Maryland’s $157 million counterclaim: ACC recruited B1G schools

[CL82]

I'm not necessarily adverse to that outcome, although based upon the BE settlements they likely pay something.

Keep in mind that the Big East settlements were small dollar amounts and were in exchange for an early exit. The dollars are bigger and MD isn't asking for an early out.

 

[billybud]

WVU paid $20 million...to get out early.

 

[buddy]

btstimpy, I am a UMD grad and fan, so it will be no surprise my take is a bit different from yours.

I agree with your first statement that members are bound to bylaws that pass even if they oppose. That's not in dispute. The problem here is that it appears that the increased exit fee proposal was not given a proper amount of time to be deliberated amongst the conference presidents, and to have it effective immediately. Even if the bylaws allow such important proposals to be rammed through, and if the immediate effective date was also allowed by the bylaws, they have to be legal. For example, if the presidents passed a bylaw that ACC member fans are allowed to throw batteries at their opponents athletes, this would not be allowed. In my opinion, an exit fee of $52,000,000 is way too excessive, and perhaps illegal, besides being unethical. So, the NC court will have to decide if the bylaws were, in fact, followed, and if they were, if such an exit fee is legal. And from what I heard, this may have been done to appease Notre Dame to keep schools from leaving. If true, this makes the exit fee smell even more.

What is galling about this is how Swofford insists Maryland follow the bylaws that were questionably enacted, while not insisting that the last four members they poached from the Big East honor the Big East bylaws of the 27-month notice. I suppose that this is irrelevant to the case at hand, but does expose Swofford's gross hypocrisy. Somehow, he found nothing wrong with poaching seven teams from another conference, but has a hissy fit when one school leaves his conference.

It is unfortunate that the ACC decided to drag this out. In the interest of fairness and sportsmanship, Dr. Loh, Dr. Sullivan, and the other ACC presidents should have met in executive session, without Swofford, and hammered out an agreement, such as allowing Maryland to leave with the $20,000,000 exit fee that they agreed to in the past, shake hands, wish each other luck, and move on.

Unfortunately, Maryland has also made mistakes throughout this process. While I agree with Dr. Loh that an exit fee is appropriate, I thought that $20,000,000 was too high. If the bylaws allow for a president to reconsider a bylaw (even though such actions would most likely end up in the circular file before being considered), and Dr. Loh failed to do so, that would be a mistake. I also believe that Maryland voting for Notre Dame half-a--ed membership was a gross mistake. If this happened before Maryland was seriously considering leaving, they should have voted against. Otherwise, they should have abstained. Maryland may not have followed their own procedures for switching conferences, and they may have (if they haven't already) to answer for that. But this mistake has nothing to do with the ACC. I also find throwing batteries at opposing athletes/fans and other unsportsmanlike or criminal activities disgusting, and more effort should be employed to deter this.

I was pro-ACC, but gradually became disenchanted. I think Notre Dame's partial admission sealed it. I think Maryland's move to BIG is a positive move. I understand that sometimes the devil you know may end up being not as bad. We'll see.

I like UConn9604's bet. It appears that depending on which of our argument is correct, the final judgment will be either less than $25,000,000 or greater than $50,000,000. Another possibility is that neither the ACC or Maryland really wants this to go to court, and settle for something in between.

Maryland, like Rutgers, hit the jackpot. It won't matter in the long run what Maryland has to pay. They will recoup this money many many times over.

 

[CL82]

WVU paid $20 million...to get out early.

I forgot about WVU. Keep in mind that half that amount was paid by the B12, so WVU paid $10M. Still it was a quid pro quo. Money for an early exit. What is MD getting by settling? There exit date isn't changing, so it is only the litigation cost, plus a what they perceive to be their worst case scenario less the agreed upon settlement times a beta. I don't think that's >$20M but who knows?

 

[billybud]

I forgot about WVU. Keep in mind that half that amount was paid by the B12, so WVU paid $10M. Still it was a quid pro quo. Money for an early exit. What is MD getting by settling? There exit date isn't changing, so it is only the litigation cost, plus a what they perceive to be their worst case scenario less the agreed upon settlement times a beta. I don't think that's >$20M but who knows?

