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PumpkinFunk
11-27-2012, 03:11 PM
The ACC filed a lawsuit in a North Carolina court seeking a declaratory judgment, presumably of breach of contract, seeking payment of the exit fee (liquidated damages?).

Link to news story: http://www.dukechronicle.com/article/acc-files-lawsuit-against-maryland-monday

I'm sure there's some finer legal minds here who know more contract law than I do, but this feels like it's a tough case. The general principle is that liquidated damages cannot be punitive, and there's good reason to question if the exit fee is punitive. Will be interesting to follow, that's for sure.

rthomas
11-27-2012, 04:22 PM
It is pro forma for the conference to sue the school that is leaving the conference. Happens every time.

BD80
11-27-2012, 04:23 PM
The ACC filed a lawsuit in a North Carolina court seeking a declaratory judgment, presumably of breach of contract, seeking payment of the exit fee (liquidated damages?).

Link to news story: http://www.dukechronicle.com/article/acc-files-lawsuit-against-maryland-monday

I'm sure there's some finer legal minds here who know more contract law than I do, but this feels like it's a tough case. The general principle is that liquidated damages cannot be punitive, and there's good reason to question if the exit fee is punitive. Will be interesting to follow, that's for sure.

Is Maryland collectible?

kingboozer
11-27-2012, 04:23 PM
This ruling could make teams like FSU and Clemson stay put. I for one hope the fee holds firm or the ACC may go the way of the Big East.

BD80
11-27-2012, 04:27 PM
... the ACC may go the way of the Big East.

You mean to New Orleans?

http://espn.go.com/college-sports/story/_/id/8682572/tulane-join-big-east-conference-all-sports-east-carolina-join-just-football

tbyers11
11-27-2012, 04:52 PM
You mean to New Orleans?

http://espn.go.com/college-sports/story/_/id/8682572/tulane-join-big-east-conference-all-sports-east-carolina-join-just-football

And Greenville. I think about the fuss that Jim Boeheim would put up if he had to travel to Greenville, NC for a basketball game and then I remember that he'll be in the ACC by then.

jimsumner
11-27-2012, 05:22 PM
And Greenville. I think about the fuss that Jim Boeheim would put up if he had to travel to Greenville, NC for a basketball game and then I remember that he'll be in the ACC by then.

Well, hopefully someone would have reminded Boeheim that ECU was a football-only member of the BE and save him the trouble. :)

tbyers11
11-27-2012, 07:14 PM
Well, hopefully someone would have reminded Boeheim that ECU was a football-only member of the BE and save him the trouble. :)

Now if I had only read past the headline of the linked article...

Thanks for pointing that out Jim

OldPhiKap
11-27-2012, 08:14 PM
Is Maryland collectible?

The defense lawyer in me says: "bwahaha!"

The plaintiff lawyer in me says: "hmmmmm......"


The cynic in me says: "boy, it would be funny to have Alaska -- er, I mean Marland -- taxpayers subsidizing sports in the Triangle. "


But mainly, I say: "screw the Twerps, don't let the door hit you in the rump!"

UrinalCake
11-27-2012, 08:30 PM
Ok, I need someone to explain this to me. What grounds does Maryland have for NOT paying the exit fee, if it is something that was approved by the ACC by majority vote?

MChambers
11-27-2012, 08:42 PM
Ok, I need someone to explain this to me. What grounds does Maryland have for NOT paying the exit fee, if it is something that was approved by the ACC by majority vote?
It has been suggested that the exit fee is what is known at common law as a liquidated damages clause. At common law, the party seeking to collect liquidated damages must show that knowing the actual damages at the time of contract was difficult and also must show that the liquidated damage amount is a reasonable approximation of the actual damages.

It's not my area of law, so I haven't thought about this for many years.

Frankly, if the ACC and its members want to agree to an exit fee, I don't understand why a court should second guess the amount of the fee.

dukeofcalabash
11-27-2012, 09:19 PM
It has been suggested that the exit fee is what is known at common law as a liquidated damages clause. At common law, the party seeking to collect liquidated damages must show that knowing the actual damages at the time of contract was difficult and also must show that the liquidated damage amount is a reasonable approximation of the actual damages.

It's not my area of law, so I haven't thought about this for many years.

Frankly, if the ACC and its members want to agree to an exit fee, I don't understand why a court should second guess the amount of the fee.

Are you sure that you are a lawyer? They are not known for the "common sense" in my area! In either case, I agree with you --- a deal is a deal.

BD80
11-27-2012, 09:59 PM
Are you sure that you are a lawyer? They are not known for the "common sense" in my area! In either case, I agree with you --- a deal is a deal.

Maryland never "agreed" to the "deal."

At issue is the $50 mil just voted in (with ND) that Md voted against. It is a battle worth fighting. Md can justifiably argue that the bump in the exit fee was punitive, designed to discourage leaving.

FerryFor50
11-27-2012, 10:04 PM
Maryland never "agreed" to the "deal."

At issue is the $50 mil just voted in (with ND) that Md voted against. It is a battle worth fighting. Md can justifiably argue that the bump in the exit fee was punitive, designed to discourage leaving.

Well yes, they could. But they were also a member of a conference that voted a majority to institute the fee. Maryland didn't likely vote for it because they've had designs on leaving for a while now.

Being a part of a conference means you don't always get what you want.

blazindw
11-27-2012, 10:37 PM
Well yes, they could. But they were also a member of a conference that voted a majority to institute the fee. Maryland didn't likely vote for it because they've had designs on leaving for a while now.

Being a part of a conference means you don't always get what you want.

Agreed. For those teams that voted against the initial expansion, when the teams were admitted anyway, could they say "No, we're not playing them"? Nope. Being part of a conference doesn't mean that when rule changes don't go your way you don't have to abide by them.

BD80
11-27-2012, 10:58 PM
An interesting article on Md's financial situation:

http://sportsillustrated.cnn.com/2012/writers/the_bonus/11/26/maryland-athletics/index.html?sct=hp_t2_a14&eref=sihp

FerryFor50
11-27-2012, 11:05 PM
An interesting article on Md's financial situation:

http://sportsillustrated.cnn.com/2012/writers/the_bonus/11/26/maryland-athletics/index.html?sct=hp_t2_a14&eref=sihp

From that article, NCSU should be very concerned....

uh_no
11-27-2012, 11:13 PM
An interesting article on Md's financial situation:

http://sportsillustrated.cnn.com/2012/writers/the_bonus/11/26/maryland-athletics/index.html?sct=hp_t2_a14&eref=sihp

Pretty Damning of Yow...does she rub everyone the wrong way?

