OT: State of Maryland sues ACC

Submitted by MaizeAndBlueWahoo on January 14th, 2014 at 12:18 PM

http://www.testudotimes.com/2014/1/14/5307746/maryland-acc-lawsuit-counterclaim

So the state of Maryland has filed suit against the ACC, claiming, as best as I can tell, that the ACC attempted to recruit B1G teams to make the switch.

I'm no lawyer, but as far as I can tell, the claim is based on the idea that that would have caused harm to Maryland.  (Otherwise why file.)  So....it seems to me that Maryland (through the state and the AG) is claiming that when a team leaves a conference, it causes harm to the teams in the conference.  Which would really not help them make their case that they shouldn't have to pay the exit fee to the ACC.

Comments

Carl Alphonse

January 14th, 2014 at 12:34 PM ^

@ESPN_BigTen is reporting that the ACC tried to poach 2 teams - Penn St is the obvious candidate but who is the other?

Also odd that ESPN is reporting on this considering Maryland is accusing them of wrongdoing - they normally blackout anything that could possibly cast ESPN in a negative light.

 

NittanyFan

January 14th, 2014 at 2:40 PM ^

that's the scuttlebutt on some other boards.  The Wake Forest AD used to work at Northwestern, so there's a connection for why Wake would have done the contacting.

 

Approaching both Penn State and Northwestern does make some sense from the ACC POV:

 

(1)  Penn State as a big state school with a traditionally good football team would appeal to a certain portion of the ACC (Florida St, Clemson, Virginia Tech, Notre Dame?).  

 

(2)  Northwestern as a private school with a very strong academic profile would appeal to a completely different portion of the ACC (Wake, Duke, Syracuse, Notre Dame?).

kevin holt

January 14th, 2014 at 12:36 PM ^

Well, it's a counterclaim, not an independent lawsuit.  So it's still an affirmative charge (i.e., they're suing and need to prove it like it was an independent claim), but it's kind of attached to the suit the ACC filed against Maryland.  That might explain why they would file it in the first place.  If it was independent of the other case, I doubt they'd do it, but it's more like "Oh yeah, you're gonna sue me? Well then I'll sue you back because you've done some shit too!"

So that means it's not necessarily true that they're contradicting themselves, but I don't know. I don't think your assumption necessarily follows.  I would really have to read the pleadings to know for sure, and don't really trust an SBNation article for completely accurate legal journalism (not saying they're wrong at all, just saying it's incomplete information to make any conclusions on the case).

Strong disclaimer: I'm [not a girl,] not yet a lawyer

BiSB

January 14th, 2014 at 12:40 PM ^

They're arguing that (a) the exit fees were increased in violation of the ACC rules a while back, (b) that the exit fees are punitive and anti-competitive, and (c) the attempts to recruit other schools from the B1G to the ACC constituted retaliation (which isn't really a thing) and unfair trade practices.

They... won't win.

kevin holt

January 14th, 2014 at 12:51 PM ^

So I assume they're just seeking to enjoin them from continuing to seek the exit fees (or at least the increased fees)? Wouldn't that just come up as a defense, not an affirmative counterclaim?

I can see the first two you stated being plausible. I mean, if the fees were increased against the rules then totally. Saying the fees are punitive and anti-competitive makes sense I guess but is not really that strong.  I mean, there are fees for exiting a contract all the time (buyout clause, etc.) as long as they aren't excessive. The third claim... lolno.

GoBLUinTX

January 14th, 2014 at 1:09 PM ^

As I understand it the ACC held a vote in September 2012 to increase the conference exit fee from $15M to $50M.  Maryland and FSU voted no feeling that the exit fee was unfair .  November 2012 Maryland announced its intention to accept the B1G invitation.   Sounds to me that Maryland said to the ACC that it wasn't going to be held in bondage and that they were leaving, and then they did.

They may not win the counter-recruiting claim, but that isn't really what this is all about.

MaizeAndBlueWahoo

January 14th, 2014 at 1:22 PM ^

I've never felt Maryland had a case by arguing "we didn't vote for that."  Membership in an association of any kind implies a willingness to abide by its bylaws.  Besides that, all the ACC would have to do is bring up one single case in its past where Maryland voted against something but abided by it anyway and it would torpedo the whole argument - or even a case where Maryland voted for something and expected the schools against it to abide by it.

