Mediator assigned in Maryland vs. ACC lawsuit

[AZHuskiePop]

I tried to set set up a poll on the final amount but I failed.
Less than 20mm,20-25mm,25-30mm,30-35mm,35-40 or greater than 40
I'm guessing 25-30mm ,
It has to be greater than the original and substantially less than the new number.
They both claim victory.

 

[nelsonmuntz]

If the games haven't been played and the money not yet paid, then your house analogy falls flat.

That must be why there are so many examples of people getting out of rights' sales elsewhere in the entertainment industry.

If any money has been paid, the contract is binding. Maybe a better example is a lease. It is near impossible for a landlord to get out of a standard lease unless there is a contractual out. If you have seen the ACC or Big 12 GOR, then please let me know what the language is that lets teams out of it. I am very interested in knowing.

You can keep living in a world where teams break a GOR, but 5 years from now, you will see the same lame arguments for why a GOR can be broken and I will still be pointing out that no one has ever done it.

 

[CTMike]

That must be why there are so many examples of people getting out of rights' sales elsewhere in the entertainment industry.

That is an interesting angle and why I left it out when tweaking you for the house comparison.

 

[btstimpy]

What you incorrectly view as Maryland's desperation is far more likely the ACC, ESPN, and their comrades saving face, avoiding discovery, acknowledging they would not win a court case, acquiesing, and accepting a more reasonable decision on a lower mediatiated exit payment.

To believe otherwise requires believing Swofford. ACC presidents, ADs, etc., and ESPN want to undress themselves in court. With respect to discovery, precisely what is it which impedes you from understanding such clarity?

The Judge has stayed all Discovery on that Maryland Counter Suit until after the hearing on the ACC motion to Dismiss the CounterSuit. The Brief is filed to dismiss, and they are waiting on the hearing. The ACC expects the North Carolina judge to dismiss just like the Maryland judge already dismissed the part about damages to Maryland due to Anti-Trust.

It's not ESPN that wants to settle this, it's the B1G. They are trying to work with the ACC, PAC12, SEC, and Big XII on the restructuring of the NCAA, and they want this problem to go away rather than continue to be a distraction. The ACC will have collected about $33 million of Maryland's money by June, and the B1G has provided Maryland $30 million in travel money to use as they please. Using that combined $63 million, the B1G thinks Maryland and the ACC can come up with a number to settle the dispute on the Exit Fee. They want to have this resolved when Maryland joins the B1G in July. The B1G also doesn't want a situation where Maryland cannot schedule any ACC schools in any sports going forward.

 

[btstimpy]

I tried to set set up a poll on the final amount but I failed.
Less than 20mm,20-25mm,25-30mm,30-35mm,35-40 or greater than 40
I'm guessing 25-30mm ,
It has to be greater than the original and substantially less than the new number.
They both claim victory.

My guess is that it will settle at the amount collected in the withheld offset by June, which is estimated at $33 million. And the B1G will then schedule a number of football games against ACC opponents to make up the rest. Maryland will keep the $30 million in B1G travel money. The ACC will continue to schedule Maryland lacrosse teams in some capacity. This is just a speculation.

 

[Excalibur]

This is like having the local guy that handled your refi explain a billion dollar plus media contract. He is mostly missing the point of the GOR. A GOR simply means that the rights to a schools games are sold in return for some amount of money. Revoking a GOR is roughly equivalent to selling your house, and then trying to get it back a couple of years later because someone else will pay you more for it. Once the media right are sold, they are sold. There is no getting them back.

Aerosmith, Boston and George Michael flushed years of the prime of their careers in pissing matches over rights that they ended up losing. Someone on this board once used Prince as an example of an artist that beat his rights contract, but he never beat Warner Brothers. He just rushed a bunch of albums out the door to finish off his contract. Billy Joel got out of his deal only when a larger studio threatened to break Joel's producers' legs. There is no equivalent way to beat a GOR in college athletics to do what Billy Joel or Prince did. The only time the talent wins is when there is a dispute over the accounting (James Garner and the Rockford Files is an example).

Unless there is something inside these particular GOR's that we are not aware of, there is no getting out of them.

I don't think the royalty analogy works here. In the case of the bands, the consequence of assigning ownership of your work for pennies is that so long as the pennies are paid, the other party still owns the work. If the GOR was structured like this, the B12 couldn't prevent someone from leaving, but they would still have to pay out whatever monetary consideration was promised to enforce the GOR. The new conference would not be able to sell broadcast rights to the new member's home games, which is the real deterrent in this scenario, but the old conference would still have to make the payout to its previous member.