UrinalCake
11-28-2012, 12:23 AM
Thanks for all who responded to my question. Unfortunately, to this software engineer with zero knowledge of law, none of them make any sense to me. The exit fee must be equal to liquidated damages? Why? I thought it was just a fee. Like the fee my cell phone carrier charges if I decide to break my contract and go to a different carrier. Maryland is arguing that the fee is "punitive and intended to discourage leaving"? Of course it is! That's exactly what the fee is intended to be. How does that constitute an argument for why they shouldn't have to pay it?

Again, I think I'm missing something. Because most of the people that I read seem to assume that Maryland is going to win this suit, or that a settlement will be reached in which they pay a substantially reduced fee.

OldPhiKap
11-28-2012, 07:33 AM
Do not know NC law, but the test of validity is usually whether the amount is a reasonable pre-estimate of damages. I would want to look at the discussion around its implementation to raise a good defense if I was so inclined.

Louisville joining may help mitigate damages as well. Depends on NC law.

Mike Corey
11-28-2012, 07:40 AM
Whether or not the ACC will win is likely a moot point.

I have little doubt the Big10 presented Maryland with a plan that made defecting to the Big10 worthwhile no matter any potential loss in this predictable suit over $50 million.

PumpkinFunk
11-28-2012, 07:48 AM
Thanks for all who responded to my question. Unfortunately, to this software engineer with zero knowledge of law, none of them make any sense to me. The exit fee must be equal to liquidated damages? Why? I thought it was just a fee. Like the fee my cell phone carrier charges if I decide to break my contract and go to a different carrier. Maryland is arguing that the fee is "punitive and intended to discourage leaving"? Of course it is! That's exactly what the fee is intended to be. How does that constitute an argument for why they shouldn't have to pay it?

(I'm saying this with my limited knowledge from my 1L Contracts class last year... so take it with a grain of salt) As OldPhiKap said, the traditional rule is that the liquidated damages be a reasonable estimate of damages at the time they were set. They cannot be much higher than the estimate of damages, because that would be a punitive measure rather than a fair estimate of damages. Of course, here's the kicker: I'm pretty sure that the reasonableness of the liquidated damages is a matter of law, decided by judges, which is why it's so important for the ACC to have filed suit in North Carolina rather than in federal court. I have no doubt that Maryland will almost immediately try and remove it to federal court specifically so that it can avoid elected North Carolina judges from deciding on it. Anyway, Maryland at least has a strong argument to be made that the damages were meant to be punitive rather than a reasonable estimate of damages at the time they were made. But it's hard to know for sure.

Reilly
11-28-2012, 08:18 AM
...

Louisville joining may help mitigate damages as well. ...

Trading rioting, sour couch burners for folks who know how to p-a-r-t-y in closed restaurants (at least for 15 seconds) ... we've stepped up in the world and not been damaged at all.

UrinalCake
11-28-2012, 08:19 AM
Ok, so the fee is not a flat amount but rather it is based on the amount of damage caused to the conference by the school leaving. That makes more sense to me. I do have to say in Maryland's defense that it would seem unfair for this to be decided by a North Carolina court. Of course, the NC bias in the ACC has long been a sticking point for Maryland to begin with.

gw67
11-28-2012, 08:54 AM
SORRY! Put in wrong thread. Don't know how it happened because I wasn't reading this thread.

I switched back and forth among several games last night. Some observations:


Michigan and Indiana stood out among the teams. I really like Michigan. They have some very good talent, including four talented freshmen, are well rounded, share the ball, and they are well coached. By the end of the year, they may be better than Indiana.
NC State has talent but is their coach capable of pulling it together as a cohesive team?
UNC looked terrible. I've only seen them play twice but they seem overrated. It won't matter during ACC play because the league is not strong this year.
Sheehy looked to be a better player than uncle Tom who was mainstay for Virginia several years ago.
Maryland defended well and destroyed NW on the boards. By my count, they only made seven jump shots but it didn't matter. They will be a very competitive team during ACC play regardless of what Pomeroy thinks.
Based on the four games I watched, the B1G is the superior league. I'd like to see the ACC do better tonight but I will be surprised if they win more than 5 games.


gw67

mgtr
11-28-2012, 09:05 AM
OK, all I really know about NC State this year is what I have read here. Having watched about half their game last night, I have two observations: I don't understand why NC State is even ranked. The eight teams in the Atlantis tournament were all better, and, second, what in the world is Herrick doing on the NC State sideline? I would have thought that he was restricted to coaching in Burma! And isn't having him associated with your team sort of like waving a red flag in front of NCAA while poking at them with sharp sticks?

sagegrouse
11-28-2012, 09:22 AM
(I'm saying this with my limited knowledge from my 1L Contracts class last year... so take it with a grain of salt) As OldPhiKap said, the traditional rule is that the liquidated damages be a reasonable estimate of damages at the time they were set. They cannot be much higher than the estimate of damages, because that would be a punitive measure rather than a fair estimate of damages. Of course, here's the kicker: I'm pretty sure that the reasonableness of the liquidated damages is a matter of law, decided by judges, which is why it's so important for the ACC to have filed suit in North Carolina rather than in federal court. I have no doubt that Maryland will almost immediately try and remove it to federal court specifically so that it can avoid elected North Carolina judges from deciding on it. Anyway, Maryland at least has a strong argument to be made that the damages were meant to be punitive rather than a reasonable estimate of damages at the time they were made. But it's hard to know for sure.

As a layman, let me offer the following: Twelve member schools, highly sophisticated entities and all well represented by lawyers, have come togetherto participate in an athletic conference with a lot of big-boy member provisions and to work as business partners and athletic competitors. Recently the ACC agreed 10-2 to impose a penalty of $50 million on anyone who leaves the Conference. This is a voluntary agreement among consenting multi-billion dollar educational institutions. I am guessing that the well-vetted motion did not ascribe "liquidated damages" or any other reason.

