theory of the

case, if the AAF were to survive, then Dundon would have been forced to fulfill the commitment
he made to the league if he planned to remain in control. (Id., lns. 17–19). Trustee insinuates that
Dundon took issue with this because Dundon did not want to lose control and fulfill the entirety
of the $250M commitment, did not want to become a minority owner or even a majority owner,
and instead wanted complete control over the AAF without any of the prior Ebersol-negotiated
agreements attached. (Id., lns. 20–25). In Trustee’s view, Dundon and Defendant were hoping for
an “asset deal,” meaning they hoped to acquire the AAF with assets, no liabilities, no other
shareholders to listen to, and no commitments aside from those to which Dundon agreed. (Id. at
93, lns. 1–7).

After inquiry from the Court at the aforementioned hearings, Trustee explained that this is
essentially Defendant and Dundon’s typical scheme, in which Dundon permits “all of the losses
[to] roll up to Mr. Dundon individually” and then subsequently receives a substantial tax benefit
while Defendant continues to follow Dundon to his various entities. (Id. at 94, lns. 21–24). Trustee
hypothesized that Defendant and Dundon’s plan was to transition the company into an asset deal
that could be obtained through a prepackaged bankruptcy, which would later be sold to Dundon.
(Id. at 96, lns. 8–9, lns. 14–19). To support this theory, Trustee points to Defendant’s comment,

which was made at the time of his full control over the company, as to whether he and Dundon
wanted to be further involved with the AAF or whether they should evaluate purchasing the assets
and leaving the liability behind. (Id. at 93, lns. 18–22). Trustee also notes that even after the DCP
team was pushed by Dundon to renegotiate contracts and give discounts, Dundon still was reluctant
to pay and once again discussed a prepackaged bankruptcy. (Id. at 105, lns. 8–11).
DEFENDANT’S COUNTERARGUMENTS

In its Motion for Summary Judgment, Defendant focuses primarily on waiver and proper
pleading under Delaware law. Defendant counters that summary judgment should be granted on
the grounds of (1) waiver through the AAF’s certificate of incorporation (ECF No. 175 at 8), (2)
Defendant’s lack of approving the Release Agreement (ECF No. 175 at 9), (3) the alleged fiduciary
duties improperly duplicating contractual duties (ECF No. 175 at 10), and (4) lack of sufficient
specificity with regards to pleading unjust enrichment (ECF No. 175 at 11).
First, Defendant argues that Trustee may not bring forward duty of care-related claims
because these claims are waived through an exculpatory provision.15 (ECF No. 175 at 4–6). In
Defendant’s view, the “exculpatory clause requires a take-nothing judgment against the Trustee on
claims for money damages based on the duty of care” as found in ¶¶ 173(a), (b), (e), and (f) of the
First Amended Complaint. (Id. at 9). Defendant further argues that Defendant cannot be liable for

the ESMG Board’s approval of the Release Agreement because it was prior to when Defendant
became a member of the ESMG Board. (Id.). Defendant notes that the ESMG Board authorized
the release by vote on February 24, 2019, and Defendant was elected to the board on February 24,
2019; thus, “he cannot be held to account for it as a breach of fiduciary duty.” (Id.).
Defendant next argues that Trustee may not bring forward its breach of fiduciary duty
claims for failing to “paper up” the oral agreement (Complaint at ¶ 173(a)) and failing to address

that Dundon did not intend to comply with the oral agreement (Complaint at ¶ 173(b)). (Id. at 10).
Defendant’s reasoning is because Delaware law does not permit plaintiffs to bring breach of
fiduciary duty claims forward which “completely overlap” with breach of contract claims. (Id.)
(citing Edinburgh Holdings, Inc. v. Educ. Affiliates, Inc., No. CV 2017-0500-JRS, 2018 WL
2727542, at *15 (Del. Ch. June 6, 2018)). Defendant argues that Trustee fails to allege an
independent basis apart from the contract for the fiduciary duty claim. For example, the breach of
oral contract claim “rests on Dundon’s failure to fund the league” and the “alleged breach of
fiduciary duty in paragraph 172(a) is based on Dundon’s failure to provide funding as promised in
exchange for control of the league.” (Id.). Thus, the “claims are the same.” (Id.).