Huma

January 14th, 2014 at 4:32 PM ^

I actually think Maryland has a pretty good case by arguing it didn't vote for the increase to $50M in exit fee -- if it didn't vote for that change then it is hard to say the ACC and Maryland actually had a contract in place that provided for a $50M exit fee.  Why is this important --- well, the entire basis of the ACC claiming Maryland owes $50M is based on breach of a contract (for $50M in liquidated damages).  Maryland's position is that the new $50M exit fee was never part of the contract that Maryland and the ACC had each agreed to.   If Maryland is correct, then the likely scenario is that the old exit fee is reinstated.  

If I was a betting man I would bet on the Maryland position.  This doesn't mean that Maryland won't owe some exit fee, it will just mean that the ACC can't unilaterally impose the $50M exit fee.  There are probably a lot of other terms and conditions in the bylaws that govern changes to the "deal" between the ACC and its members, so I am sure the issue is much more complicated than this explanation, but because a $50M exit fee is so fundamental to the overal "deal," I wouldn't be surprised if a judge finds that it doesn't apply to Maryland.

I also like Maryland's position that $50M liquidated damages provision is an unenforceable penalty b/c it is not reasonable in proportion to the actual damages the ACC was likely to have incurred.

MaizeAndBlueWahoo

January 14th, 2014 at 6:28 PM ^

But every change to the bylaws doesn't involve a new contract - the contract was entered into when Maryland joined the ACC (or, as is the case, helped form it.)  The $50 million isn't a contract in and of itself, it's just part of the larger agreement.

And there's this.  As I've admitted IANAL, but I did take a business law course for my MBA which was about half contract law, and one of the primary takeaways from the course was: you can enter into a bad contract.  The prof really wanted to make sure we business students understood that the courts don't exist to protect your ass from a bad contract.  Entering into one that you later on don't like doesn't absolve you from fulfilling its terms.

So Maryland, if they want to argue that they didn't breach any contract, they'll have to convince the court that every new change in the bylaws or anything that's voted on is a whole new contract.  And they'll have to convince the court too that their entire time in the ACC between the exit fee and their departure didn't constitute tacit acceptance of the contract - because another takeaway from contract law is essentially that if your actions can be construed as acceptance of the contract, then the contract is valid.

Meaning: let's say I have a two year contract to deliver apples to your grocery store for $X per truckload.  Two years pass and the contract runs out but I continue to deliver apples and you continue to pay me.  Then one day I deliver apples and you take and sell them as usual, but refuse to pay claiming there is no contract forcing you to do so.  The court will side with me and make you pay me the $X because if you didn't want to abide by the contract any more, you had the right to do so but in order to do so, you should have rejected the shipment, not taken the apples and sold them. 

Therefore, in this case, let's say the $50 million construes a new contract - Maryland, if rejecting the contract, would have been obliged to leave the conference immediately and thereby demonstrate with their actions that they did not intend to "accept" the new contract.  The argument that it took two months to find a new conference wouldn't (or shouldn't) hold water, as nothing requires them to be associated with one.  Had they left immediately, it'd be a worthwhile argument - as it is, if I were a betting man I'd bet against you here. 

Betting that by existing in the ACC they have an agreement to abide by its bylaws and votes; that in the past they have abided by votes they did not vote for; that in the past they have expected other schools to abide by votes they did not vote for (for example: Duke and UNC voted against the inclusion of BC, VT, and Miami, yet Maryland obviously accepted the outcome of a Duke-VT basketball game as official); that even if their "new contract" argument is accepted by the court, their failure to immediately reject the deal by leaving the ACC constitutes acceptance; and finally, that associations could not possibly exist if their members could nullify the application of its rules to themselves simply by not voting on them.  Say, for example, the ACC were to vote that a football player would be automatically suspended one game for, I dunno, earning three personal fouls in one game, something that's in their power to do.  If one school voted no, could they then sue to not have their player suspended when that happened?  Of course not, they would never succeed.  I don't see any difference in the $50 million exit fee.

ats

January 14th, 2014 at 9:01 PM ^

Well there are a lot of issues with the ACC exit fee including the process to increase the fees not actually following ACC bylaws in two cases: notification and date of effect.  Then there is the blatant violation of contract by the ACC of withholding revenue and denying Maryland their voting rights under the ACC bylaws.  The withholding of revenue and removal of voting rights show real and valid breach of contract by the ACC which will likely cause any exit fee to be very hard to actually collect legally. 