Why on earth would a state or federal judge find reason to question this agreement? Maryland will argue it is unfair. The ACC will argue: it was enacted properly by the Conference members; Maryland could have left the ACC before the provision went into effect; and that is the end of the story. If necessary, the ACC will say the penalty is not unreasonable given that the ACC oversees sports programs generating way more than $500 million in revenue per year and has media deals in place for multiple years, whose value is threatened by the departure of a member or members.

sagegrouse

hudlow
11-28-2012, 11:37 AM
The ACC filed a lawsuit in a North Carolina court .....

One parting shot at Gary....

uh_no
11-28-2012, 12:38 PM
One parting shot at Gary....

Or it has to do with the fact that the ACC is based in North Carolina...and one of the benefits of filling suit first is that you get to choose where to file. It's a lot easier for the ACC to fight locally rather than going up to anywhere else....It has nothing to do with the school.

BD80
11-28-2012, 01:33 PM
Or it has to do with the fact that the ACC is based in North Carolina...and one of the benefits of filling suit first is that you get to choose where to file. It's a lot easier for the ACC to fight locally rather than going up to anywhere else....It has nothing to do with the school.

Wouldn't something like the agreement governing ACC membership include a choice of forum clause?

77devil
11-28-2012, 02:50 PM
Whether or not the ACC will win is likely a moot point.

I have little doubt the Big10 presented Maryland with a plan that made defecting to the Big10 worthwhile no matter any potential loss in this predictable suit over $50 million.

I'd like to believe that you are giving the MD Board of Regents too much credit.

ForkFondler
11-28-2012, 03:01 PM
Ok, so the fee is not a flat amount but rather it is based on the amount of damage caused to the conference by the school leaving. That makes more sense to me. I do have to say in Maryland's defense that it would seem unfair for this to be decided by a North Carolina court. Of course, the NC bias in the ACC has long been a sticking point for Maryland to begin with.

So, if Maryland is replaceable but FSU and Clemson aren't, is the exit fee adjusted by the damage caused by each individual school?

BigWayne
11-28-2012, 04:27 PM
Wouldn't something like the agreement governing ACC membership include a choice of forum clause?

You would think so, but there is no telling as the bylaws are secret now.


http://tuxedoyoda.blogspot.com/2012/07/august-15-deadline-in-acc-to-notify-for.html

BigWayne
11-28-2012, 05:01 PM
You would think so, but there is no telling as the bylaws are secret now.


http://tuxedoyoda.blogspot.com/2012/07/august-15-deadline-in-acc-to-notify-for.html


I am not an expert on this, but I would imagine that the wording in the by laws, esp. concerning choice of venue
and the exit payment language, would be included as part of the lawsuit filing. Usually these filings get posted online at
some point, where we would get a chance to see what language is in there.

Tried to edit the post above, but couldn't figure out how to do it.

budwom
11-28-2012, 05:28 PM
Whether or not the ACC will win is likely a moot point.

I have little doubt the Big10 presented Maryland with a plan that made defecting to the Big10 worthwhile no matter any potential loss in this predictable suit over $50 million.

It's no doubt a moot point with respect to Maryland leaving. They're gone for sure.
It's hardly moot if the courts nullify or greatly reduce the exit fee, as it could open the way for other departures.
A major loss could be catatrophic for the league.

Mike Corey
11-28-2012, 05:31 PM
I think that's a great point, Budworm. But I think that either way, if these defections are going to happen, $50 million or less is not going to deter people for long-term gain if they can be sold that such gain is there.

Whatever happened was enough to convince Maryland. Unless the ACC has some leverage--and maybe Louisville's addition provides that--I'll be worried regardless.

OldPhiKap
11-28-2012, 06:09 PM
It's no doubt a moot point with respect to Maryland leaving. They're gone for sure.
It's hardly moot if the courts nullify or greatly reduce the exit fee, as it could open the way for other departures.
A major loss could be catatrophic for the league.


I doubt that the ACC is seeking to enjoin them from leaving as a remedy. (Although have not read the complaint).

Agreed that there is precedential value to the outcome. That is why these often settle, too.

-bdbd
11-28-2012, 06:29 PM
It is interesting seeing this discussion on this board, largely from the NC/Duke perspective, and then reading and hearing the arguments up here in DC largely from the MD one. I am linking to an article on this topic in today's Wash. Post, but if you look to the reader comments at the bottom, the vast majority - no surprise - think the move unfair. They throw around words like "punitive" and "net damages" (comparing the value of L'ville to that of MD for the ACC, and arguing that they should only owe that difference, which they argue is very small of course).
http://www.washingtonpost.com/sports/colleges/acc-sues-maryland-seeking-payment-of-its-exit-fee/2012/11/27/6773c6a4-38de-11e2-b01f-5f55b193f58f_allComments.html?ctab=all_&

There's also a lot of attempted justification, still, for making the move on academic grounds. It is silly, but they are pulling out polls of World Research Universities that, surprise!, show the Big10 schools as ranked higer. I've sanity-checked this with several sports-oriented friends with Pac12 and Big12 backgrounds, who assure me the ACC has a better academic rep (though the Big10 is well regarded too). But I call the discussion "silly" b/c any serious discussion of the decision-making process that tries to argue that the motivation wasn't purely (or nearly so) financial in nature, is well, being less than honest.

Here is the post that I placed in the Post following the article linked above... Safe to say I didn't find a lot of support there...

While you can always find some poll that will tell you what you want to hear, if you really try hard enough... These are NOT the mainstream polls, which you reference, that most look at in evaluating rankings among US National colleges and universities. The closest thing to a "universally accepted" ranking system is US News. Here are the rankings from that poll, below. Again, utilizing this widely accepted/used ranking system, please note that the Big10 has two schools in the top-40. The ACC has seven. That is to say, the majority of the ACC is in the top-40. And the "average ranking" for the ACC is significantly better than the Big10.

Look, both conferences have above-average academics. But to try to justify this move, even partially, as an "academic upgrade," is just silly.



U.S. News & World Report University Rankings
ACC Schools
No. 8 Duke
No. 17 Notre Dame (arriving from Big East)
No. 24 Virginia
No. 27 Wake Forest
No. 30 North Carolina
No. 31 Boston College
No. 36 Georgia Tech
No. 44 Miami
No. 58 Pittsburgh (arriving from Big East)
No. 58 Syracuse (arriving from Big East)
No. 58 Maryland (leaving for Big Ten)
No. 68 Clemson
No. 72 Virginia Tech
No. 97 Florida State
No.106 N.C. State

Contrast that with the Big10:
12. Northwestern
29. Mich.
41. Wisc
46. PSU
46. IL
56. OSU
65. Purdue
68. Minn.
68. Rutgers (joining)
72. Minn.
72. Iowa
83. IN
101. Neb.