15 The relevant provision of the exculpatory provision in the ESMG restated certificate of incorporation states:
To the fullest extent permitted by law, a director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director.
ECF No. 175 at 8 (citing Ex. 1 (Restated Cert.) at 25–26 art. 8A).
Defendant directs the Court to the board minutes to demonstrate that Defendant was not a
member of the Board at the time of the Term Sheet’s authorization. (Id.) (citing Ex. C, Ebersol
Deposition at 282:13-285:18). Defendant states that the “prior members of the Board, which
included Ebersol, approved the Term Sheet and that Board determined it was in the best interests
of ESMG to accept a maximum cumulative commitment of $70 million in exchange for granting

DCP 75% of the equity of ESMG and control of the Board.” (Id.). Defendant states that Defendant
was “powerless to paper” a $250M deal without “board or shareholder approval” and the evidence
fails to demonstrate that the Board or shareholders of ESMG “ever approved a $250 million
agreement with Dundon, DCP or any other Dundon affiliate.” (Id.).
Turning to Trustee’s unjust enrichment argument, Defendant argues that Trustee’s claim
for unjust enrichment should be dismissed because it is not properly pleaded, and Defendant

obtained no benefit from his role with the AAF. (Id. at 11). Defendant then proceeds to cite to
Texas law to support the proposition that unjust enrichment “describes an action to recover
restitution when a contract action fails for some reason.” (Id.) (citing Burlington N. R. Co. v. Sw.
Elec. Power Co., 925 S.W.2d 92, 98 (Tex. App.—Texarkana 1996), aff’d sub nom. Sw. Elec.
Power Co. v. Burlington N. R.R. Co., 966 S.W.2d 467 (Tex. 1998)). The Court previously
established that the governing law for this case is Delaware law. (ECF No. 54 at 28) (“The Court
will analyze the cause of action under Delaware law because the parties state that Delaware should
apply to this claim. The Court will not analyze the cause of action . . . differently for each argument
the Defendant make against the Complaint.”). Thus, the Court will not consider Defendant’s Texas
law citation and will solely assess Defendant’s factual counterstatements.

In its Motion for Summary Judgment, Defendant argues that it Trustee’s “unjust enrichment
claim makes little sense” because “DCP—not Zutter—received a 75% interest in the AAF pursuant
to the Term Sheet” and “Zutter got nothing,” (ECF No. 175 at 11). At the hearing, Defendant
countered that Trustee’s citation of an alleged tax benefit was not sufficiently supported by the
summary judgment evidence presented by Trustee. (ECF No. 244 at 117, lns. 11–14). Defendant
argues that it “makes no sense” for a party to lose $70M “for the purpose of getting some sort of
credit or an offset.” (ECF No. 244 at 117, lns. 17–21). Defendant notes that the tax report’s raw

dollar amount shows a potential $14M offset, and “know[s] of no mathematical equation where 1
million, 12 million, 14 million [is] greater than 70 million to arise to such a benefit or a motivation
for [an offset.]” (ECF No. 244 at 117, lns. 17–24). In Defendant’s view, there is no affirmative
statement from Dundon or Defendant affirmatively stating that they attempted to “drive the league
into the ground” or engage in an asset deal, and implications do not conclusively establish any
elements. (ECF No. 244 at 119, lns. 10–14).

ANALYSIS
To reiterate, Defendant argues that the Court should dismiss Trustee’s fiduciary duty claims
against Zutter because “the AAF waived any such claims for breaches of duty of care, Zutter never
approved or participated in the voting on the Release Agreement, and the Trustee improperly
asserts contract claims as fiduciary claims.” (ECF No. 175 at 7). The Court will first address the
relevant Delaware standard of review and then turn to address each of Defendant’s summary
judgment arguments, in turn, below.

