Shawne Merriman’s Lights Out Xtreme Fighting Faces Legal Issues

Shawne Merriman, the former NFL player, established Lights Out Xtreme Fighting in April 2019 with the aim of creating a unique mixed martial arts brand, distinct from giants like the UFC and Bellator. Since then, the organization has made notable progress, incorporating innovative AI technology for match advertising and securing a broadcast deal with ESPN for various Latin American markets.

However, a significant change occurred on January 8th. Lights Out Sports announced that Applied Real Intelligence (ARI), which is known as a key investment firm focusing on growth capital for North American innovators, acquired a majority stake in the company.

A press release indicated that Dr. Zach Ellison has been appointed as the new Chairman of the Board, President, and CEO of Lights Out Sports. He is expected to handle strategy and governance as the company moves into its next growth phase. “Wealth doesn’t grow on its own. Leadership does,” Ellison emphasized. “Lights Out has an incredible chance to expand its platform through live events, streaming, and strategic partnerships.”

Interestingly, Merriman expressed surprise over the announcement. “It was so sudden. I was just removed from the board without much warning,” he remarked. “We were working on solutions, but I guess that wasn’t even an option for them. This feels unnecessary. My thoughts are with the team and the fighters every single day.”

According to Merriman, the conflict arose from a loan agreement with ARI. A lawsuit was filed on January 26th against ARI Agent, LLC and ARI Senior Secured Growth. The documents reveal that Lights Out had borrowed $2.1 million in May 2024 but failed to make timely interest payments, totaling around $50,000 late last year. While the loan is secured against the company’s assets, including intellectual property, ARI claimed no ownership interest in Lights Out.

Merriman’s legal team highlighted that the loan agreement preserved his voting rights and ownership equity. It stated that ARI had issued a notice of default for the loan on January 2, which allowed them to act on behalf of the company under power of attorney provisions.

In a significant turn, ARI removed Merriman from the board, altered its corporate structure, and placed Ellison as a director, effectively creating a pathway for stock conversion. Merriman’s legal representatives argued against ARI’s authority to manage or govern the company without a legal foreclosure process.

Moreover, Merriman sought declarations affirming that ARI was not a legitimate director of Lights Out. He also requested legal fees and costs from the court.

In response, ARI moved to transfer the case to the federal court, citing jurisdictional issues, which was ultimately denied by Chief U.S. District Judge Andrew P. Gordon, who ordered the case back to state court. ARI was instructed to comply with the demand for payment of Merriman’s attorney’s fees, leading to a new lawsuit on February 20.

Merriman reiterated his desire to recover the initial investment as planned and to move forward quickly. “I’m not looking for a fight; they take time and resources that many people depend on. My team had opportunities elsewhere, yet they chose to stay because they believed in our vision. It’s genuinely upsetting that this situation is affecting so many lives,” he reflected.

As events unfolded, ARI’s lawyers countered Merriman’s claims, arguing that the situation is not an unfair seizure but rather a question of distressed loans. They noted that Merriman had knowingly agreed to the terms allowing ARI to possess control over the company.

The filings revealed that if Merriman defaults, ARI reserves the right to act as if it were the full owner of Lights Out. Furthermore, ARI’s legal arguments suggested that Merriman, having admitted to default, lacks grounds for emergency relief.

A decision on the matter is anticipated soon, possibly by Friday.