33laszlo99
02-01-2014, 09:57 AM
As a layman, let me offer the following: Twelve member schools, highly sophisticated entities and all well represented by lawyers, have come togetherto participate in an athletic conference with a lot of big-boy member provisions and to work as business partners and athletic competitors. Recently the ACC agreed 10-2 to impose a penalty of $50 million on anyone who leaves the Conference. This is a voluntary agreement among consenting multi-billion dollar educational institutions. I am guessing that the well-vetted motion did not ascribe "liquidated damages" or any other reason.

Why on earth would a state or federal judge find reason to question this agreement? Maryland will argue it is unfair. The ACC will argue: it was enacted properly by the Conference members; Maryland could have left the ACC before the provision went into effect; and that is the end of the story. If necessary, the ACC will say the penalty is not unreasonable given that the ACC oversees sports programs generating way more than $500 million in revenue per year and has media deals in place for multiple years, whose value is threatened by the departure of a member or members.

sagegrouse

You use the phrase "impose a penalty". That's the troublesome part. Freedom of association allows any member of this kind of organization to leave any time they wish. It is unlawful for any person, group, government to interfere with that decision to leave the organization. Liquidated damages must not be seen as a deterrent or a punishment for a party who wishes to leave.
Thats why MD may not want to settle the case. If a trial occurs, and discovery produces communication (emails, etc.) among conference members discuss "making them stay put" or making them "pay through the nose", then the exit fee is not valid and not enforceable. Even if the vote was unanimous, the court could declare it invalid.

uh_no
02-01-2014, 10:21 AM
You use the phrase "impose a penalty". That's the troublesome part. Freedom of association allows any member of this kind of organization to leave any time they wish. It is unlawful for any person, group, government to interfere with that decision to leave the organization. Liquidated damages must not be seen as a deterrent or a punishment for a party who wishes to leave.
Thats why MD may not want to settle the case. If a trial occurs, and discovery produces communication (emails, etc.) among conference members discuss "making them stay put" or making them "pay through the nose", then the exit fee is not valid and not enforceable. Even if the vote was unanimous, the court could declare it invalid.

source? case precedent?

by that same argument you could say termination fees for your cell contract, or buyout clauses for employment contracts should be illegal....after all, the cell user or employer should be able to leave this organization any time they wish.....and it should be unlawful for any group to interfere with that decision to leave.

From what i have read, such fees should not be punitive, and maryland will have a hard time arguing that point, as a school leaving the conference leaves a very real financial loss to the conference (espeically in light of what happened to the big east). Further, the argument that they did not vote for the high exit fee, and therefore should not be held to it will not hold water. If they were opposed to the change, they should have left the conference when the vote was passed...rather than hanging around. By choosing to remain in the conference after the exit fee was approved, they consented to it. Further, they then can't argue on top of it that the conference had no basis to withhold bowl monies....since they'd be implying the school could pick and choose which provisions of the league contract they could follow....you can't say "we won't hold ourselves to the exit fee" while also saying "we want our full payout"....

They argue procedural issues on the vote as well (among several other things), which is mostly throwing muck at a wall to see what sticks.

what will probably happen is after all the legal manouvering, they'll settle out of court for some number between the old exit fee and the new....lawyers are expensive

sagegrouse
02-01-2014, 10:29 AM
You use the phrase "impose a penalty". That's the troublesome part. Freedom of association allows any member of this kind of organization to leave any time they wish. It is unlawful for any person, group, government to interfere with that decision to leave the organization. Liquidated damages must not be seen as a deterrent or a punishment for a party who wishes to leave.
Thats why MD may not want to settle the case. If a trial occurs, and discovery produces communication (emails, etc.) among conference members discuss "making them stay put" or making them "pay through the nose", then the exit fee is not valid and not enforceable. Even if the vote was unanimous, the court could declare it invalid.

If it were a person you are right. Usually those retention agreements go in the direction of restrictions on competition (non compete clauses) to achieve the same thing. Cell phone fees are something else, I believe.

Maryland is not a person. It is a business entity, which would make a difference to me.

Also, I don't believe the ACC lawyers are numbskulls and drafted an unenforceable agreement, but perhaps I am mistaken.

Indoor66
02-01-2014, 10:39 AM
If it were a person you are right. Usually those retention agreements go in the direction of restrictions on competition (non compete clauses) to achieve the same thing. Cell phone fees are something else, I believe.

Maryland is not a person. It is a business entity, which would make a difference to me.

Also, I don't believe the ACC lawyers are numbskulls and drafted an unenforceable agreement, but perhaps I am mistaken.

I agree, sage one. At these meetings they all wear big boy pants. There is no contract of adhesion here. They knew the stakes and stuck around. It is a little late to want to start a new game. They made the decision to stay in and to get out. Pay the piper.

33laszlo99
02-01-2014, 11:16 AM
If it were a person you are right. Usually those retention agreements go in the direction of restrictions on competition (non compete clauses) to achieve the same thing. Cell phone fees are something else, I believe.

Maryland is not a person. It is a business entity, which would make a difference to me.

Also, I don't believe the ACC lawyers are numbskulls and drafted an unenforceable agreement, but perhaps I am mistaken.

I'm no lawyer, and I wouldn't bet my life on my understanding of the nuts & bolts of liquidated damages. Just offering a possibility that should be considered before we start counting our chickens.
Universities and their athletic departments sure do resemble businesses, but in fact they are non-profits. Members are not bound by contracts. They become and remain members voluntarily and withdraw without interference. The bylaws contain specific steps for orderly withdrawal, which apparently MD has followed.
I can't cite legal pecedent, but there is tons of layman-friendly lierature about liquidated damages on the web. The $52 million exit fee is no slam dunk.

OldPhiKap
02-01-2014, 11:47 AM
You use the phrase "impose a penalty". That's the troublesome part. Freedom of association allows any member of this kind of organization to leave any time they wish. It is unlawful for any person, group, government to interfere with that decision to leave the organization. Liquidated damages must not be seen as a deterrent or a punishment for a party who wishes to leave.
Thats why MD may not want to settle the case. If a trial occurs, and discovery produces communication (emails, etc.) among conference members discuss "making them stay put" or making them "pay through the nose", then the exit fee is not valid and not enforceable. Even if the vote was unanimous, the court could declare it invalid.