I. Standard of Review: Application of the Entire Fairness Standard
The parties disagree as to which Delaware standard of review applies: the business
judgment rule or the entire fairness test. Defendant argues the business judgment rule applies

whereas Trustee argues that the entire fairness standard is the appropriate test.
At the hearing, Trustee explained that it has plead sufficient facts and demonstrated
adequate summary judgment evidence to rebut the business judgment rule presumption and require
the Court to employ the more rigorous “entire fairness” analysis. Trustee cited to the following
cases to support its interpretation that entire fairness is the appropriate test: Frederick Hsu Living
Tr. V. ODN Holding Corp., C.A. No. 12108, 2017 WL 1437308 (Del. Ch. 2017); Stone v. Ritter,

911 A.2d 362 (Del. 2006); In re Bridgeport Holdings, Inc., 388 B.R. 548 (Bankr. D. Del. 2008).
Trustee explained at the hearing that the Court should consider “a series of actions” undertaken
and evaluate the facts holistically. Trustee argues that Bridgeport’s fact pattern, in which a series
of action by the board of directors led to a rush fire sale of all the company’s assets, is comparable
to the decision making undertaken by Defendant. (ECF No. 244 at 81, lns. 23–25).
Next, Trustee argues that In re Xtreme Power Inc., 563 B.R. 614 (Bankr. W.D. Tex. 2016)

is comparable to the case at bar because it addressed a company which, had the petition been filed
earlier, could have reorganized successfully but was unable to do so due to self-dealing directors.
(Id. at 82, lns. 8–15). Trustee then notes that Frederick Hsu Living Trust is analogous because it
involved a series of actions and inactions taken by directors in which the company’s growth
strategy was abandoned amid multiple directors being allegedly “beholden” to one shareholder
who stood to substantially benefit. (Id., lns. 16–22). Finally, Trustee argued at the hearing that In
re Tower Air stands for the proposition that the “transaction” the Court may analyze is broad,
requiring the Court to look beyond typical business operations and whether the pattern of decision-
making was economically sensible. (Id. at 83, lns. 9–20).

Trustee argues that Defendant was “sufficiently loyal to, beholden to, or otherwise
interested in” Dundon. (Id. at 78, lns. 8–13). In Trustee’s view, Defendant “bounces from Dundon
company to Dundon company, sometimes several at the same time” and is entirely “beholden to
Dundon.” (Id., lns. 23–25). Trustee argues that Defendant was never independent because he was
a “DCP appointed director” who relies on Dundon for financial means and other business deals.
(Id. at 79, lns. 21–25). Trustee argues Defendant engaged in “self-dealing” through initiating deals
with Carvana and Topgolf, landing Defendant squarely on “both sides of the transaction” because
these two organizations are Dundon-affiliated. (Id. at 88, lns. 14–18). As Trustee argued at the

hearing, Defendant does receive “the business judgment benefit of the doubt when [he] actually
owe[d] competing duties of loyalty to two different companies.” (Id. at 75, lns. 19–21).
In contrast, Defendant argues that the business judgment standard presumption is correct.
Defendant posits that if the Court applied entire fairness, Trustee needed to “connect the dots”
between a breach and specific transaction. (Id. at 122, lns. 1–2). Defendant posited at the hearing
that offering free advertising, for example, is not sufficiently connected to a specific transaction to

amount to a breach. (Id., lns. 3–7). Defendant argues that Trustee only identifies two transactions
specifically towards Defendant: (1) the $250 million funding commitment and (2) the Fowler
Release Agreement. (ECF No. 230 at 5). As such, the Court should dismiss the other claims
because “Trustee makes no effort to tie together particular transactions and . . . interests that would
implicate breach of the duty of loyalty or bad faith.” (ECF No. 230 at 6) (citing Bridgepoint
Holdings Inc. Liquidating Trust v. Boyer (In re Bridgeport Holdings, Inc.), 388 B.R. 548 (Bankr.
D. Del. 2008)).

Under Delaware law, there is a distinction 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 standard of review is the “test that a court applies when evaluating whether
directors have met the standard of conduct.” Id. The standard of review is divided into three tiers:
the business judgment rule, enhanced scrutiny, and entire fairness. Id. Delaware corporate law’s
default standard of review for director decision making is the business judgment standard, which
requires courts to “presume 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 City of Kansas City v. Found. Bldg.