However, the B12 GOR doesn't actually make any reference to monetary consideration. The grant is not given in exchange for the conference's TV payout to its members, at least not expressly. This avoids the question of the payment of ongoing consideration, but raises some others regarding whether the consideration is adequate and how a non-breaching party is made whole.

 

[Fairfield_1st]

If the GOR holds and a school does leave, the GOR only covers that school's home games, correct?
Also, if the school leaves and the prior conference retains the rights, are they allowed not to pay that school for those rights going forward? I'm sure this is a naive question, but I won't even pretend to understand the GOR.

 

[CL82]

I wonder how much the legal fees and ediscovery costs are for Maryland. This could also be driving arbitration and potentially settlement.

I'm sure that they are considerable, but just a drop in bucket when compared to the cost of the suit and the counterclaim. Unlike our friends from south of the Mason-Dixon line, I think that Maryland has the better argument.

 

[upstater]

The ACC is not concerned about this. It lost Maryland's market, but gained Louisville's and Louisville has a lot of fans watching.

 

[HuskyHawk]

That must be why there are so many examples of people getting out of rights' sales elsewhere in the entertainment industry.

If any money has been paid, the contract is binding. Maybe a better example is a lease. It is near impossible for a landlord to get out of a standard lease unless there is a contractual out. If you have seen the ACC or Big 12 GOR, then please let me know what the language is that lets teams out of it. I am very interested in knowing.

You can keep living in a world where teams break a GOR, but 5 years from now, you will see the same lame arguments for why a GOR can be broken and I will still be pointing out that no one has ever done it.

A lease is very different. Courts will routinely enforce a lease by specific performance, because to do otherwise is actually more difficult than assessing damages, and involves evicting a tenant. Typically the tenant has personal property on site etc. Also, a lease, though it is a contract, is governed by property law rather than contract law. It is a right to real property.

This person is correct that there is virtually no change that any court would require specific performance of the GOR contract. Meaning that the school can take its media rights with it, it just has to compensate the prior conference. In calculating those damages, the normal duty to mitigate will indeed apply. So in the case of Maryland for example, where it was replaced by Louisville, it is difficult to calculate damages. The ACC could argue that the DC market is more valuable etc. Now if you lost a valuable property, say Texas, and replaced them with the best you could do...say Colorado State, the damages would be quite high. The reality of this is that the more valuable the media rights of the school, the more the GOR will restrict them. Wake Forest could probably walk pretty easily.

 

[kyleslamb]

I don't think the royalty analogy works here. In the case of the bands, the consequence of assigning ownership of your work for pennies is that so long as the pennies are paid, the other party still owns the work. If the GOR was structured like this, the B12 couldn't prevent someone from leaving, but they would still have to pay out whatever monetary consideration was promised to enforce the GOR. The new conference would not be able to sell broadcast rights to the new member's home games, which is the real deterrent in this scenario, but the old conference would still have to make the payout to its previous member.

However, the B12 GOR doesn't actually make any reference to monetary consideration. The grant is not given in exchange for the conference's TV payout to its members, at least not expressly. This avoids the question of the payment of ongoing consideration, but raises some others regarding whether the consideration is adequate and how a non-breaching party is made whole.

Good post, and I think you raise some valid points. That said, while it does avoid expressing the consideration is payment, it's spelled out in the bylaws how/why members receive consideration for media rights. Since the television agreement is an extension of the bylaws, and the Grant of Rights is dependent upon the television agreement being fulfilled, it would be hard for them to argue that the conference payout wasn't the 'consideration' for the rights being given. I do agree with you they purposely omitted it from the GOR likely to leave consideration vague, but they'd still have a hard time arguing that money wasn't it.

 

[bingethinker]

The ACC is not concerned about this. It lost Maryland's market, but gained Louisville's and Louisville has a lot of fans watching.

It certainly got the better athletic program, but the markets don't remotely compare. It's not (just) about the eyeballs properties bring to the table. In this instance, the ACC certainly lost out on some particularly wealthy eyeballs and replaced them with the second option in Kentucky.

 

[nelsonmuntz]

A lease is very different. Courts will routinely enforce a lease by specific performance, because to do otherwise is actually more difficult than assessing damages, and involves evicting a tenant. Typically the tenant has personal property on site etc. Also, a lease, though it is a contract, is governed by property law rather than contract law. It is a right to real property.