Nobody in the BE settled for less then the exit fee...Maryland won't get away for less then $20 million..IMHO.

The ACC has no incentive to settle while they are withholding monies for football and basketball season normally paid out near June.

 

[WestHartHusk]

I think that is reasonable. Most of us on here have thought the original $20M would the number, maybe with a little upward movement (say, $25M).

 

[CL82]

Nobody in the BE settled for less then the exit fee...Maryland won't get away for less then $20 million..IMHO.

The ACC has no incentive to settle while they are withholding monies for football and basketball season normally paid out near June.

Different deals. The C7 traded monies received for the Big East naming rights. Cuse and Pitt traded monies due for an early release. What is Maryland getting for settling?

The MD counsel is changing the cost benefit of litigation. I think that they are positioned well. We'll see though.

 

[billybud]

I don't think it is even about the money for the ACC.....the question is what does the ACC get for settling?

 

[billybud]

I think that Maryland is positioned very poorly to avoid the $20 million exit fee...from a legal standpoint.

.....They agreed to that bylaw provision, their President drafted it as chair of the committee. They agreed that $20 million would stand in as the approximation of liquidated damages. The courts have been loathe to overturn such agreed upon liquidated damages and would be unlikely to call $20 million "punitive".

I think that they are positioned quite well, however, to avoid the $52 million exit fee.

 

[btstimpy]

I think that Maryland is positioned very poorly to avoid the $20 million exit fee...from a legal standpoint.

.....They agreed to that bylaw provision, their President drafted it as chair of the committee. They agreed that $20 million would stand in as the approximation of liquidated damages. The courts have been loathe to overturn such agreed upon liquidated damages and would be unlikely to call $20 million "punitive".

I think that they are positioned quite well, however, to avoid the $52 million exit fee.

The two numbers are 1.5 times operating revenue and 3.0 times operating revenue. Maryland voted for the 1.5 times, but Maryland did not vote for the 3.0 times. Those translate to $26 million and $52 million respectively. Don't expect the court to come up with another arbitrary number. The ACC thinks it followed proper procedure to change the multiplier from 1.5 to 3.0. Maryland is arguing that the ACC did not follow proper procedure to change it.

The two sides can settle at another number besides $26 or $52 million. But expect the court to pick one of those two if it gets to the court's judgement. One court has already ruled that the exit fee and the ACC's offset is not anti-trust and is not impeding Maryland's rights of association or harming Maryland financially. Therefore, don't expect the court to look at either of these numbers as excessive. Expect it to come down to process.

 

[billybud]

You may be right...I did not do the multiplier math based on the conference yearly cut at the time of the notice.

 

[UConn9604]

The two numbers are 1.5 times operating revenue and 3.0 times operating revenue. Maryland voted for the 1.5 times, but Maryland did not vote for the 3.0 times. Those translate to $26 million and $52 million respectively. Don't expect the court to come up with another arbitrary number. The ACC thinks it followed proper procedure to change the multiplier from 1.5 to 3.0. Maryland is arguing that the ACC did not follow proper procedure to change it.

How does 1.5 times a team's revenue (or 3.0 times a team's revenue) translate to a liquidated damages amount? It's an arbitrary figure that penalizes Duke basketball and BC basketball in the same manner for leaving (or Florida State football and BC football, for that matter) when, in reality, the "damages" suffered on account of a school's departure vary widely from school to school.

 

[billybud]

Yep...the loss of different programs may have very different individual damage effects. But the purpose of an agreed upon exit fee as a stand in for actual damage is so that you do not have to go through the painful process of determining an actual damage. Which can be fairly ephemeral.


On an aside, BC football receives the same monetary amount from the conference as FSU football. And Duke basketball the same amount as FSU basketball. The equality goes both ways

 

[UConn9604]

Yep...the loss of different programs may have very different individual damage effects. But the purpose of an agreed upon exit fee as a stand in for actual damage is so that you do not have to go through the painful process of determining an actual damage. Which can be fairly ephemeral.


On an aside, BC football receives the same monetary amount from the conference as FSU football. And Duke basketball the same amount as FSU basketball. The equality goes both ways

Do you have a cite to a source for the 1.5 multiple? I know the current fee is 3.0, but I hadn't heard that the previous one was 1.5.