Materials, Inc., 318 A.3d 1105, 1136 (Del. Ch. 2024). Essentially, directors must operate in “good
faith” and “free of any conflicts of interest and exercise due care” to fulfill their fiduciary mandate.
Id.
If these elements are unrebutted, then the court’s only role is charged with seeing “whether
the business decision made was rational in the sense of being one logical approach to advancing
the corporation’s objectives.” Id. Delaware, however, is unflinching in there being “no ‘safe

harbor’ for [] divided loyalties . . . where one stands on both sides of a transaction, he has the
burden of establishing its entire fairness, sufficient to pass the test of careful scrutiny by the
courts.” In re Tesla Motors, Inc. S’holder Litig., No. 12711-VCS, 2020 WL 553902, at *18 (Del.
Ch. Feb. 4, 2020). This means that if Defendant demonstrates at trial that even if Trustee
demonstrates Defendant was controlling the ESMG Board in its decision making, Defendant could
nonetheless avoid liability so long as the transactions at issue were “fair.” Id. at 19.
Here, the issue is whether the entire fairness test can be applied to a non-shareholder, non-

official director’s actions when that individual wielded significant authority over the business and
had “actual control.” Trustee extensively alleges that Defendant effectively operated in a
managerial capacity prior to the Release Agreement occurrence on February 24. Trustee’s
allegations, which for summary judgment purposes are taken as true, indicate that advertising
deals, weekly rent, and instructions to run the League as leanly as possible flowed through and
from Defendant. Trustee’s evidence creates a plausible factual inquiry as to whether Defendant
operated as a shadow director such that this Court could apply the entire fairness standard and hold
him liable for a breach of fiduciary duty and self-dealing. As such, the Court declines to take a
hyper-technical reading of the law that only a director or minority shareholder may be addressed
under entire fairness. Because there are genuine disputes of material fact as to (1) whether

Defendant operated as a controlling shadow director and (2) whether the evidence satisfies the
entire fairness test, Defendant’s Motion for Summary Judgment predicated upon the defense of
him not physically voting on the Release Agreement’s approval is denied.
II. Defendant’s Remaining Summary Judgment Arguments
a. Trustee’s Duty of Care Claims Are Not Waived

Defendant argues that the Court should dismiss Trustee’s fiduciary duty claims based on
the duty of care because the ESMG restated certificate of incorporation bars such claims. (ECF
No. 175 at 8). Defendant argues that Delaware corporate law permits a certificate of incorporation
to limit the personal liability of a director or officer for any breach of the duty of loyalty or for acts
or omissions not in good faith. Id. at 9. Thus, the court must draw the conclusion of a “a take-
nothing judgment against the Trustee on claims for money damages based on the duty of care.” Id.
Trustee counters that the exculpatory provision does not bar Trustee’s breach of fiduciary duty
claims because Trustee is also claiming that Defendant’s conduct breached his duties of loyalty

and fair dealing, noting that Delaware law does not permit dismissal of a duty of care claim based
on an exculpatory provision if it is not the exclusive claim. (ECF No. 197 at 13) (citing In re
Cornerstone Therapeutics Inc., S’holder Litig., 115 A.3d 1173, 1179–81 (Del. 2015)). Trustee
explains that here, Trustee is also alleging that Defendant breached his duties of loyalty and fair
dealing alongside duty of care claims, and thus the exculpatory provision does not apply.
In Delaware, “plaintiffs must plead a non-exculpated claim for breach of fiduciary duty
against an independent director protected by an exculpatory charter provision, or that director is
entitled to be dismissed from the suit.” In re Cornerstone Therapeutics Inc, Stockholder Litig.,
115 A.3d 1173, 1180–81 (Del. 2015). Generally, “invocation of the entire fairness standard has a
powerful pro-plaintiff effect against interested parties” because once invoked at the pleading stage,

plaintiffs are “able to survive a motion to dismiss by interested parties regardless of the presence
of an exculpatory charter provision because their conflicts of interest support a pleading-stage
inference of disloyalty.” Id.
The Delaware Supreme Court has also addressed the effect of coupling exculpated duty of
care claims with non-exculpated duty of loyalty of duty of good faith claims. In In re Cornerstone
Therapeutics Inc., Stockholder Litigation, the court explained that “unless there is a violation of

