A lawyer who read through complain(s). His take below:
Lawyers’ Thoughts on FSU’s Lawsuit
https://www.reddit.com/r/fsusports/search?q=flair_name:"FOOTBALL :newhelmet:"&restrict_sr=1
Its been almost a week since this early Christmas present and I’ve re-read FSU’s complaint. I have a few new thoughts about FSU’s lawsuit.
First, FSU’s lawsuit asks for only 2 things – · for the Court to interpret the contract to determine the amount of the exit fee. FSU argues that various penalty clauses are not enforceable. The result will be judicial certainty as to how much FSU owes.
Also, there is no request for damages from either the ACC for its anticompetitive behavior. Presumably, if FSU wins its suit then it can also demonstrate violation of state and federal antitrust laws, economic damages, and potentially receive treble damages. I’m guessing FSU is prioritizing exiting the ACC and finding a landing spot in a Power 2 conference before attempting to be made whole. But such a suit is possible down the road, and will be bolstered by the Florida AG’s investigation (which may expand to ESPN).
FSU in the last paragraph asks the court to deem its lawsuit as official notice of intent to withdraw as a member from the ACC and that such notice be effective as of August 14, 2023 (i.e. backdated).
Together, these mean that FSU is leaving, the only question is when and how much it will cost.
What’s not in the lawsuit
What is not in FSU’s suit may be as interesting as what is in it.
First, there is mention of Tier I and Tier III rights, but no mention of Tier II rights. Are these the rights that Swofford directed to Raycom?
Also, there is no request for damages from either the ACC for its anticompetitive behavior. Presumably if FSU wins its suit then it can also demonstrate violation of state and federal antitrust laws, economic damages, and potentially receive treble damages. I’m guessing FSU is prioritizing exiting the ACC and finding a landing spot in a Power 2 conference before attempting to be made whole. But such a suit is possible down the road, and will be bolstered by the Florida AG’s investigation (which may expand to ESPN).
Part I – Exit Fees
The crux of FSU’s lawsuit is to get the court to determine how much, if any, FSU owes the ACC to leave. There are 2 main “fees,” both of which were amended so I’ll analyze them as if they are 4 different fees.
Original Termination Fee – 1.25X operating budget (1.25* $43.3 million = $54 million). This exit fee was first added in September 2011 following the initial multimedia contract with ESPN. FSU refers to this fee as the ACC Withdrawal Penalty. The ACC made an attempt to justify this a liquidated damages, and a NC court apparently enforced this provision against Maryland a decade ago.
If this is all FSU has to pay its hard not to characterize the result as anything other than a home run (or a touchdown, as the case may be). Still, based on the ACC’s bad faith, I would say there is only an 85% chance that the court does not even enforce this provision whether due to bad faith, unclean hands, etc. Florida is a blue pencil state so I think there is a very large possibility this will be enforced, although that concept is not entirely on point here.
Severe Termination Fee – 3X operating budget (3* $43.3 million = $130 million). In September 2012 the conference increased the exit fee from 1.25 to 3.0X following a new 15 year agreement with ESPN. Its unclear what if any increase the ACC got over the prior agreement with ESPN. FSU refers to this fee as the Severe ACC Withdrawal Penalty.
Interestingly, a North Carolina court already ruled that this fee was an unenforceable penalty back in 2012 when Maryland exited. That was a different time and different circumstances, since Maryland didn’t “agree” to that amendment.
Still, I would say that the ACC will have a hard time enforcing this since the case has already been made that its an unenforceable penalty.
2013 GOR through 2027 (4 years remining *$13 million = $52 million). The initial GOR was agreed to in 2013 when the ACCN was contemplated. But according to FSU the ACC provided no additional consideration beyond the existing agreements. Further, the ACC made no attempt to justify the fee as liquidated damages as it had no relation to an estimate of future damages. And the ACC Constitution was not amended and still allows members to come and go.
This has been referred to in the media as the “ironclad” GOR but I fail to seen anything that makes this any more enforceable than the Severe Withdrawal Penalty that a court already ruled was not enforceable. The ACC in its answer may point to supposed consideration; all of this has been conducted behind closed doors so we will have to wait and see.
Without knowing more, I estimate a 90% chance that this will not be enforced for the reasons that convinced the North Carolina court to not enforce it against Maryland.
GOR through 2028 – 2036 (9 years remining * $13 million = $117 million)
. The amended GOR was agreed to in 2016 when Notre Dame joined as a partial member. ESPN was dragging its fee creating the ACCN (which competes for carriage with its SECN) and the ACC claimed ESPN required this amendment. But the ACC got no additional consideration beyond the existing agreements, which did not obligate ESPN to do anything beyond 2027.
For non-lawyers, “consideration” is a legal concept. There has to be a give and take for a promise to be the sort of promise a court will enforce as a contract. Imagine if you hire movers and agree to pay $1000 for your move. After they load your stuff on their truck, they change the price to $2000. You agree to this because your stuff was held hostage. So even though you sign a contract, a court won’t enforce the $2,000 amount because you didn’t receive anything additional for the increase. So the lack of additional consideration for the new promise (extension to 2036) is an additional, important reason why a court is not likely to enforce the GOR beyond 2027.
That said, this is based on reading FSU’s complaint alone. It looks like payouts increased from adding ND so maybe there was consideration. The ACC in its answer may point to supposed consideration; all of this has been conducted behind closed doors so we will have to wait and see.
As an aside, FSU labels these rights as worth $13 million a year. I don’t know where they got that figure. This is not a fee FSU would pay. Instead, if enforced FSU would not take its rights with it. That makes it less valuable to a future conference, and those rights might be worth far more than $13 million.
Without knowing more, I would estimate only a 10% chance this gets enforced. I see a Florida court having a really difficult time enforcing such a large penalty.
Withdrawal from ACC
I see no reason why a court won’t deem the lawsuit as notice to the ACC of FSU’s intent to withdraw. FSU did ask for this to be effective as of August 2023, which if honored would allow them to play in a different conference in 2024. As this is only a complaint, FSU didn’t provide reasons for why the Court should honor this request. I’m not aware of any but if I was FSU’s lawyer I would point to actions by the ACC last year to hinder or delay FSU’s notice. Without knowing more, getting out a year early is probably a stretch.
ACC’s lawsuit
The ACC’s lawsuit basically says that FSU has breached the ACC contracts by suing the ACC. FSU hasn’t answered the ACC lawsuit but FSU’s lawsuit lists many reasons why FSU’s performance of that clause should be excused. Its never easy to gauge the magnitude of a breach that will be sufficient to excuse the other side’s performance, but FSU makes a very strong case that its performance is excused.
Oddly, the interpretation of this contract may be a North Carolina issue, but FSU’s defense will be demonstrated under Florida law. It might happen that FSU is found to have breached the ACC agreement but is not liable for damages beyond the exit fee determined by the court above.
Conclusion
I think there is a very good chance FSU is able to exit on terms it finds attractive.
There is still probably a lot that we don’t know yet.
The backdating the notice of withdrawal is very interesting and makes one want to read between the lines.
Not sure why this complaint couldn’t have been filed in August last year or several years ago for that matter.
Interested in different opinions or things you think I may missed or gotten wrong – I’m a lawyer but I don’t practice in Floirda. I did have a matter in Leon County once and I can vouch for their love of home cooking lol.
