Former EEG CEO Files $3.1M Lawsuit for Breach of Contract

Credit: EEG/Grant Johnson

Former Esports Entertainment Group CEO Grant Johnson has filed a lawsuit against the company in federal court claiming that it breached his employment agreement by terminating his position on Dec. 3, 2022, for “cause” using “contrived reasons.” The lawsuit was filed in the U.S. District Court for the Southern District of New York on Dec. 23. Johnson is being represented by attorney Alan L. Frank, of Alan L. Frank Law Associates, P.C.

Johnson claims that he was terminated for “cause” but the company did not show actual cause when he was terminated; therefore, is owed severance and future compensation. Additionally, Johnson is suing EEG for outstanding compensation from his time at the company regardless of the court’s outstanding judgment on the termination cause’s legitimacy.

Johnson was replaced as CEO by Damian Mathews in December—Mathews resigned in January from the interim post and was replaced by Michael Villani, who joined the company in February of 2021 as financial controller. Villani was finally replaced with a permanent CEO selection in Alex Igelman, the co-founder of advisory firm Esports Capital Corp.

According to the lawsuit, Johnson signed his employment agreement in September 2020, with an initial retroactive term of the period starting February 2020 and ending on Jan. 31, 2025. The five-year agreement included an automatic renewal option of an additional year unless one of the parties expressed a desire to terminate the agreement in writing. According to that agreement, Johnson was supposed to receive an annual base salary of $300K USD, which increases annually at a rate of 3%; a cash bonus based upon the relationship between the EEG’s annual performance and its target performance; and a similar stock bonus based upon “achieving certain metrics.”

The lawsuit takes issue with the nature of Jonson’s termination. EEG terminated Johnson’s employment agreement on Dec. 3, 2022, and gave him the termination letter on the same day citing fraud, willful misconduct, and/or gross negligence as cause for termination. However, Johnson’s lawsuit claims that his termination is void. The reasons provided by the plaintiff are a) EEG did not provide 60-days notice and an opportunity to cure according to his employment agreement, b) the allegations against him would not constitute fraud, willful misconduct, and/or gross negligence even if true, and c) the allegations against him are false as EEG’s board of directors unanimously agreed on April 18, 2022, that no investigation into Johnson based on the same allegations was necessary. As Johnson’s employment can only be terminated for cause or at the end of the agreement term on Jan. 31, 2025, his lawsuit is seeking damages representing compensation of the full term.

Johnson is seeking a cash bonus of $450K for the company’s financial performance in FY 2021 (based on revenues of $16,783,914 against a target of $13M); approximately $1.15M corresponding to 200K shares (100K registered in July 2021 at a price of $10.50 per share, and 100K registered in March 2022 at a price of $1 per share); base compensation of $300K plus 3% annual increases on the two remaining years of his employment agreement and compensation related to unpaid 3% increases for 2021 and 2022; severance of $355,350 and $366,010, as well as employment benefits worth $14,232 annually for the full five years of the agreement; a one-time payment of $14,946 for vacation and personal days; and an “amount in excess of $75,000, plus interest, costs, attorney’s fees, and such other relief as the Court deems just and proper.”

In total (excluding attorney’s fees) Johnson is seeking damages of approximately $3.1M in his lawsuit.

On a related note, EEG filed a form S-1 with U.S. Securities and Exchange Commission on Friday for an option to sell additional shares of common stock—price range and the amount of shares to be offered were not included in the filing.

TEA has reached out to Johnson, his attorney, and EEG for further comments and will update this article should they respond.