OT: Florida State to sue ACC over GOR

[CL82]

Greg Flugaur has been spot on with everything conference realignment. I’ll believe every word out of his mouth until he is ever proven wrong.

Are you Greg Flugar?

 

[Rufus]

Are you Greg Flugar?

I wish I had his connections!

 

[Rufus]

Florida State’s Way Out of ACC? Exit Penalties Could Be Ruled Unenforceable | JD Supra

Last summer, we wrote about the Atlantic Coast Conference’s (“ACC”) “ironclad” Grant of Rights agreement being the only document keeping top schools...

www.jdsupra.com

 

[noeynox]

Florida State’s Way Out of ACC? Exit Penalties Could Be Ruled Unenforceable | JD Supra

Last summer, we wrote about the Atlantic Coast Conference’s (“ACC”) “ironclad” Grant of Rights agreement being the only document keeping top schools...

www.jdsupra.com

I personally, can't get past this part,

The ACC claims that as a result of these media rights agreements, which could not have been achieved without the Grant of Rights, FSU has received hundreds of millions in distributions since 2013, when it executed the Grant of Rights.[viii] The ACC thus seeks a declaration that having accepted the benefits of the Grant of Rights for a decade, FSU is estopped from now challenging its enforceability.[ix

 

[upstater]

we'll see... FSU's lawyers are pretty highly regarded (you won't find their pictures on billboards trying to lasso an ambulance...)

The fact that they're highly regarded reinforces my point. They are doing their best to muddle things!

 

[How Sway?!]

I wish I had his connections!

Greg Flugaur, is this you? Only explanation for all the simping going on by you

 

[Waquoit]

It is a huge stretch for anyone to believe the FSU lawyers just now traveled to NC to undertake this mission when they could've done it at any point.

Sounds like the Yankees and George Brett's bat. They didn't say anything until he hit a home run. Then again, they lost on appeal because they didn't say anything until he hit a home run.

 

[nelsonmuntz]

Florida State’s Way Out of ACC? Exit Penalties Could Be Ruled Unenforceable | JD Supra

Last summer, we wrote about the Atlantic Coast Conference’s (“ACC”) “ironclad” Grant of Rights agreement being the only document keeping top schools...

www.jdsupra.com

A Grant of Rights is essentially a sale of media rights, not any of the items covered in that long, silly column. It does not technically restrict programs from leaving their conference, it just requires them to leave their media rights behind.

The FSU v. ACC question is going to be if their rights were alleged to have been sold until 2036, but they were not actually sold beyond 2027, is the GOR binding beyond 2027?

There is a lot of weird stuff in this case, and anyone claiming to have the answer is talking out their butt, because no one has access to the GOR or media rights agreement, including apparently the parties to the agreement.

 

[upstater]

A Grant of Rights is essentially a sale of media rights, not any of the items covered in that long, silly column. It does not technically restrict programs from leaving their conference, it just requires them to leave their media rights behind.

The FSU v. ACC question is going to be if their rights were alleged to have been sold until 2036, but they were not actually sold beyond 2027, is the GOR binding beyond 2027?

There is a lot of weird stuff in this case, and anyone claiming to have the answer is talking out their butt, because no one has access to the GOR or media rights agreement, including apparently the parties to the agreement.

If I were a lawyer from FSU, I would book a trip to North Carolina so I could read the agreement in person, so I could claim that, just now, FOR THE 1ST TIME EVER, FSU's lawyers have become aware of what a horribly flawed document it is!

 

[B1GEast]

Apparently ACC commissioner Jim Phillips extended an ESPN contract extension deadline on his own without league approval.

This might be the crux that gets FSU out of the GOR, who knows.

 

[Zissou]

My understanding:

GOR: an agreement between the members and the ACC, with the members granting their individual media rights to the ACC through 2036. This is a separate agreement than any media deal, but brings strength and value to any media deal that the ACC negotiates. GOR is a ~$430M issue for FSU, but valuation could be further debated (and litigated).

ACC and ESPN contract. The contract has a unilateral option by ESPN that it has to exercise in early 2025. It will end in 2027 or 2036 on ESPN’s option.

Exit fee to the ACC: ~$130M issue for FSU, subject to negotiation (up or down, based on departure date)

As the GOR and the ESPN are separate agreements, FSUs effort to tie them may be difficult. We shouldn’t assumed that they are one and the same. One year from today ESPN could announce that they are not optioning through 2036 and the agreement ends in 2027. The ACC still has the GOR and can secure an alternate deal with FOX or anyone else, and still has the strength of its ACC network.

