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May 30, 1978

ALABAMA FOOTBALL, INC., an Alabama Corporation, Plaintiff,
L. C. GREENWOOD, an Individual, Defendant

The opinion of the court was delivered by: MARSH

Marsh, District Judge

 Defendant, L. C. Greenwood, (hereinafter Greenwood) a professional football player, signed a contract to play football for the plaintiff, Alabama Football, Inc., (hereinafter AFI) beginning in 1975. AFI is an Alabama corporation which operated a professional football franchise known as the Birmingham Americans in the World Football League (hereinafter WFL). Neither Greenwood nor the Birmingham Americans played football in the WFL during 1975 or thereafter. AFI has brought this breach of contract action seeking to recover general damages and a $50,000 bonus it paid to Greenwood. In our opinion AFI is not entitled to recover either.

 After review of the testimony and other evidence presented at the non-jury trial, and after consideration of the briefs and reply briefs submitted by the parties, the court makes the following findings of fact and conclusions of law.


 On May 31, 1974, AFI and Greenwood entered into a WFL player's contract (Pl. Exhibit 1). The contract is a standard form of five pages with blanks which were filled in to show the name of the WFL team, the name of the player, the term of the contract, the compensation, and the effective date of the contract.

 The compensation section of the contract states that AFI will pay Greenwood a bonus in three installments: $25,000 upon signing of the contract, $25,000 in September, 1974, and $25,000 in April, 1975. In addition, Greenwood was to receive a salary of $90,000 in 1975, $100,000 in 1976, and $110,000 in 1977. The parties indicated in the contract that they desired the contract to be effective on May 31, 1974, and that the contract was for a term of three years. If AFI failed to make any payment due to Greenwood under the contract, the payment was to be made by the WFL which then could exercise an option to have the contract assigned to the WFL as property of the league.

 The WFL player's contract required Greenwood to report to AFI in good physical condition, to participate in their football games to the best of his ability, and to give his loyalty to the team and the WFL and to participate in their promotions and publicity (Pl. Exhibit 1, paragraph 4). Greenwood granted and assigned to AFI the right to use his name, likeness, and biographical sketch in connection with any matter associated with the team's or the league's business on publicity (Pl. Exhibit 1, paragraph 5).

 Greenwood had played football during the 1973 season with the Pittsburgh Steelers in the National Football League. Testimony at trial indicated that all parties understood at the time the contract was signed that Greenwood would be obligated under an option clause in his 1973 Pittsburgh contract to play football during the 1974 season with the Steelers. Although not stated explicitly in the contract, it is clear from the testimony that the parties understood that Greenwood would not play football for AFI until the beginning of AFI's 1975 season. *fn1"

  When the contract was signed on May 31, 1974, Greenwood and his agent, Glenda Patterson, received checks totalling $25,000 from AFI representing the first installment of the bonus. The second $25,000 payment was received by Greenwood in September, 1974. AFI made no further payments to Greenwood.

 AFI began its first and only football season on July 10, 1974. At AFI's request, Greenwood came to Birmingham to be present for the opening game (Transcript, p. 119). He also appeared at a reception where he met local bankers, political figures and members of the local press (Transcript, p. 125).

 AFI's 1974 season was marked with financial difficulties. The AFI balance sheet for July 31, 1974, shows liabilities of $2,200,000 and assets of $1,700,000. As the season continued, cash flow problems became severe. In October, 1974, AFI stopped paying Internal Revenue Service the money which AFI was withholding from its player's salaries for tax purposes. This money was used by AFI to pay salaries and other operating expenses (Transcript, p. 98). Eventually, AFI stopped paying the players their salaries. The players of the Birmingham Americans were not paid for the final five games of the season played between October 16, 1974, and November 13, 1974 (Transcript, p. 99). In mid-October, the team received notice from the WFL that AFI was in default on its payments to the league (Transcript, p. 115).

 In spite of these difficulties, AFI had a good season on the football field. The Birmingham Americans won most of their games and qualified to play in the first WFL World Championship Game in December, 1974. Birmingham won the game, but on the following day the team's uniforms were seized by the sporting goods firm which had not received payment for them. Shortly thereafter, the telephones at AFI's offices in Birmingham were disconnected (Transcript, pp. 82, 83). AFI's financial difficulties were widely reported in the press. Greenwood learned of them personally from his friend and former college roommate, Clarence Washington, who lived in Birmingham and who played football for the AFI team during most of the 1974 season (Transcript, p. 148).