Revenue sharing doesn't imply actual damages, by the way. Since the ACC has more than 12 members, it can suffer the loss of one and still host a conference championship game for no one to watch -- and the remaining members can actually improve their financial positions. For example, if Wake Forest bolts for the _____ league, and the ACC's TV contract is renegotiated, the size of the ACC's revenue pie probably won't drop, and there will be fewer slices cut from it. Setting aside the exit fee, the question of actual damages is all based on the specific member that leaves.

Now, Maryland's argument will be, look, we stink in everything but lacrosse, and Louisville and UConn were lined up to replace us in an instant; both were the best basketball programs in the Big East, and played in BCS bowls very recently. How was the ACC actually damaged by our departure?

The ACC's argument will be, there's a reason why the B1G wanted a stinky Maryland team -- the Baltimore and D.C. markets. That's how we were damaged.

 

[btstimpy]

Do you have a cite to a source for the 1.5 multiple? I know the current fee is 3.0, but I hadn't heard that the previous one was 1.5.

Revenue sharing doesn't imply actual damages, by the way. Since the ACC has more than 12 members, it can suffer the loss of one and still host a conference championship game for no one to watch -- and the remaining members can actually improve their financial positions. For example, if Wake Forest bolts for the _____ league, and the ACC's TV contract is renegotiated, the size of the ACC's revenue pie probably won't drop, and there will be fewer slices cut from it. Setting aside the exit fee, the question of actual damages is all based on the specific member that leaves.

Now, Maryland's argument will be, look, we stink in everything but lacrosse, and Louisville and UConn were lined up to replace us in an instant; both were the best basketball programs in the Big East, and played in BCS bowls very recently. How was the ACC actually damaged by our departure?

The ACC's argument will be, there's a reason why the B1G wanted a stinky Maryland team -- the Baltimore and D.C. markets. That's how we were damaged.

I just went back and read it. It is 1.25 rather than 1.5, but same point applies. I knew it was more than 1, but it's not 1.5. 1.25 would be $21.77 million using operating revenue from 2012. . On page 5 of the lawsuit, point 22, it states that the ACC Council of Presidents adopted Dr. Wallace Loh of Maryland's amendment to make the damages 1.25 time operating revenue in 2011.

http://www.documentcloud.org/documents/525109-acc-vs-university-of-maryland-college-park.html

 

[UConn9604]

I just went back and read it. It is 1.25 rather than 1.5, but same point applies. I knew it was more than 1, but it's not 1.5. 1.25 would be $21.77 million using operating revenue from 2012. . On page 5 of the lawsuit, point 22, it states that the ACC Council of Presidents adopted Dr. Wallace Loh of Maryland's amendment to make the damages 1.25 time operating revenue in 2011.

http://www.documentcloud.org/documents/525109-acc-vs-university-of-maryland-college-park.html

That's interesting. What's also interesting is that these meetings happened on September 13 and 14, 2011, and the Syracuse/Pitt invites were leaked to the press that weekend (Sep. 16-17).

I'll never forget driving home from that embarrassing loss to Iowa State and having my cell phone blow up with texts that night.

With that in mind (i.e., the ACC's expansion from 12 to 14), I don't get the ACC's argument in paragraph 23, that "the potential harm to ACC member institutions in the event of the withdrawal of one or more members of the Conference substantially increased." Why? Adding Syracuse and Pitt created a two-team buffer to protect their right to hold a championship game that no one watches.

 

[SouthronCross]

That's interesting. What's also interesting is that these meetings happened on September 13 and 14, 2011, and the Syracuse/Pitt invites were leaked to the press that weekend (Sep. 16-17).

I'll never forget driving home from that embarrassing loss to Iowa State and having my cell phone blow up with texts that night.

With that in mind (i.e., the ACC's expansion from 12 to 14), I don't get the ACC's argument in paragraph 23, that "the potential harm to ACC member institutions in the event of the withdrawal of one or more members of the Conference substantially increased." Why? Adding Syracuse and Pitt created a two-team buffer to protect their right to hold a championship game that no one watches.