It seems to me that FSUs actions now undermine the value of the ACC and its members. The GOR protects the value of the ACC from FSUs actions. This the the purpose of the GOR.

The ESPN contract option does not seem to be the magic loophole. It will still come down to the GOR being legally enforceable (iron clad?), and if the sides want to agree to settle an exit (maybe $130M + $215M) or let the courts decide.

 

[FfldCntyFan]

My understanding:

GOR: an agreement between the members and the ACC, with the members granting their individual media rights to the ACC through 2036. This is a separate agreement than any media deal, but brings strength and value to any media deal that the ACC negotiates. GOR is a ~$430M issue for FSU, but valuation could be further debated (and litigated).

ACC and ESPN contract. The contract has a unilateral option by ESPN that it has to exercise in early 2025. It will end in 2027 or 2036 on ESPN’s option.

Exit fee to the ACC: ~$130M issue for FSU, subject to negotiation (up or down, based on departure date)

As the GOR and the ESPN are separate agreements, FSUs effort to tie them may be difficult. We shouldn’t assumed that they are one and the same. One year from today ESPN could announce that they are not optioning through 2036 and the agreement ends in 2027. The ACC still has the GOR and can secure an alternate deal with FOX or anyone else, and still has the strength of its ACC network.

It seems to me that FSUs actions now undermine the value of the ACC and its members. The GOR protects the value of the ACC from FSUs actions. This the the purpose of the GOR.

The ESPN contract option does not seem to be the magic loophole. It will still come down to the GOR being legally enforceable (iron clad?), and if the sides want to agree to settle an exit (maybe $130M + $215M) or let the courts decide.

I could be wrong but I think FSU's strategy here is to threaten that a document the conference does not want subject to FOI requests (the GOR agreement) would be called into discovery if the suit proceeds, making it available for an FOI request, leading the ACC to settle to avoid this.

 

[upstater]

My understanding:

GOR: an agreement between the members and the ACC, with the members granting their individual media rights to the ACC through 2036. This is a separate agreement than any media deal, but brings strength and value to any media deal that the ACC negotiates. GOR is a ~$430M issue for FSU, but valuation could be further debated (and litigated).

ACC and ESPN contract. The contract has a unilateral option by ESPN that it has to exercise in early 2025. It will end in 2027 or 2036 on ESPN’s option.

Exit fee to the ACC: ~$130M issue for FSU, subject to negotiation (up or down, based on departure date)

As the GOR and the ESPN are separate agreements, FSUs effort to tie them may be difficult. We shouldn’t assumed that they are one and the same. One year from today ESPN could announce that they are not optioning through 2036 and the agreement ends in 2027. The ACC still has the GOR and can secure an alternate deal with FOX or anyone else, and still has the strength of its ACC network.

It seems to me that FSUs actions now undermine the value of the ACC and its members. The GOR protects the value of the ACC from FSUs actions. This the the purpose of the GOR.

The ESPN contract option does not seem to be the magic loophole. It will still come down to the GOR being legally enforceable (iron clad?), and if the sides want to agree to settle an exit (maybe $130M + $215M) or let the courts decide.

Exactly. If anything, the idea that ESPN won't take on the option works against FSU because it allows the ACC to go to market. It works against FSU's argument that the TV deal is undervalued.

 

[Patman]

The ultimate weapon would be sovereign immunity which could render a contract void but that requires political will. As mentioned, if an ugly document comes out that could be the catalyst but that may also be a poison pill for the schools involved

 

[Rufus]

Since ESPN did not extend the contract by the original legal deadline, the monetary damages of breaking the GOR after 2027 is 0. No harm to the ACC when there is no legally binding television contract in place.

I don’t believe ESPN ever intended on extending the contract. Cheaper to pay a few top ACC brands under the SEC umbrella.

 

[upstater]

The ultimate weapon would be sovereign immunity which could render a contract void but that requires political will. As mentioned, if an ugly document comes out that could be the catalyst but that may also be a poison pill for the schools involved

The ACC is located in North Carolina though; that's where the GOR was executed. One state court isn't going to decide this.

 

[upstater]

Since ESPN did not extend the contract by the original legal deadline, the monetary damages of breaking the GOR after 2027 is 0. No harm to the ACC when there is no legally binding television contract in place.

I don’t believe ESPN ever intended on extending the deadline. Cheaper to pay a few top ACC brands under the SEC umbrella.

The ACC network is still in play regardless.

