OT - Washington Post Article on Maryland/ACC legal situation
Figured a subject change from the IU game was in order. Not sure how extensively this has been discussed, but there's an article in the Washington Post from a few days ago about Maryland leaving the ACC and the legal battle involved. Basically, Maryland wants to argue that the exit fee is punitive, not compensatory, which makes it illegal, and they never had a chance to opt out of it and go elsewhere - so an anti-trust argument. The ACC has actually cut Maryland off from its royalties, I guess in an attempt to starve them out. If the fee gets overturned, it sounds like Armageddon for certain conferences (ACC, largely), and could have ripple effects down the line that would be unpleasant. Link.
February 3rd, 2013 at 1:14 PM ^
February 3rd, 2013 at 1:26 PM ^
What incentive does the ACC have to settle?
February 3rd, 2013 at 1:28 PM ^
To avoid the risk of the whole fee being thrown out in court, which would set a precident allowing all other ACC members to just leave.
February 3rd, 2013 at 1:37 PM ^
Half is as good as nothing. If the fee is reduced down to something more manageable by a settlement, then the same exodus is just as likely to occur as if there is no fee at all.
February 3rd, 2013 at 1:58 PM ^
February 3rd, 2013 at 1:34 PM ^
February 3rd, 2013 at 1:36 PM ^
Generally, a penalty clause in a contract is unenforceable. But a "liquidated damages" provision usually is enforceable, so long as two things are true: (i) the damages it is meant to compensate for are difficult to predict or quantify, and (ii) the amount is reasonable in proportion to what those actual damages would be.
I don't really know the numbers on these things, but $50 million doesn't sound all that unreasonable in terms of the damage Maryland's departure would cause the ACC.
February 3rd, 2013 at 2:07 PM ^
In determining the amount of a reasonable fee, wouldn't the ACC have to establish why the exit fee jumped from what it was before to the new number?
Seems to me that in the future it might make sense for conferences to have a substantial fee to join spread over several years and coming out of revenue, which I what I believe the B1G did with Nebraska and a small, but legally enforceable, exit fee.
I also believe this gets settled. It is a high stakes game that would seem to be potentially more deleterious to the ACC should they lose than it would be to Maryland who may have a big dollar suitor with Under Armour and who will share in a vastly larger revenue stream.
February 3rd, 2013 at 3:10 PM ^
Maryland could certainly point to the large increase in the amount of the exit fee as evidence that the purpose behind the fee is to deter teams from leaving, and not as a genuine attempt to forecast the damages.
February 3rd, 2013 at 2:21 PM ^
but they aren't leaving until 2014, and Lousiville is probably at least as valuable an athletic property as Maryland, and came in right away to replace them.
February 3rd, 2013 at 3:23 PM ^
As a graduate of Louisville's law school, I will not object to this (even though I think Maryland probably has a stronger overall repuation as an institution of higher learning).
February 3rd, 2013 at 5:11 PM ^
Sorry, it's not a probably. Maryland does have a stronger reputation academically.
Also, sorry for the B1G, Louisville is a much more valuable athletic program.
February 3rd, 2013 at 1:54 PM ^
So, here's the ACC's initial lawsuit - (LINK)
I'm not a lawyer, but in the original suit, the ACC asks for a declaratory judgment on the rights and liabilities of the University Of Maryland as the pertain to certain portions of the ACC's constiution, or more succinctly, if they can get the money (the declaratory relief, I assume).
It seems to me that if the conference is withholding royalties because Maryland won't pay the fee (and has a letter to confirm that this is the intent, as another Post piece indicates), then isn't the ACC sort of ignoring its own official complaint by doing this? Technically, they might be able to do such a thing (as many conferences provide for means to financially penalize their members for wrongdoing), but it seems obvious that this is sparked by bad will on the part of the ACC.
Here's the Washington Post's Terrapins blog, which has some information on Maryland's lawsuit. The entire entry is an interesting read,but here's what appears to be the meat of it:
"Gansler’s lawsuit, which was filed in Prince George’s County Circuit Court, alleges that the ACC violated Maryland antitrust lawsuits, “breached contractual obligations and tortiously interfered with the prospective economic advantage of the flagship campus of the University of Maryland System.”
Part of me thinks that they eventually settle on something, because in the event the ACC found itself on the losing side of a ruling, it would mean that teams could just, well, leave, and I doubt they want this.
February 3rd, 2013 at 1:59 PM ^
Part of me thinks that they eventually settle on something, because in the event the ACC found itself on the losing side of a ruling, it would mean that teams could just, well, leave, and I doubt they want this.
Again though: no reason whatsoever to settle. If anyone else is looking elsewhere, then a settlement only encourages those schools to look even harder, knowing they can get out for peanuts too. The ACC is doing the smart thing by making the whole process as ugly and ruthless as possible: it's win or bust, and there's nothing at all to be gained by settling amicably.
February 3rd, 2013 at 2:21 PM ^
It is not risk-free for the ACC to not settle. The schools that are going to leave will do so, no matter what. They have big dollar suitors like the Big Ten. Maryland is not going to stay in the ACC, period.
If the ACC settles, it can still get a very large payment. If it loses the suit, it gets much less/nothing and still loses the school.
The refusal to settle is not an effective deterrent. It will not keep UVA out of the Big Ten or VA Tech out of the SEC.
February 3rd, 2013 at 3:16 PM ^
I think that is Maize & Blue Wahoo's point. The only possible deterrent may be the fee itself. So if you are in the ACC's shoes, you have to insist on it. The fee may well be unenforceable, but it's your only shot.
February 3rd, 2013 at 3:42 PM ^
February 3rd, 2013 at 3:30 PM ^
but you play one on Mgoblog, doing a fine job at it, too.
peremptory breach of contract and/or withholding of receipts without a proper security interest by the ACC and if so they could get quite a thrashing in court. shows a real level of aggression and/or desperation. i'm not sure this ends well for the ACC, but maybe we could pass the hat and beg the ACC to hang in there and keep maryland in their conference. still a stupid pick-up by the big-(insert variable here) conf.
February 3rd, 2013 at 5:05 PM ^
Never underestimate the power of the jurisdictional battle that will take place before the merits of the case are reached. A settlement might be reached based on that outcome alone.
The ACC will have to show irreparable harm in order to enjoin Maryland's move to the B1G. They'll never be able to do that, since they also have to argue that the the 52 million exit fee is in fact reasonable compensation. There is ample precedent that money damages do not constitute irreparable harm. They can't walk away from that issue without walking away from the entire case.
So Maryland will be a B1G member in 2014 come hell or high water. There will be no injunction.
By the time the case reaches trial, there will be numbers on the ACC's actual damages, because Maryland will be gone by then. The conference would have to show that its exit fee is reasonable based on those numbers and projections based on the numbers. It won't be able to do that, all the schools will be making more money under the 2012 extension of TV rights. 52 million will be very hard to justify and will appear to be a penalty.
If it is clear from those numbers that the ACC will suffer no loss at all, then Maryland wins or gets out on the cheap.
This might be dangerous precedent for the ACC. I wouldn't bet on the ACC in this one, and that's why it'll be settled.
It would be very interesting to see the projections that were given to Louisville to encourage their ACC membership.