The 2011 and 2012 TV ratings for the ACCCG were indeed abysmal. But, a 3.4 rating for the 2013 game means somebody was watching it.

http://www.sportsmediawatch.com/201...big-ten-title-games-top-season-bedlam-strong/

Granted, it'll likely never match the SECCG or the B1G CCG ratings, but, a 3.4 is not shabby at all. Especially with the SEC's and B1G's on network TV, and, the ACC's on ESPN.

And, it did outdraw the Pac-12 CCG by more than triple. And, that was with Duke representing the Coastal Division.

 

[CL82]

I'll say it again, the ACC ended up being enriched not damaged by MD's departure. That is an important point that is conveniently ignored by some posters. MD leaves and the ACC ends up making more money, but they want MD to pay a staggering amount anyway even though they weren't damaged. Sure sounds punitive rather than compensatory doesn't it?

 

[billybud]

Yep..it is punitive.

It will be the $20ish million that Dr. Loh designed in 2011.

 

[SouthronCross]

I'll say it again, the ACC ended up being enriched not damaged by MD's departure. That is an important point that is conveniently ignored by some posters. MD leaves and the ACC ends up making more money, but they want MD to pay a staggering amount anyway even though they weren't damaged. Sure sounds punitive rather than compensatory doesn't it?

Its sound like a legal matter to me. Which is something that you seem to want to gloss over.

What you seem to not want to see is, that as a member of the ACC, UMD are bound by certain agreements. Just like the other league members are. The exit fee is one of them. It was an issue that was brought up, debated, and, passed by member schools, by a 10-2 vote. The whole key to this is whether or not the ACC violated its own bylaws in implementing it. If they didn't, UMD is on the hook for the full $52M. If they did, then, thats a whole other ballgame. It really is that simple.

How the term 'damaged' is defined depends upon who is speaking at the time.

 

[UConn9604]

The whole key to this is whether or not the ACC violated its own bylaws in implementing it. If they didn't, UMD is on the hook for the full $52M. If they did, then, thats a whole other ballgame. It really is that simple.

It's a little more complicated than that, according to the North Carolina Supreme Court.

Liquidated damages are a sum which a party to a contract agrees to pay or a deposit which he agrees to forfeit, if he breaks some promise, and which, having been arrived at by a good-faith effort to estimate in advance the actual damage which would probably ensue from the breach, are legally recoverable or retainable . . . if the breach occurs. A penalty is a sum which a party similarly agrees to pay or forfeit . . . but which is fixed, not as a pre-estimate of probable actual damages, but as a punishment, the threat of which is designed to prevent the breach, or as security . . . to insure that the person injured shall collect his actual damages.

Liquidated damages may be collected; a penalty will not be enforced.

Kinston v. Suddreth, 266 N.C. 618, 620 (1966) (citations omitted).

 

[billybud]

Yep...I have thought all along, as does FSU's legal team and BOT Chair, that the $52 million will be judged to be punitive.

The ink was barely dry on it before FSU's BOT Chair declared it to be punitive...

 

[SouthronCross]

Yep...I have thought all along, as does FSU's legal team and BOT Chair, that the $52 million will be judged to be punitive.

The ink was barely dry on it before FSU's BOT Chair declared it to be punitive...

FSU was also the other 'no' vote in a 10-2 outcome. So, of course, that is his view.

If it was that punitive, don't you believe that there would've been more than just two dissenting votes? I do.

 

[btstimpy]

It's a little more complicated than that, according to the North Carolina Supreme Court.

Liquidated damages are a sum which a party to a contract agrees to pay or a deposit which he agrees to forfeit, if he breaks some promise, and which, having been arrived at by a good-faith effort to estimate in advance the actual damage which would probably ensue from the breach, are legally recoverable or retainable . . . if the breach occurs. A penalty is a sum which a party similarly agrees to pay or forfeit . . . but which is fixed, not as a pre-estimate of probable actual damages, but as a punishment, the threat of which is designed to prevent the breach, or as security . . . to insure that the person injured shall collect his actual damages.

Liquidated damages may be collected; a penalty will not be enforced.

Kinston v. Suddreth, 266 N.C. 618, 620 (1966) (citations omitted).

