Conference exit fee lawsuits
It was hardly an unfamiliar story — in November, another school decided to switch athletic conferences for more money and security. Nothing unprecedented.
But the stakes were different. University President Wallace Loh’s November announcement that the Terps would join the Big Ten in 2014 rattled the ACC. Though all conference realignments have been settled out of court, some legal experts said the lawsuits between the ACC and the university could be drawn out for months or even years.
Between the ACC’s recently signed grant of rights deal, the possibility the conference violated its constitutional bylaws, the highest-ever exit fee and both sides’ desires to fight lawsuits in their home states, experts said, it seems the ACC and the university are both prepared for a drawn-out legal battle.
Just a week after Loh’s announcement, the conference filed a lawsuit in North Carolina — where its headquarters are located — to ensure the university would pay the entirety of its $52 million exit fee. By January, the state had filed its own lawsuit in Prince George’s County on behalf of the university; that suit argues the ACC violated antitrust laws and its constitutional bylaws when it hiked its exit fee in September. Both the state’s and the ACC’s lawyers presented preliminary arguments a week ago.
“At the end of the day, it’s always about the money,” said Bradley Shear, a sports lawyer and sports management professor at George Washington University. “It literally just comes down to economics and money and ensuring that both parties are protected financially.”
ACC GRANT OF RIGHTS DEAL
The ACC argues in its North Carolina lawsuit that this university’s departure weakened it financially. A member’s withdrawal leads to conference instability, the ACC has argued, and could hamper its ability to negotiate a lucrative TV deal.
In April, though, ACC Commissioner John Swofford convinced all 15 members — including new additions Syracuse, Pittsburgh and Louisville — to hand over their media rights to the conference until 2027. That means the schools themselves cannot negotiate their own TV deals, even if they switch conferences. It essentially keeps the conference intact for at least 14 years.
The ACC is now financially stronger than it ever was with this university as a member, said Jeremi Duru, a leading sports law expert, and that could weaken its argument that it needs the exit fee to compensate for damages incurred by this university’s departure.
In September, the ACC’s Council of Presidents approved an exit fee hike from $21 million to $52 million — three times the ACC’s operating budget of about $17 million. Loh, along with Florida State President Eric Barron, opposed the fee for “legal and philosophical reasons.” Loh called the fee punitive and illegal.
The new financial security, however, could decrease the ACC’s urgency to settle, Duru said. Attorney fees won’t strain the conference, he said, leaving less reason to end the lawsuits.
“I’m not sure they think they have a whole lot to lose,” Duru said of the ACC. “They’re more likely to fight this thing through.”
POTENTIAL VIOLATION OF BYLAWS
The state argues in its lawsuit that the ACC did not follow proper procedures to implement the increased exit fee, which, if proven true, could alter the nature of both cases, Shear said.
Because the increased exit fee did not go through the ACC’s constitution and bylaws committee before the vote, and members did not receive a copy of the constitutional amendment 15 days before the September meeting, the fee is not enforceable, Maryland Assistant Attorney General John Kuchno argued last week.
If a judge upholds that argument — the state’s strongest, Shear said — the ACC will have to revert to its old exit fee.
“If their own constitution was not properly followed,” Shear said, “it would be very difficult for them to win, at least in Maryland court.”
And that would also push the conference to settle out of court on a fee that is more favorable toward the university, Shear said.
While there’s no telling whether such a ruling would affect the ACC’s North Carolina case, Shear said it likely would because it changes both cases’ facts.
“If Maryland followed the constitution of the conference … then Maryland’s case should be strengthened, whether it’s in North Carolina or Maryland,” Shear said. “Wherever the case is eventually adjudicated, it should come down to the facts.”
“HOME COOKING”
While in theory it shouldn’t matter where a lawsuit takes place, both sides are likely looking to fight in their home states, experts said.
Similar lawsuits ensued when West Virginia left the Big East for the Big 12 in 2011 — the university filed a suit to forgo its waiting period, and the Big East filed a suit in Rhode Island,where it’s headquartered.
Shear likened it to home field advantage in sporting events. The crowd is more likely to be rooting for the home team, and the referees may be more inclined to make favorable calls. It’s unproven whether that same advantage exists for court cases, but parties often rush to file suits at home.
“Obviously everyone wants home cooking,” Shear said. “When people file lawsuits, they always have the mind-set that the judge doesn’t want to anger local communities.”
And because the exit fee would be the highest in history, the university is unlikely to concede anytime soon, Shear said. That means there’s no predicting how long it will take for the two sides to settle outside of court, he added, or whether they’ll settle at all.
But a drawn-out lawsuit isn’t in either party’s best interest because of mounting attorney fees, experts said.
“The longer this thing wears on, the more fatigue there will be on those who are interested in following ACC and Maryland athletics,” Duru said. “A lawsuit’s not good for anybody.”