the duty of loyalty or the duty of good faith, a trial on the issue of entire fairness is unnecessary
because a Section 102(b)(7) provision will exculpate director defendants from paying monetary
damages that are exclusively attributable to a violation of the duty of care.” Id. at 1180, n. 27
(citing Malpiede v. Townson, 780 A.2d 1075, 1094 (Del. 2001)); see Emerald Partners v. Berlin,
726 A.2d 1215 (Del. 1999) (“Nonetheless, where the factual basis for a claim solely implicates a
violation of the duty of care, this Court has indicated that the protections of such a [Section
102(b)(7)] charter provision may properly be invoked and applied.”). Here, because Trustee has
coupled its duty of care claims with duty of loyalty and good faith claims, the Court may not grant
Defendant’s dismissal because such claims are non-exculpated. Further, Defendant cannot have it
both ways—claim the exculpation clause’s protection for directors while disclaiming liability for

the ESMG’s board’s decision related to the Fowler Release Agreement because Defendant was not
technically a director earlier that same day.
b. The Fiduciary Duty Claim is not Duplicative of the Breach of Contract Claim
Defendant next claims that Trustee’s claims related to “paper[ing] up” the oral agreement

and failure to disclose Dundon’s lack of intent to comply with the agreement are improperly
duplicative of contract claims. (ECF No. 175 at 10). Defendant argues that Delaware law prohibits
court review of a breach of fiduciary duty claim that “completely overlaps” with a breach of
contract claim. Id. (citing Edinburgh Holdings, Inc. v. Educ. Affiliates, Inc., No. CV 2017-0500-
JRS, 2018 WL 2727542, at *15 (Del. Ch. June 6, 2018)). Defendant argues that Trustee “does not
allege an independent basis (apart from the contract) for this particular breach of fiduciary duty
claim” and the breach of oral contract claim “rests of Dundon’s failure to fund the league; the
alleged breach of fiduciary duty in paragraph 172(a) is based on Dundon’s failure to provide
funding as promised in exchange for control of the league.” Id. In Defendant’s view, the “claims

are the same.” Id.
Trustee counters that Delaware law permits breach of contract and fiduciary duty claims to
coexist if the claims “share a common nuclear of operative facts” so long “as the breach of
fiduciary duty claim relies on additional facts, is broader in scope, or involves different
considerations in terms of a potential remedy.” (ECF No. 197 at 17) (citing Schuss v. Penfield
Partners, L.P., No. 3132, 2008 WL 2433842, at *10 (Del. Ch. June 13, 2008); see also PT China
LLC v. PT Korea LLC, No. 4456, 2010 WL 761145, at *7 (Del. Ch. Feb. 26, 2010) (stating that

the “appropriate inquiry is whether there’s an independent basis for the two claims, even if both
are related to the same or similar conduct”). Trustee points to its First Amended Complaint, which
has “specific categories of damages that are separate and apart from, independent of, and unrelated
to, the Trustee’s breach of contract claims and damages, including ‘compensatory damages . . .
rescissory damages, disgorgement of benefits received . . . and attorneys’ fees.” (ECF No. 197 at
19). Trustee argues that its claims also are more factually elaborate, and that Defendant’s actions
“impaired the League’s operational capabilities . . . tarnished its public reputation and diminished
its chances of success in future seasons . . . erod[ing] the League’s enterprise value and directly
le[adding] to the League’s bankruptcy, effectively reducing its value to zero.” (ECF No. 197 at
19).

Under Delaware law, “breach of fiduciary duty claims is duplicative of breach of contract
claims that either were substantially identical, such that the fiduciary duty claim would have been
‘superfluous,’ or involved remedies that were likely to be equivalent . . . .” Schuss v. Penfield
Partners, L.P., No. CIV.A. 3132, 2008 WL 2433842, at *10 (Del. Ch. June 13, 2008) (footnotes
and citations omitted). For example, in Gale v. Bershad, the court dismissed a plaintiff’s fiduciary
duty claims when the plaintiff alleged that a company and its directors breached both contractual

and fiduciary duties owed to the preferred stockholders. No. CIV. A. 15714, 1998 WL 118022, at
*1–2 (Del. Ch. Mar. 4, 1998) (assessing an express contract claim, an implied contract claim, and
a fiduciary claim). The plaintiff argued the preferred stock was redeemed at an unreasonably low
and unfair price, which violated the certificate of incorporation. Id. The court held that the same
facts underlying the implied contract claim were also the basis for the fiduciary duty claim, and
that duty arose out of the party’s contractual relationship, instead of their fiduciary relationship.
Id. at 5. Thus, “because the contract claim addresses the alleged wrongdoing by the board, any
fiduciary duty claim arising out of the same conduct is superfluous.” Id. The court reasoned that,
in Delaware, “the implied covenant of good faith and fair dealing defines the duties of parties to a
contract and is analogous to the role of fiduciary law in defining the duties owed by fiduciaries.”