Yes. And the Exit Fee is not a set amount because it is not a penalty. It is damages based upon a variable amount relative to the individual school's contribution to operating revenue of the overall league. When that party leaves, it puts a hole in the operating revenue that is their share. So the ACC Exit Fee is designed as damages and not a penalty. It is not designed to be punitive either. The debate on the multiplier is valid. Maryland agreed to 1.25 times operating revenue and not 3.0 times operating revenue. But at the same time Maryland as an active member of the ACC is contractually obligated to follow the ACC Constitution which is controlled by 75% vote of the Council of Presidents. That 75% vote set the multiplier for the operating revenue as the pre-estimate of damages to 3.0. That 75% is also voted on in a much larger quorum than 3 out of 4. It was 10 out of 12 implying that more debate and careful consideration would be required to reach the 75% out of the larger pool of votes.

 

[btstimpy]

I'll say it again, the ACC ended up being enriched not damaged by MD's departure. That is an important point that is conveniently ignored by some posters. MD leaves and the ACC ends up making more money, but they want MD to pay a staggering amount anyway even though they weren't damaged. Sure sounds punitive rather than compensatory doesn't it?

The ACC has worked to enrich itself by other means since the Maryland departure such as the offering of membership to Louisville, the extra contributions of Notre Dame, and the Grant of Rights. All of these things are fine and dandy, and they all have absolutely nothing to do with Maryland's departure or the liquidated damages caused by Maryland's departure. The only one even triggered by Maryland's departure was the offering of Membership to Louisville. But that doesn't mitigate any of Maryland's responsibility for the pre-determined liquidated damages.

 

[itgoeslike]

FSU was also the other 'no' vote in a 10-2 outcome. So, of course, that is his view.

If it was that punitive, don't you believe that there would've been more than just two dissenting votes? I do.

Not if the assenting universities had a vested interest in keeping the conference together and believed that the higher fee would deter members from defecting.

 

[btstimpy]

Yep...I have thought all along, as does FSU's legal team and BOT Chair, that the $52 million will be judged to be punitive.

The ink was barely dry on it before FSU's BOT Chair declared it to be punitive...

If Maryland would stop its delay tactics with motions to move venue, Counter Lawsuits, motion appeals, etc. that they are losing one after another, we might be able to find out the answer. And the $52 million is simply a relative number for that point in time. The issue is the multiplier against operating revenue. Is 3.0 times too much for liquidated damages? 10 of 12 members who voted to add it to the Constitution do not think so. Will the court? That is the question. If someone else chose to leave this month, that number would be in the $66 million range based upon the projected $22 million to be received in operating revenue this year. Notre Dame would be a lower number of course because they don't participate in the football portion.

 

[Fishy]

I don't know why the ACC is going to the mat on this one. I get it for Maryland - they really have nothing to lose - but there's an odd edge to the ACC's pursuit.

The Big East's corpse has been sued by Pitt, Rutgers and West Virginia - all, basically, in an attempt to circumvent the 27-month rule. All, predictably, were quickly settled with a few extra bucks. (Or more than a few in the case of WV who wanted to leave immediately.)

The ACC seems more defensive here, especially given that the conference isn't worried about its imminent demise.

 

[btstimpy]

Not if the assenting universities had a vested interest in keeping the conference together and believed that the higher fee would deter members from defecting.

And by denying Maryland's appeal to dismiss, the North Carolina Court of Appeals declared Maryland an assenting member because it had agreed to be bound by the 75% vote of the ACC Council of Presidents as an active member of the league.

Despite Maryland's negative vote on increasing the exit fee, "each member, including the University of Maryland, has agreed to be bound by the vote of the Council," Judge Robert N. Hunter Jr. wrote in the appeals court's decision

http://www.usatoday.com/story/sport...t-fee-52-million-court-appeal-denied/3640547/

 

[billybud]

Fishy...while there are business reasons for going to the mats...as a deterrent if others think it will be an easy settlement and backslap..

I believe that it is also personal...

Swofford was PO'd that Maryland dodged his calls for 48 hours before the announcement. PO'd that the Maryland team had snookered him in by professing loyalty and that they were in it for the long run while working out the details of the conference switch.

Swofford, I think, has little incentive to make it any easier for Maryland...on a personal as well as business basis.