The ACC really backed themselves into a corner by their actions in violation of the contract.  If the ACC had received proper legal advice they would have either maintained the letter of the ACC contract until formally notified by Maryland that they were leaving OR sent Maryland a formal request for their future status and requested negotiations for legalities and actions going forward.  Anyone who has any inkling of contract law and business relationships knows that especially when two parties are on the outs, you follow the letter of all contracts to a T.  The ACC did not do that in this case and it will likely come back to bite them. 

This will be an example case going forward of what not to do as an organization when a member decides to join another organization.  The ACC did just about everything wrong that they could do wrong.

 

 

Huma

January 15th, 2014 at 8:27 AM ^

The $50M was effectively a proposed amendment to the contract Maryland and the ACC had in place. Maryland is arguing that the ACC can't essentially unilaterally force an amendment to put in place the $50m exit fee if Maryland did not agree. A fundamental aspect of contract law is that there must be an offer and acceptance of the offer - Maryland is saying they never accepted this offer and that the "auto-accept" process in the bylaws done by majority vote should not work for something as fundamental to the contract as a $50M termination fee.

BiSB

January 14th, 2014 at 1:44 PM ^

It's like saying "I didn't vote for Referendum X, so I'm not bound by it." They were a voluntary member of a business association, and if the association modified the terms of the agreement in the manner set forth in the organizations bylaws, them's the breaks.

Essentially, this is a liquidated damages clause. Maryland leaving would harm the organization, and the exit fee is a way to capture those damages. Now, you can argue whether $50M would be reasonable (i.e. they can't make it $100 Trillion and expect it to be enforceable), but they are bound by it regardless of whether they voted for it.

Besides, there is no 13th amendment for businesses.

Meson

January 14th, 2014 at 2:17 PM ^

Part of their argument is that since $50M isn't reasonable, it's punitive which isn't allowed under law. The conference is allowed to set an exit fee to recover a reasonable amount of income from tickets/media. They are not allowed to arbitrarily set the exit fee as a retaliation or penalty. The $50M was set as three times the operating budget for the ACC, which has nothing to do with how much money they'd lose by losing Maryland.

Another part of the claim here was the $3M being witheld by the ACC, which Maryland says isn't allowed because Maryland hasn't formally told them they're leaving: they don't owe the exit fee yet. How can you keep money when the other party doesn't owe you anything yet?

Yet another part of the claim states that the ACC isn't giving Maryland full member rights (such as voting for Louisville, etc.) in retaliation for leaving - since Maryland no longer has their rights (allowed under the bylaws) they shouldn't be bound by the bylaws.

I am not a lawyer and can't comment on whether these legal points stand, but I think these are some of the arguments that they're making.

MaizeAndBlueWahoo

January 14th, 2014 at 2:55 PM ^

WRT to the argument of not formally telling the ACC they're leaving, I think the ACC would certainly argue that formal acceptance of the B1G's offer constitutes the same thing.

IANAL either, but the whole thing really does have the feel of throwing whatever they can think of against the wall in the hope that some will stick.  They are, after all, financially strapped, hence the move in the first place, and won't receive full B1G benefits for a while after joining.

ak47

January 14th, 2014 at 1:00 PM ^

Of course the arguments are dumb,they also filed in a north carolina court, they don't expect to win.  Maryland is going to drag this out and bog it down in attempt to get the ACC to settle for a lower fee.  As long as there is legal proceedings ongoing the ACC will not see a dime of marylands exit fee and Maryland is just ensuring that there will be legal proceedings ongoing for a long time.

gwkrlghl

January 14th, 2014 at 1:13 PM ^

I feel like the "tried to poach" thing is going to get overblown as if University Presidents across the Big Ten were up late sweating over legal paperwork, just inches from signing on the dotted line and joining the ACC. I guarantee no one even seriously entertained this.

"Hey Penn State, come join our conference where you can enjoy less prestige and less money and where barely half the schools are in the AAU and we don't have our own TV network! Maryland's just stupid. That's definitely the only explanation for why the dropped the ACC the minute Jim Delaney called them. How can you say no to us?! We got Syracuuuuse"

MaizeAndBlueWahoo

January 14th, 2014 at 1:29 PM ^

I think Jim Delany was honestly worried PSU would depart for the ACC.  He made some comment, when he announced the additions of Rutgers and Maryland, about "keeping recent additions happy" (I'm paraphrasing, don't remember exactly what he said, but it was that, basically.)  There's no way he meant Nebraska.  Delany wanted East Coast access for TV and if there was even the slightest possibility of Penn State jumping ship, he'd have been outflanked and gotten no access out East whatsoever.