I do not believe that the First Amendment's prohibition against governmental laws curtailing "the right of the people peaceably to assemble" has anything to do with this. For many reasons.

This is contract law. Contracts can have reasonable pre-estimates of damages (sometimes called a "liquidated damages clause") but they generally cannot have a punative penalty. That is an extreme generalization, mind you, but that's the issue.

UMd presumably is a sophisticated business actor. At least the law generally presumes that in cases such as this (whether that is in fact true at Maryland is a genuine issue of disputed fact). Given that presumption, I would want to know:

1. Did Maryland vote for the increase? They may have an estoppel problem if they did, but I seem to recall that they (and maybe FSU) voted against it.
2. Regardless of #1 above, what facts were put forward at the time to justify $50M as a reasonable pre-estimate of damages?
3. Did the ACC mitigate its damages by in essence finding suitable replacements?

Interesting case that I imagine will settle before all is said and done. Too much at risk for both parties. If they need a mediator, they can shoot me a PM.

BD80
02-01-2014, 12:22 PM
... Universities and their athletic departments sure do resemble businesses, but in fact they are non-profits. Members are not bound by contracts. They become and remain members voluntarily and withdraw without interference. The bylaws contain specific steps for orderly withdrawal, which apparently MD has followed. ...

If not bound by contract, then they can't enforce the contract. The ACC is holding on to Md's "share." Md will have trouble arguing that they get the benefits of the contract without obligation.

The liquidated damage case is interesting and complicated. Md argues that it is punitive and non proportionate to "anticipated" damages from a members departure. But Md also argues its value to the B1G and how Md has been damaged by not being able to change conferences.

The real anticipated harm is the loss of market share in the core of the geographic region and the damage is difficult to quantify, thus a liquidated damage is appropriate. Is the amount outrageous? Md's own claims for damages suggest no.

Adding Syracuse, Pitt, ND, and Louisville does not really "compensate" for the loss of one of the existing members,

burnspbesq
02-01-2014, 12:44 PM
Members are not bound by contracts.

Not sure where you got that idea, but it couldn't be more wrong.

OldPhiKap
02-01-2014, 02:38 PM
Not sure where you got that idea, but it couldn't be more wrong.

To take it one step farther:

Membership IS a contract.

NSDukeFan
02-01-2014, 10:01 PM
I guess Maryland could make the argument that its departure has been a benefit to the conference and the ACC owes it for that.

Acymetric
02-01-2014, 11:01 PM
I guess Maryland could make the argument that its departure has been a benefit to the conference and the ACC owes it for that.

If you told me 5 years ago we could pay to have Maryland leave the conference I would have thrown a parade. That said, I would much rather they pay us and although I have no real knowledge or insight as to the legal voodoo going on here I think they will end up paying if not the full amount at least a large percentage of it. It seems like a huge number but think about how many tv viewers could theoretically be tied to their location. It also could be said to hurt members future recruiting in Maryland's geographic area. So on and so forth.

33laszlo99
02-02-2014, 02:17 AM
If not bound by contract, then they can't enforce the contract. The ACC is holding on to Md's "share." Md will have trouble arguing that they get the benefits of the contract without obligation.

The liquidated damage case is interesting and complicated. Md argues that it is punitive and non proportionate to "anticipated" damages from a members departure. But Md also argues its value to the B1G and how Md has been damaged by not being able to change conferences.

The real anticipated harm is the loss of market share in the core of the geographic region and the damage is difficult to quantify, thus a liquidated damage is appropriate. Is the amount outrageous? Md's own claims for damages suggest no.

Adding Syracuse, Pitt, ND, and Louisville does not really "compensate" for the loss of one of the existing members,

The yes/no vote of MD is irrelevant. If you and I made a bet on the Superbowl, and even went so far as to make a written contract, neither of us could enforce the contract in court because it involves illegal activity. That's what MD is claiming: When the conference raised the fee to $52 million, the intention was to punish Maryland for withdrawing. If (maybe a big if) MD can persuade a court of that, then the exit fee would be unenforceable.
I read so often on these boards that MD "signed the contract" so they have to pay. I suspect that the ACC was formed with a charter and is regulated through bylaws. A contract typically specifies duration (start and end dates). Members of the conference are not commited indeinitely. They are free to leave when they want to.

Indoor66
02-02-2014, 07:58 AM
The yes/no vote of MD is irrelevant. If you and I made a bet on the Superbowl, and even went so far as to make a written contract, neither of us could enforce the contract in court because it involves illegal activity. That's what MD is claiming: When the conference raised the fee to $52 million, the intention was to punish Maryland for withdrawing. If (maybe a big if) MD can persuade a court of that, then the exit fee would be unenforceable.
I read so often on these boards that MD "signed the contract" so they have to pay. I suspect that the ACC was formed with a charter and is regulated through bylaws. A contract typically specifies duration (start and end dates). Members of the conference are not commited indeinitely. They are free to leave when they want to.

By the same logic, if you join an association you agree to abide by its charter and bylaws. When they change the charter and/or bylaws you have the option to withdraw and not be bound by the changes you consider onerous. If you choose to stay around you implicitly agree to the changes whether you voted for them or not. Kind of a laches argument.

OldPhiKap
02-02-2014, 08:13 AM
By the same logic, if you join an association you agree to abide by its charter and bylaws. When they change the charter and/or bylaws you have the option to withdraw and not be bound by the changes you consider onerous. If you choose to stay around you implicitly agree to the changes whether you voted for them or not. Kind of a laches argument.

Exactly, I think it could go to a waiver/estoppel/laches argument. But I seem to recall that Md voted against it, no?

33 is correct that an illegal contract is void. But this is not a clear issue like a contract for gambling, prostitution or selling prohibited substances. This is a judgment call. And it would be harder for Md to argue that this is something different than a reasonable pre-estimate of damages if they voted for the fee at the time.

-jk
02-02-2014, 08:21 AM
Exactly, I think it could go to a waiver/estoppel/laches argument. But I seem to recall that Md voted against it, no?

33 is correct that an illegal contract is void. But this is not a clear issue like a contract for gambling, prostitution or selling prohibited substances. This is a judgment call. And it would be harder for Md to argue that this is something different than a reasonable pre-estimate of damages if they voted for the fee at the time.