Blue Chip Capital Fund II Ltd. P’ship v. Tubergen, 906 A.2d 827, 833 (Del. Ch. 2006) (citing
Bershad, 1998 WL 118022, at *5)).
In another instance, Madison Realty Partners 7, LLC v. Ag ISA, LLC, another Delaware
court applied Bershad to hold that the plaintiffs could not prosecute their claim for breach of
fiduciary duty when it “overlap[ped] completely” and was “based on the same underlying conduct”
with their breach of contract claim. No. CIV.A. 18094, 2001 WL 406268, at *6 (Del. Ch. Apr. 17,
2001) (analyzing four claims in total, which included a breach of contract claim and aiding and

abetting a breach of fiduciary duty). Here, the fiduciary duty Trustee alleges in its Complaint is
not solely duplicative of a breach of contract claim. Trustee is not asserting breach of contract as
a claim in this adversary—only breach of fiduciary duty and unjust enrichment. If the Court were
to dismiss the breach of fiduciary duty claim based on it being duplicative of a breach of contract
claim, then the entire adversary would very nearly be disposed of in its entirety despite there being
genuine issues of material fact. This is not the scenario Madison Realty and Bershad contemplated
avoiding. Defendant’s argument to dismiss based on this Delaware principle of law is denied.

c. There is a Genuine Issue of Material Fact as to Whether Defendant was
Unjustly Enriched and Received a Benefit from his Influence over the AAF
Defendant finally argues that he was not unjustly enriched because he received no benefit.
(ECF No. 230 at 9); see (ECF No. 175 at 11) (“Zutter got nothing.”). Defendant argues it is “hard
to understand how taking a tax write off for a $70 million loss is an unjust benefit. But for Zutter,
it makes no difference. There is no evidence Zutter obtained any tax write off relating to any

involvement in the AAF.” (ECF No. 230 at 11). Defendant also argues there is no evidence
Defendant received any benefit through any of the entities that advertised with the AAF. Id.
Trustee counters that there is a genuine issue of material fact related to the determination
of a following valuations: whether (1) Defendant and Dundon obtained benefits from tax write-
offs; (2) there was a monetary equivalent of that benefit received through the advertising; and, (3)
routing funds to DCP instead of AAF operations directly prior to the bankruptcy resulted in an
unjust benefit to Defendant. (ECF No. 244 at 114, lns. 18–25). Curiously, in its Response to
Defendant’s Motion to Dismiss, Trustee also cites to multiple Texas cases despite the Court stating
that Delaware law controls. As such, the Court will not consider those cases cited in Trustee’s
response. However, Trustee is correct in its contention that genuine issues of material fact remain

as to whether Defendant received an unjust benefit from a tax perspective, through his free
advertising offers, and from pushing funds to DCP as opposed to the AAF immediately before the
AAF entered bankruptcy. (Id. at 115, lns. 1–4). Trustee argues Defendant received the following
benefits: (1) a 75 percent interest in the AAF for DCP (of which Defendant is a partner); (2) control
over the AAF’s operations; (3) financial benefits to other business ventures Defendant controlled
or are Dundon-affiliated entities for which Defendant leads as Dundon’s right hand man; (4) tax
benefits for DCP, where Defendant is a partner. (ECF No. 197 at 21).

Further, at the hearing, as explained above, Trustee alleged that Defendant conspired with
Dundon to put the AAF through a prepackaged bankruptcy to avoid liabilities and receive full
control over the League. Trustee cited to numerous depositions and emails from Defendant
indicating his disinterest in reviving the League. It is apparent that there is a genuine issue of
material fact as to whether Defendant indeed obtained a benefit under this theory of the case. As
such, Defendant’s request for dismissal on the unjust enrichment claim is denied.

CONCLUSION
IT IS THEREFORE ORDERED that Defendant’s Motion for Summary Judgment is
DENIED.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10815484. Public record. Not legal advice.