This is the key to everything. If they hold FSU's rights, it doesn't matter if the value of those rights is 50 cents from 2027 through 2036. If they own them, they own them.

FSU can break with them, that's fine. There's no penalty for them breaking the GOR. The problem is they won't be able to sell their TV rights.

 

[Zissou]

Since ESPN did not extend the contract by the original legal deadline, the monetary damages of breaking the GOR after 2027 is 0. No harm to the ACC when there is no legally binding television contract in place.

I don’t believe ESPN ever intended on extending the contract. Cheaper to pay a few top ACC brands under the SEC umbrella.

I think this is incorrect.

The GOR is valuable and is separate from the ESPN contract.

 

[Zissou]

I could be wrong but I think FSU's strategy here is to threaten that a document the conference does not want subject to FOI requests (the GOR agreement) would be called into discovery if the suit proceeds, making it available for an FOI request, leading the ACC to settle to avoid this.

Agree that they prefer to keep it confidential, but at what value / cost?

I believe an earlier version was published by the Athletic.

I’d think the ACC would prefer to keep the document from the press and make it difficult to reach through a info request from a public member institution, but I don’t think it’s confidentiality is worth $100M. I therefore think FSUs leverage is weak on this part.

FSU can damage its peer institutions in the process, but it won’t likely be a gain to FSU.

 

[CL82]

I could be wrong but I think FSU's strategy here is to threaten that a document the conference does not want subject to FOI requests (the GOR agreement) would be called into discovery if the suit proceeds, making it available for an FOI request, leading the ACC to settle to avoid this.

Not so sure that's much of an impetus to settle. Keeping the GOR private he's a tool to make it enforceable. Settling with FSU will provide a template for breaking it.

 

[Zissou]

If it’s an expensive settlement it still protects the value of the GOR and the security of the ACC. $130M exit fee plus $200M+ to buy out of the GOR.

That might be fair to both sides. ACC gets rid of a discontented member.

If it’s much less than that, the ACC might be better to defend its position all the way through the legal process, cases in multiple states, maybe federal, and all of the appeals.

What will be the estimated legal costs for FSU to see this through without settlement?

 

[TheCatsLair]

I think this is incorrect.

The GOR is valuable and is separate from the ESPN contract.

It's not completely separate. There's a reason that it was signed concurrently with the TV deal. The fact that the TV deal with ESPN is not guaranteed beyond 2027 makes the GORs valueless at that point because it would be keeping a conference tied together at a time it does not have a TV deal.

 

[Zissou]

It's not completely separate. There's a reason that it was signed concurrently with the TV deal. The fact that the TV deal with ESPN is not guaranteed beyond 2027 makes the GORs valueless at that point because it would be keeping a conference tied together at a time it does not have a TV deal.

The GOR brings value and security to the ACC to make a media deal. It’s reasonable that a long term deal has an option, in this case ESPN’s option. That option will be exercised one year from now.

The GOR is far from valueless. It underwrites the value of ESPN exercising its option.

Should ESPN end the deal buy not exercising the option in early 2025, the the GOR is still very valuable as the ACC negotiates an alternative contract for beyond 2027.

Fox, for example, could sign a 3 year deal with the ACC through 2030. Or a deal through 2036. It might value a deal through 2040 with much more risk as the GOR runs out in 2036.

 

[CTFAN4LIFE]

Cheaper to pay a few top ACC brands under the SEC umbrella.

I think this is getting at the crux of all of what will occur to the ACC. We have the PAC as Exhibit 1...

The PAC was gutted because like most/all conferences, it had tiers of values that the schools were worth. The most valuable (USC, UCLA, OR and WA) went to the B1G. The rest went to the Big12, the ACC, or were left behind.

It's called realignment and money/value is driving the movements. So, why would the ACC be any different? It has upper tier schools (e.g. FSU and a few others) that are worth more to tv outlets/advertisers that will move to higher end conferences and it has others that will move elsewhere as well. All of this works well for the media outlets because it can generate more higher viewed games that advertisers will pay more to place their ads on. And, they shed paying for low-vale schools. Pretty basic business drivers.

The lower viewed schools more and more will be left to play each other and do it more frequently on lower end platforms/streaming. Higher end schools will be on the best platforms. Again, basic business drivers.

FSU has higher football aspirations than the rest of the ACC and has determined in order for them to optimize their past, current, and future investments in football that it is better off moving out of the ACC. Not much to argue there...