I seem to recall Md and FSU were the only two votes against the increased fee. They both probably had a foot out the door, but only Md stepped through. Perhaps Florida blocked FSU.

FSU eventually went all in for the ACC with the media rights thingy.

-jk

Indoor66
02-02-2014, 08:40 AM
Exactly, I think it could go to a waiver/estoppel/laches argument. But I seem to recall that Md voted against it, no?

33 is correct that an illegal contract is void. But this is not a clear issue like a contract for gambling, prostitution or selling prohibited substances. This is a judgment call. And it would be harder for Md to argue that this is something different than a reasonable pre-estimate of damages if they voted for the fee at the time.

I believe they voted against the fee. That said, if they had issues with the decision they could have withdrawn at that time. They chose to live with the benefit of the fee (protection of the conference membership integrity) and to accept the payouts that came from conferenced membership. Only after they chose to withdraw did they find that decision so onerous that they should not have to pay it. But then, up there in MD country, they always did like it both ways.

Matches
02-02-2014, 12:01 PM
Exactly, I think it could go to a waiver/estoppel/laches argument. But I seem to recall that Md voted against it, no?

33 is correct that an illegal contract is void. But this is not a clear issue like a contract for gambling, prostitution or selling prohibited substances. This is a judgment call. And it would be harder for Md to argue that this is something different than a reasonable pre-estimate of damages if they voted for the fee at the time.

Maryland announced its intention to leave the ACC about a year after the exit fee was raised. That's not an especially long time as far as such things go.

"Exit fees" that are as large as this are VERY dodgy, legally. $50M is a crazy amount of money. The conference schools knew when it was agreed to that it might not be enforceable, as did most outsiders. The point of raising the fee was to show solidarity at a time when the league appeared unstable. There is just no way that Maryland leaving the ACC is going to "damage" the remaining members by $50M. It's a penalty, pure and simple, and that's a problem legally.

Which isn't to say that UMd doesn't owe the league *anything* - but the amount is likely a lot less than $50M.

Henderson
02-02-2014, 12:13 PM
Let's be clear: The exit fee is not $50 million. It's 3 years worth of conference distributions. As of today, that's about $50 million for Maryland.

I mention that only because $50 million sounds like a round arbitrary number that would easily be characterized as a penalty. But I think the principle for the ACC is this: If you've been benefiting from being in the league, and we've made future plans and financial deals around your participation, you can't take all the bennies then walk away with them, leaving us holding the bag. So if you want to go, go. But you have to cough up three years' worth of financial bennies.

Before the adoption of the "3 years" exit fee, the fee was $20 million, and Maryland signed on to that. So they can't plausibly claim they owe less than $20 million. Their argument can only be that the "3 years" exit fee is exorbitant in some legally cognizable way that the $20 million is not.

But let's remember: Maryland also signed up for a process by which the exit fee could be changed without a unanimous vote. That happened. So I'm not sure the question is whether an "agreement" to pay the 3 year fee is somehow unconscionable or punitive. Rather, I think the question is whether Maryland's agreement by which the exit fee could be changed over Maryland's objection is unenforceable.

MartyClark
02-02-2014, 02:20 PM
Exactly, I think it could go to a waiver/estoppel/laches argument. But I seem to recall that Md voted against it, no?

33 is correct that an illegal contract is void. But this is not a clear issue like a contract for gambling, prostitution or selling prohibited substances. This is a judgment call. And it would be harder for Md to argue that this is something different than a reasonable pre-estimate of damages if they voted for the fee at the time.

Not my specialty, but how could this be an illegal contract?

Isn't it a matter of whether Maryland has a valid affirmative defense to the liquidated damage clause? My limited exposure to this area makes me think that Maryland has the burden of proving that, at the time of execution of the agreement, the agreed liquidated damages were out of proportion to any possible loss.

33laszlo99
02-02-2014, 03:15 PM
Let's be clear: The exit fee is not $50 million. It's 3 years worth of conference distributions. As of today, that's about $50 million for Maryland.

I mention that only because $50 million sounds like a round arbitrary number that would easily be characterized as a penalty. But I think the principle for the ACC is this: If you've been benefiting from being in the league, and we've made future plans and financial deals around your participation, you can't take all the bennies then walk away with them, leaving us holding the bag. So if you want to go, go. But you have to cough up three years' worth of financial bennies.

Before the adoption of the "3 years" exit fee, the fee was $20 million, and Maryland signed on to that. So they can't plausibly claim they owe less than $20 million. Their argument can only be that the "3 years" exit fee is exorbitant in some legally cognizable way that the $20 million is not.

But let's remember: Maryland also signed up for a process by which the exit fee could be changed without a unanimous vote. That happened. So I'm not sure the question is whether an "agreement" to pay the 3 year fee is somehow unconscionable or punitive. Rather, I think the question is whether Maryland's agreement by which the exit fee could be changed over Maryland's objection is unenforceable.

The exit fee was set at 3X the annual operating budget of the conference, not the payout. That is arbitrary, as are all liquidated damamges. They are always guesswork. But they must be reasonable.

The formal notice of withdrawal was a year after the increase, but the public announcement occurred in Nov. 2012. The fee was raised in Sep. 2012. MD is going to claim that when the ACC got wind of their talks with the B1G, the conference made a mad dash to bump-up the fee prior to any move by MD.

Thurber Whyte
02-02-2014, 04:19 PM
Now that this thread has been revived, I have a question for lawyers on the board who litigate on the civil side of things. Why does UM not have this case removed to federal court? UM lost the race to the courthouse. The ACC filed first in North Carolina. UM tried to have a Maryland court seize control by suing the ACC there, but that suit was dismissed. So why does UM not do the next best thing and have the ACC’s suit removed for to Federal court under diversity jurisdiction? Diversity jurisdiction exists to protect out of state litigants from the presumed partiality of local judges. Furthermore, the tradition of the Fourth Circuit is to put at least one judge from the state whose law is being applied on the panel. Because UM attached Maryland antitrust law claims in its countersuit, UM would be guaranteed to have one Maryland judge on the panel (along with a North Carolina one) on appeal.