 The WFL, at a meeting of its Board of Governors held January 16, 1975, apparently passed a resolution declaring AFI to be in default on its payments to the league and cancelling AFI's membership in the WFL. On approximately January 22, 1975, WFL officials announced to the press that AFI's franchise in Birmingham had been terminated. At a subsequent meeting on February 13, 1975, the WFL Board of Governors ratified, confirmed and approved the previously passed resolution of default against AFI. The WFL authorized its officers to pursue negotiations with persons or entities capable of meeting the requirements of operating a WFL club in Birmingham in 1975 (Def. Exhibit N; Transcript, p. 80).

 In a letter dated January 23, 1975, Lee H. Goldberg, an attorney who then represented Greenwood, advised the President of the WFL, Cris Hemmeter, that Goldberg had been unable to contact AFI because its telephone had been disconnected. Goldberg stated that he was giving written notice on behalf of Greenwood that AFI had failed to comply with two provisions of the WFL contract and he requested Hemmeter to respond (Pl. Exhibit 15; Def. Exhibit J). *fn2" In response, Goldberg received a telephone call from Donald J. Reagan, General Counsel of the WFL. Following this telephone conversation, Goldberg formally advised Reagan in a letter dated February 10, 1975, that Greenwood was terminating the contract which had been executed with AFI the previous May 31 (Pl. Exhibit 2). Thereafter, Greenwood and the WFL executed a mutual release and agreement not to sue. That agreement, which was signed by Reagan on March 10, 1975, and by Greenwood on March 18, 1975, released Greenwood from any further obligations to the WFL under the terms and conditions of the player's contract (Pl. Exhibits 4A and 4B).

 In a mailgram subsequently sent to Goldberg on March 31, 1975, Reagan stated that he had been told that, contrary to previous statements by Goldberg, Greenwood had received a $25,000 installment payment in September, 1974. Reagan advised Goldberg that if this were true and if Greenwood's contract had not been breached by AFI, then the WFL stood ready to assume the player's contract (Pl. Exhibit 6).

 At trial, AFI's Chairman of the Board William R. Putnam testified that he first learned of the possibility that Greenwood would not honor the player's contract in March or April, 1975, from his discussions with news reporters. He testified that AFI did not make the third $25,000 bonus payment on April 1, 1975, because of the questionable status of the Greenwood contract (Transcript, p. 45). Putnam acknowledged that as of April 1, 1975, AFI had no funds for the $25,000 payment but stated that he personally would have put up the money for AFI.

 The first direct correspondence between AFI and Greenwood in 1975 occurred on April 18 when Putnam wrote to Greenwood's attorney Goldberg advising him that AFI intended to operate in the WFL during the 1975 season and that AFI considered its contract with Greenwood to be valid and binding (Pl. Exhibit 8). This letter from Putnam was prompted when he learned of an earlier letter Goldberg had sent to the Internal Revenue Service after Goldberg learned that the Greenwood contract was listed among the items to be sold by the Internal Revenue Service at a tax sale of AFI's assets. Goldberg had informed the IRS that any potential bidder should be advised that Greenwood's contract was in default and that Greenwood intended to terminate the contract. The tax sale never took place, and Goldberg's letter was turned over to Putnam.

 At trial, Putnam admitted that as of the time of his letter to Goldberg on April 18, 1975, the AFI franchise had been cancelled by the WFL and the WFL had issued the Birmingham territory franchise to another corporation operating as the Birmingham Vulcans. He testified that at the time of the letter AFI was contesting the cancellation of its franchise (Transcript, p. 47) and that AFI intended to relocate and operate a team in some other city during the 1975 WFL season. Putnam wrote to Greenwood on May 16, 1975, stating that Putnam had developed an interest in the New York area and that Putnam would contact Greenwood "within the next two weeks to give you all of the details" (Def. Exhibit V). Greenwood testified that he did not hear from Putnam again. The evidence shows that AFI did not operate a team in 1975, and that the WFL ceased operation prior to completion of the 1975 season.