This person is correct that there is virtually no change that any court would require specific performance of the GOR contract. Meaning that the school can take its media rights with it, it just has to compensate the prior conference. In calculating those damages, the normal duty to mitigate will indeed apply. So in the case of Maryland for example, where it was replaced by Louisville, it is difficult to calculate damages. The ACC could argue that the DC market is more valuable etc. Now if you lost a valuable property, say Texas, and replaced them with the best you could do...say Colorado State, the damages would be quite high. The reality of this is that the more valuable the media rights of the school, the more the GOR will restrict them. Wake Forest could probably walk pretty easily.

Since it is so easy to break a rights sale arrangement, where are all the examples?

 

[BlueHen]

Since it is so easy to break a rights sale arrangement, where are all the examples?

You remind me of Ned Stark at the end of Game of Thrones season 1, trying to stop Joffrey from becoming King with a piece of paper.

 

[nelsonmuntz]

You remind me of Ned Stark at the end of Game of Thrones season 1, trying to stop Joffrey from becoming King with a piece of paper.

If Joffrey was trying to break a GOR, Ned Stark would still be alive.

 

[nelsonmuntz]

I don't think the royalty analogy works here. In the case of the bands, the consequence of assigning ownership of your work for pennies is that so long as the pennies are paid, the other party still owns the work. If the GOR was structured like this, the B12 couldn't prevent someone from leaving, but they would still have to pay out whatever monetary consideration was promised to enforce the GOR. The new conference would not be able to sell broadcast rights to the new member's home games, which is the real deterrent in this scenario, but the old conference would still have to make the payout to its previous member.

However, the B12 GOR doesn't actually make any reference to monetary consideration. The grant is not given in exchange for the conference's TV payout to its members, at least not expressly. This avoids the question of the payment of ongoing consideration, but raises some others regarding whether the consideration is adequate and how a non-breaching party is made whole.

The recording contracts I cited are multi-album contracts. Prince got out of his by averaging over an album a year for like a 5 year period, thereby producing the requisite number of albums to satisfy the contract with the label. I suspect that contracts today are written such that a stunt like that won't work again.

It is an almost perfect analogy for what we are talking about, selling future entertainment in advance of its production. Many artists have sued to beat these deals, and the label always wins. At least I can't find an example where the artist won.

 

[TerryD]

I have been predicting a settlement of about $27 million for about a year now.

As a litigator, I think that people seriously overestimate how much discovery (or shutting down discovery) drives parties to settlement.

This case is proceeding just like most civil cases. Over 95% of them settle. This case is not unique just because sports fans are interested in the outcome.

 

[dayooper]

If Joffrey was trying to break a GOR, Ned Stark would still be alive.

Wait . . . Ned Stark died?

 

[Excalibur]

The recording contracts I cited are multi-album contracts. Prince got out of his by averaging over an album a year for like a 5 year period, thereby producing the requisite number of albums to satisfy the contract with the label. I suspect that contracts today are written such that a stunt like that won't work again.

It is an almost perfect analogy for what we are talking about, selling future entertainment in advance of its production. Many artists have sued to beat these deals, and the label always wins. At least I can't find an example where the artist won.

I think I just read the forum equivalent of putting your fingers in your ears and screaming "LALALALALA CAN'T HEAR YOU!!!!!"

 

[Excalibur]

It certainly got the better athletic program, but the markets don't remotely compare. It's not (just) about the eyeballs properties bring to the table. In this instance, the ACC certainly lost out on some particularly wealthy eyeballs and replaced them with the second option in Kentucky.

UL is a bigger draw nationally than MD, at least for now.

 

[HuskyHawk]

Since it is so easy to break a rights sale arrangement, where are all the examples?

Who said it was easy? There are certainly damages. So if Tom Selleck just decides to break his contract with CBS and not film Blue Bloods, the damages would be huge. His status on the show means it would effectively have to end. But, no court would force him to perform the contract. The courts avoid anything that looks like involuntary servitude. On the other hand, if some more minor character actor does the same thing, the damages would be minor, as the should could go on more or less as it was.

It's the same with the GOR. If UT, Michigan, USC or say Notre Dame with NBC break a contract, the damages would be massive, as those properties cannot reasonably be replaced (in ND's case it is the sole content provider, and so definitely can't be replaced). But if you replace Iowa State with BYU, have you lost anything? If you replace Wake Forest with UConn have you lost anything? Damages need to be proven, actual damages. I'm sure there would be some, due to inconveniences caused, but in both those latter cases, they would be small. Much less than the ACC's prior $50M exit fee.