Speaking of Maryland antitrust law, I was intrigued by the possible rationale for UM relying on state rather than federal antitrust claims. Part of the answer seems to be its inexplicable allergy to federal court. (Any federal claim would trigger removal of the case to federal court as a federal question with ancillary state law claims.) However, I am concerned about what would happen if a question of Maryland law arose such that a certified question of law had to be made to the Maryland Court of Appeals. Most of the judges of that court understand their job as reaching the “right” outcome or helping government officials do whatever they want and they will make the law fit the facts to do so.

What impresses me is that both sides are committed to an all or nothing strategy. Neither seems to want to settle. If the exit fee is found to be an illegal penalty clause, the Court will simply cross it out. There is no blue pencil. The Court will not rewrite the provision to say $20M or whatever the Court would find reasonable.

I believe that a good argument can be made that the exit fee is reasonable as liquidated damages. The survival of the ACC was at stake and no one knew the ultimate outcome of the game of musical chairs the Big Ten itself set in motion and which lead to the destruction of the Big East. For years, we have been subject to rumors about the SEC and Big Ten poaching our most attractive schools. And the Big Ten actually did that to us (although UM’s athletic program was attractive as a tear down so that it could get the land underneath). We actually may have come out ahead by swapping them for Louisville, but that outcome was not certain. Liquidated damages do not have to be accurate in hindsight and can even reflect the worst case scenario. Three years revenue or $52M does seem on the high side. However, the exit fee as liquidated damages was meant to take into account the potential damage to the conference from the most attractive members of the conference leaving, e.g., Florida State, not UM. Even without a replacement such as Louisville, is UM worth $52M to the ACC? Maybe not, but no one had them in mind when the ACC upped the exit fee. The damage if Florida State left for the SEC would be much more significant and could have actually triggered the death spiral of the conference a la the Big East. That is the yardstick that should be applied. UM’s leaving the conference was something no one (other than UM) foresaw and was the result of the unlikely combination of its need for a quick fix for the ridiculous financial problems it created for itself and a Rust Belt based conference’s need for lebensraum. UM’s move supposedly took the ACC completely by surprise and did everything it could to keep it a secret so it would be hard for it to argue that the exit fee was directed at it.

OldPhiKap
02-02-2014, 05:02 PM
^^^^ excellent post.

Did not realize that this was notin federal court. Very odd. I cannot imagine that anyone other than Traingle schools would agree to a forum selection clause that would waive federal court removal.

33laszlo99
02-02-2014, 05:15 PM
I like the argument that the ACC was concerned about the "domino effect." But WHY were they concerned about it? If they had knowledge of MD's "secret" plan, the ensuing email traffic will hold some interesting evidence. Were the discussions about deterring/punishing MD or were they more about fear of financial loss. If there was talk of deterring other schools from following MD, that bolsters MD's case.
Is this why there is no settlement? Does MD need discovery to make their case?

BD80
02-12-2014, 02:32 PM
Rutgers agrees to pay $11.5 million exit fee to leave AAC fka Big East.

http://espn.go.com/new-york/college-sports/story/_/id/10445006/rutgers-pay-115-million-exit-fee-leave-aac

Dev11
02-12-2014, 02:50 PM
Rutgers agrees to pay $11.5 million exit fee to leave AAC fka Big East.

http://espn.go.com/new-york/college-sports/story/_/id/10445006/rutgers-pay-115-million-exit-fee-leave-aac

The important text:


The AAC sought $15 million from Rutgers, but the school was able to negotiate a lower amount because Louisville had done so a few months ago, sources told ESPN.

Louisville negotiated an $11 million exit fee because athletic director Tom Jurich informed then-Big East commissioner John Marinatto and South Florida president Judy Genshaft in October 2011 that the Cardinals would leave the league in 27 months, Marinatto told ESPN.

Looking at it optimistically as Duke/the ACC, this doesn't have much bearing on a court's future decision on Maryland, as there is no similar precedent as Rutgers had with Louisville.

Here is a Turtle
04-28-2014, 11:47 PM
Not saying that this is going to end with a settlement, Maryland and the ACC are assigned a mediator. The mediator is Johnathan A. Marks, an arbitor from Bethesda, MD.

http://espn.go.com/college-sports/story/_/id/10852255/court-battle-acc-maryland-terrapins-gets-mediator

http://www.washingtonpost.com/blogs/terrapins-insider/wp/2014/04/28/mediator-assigned-in-maryland-vs-acc-lawsuit/?wpmk=MK0000203&clsrd

OldPhiKap
04-29-2014, 07:20 AM
Not saying that this is going to end with a settlement, Maryland and the ACC are assigned a mediator. The mediator is Johnathan A. Marks, an arbitor from Bethesda, MD.

http://espn.go.com/college-sports/story/_/id/10852255/court-battle-acc-maryland-terrapins-gets-mediator

http://www.washingtonpost.com/blogs/terrapins-insider/wp/2014/04/28/mediator-assigned-in-maryland-vs-acc-lawsuit/?wpmk=MK0000203&clsrd

Thanks for the links.

Both parties have a lot to lose if the litigation goes south, and years of legal wrangling ahead. As the WP article states, this is a typical step. Mediation resolves (or helps resolve) most cases.

Henderson
04-29-2014, 10:33 AM
Thanks for the links.

Both parties have a lot to lose if the litigation goes south, and years of legal wrangling ahead. As the WP article states, this is a typical step. Mediation resolves (or helps resolve) most cases.

I think the use of the word "most" is too strong here, generalizing as it does over hundreds of jurisdictions, dozens of types of cases, and an unfathomable number of individual circumstances. I don't know of any statistics showing that mediation resolves or helps to resolve most cases.

It does help the parties focus on what they have to win or lose by continuing litigation and forces them to face the weaknesses in their respective cases, something a "groupthink" situation can mask as parties and their lawyers get all revved up about the case initially. But the parties have to be motivated to settle and settle early. They always know that the early mediation is not their last hope of settlement, so they can choose to wait, keep talking, and maybe settle later. One reason they might decide to wait is to see, through discovery, what the evidence looks like, so they can make a more informed decision about what the proper settlement would be. (Of course, sometimes a party will settle early precisely to avoid bad facts coming out in discovery.).

But in this case, it seems pretty ripe for settlement early. The facts aren't really in dispute as far as I know, and they're really only talking about money (which always makes settlement easier). Because there aren't many facts in dispute, it seems likely to go out on summary judgment anyway, followed by appeals. If the parties here are motivated to settle (i.e. one doesn't believe it has an airtight slam dunk of a case) -- and I think they are -- this is the sort of case that should. Whether it will in this mediation is another question.