So, they announce they seek a divorce. They think they have enough legal grounds and public pressure to make a move that will cost them less than their exit costs over some period of time they find reasonable.

They've clearly thought about all of this for several years. They've lined up strategy on raising exit monies and it's pretty common belief amongst insiders and unbiased reporters that they have had enough detailed input from third party media consultants to feel confident that they are valued by at least one of the two high value conferences (B1G and SEC) to have a landing spot if/when they free themselves.

I think they know they have a spot in the B1G and are now willing to leave the ACC and are confident that they can negotiate a settlement substantially less than the $572m amount they believe is the high end. I think they believe they have enough dirt/legal ground that they won't be sitting across the ACC in a court room.

If this occurs, then the door will be open for other high value ACC schools to leave as well. Seems like the FSU settlement will range from (a) no GOR and 60% of exit fee at the floor to (b) full $572m at the ceiling. So, maybe $130 to $572m? Am I wrong on this range?

They certainly seem comfortable making this all public and so they must be convinced that over the long haul even at the higher end of the GOR + exit cost range, that they will come out ahead financially while raising their football brand.

 

[CTFAN4LIFE]

The GOR brings value and security to the ACC to make a media deal. It’s reasonable that a long term deal has an option, in this case ESPN’s option. That option will be exercised one year from now.

The GOR is far from valueless. It underwrites the value of ESPN exercising its option.

Should ESPN end the deal buy not exercising the option in early 2025, the the GOR is still very valuable as the ACC negotiates an alternative contract for beyond 2027.

Fox, for example, could sign a 3 year deal with the ACC through 2030. Or a deal through 2036. It might value a deal through 2040 with much more risk as the GOR runs out in 2036.

Unless the GOR was written in some very strange/un-smart manner (which I suppose it could be) wouldn't the GOR dissolve on its own or be something member schools could exit from if the media contract with ESPN discontinued via no extension? There'd be no media contract to tie a GOR to.

 

[CL82]

If it’s an expensive settlement it still protects the value of the GOR and the security of the ACC. $130M exit fee plus $200M+ to buy out of the GOR.

That might be fair to both sides. ACC gets rid of a discontented member.

If it’s much less than that, the ACC might be better to defend its position all the way through the legal process, cases in multiple states, maybe federal, and all of the appeals.

What will be the estimated legal costs for FSU to see this through without settlement?

I'm not so sure. Once the value of escaping the GOR becomes quantifiable, then it's just a matter of math for the other teams that are possible targets of the P2. Any settlement would need to be a sufficiently high number that it would be prohibitive to other teams. Of course, if it were, it would likely also be prohibitive to FSU.

 

[Zissou]

I'm not so sure. Once the value of escaping the GOR becomes quantifiable, then it's just a matter of math for the other teams that are possible targets of the P2. Any settlement would need to be a sufficiently high number that it would be prohibitive to other teams. Of course, if it were, it would likely also be prohibitive to FSU.

I agree. If a settlement is possible, it’s about finding the number that FSU can buy out but is also sufficiently high to deter other defections.

If 4 teams want out, is it so bad to put $1B in the bank for their exit? That might be fair.

 

[Zissou]

Unless the GOR was written in some very strange/un-smart manner (which I suppose it could be) wouldn't the GOR dissolve on its own or be something member schools could exit from if the media contract with ESPN discontinued via no extension? There'd be no media contract to tie a GOR to.

No the GOR is separate. It enables the ACC to shop and negotiate a TV deal.

If the ESPN deal discontinues, the ACC still has the GOR so it can still negotiate an alternate TV deal for 2028-2036.

 

[CTFAN4LIFE]

No the GOR is separate. It enables the ACC to shop and negotiate a TV deal.

If the ESPN deal discontinues, the ACC still has the GOR so it can still negotiate an alternate TV deal for 2028-2036.

I'm not doubting you but are you sure of that/seen this documented? Most deals/contracts/agreements have exits or dissolutions. I suppose the GOR might not have had this but if I was a party to the GOR, I would have made sure it dissolved if the media deal associated to it dramatically changed or expired.

 

[Zissou]

I'm not doubting you but are you sure of that/seen this documented? Most deals/contracts/agreements have exits or dissolutions. I suppose the GOR might not have had this but if I was a party to the GOR, I would have made sure it dissolved if the media deal associated to it dramatically changed or expired.

No one can be sure.

The agreement has been widely described as “iron clad”, including strong opinions on its strength from members, so probably no easy exits.

A logical construct would be that the ESPN contract is contingent on the GOR, not the other way around.