The ACC has the same problem with the $50M exit fee. Liquidated damages are generally ok, if they are not punitive and are a fair approximation (at the time entered into) of actual damages. Where Maryland can be replaced by Louisville, $50M is absolutely punitive. The damages to the ACC are far, far below that. If North Carolina had left, and UConn, Cinci and UL were off the board, so UCF got the invite, the $50M would probably stick. So the benefit of the GOR is not that it is iron clad, it is that it provides an effective sliding scale by value, making it hardest for the most valuable properties to leave. In the Big XII's case it really locks in Texas, and in the ACC North Carolina, Duke and maybe FSU, which is what the network cares about. If you look at the SEC, it doesn't have or need one for two reasons. First nobody wants to go, and second, none of the programs stand out dramatically. Florida, Georgia, LSU, Bama, A&M, those are all pretty similar, and Auburn, Mizzou, SC, Tennessee, Arkansas, UK and Ole Miss aren't that far behind. Miss State and Vandy are probably the least valuable, and that also makes them least likely to walk.

 

[CL82]

...It's the same with the GOR. If UT, Michigan, USC or say Notre Dame with NBC break a contract, the damages would be massive, as those properties cannot reasonably be replaced (in ND's case it is the sole content provider, and so definitely can't be replaced). But if you replace Iowa State with BYU, have you lost anything? If you replace Wake Forest with UConn have you lost anything? Damages need to be proven, actual damages. I'm sure there would be some, due to inconveniences caused, but in both those latter cases, they would be small. Much less than the ACC's prior $50M exit fee.

The ACC has the same problem with the $50M exit fee. Liquidated damages are generally ok, if they are not punitive and are a fair approximation (at the time entered into) of actual damages. Where Maryland can be replaced by Louisville, $50M is absolutely punitive. The damages to the ACC are far, far below that. If North Carolina had left, and UConn, Cinci and UL were off the board, so UCF got the invite, the $50M would probably stick. So the benefit of the GOR is not that it is iron clad, it is that it provides an effective sliding scale by value, making it hardest for the most valuable properties to leave. ....

This is what I think many are missing in their analysis of a GOR. It is essentially a liquidated damages provision and thus will be subject to the same standard of review.

 

[kyleslamb]

This is what I think many are missing in their analysis of a GOR. It is essentially a liquidated damages provision and thus will be subject to the same standard of review.

I agree, but the thing is, the Grant of Rights, if enforced as it's supposed to be, doesn't have any damages.

If a school leaves, the conference and network both keep the rights wherever the team goes. If they continue to compensate for the rights, no one is losing any value. The network retains the inventory and the league continues to retain the revenue. It's only if the old league attempts to withhold payment does the damages accrue.

The GOR is binding and enforceable if both parties continue consideration. I chuckle at those who act like a school leaving the conference is treated like a kicker that puts the Grant of Rights in full force as if it were a penalty. It's actually the opposite, the Grant of Rights applies regardless of conference affiliation, so a team leaving the league should not change what is being given in exchange for the rights (while not explicitly stated, very clearly that is: money).

 

[Excalibur]

I agree, but the thing is, the Grant of Rights, if enforced as it's supposed to be, doesn't have any damages.

If a school leaves, the conference and network both keep the rights wherever the team goes. If they continue to compensate for the rights, no one is losing any value. The network retains the inventory and the league continues to retain the revenue. It's only if the old league attempts to withhold payment does the damages accrue.

The GOR is binding and enforceable if both parties continue consideration. I chuckle at those who act like a school leaving the conference is treated like a kicker that puts the Grant of Rights in full force as if it were a penalty. It's actually the opposite, the Grant of Rights applies regardless of conference affiliation, so a team leaving the league should not change what is being given in exchange for the rights (while not explicitly stated, very clearly that is: money).

I do think that the conferences wrote these agreements to avoid tying the grants to the payments because they would try to avoid making the payments if a member left. Otherwise, the deterrent factor is nowhere near as strong.

 

[nelsonmuntz]

I think I just read the forum equivalent of putting your fingers in your ears and screaming "LALALALALA CAN'T HEAR YOU!!!!!"

I see that you don't have a rebuttal for my argument.