One big advantage of settling as a result of mediation is being able to use the mediation as a smokescreen. A mediated settlement has better optics, because it is less likely to be seen as a capitulation, particularly valuable in a high-plubicity case such as this. It looks more like a reasonable middle ground, win-win result.

So yeah, I think they'll settle. Maybe through this vehicle, maybe not, but eventually almost certainly.

BD80
04-29-2014, 11:00 AM
I think the use of the word "most" is too strong here, generalizing as it does over hundreds of jurisdictions, dozens of types of cases, and an unfathomable number of individual circumstances. I don't know of any statistics showing that mediation resolves or helps to resolve most cases.

It does help the parties focus on what they have to win or lose by continuing litigation and forces them to face the weaknesses in their respective cases, something a "groupthink" situation can mask as parties and their lawyers get all revved up about the case initially. But the parties have to be motivated to settle and settle early. They always know that the early mediation is not their last hope of settlement, so they can choose to wait, keep talking, and maybe settle later. One reason they might decide to wait is to see, through discovery, what the evidence looks like, so they can make a more informed decision about what the proper settlement would be. (Of course, sometimes a party will settle early precisely to avoid bad facts coming out in discovery.).

But in this case, it seems pretty ripe for settlement early. The facts aren't really in dispute as far as I know, and they're really only talking about money (which always makes settlement easier). Because there aren't many facts in dispute, it seems likely to go out on summary judgment anyway, followed by appeals. If the parties here are motivated to settle (i.e. one doesn't believe it has an airtight slam dunk of a case) -- and I think they are -- this is the sort of case that should. Whether it will in this mediation is another question.

One big advantage of settling as a result of mediation is being able to use the mediation as a smokescreen. A mediated settlement has better optics, because it is less likely to be seen as a capitulation, particularly valuable in a high-plubicity case such as this. It looks more like a reasonable middle ground, win-win result.

So yeah, I think they'll settle. Maybe through this vehicle, maybe not, but eventually almost certainly.

Another big factor is each party hearing an arbiter react to the arguments. Clients readily believe their own stories and are pumped up by their lawyers' arguments. It is natural to dismiss an opponent's view of the facts as tainted and the opposing argument as hyperbole. In mediation, clients start realizing the case isn't the slam dunk they imagined.

Class of '94
04-29-2014, 11:32 AM
I think the use of the word "most" is too strong here, generalizing as it does over hundreds of jurisdictions, dozens of types of cases, and an unfathomable number of individual circumstances. I don't know of any statistics showing that mediation resolves or helps to resolve most cases.

It does help the parties focus on what they have to win or lose by continuing litigation and forces them to face the weaknesses in their respective cases, something a "groupthink" situation can mask as parties and their lawyers get all revved up about the case initially. But the parties have to be motivated to settle and settle early. They always know that the early mediation is not their last hope of settlement, so they can choose to wait, keep talking, and maybe settle later. One reason they might decide to wait is to see, through discovery, what the evidence looks like, so they can make a more informed decision about what the proper settlement would be. (Of course, sometimes a party will settle early precisely to avoid bad facts coming out in discovery.).

But in this case, it seems pretty ripe for settlement early. The facts aren't really in dispute as far as I know, and they're really only talking about money (which always makes settlement easier). Because there aren't many facts in dispute, it seems likely to go out on summary judgment anyway, followed by appeals. If the parties here are motivated to settle (i.e. one doesn't believe it has an airtight slam dunk of a case) -- and I think they are -- this is the sort of case that should. Whether it will in this mediation is another question.

One big advantage of settling as a result of mediation is being able to use the mediation as a smokescreen. A mediated settlement has better optics, because it is less likely to be seen as a capitulation, particularly valuable in a high-plubicity case such as this. It looks more like a reasonable middle ground, win-win result.

So yeah, I think they'll settle. Maybe through this vehicle, maybe not, but eventually almost certainly.
I was curious to know if you or someone else with a legal background understood and could explain to me the relevance of what MD is doing in regards to requesting documents from various ACC schools that supposedly showed contact between a particular ACC school and a BIG school in regards to the ACC (with the guidance of ESPN) allegedly recruiting the BIG schools to join the ACC after MD announced its departure from the ACC to the BIG. What's the big deal about that considering all the rumors of BIG schools doing the same thing by trying to court UNC (with possibly Duke), UVA and GT to the BIG before and after MD announced its departure (in order to expand the reach of the BTN and increase revenues for the BIG)? Also, I wanted to know how citing the ACC market analysis (a supposed confidential document that somehow MD got its hands on) in their court documents could potentially help their case. I'm assuming its to show that the ACC was going to be fine and potentially be better financially with the departure of MD and the arrival of Louisville. Am I correct in that thinking?

At this point, I'd be fine with the ACC and MD settling and just moving on. MD's not changing course and apparently they're already hoisting the BIG logos across campus. I'm not so sure that the move will be as rosy and financially lucrative as MD's thinks it will be; but they made their decision and for better or for worse will have to deal with the ramifications of it. I would like to see the sides settle on an exit fee somewhere between the 21+ million (or simply agree to give up their earnings for this school year) that MD had agreed upon and the 52 million (that was voted upon by the majority of schools). It would be a win-win in that MD negotiated down the exit fee from 52million yet still payed a substantial amount as a reward for not being honest in their dealings with the ACC and how they left the league.

budwom
04-29-2014, 11:57 AM
I think it will be settled soon after each side's legal team achieves its revenue target. Should be racking up some nice fees by now...

Just getting rid of Maryland's hideous logo will be worth a few million bucks to the league.

rasputin
04-29-2014, 12:54 PM
I think it will be settled soon after each side's legal team achieves its revenue target. Should be racking up some nice fees by now...

Just getting rid of Maryland's hideous logo will be worth a few million bucks to the league.

Gratuitous lawyer-bashing. How original.

Here is a Turtle
04-29-2014, 02:30 PM
Any chance of an arbitrator coming any time soon? A mediator seems like it wont be that effective if both sides are as steadfast as they seem to be.

BD80
04-29-2014, 03:03 PM
Gratuitous lawyer-bashing. How original.

Speaking on behalf of lawyers, if we had feelings - they would be hurt.