 On June 18, 1975, Greenwood executed a contract to play football for the Pittsburgh Steelers in the National Football League during the 1975 season.


 As contemplated by the parties to the contract at issue here, Greenwood's duty to play professional football for the Birmingham Americans was dependent upon AFI's offering an appropriate setting in which the individual defendant could perform his services. By the very nature of the game, Greenwood could perform only if AFI provided a football team on which Greenwood could play.

 Greenwood's repudiation of the contract prior to the time his performance was due excuses AFI's abandonment of its responsibilities under the contract. After the repudiation it was no longer necessary for AFI to perform or to tender performance. Nevertheless, it remains a condition precedent to AFI's right to recover damages under the contract that AFI prove that it would have had the willingness and ability to perform if there had been no repudiation. See 4 Corbin on Contracts § 978; 11 Williston on Contracts § 1334 at n. 4. See also the description of plaintiff's proof in Waters v. Weintraub, 255 Ala. 530, 52 So. 2d 510, 514 (1951). On this point, AFI has failed to shoulder its burden. AFI has not proved that at the time of Greenwood's repudiation it had the ability to perform substantially its responsibilities under the contract.

 The evidence is uncontradicted that by the end of 1974 AFI's financial situation was bleak. AFI had been unable to pay players who had participated in the 1974 season, the corporation's liabilities exceeded 1.5 million dollars, the team had been forced to vacate its coaches' offices for non-payment of rent, and the team uniforms had been repossessed following the championship game. Giving AFI the benefit of every doubt, these factors may not have made it an absolute certainty that AFI would be unable to perform its duties to Greenwood under the contract. But, these difficulties were compounded by AFI's loss of its professional football league franchise. It was shown by a fair preponderance of the evidence that in early 1975, the WFL acted to stabilize its own shaky financial position by terminating AFI's franchise and revoking AFI's league membership.

 Although AFI now contends that this termination was unfair, the WFL's right to take such action was spelled out in the Membership and Franchise Agreement signed by AFI and the WFL on January 13, 1974 (Def. Exhibit BB). That agreement conditioned AFI's membership in the league on the payment of a $500,000 entry fee, which was scheduled to be paid in a series of installments, and an initial operating assessment of $100,000. In Paragraph 8.6, AFI agreed that any failure to meet these obligations could subject AFI to


"revocation of WFL membership, revocation of the WFL franchise, and forfeiture to the WFL of all tangible and intangible assets necessary to operate a WFL football club in AFI's territory."

 The WFL By-Laws specifically define the "assets necessary to operate a WFL club" as including players' and coaches' contracts. By-Law 8.1.3 (Court Exhibit No. 1; Def. Exhibit AA).

 On October 17, 1974, the WFL notified AFI that AFI was in default on payments to the league totalling $151,635.97 and that AFI's membership would be terminated and its franchise revoked unless the default was cured by October 21, 1974 (Def. Exhibit C). AFI responded by stating that it would appeal the default decision, and AFI subsequently requested a conditional reinstatement. This reinstatement was granted until the meeting of the WFL Board of Governors scheduled for January 16, 1975 (Def. Exhibit I). At that meeting, according to the WFL's minutes, a resolution was adopted declaring that the WFL membership and franchise held by AFI was in default on its league payments and that therefore the membership was cancelled, the franchise terminated and the territory released. The League President was authorized to take appropriate action to issue a new membership including the Birmingham territory to another entity (Transcript, pp. 329-330). Approximately one week later, the League President and the League Secretary announced to the press in Birmingham that the franchise of the Birmingham Americans had been revoked (Transcript, p. 334).

 In a letter to the League President, AFI Chairman Putnam took exception to the statements that the WFL had taken over the Birmingham franchise (Def. Exhibit M), and in a subsequent telegram to the WFL, Putnam objected to the minutes of the January meeting as inaccurate. At the Board of Governors meeting on February 13, 1975, Putnam's telegram was read and a resolution was adopted stating:


"the cancellation of the WFL Membership previously held by Alabama Football, Inc., the termination of its Franchise and the release of its Territory (Birmingham, Alabama) is hereby ratified, confirmed and approved;"

 (Def. Exhibit N).

 AFI argues that the termination was improper, but admits that it has never challenged these actions by the WFL, and the fact remains that the termination left AFI without a franchise in a professional football league. AFI also argues, in post-trial briefs, that there is no proof that the WFL ever formally invoked the forfeiture penalty which would cause all of AFI's assets including the contracts of players and coaches to be forfeited to the WFL. Although Greenwood has introduced no evidence to prove that a formal resolution was adopted by the WFL invoking the forfeiture option, testimony on behalf of AFI supports the view that such a forfeiture in fact did occur. AFI's Chairman Putnam testified that in February 1975, a separate corporate entity operating as the Birmingham Vulcans took over the assets of AFI by paying $25,000 to the WFL (Transcript, p. 109). AFI's team, the Birmingham Americans, operating under Coach Jack Gotta had conducted their 1974 pre-season training camp at Merian Institute in Birmingham. Putnam testified that the Birmingham Vulcans opened their training camp at the Merian Institute in June, 1975 with "Jack Gotta and the coaches and the same players that were there in '74." The difference was that the corporate entity AFI was not part of the 1975 training camp (Transcript, p. 108).

 The termination of AFI's professional football franchise frustrated the object of AFI's contract with Greenwood. There is no evidence that Greenwood caused AFI's insolvency, nor is there any evidence that either party contemplated or assumed the risk of franchise termination when the contract was signed. This would appear to be an appropriate situation for application of the doctrine of commercial frustration recognized in Section 288 of the Restatement of the Law of Contracts.3 Indeed, in a case involving a contract between AFI and another prospective WFL football player, the United States District Court in Dallas, held:


"It is undisputed that the dissolve of Alabama [Football,] Inc.'s team and the World Football League has made performance of the remaining unexecuted four-fifths of the contract impossible. Accordingly, the parties are excused from further performance in compliance with the contract."

 Alabama Football, Inc. v. Wright, 452 F. Supp. 182, 185 (Civil Action No. CA-3-75-1545-D; October 20, 1977, N.D. Texas).

 The particular contract at issue between AFI and Greenwood, however, is governed by the law of Alabama, and this court is reluctant to apply the doctrines of commercial frustration or impossibility without precedent from the courts of that state. We have found no such authority dealing with commercial frustration or with impossibility of performance in a situation similar to the instant case. Nevertheless, in light of AFI's failure to prove its ability to perform at the time of the repudiation, AFI is precluded from any recovery of damages. Alabama law does allow AFI to seek restitution of the consideration paid to Greenwood. See 4 Corbin on Contracts § 979.


 Under a theory of restitution, AFI seeks return of the $50,000 paid to Greenwood as a bonus. Greenwood argues that restitution is not available to AFI because, in exchange for the $50,000, he executed the contract and thereby rendered the agreed equivalent performance which corresponded to the payment of the bonus.

 Greenwood submits that the bonus was paid as a "signing bonus" as that term is customarily used in professional sports to mean a bonus paid to the player for his merely executing the contract. In support of this position, Greenwood points to notations on the two checks totalling $25,000 which were prepared and issued by AFI's President on May 31, 1974, and which were given to Greenwood at the time he signed the contract. One check, made out to a third-party on Greenwood's behalf, bears the notation "Part bonus for signing contract (L.C. Greenwood)" and the other check, made out to Greenwood personally, indicates "Bonus for Contract" (Def. Exhibit II). AFI argues that the contract was not divisible, but rather was one entire contract calling for a total compensation of $375,000 in exchange for three years of service as a professional football player.

 Paragraph 3 of the standard WFL Player's Contract signed by Greenwood and AFI is labeled "Compensation" and reads as follows:


"Except as modified by any other paragraph of this Contract, Club will pay to Player, for his performance described hereunder the following salary:"

  In Greenwood's contract with AFI, the following terms were typed into the blank on the contract form: "$25,000.00 Bonus due upon signing - $25,000.00 due Sept. 1, 1974 April 1, 1975 $25,000.00 Bal due on Bonus 1975 $ 90,000.00 1976 $ 100,000.00 1977 $ 110,000.00" n4


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