Maryland Lawsuit

[06029]

The ACC was not harmed monetarily, so how are they going to win anything?

It is not harm but a withdrawal fee approved by the conference members in accordance with their rules, regulations and by-laws. The ACC worded their withdrawal language in 2011 after all of the issues the BE had going back to the only litigated case (which the BE lost), thru the WVU deal, etc and the B12 l downsizing and adding of WVU. Unlike the BE, the ACC has a one year notification which seems to be reasonable and not punitive like the BE 27 month period. The withdrawal fee is based on a conference revenue stream and not an arbitrary dollar amount. It seems much more business based than punitive in nature, which was the undoing of the BE in its BC lawsuit. Settling quickly with WVU for more money in exchange for early leaving was another bad precedent for the BE (but good for Uconn should the elusive B1G or SEC invite ever show up).

The ACC has no time constraints with this. Their only concern is precedent. And for anything the ACC does not want coming out, if it gets to trial, the B1G invite process, timeline, other schools contacted by the B1G, their meeting minutes, revenue projections and the MD decision process will also be brought into the mix. I'm guessing those two do not want to air anything in open court too. I do not see an early settlement on this but there will be one. And I see MD paying almost 100% of the fee because the ACC went to school and learned from the mistakes of the BE and B12.

 

[Fairfield 1st]

It is not harm but a withdrawal fee approved by the conference members in accordance with their rules, regulations and by-laws. The ACC worded their withdrawal language in 2011 after all of the issues the BE had going back to the only litigated case (which the BE lost), thru the WVU deal, etc and the B12 l downsizing and adding of WVU. Unlike the BE, the ACC has a one year notification which seems to be reasonable and not punitive like the BE 27 month period. The withdrawal fee is based on a conference revenue stream and not an arbitrary dollar amount. It seems much more business based than punitive in nature, which was the undoing of the BE in its BC lawsuit. Settling quickly with WVU for more money in exchange for early leaving was another bad precedent for the BE (but good for Uconn should the elusive B1G or SEC invite ever show up).

The ACC has no time constraints with this. Their only concern is precedent. And for anything the ACC does not want coming out, if it gets to trial, the B1G invite process, timeline, other schools contacted by the B1G, their meeting minutes, revenue projections and the MD decision process will also be brought into the mix. I'm guessing those two do not want to air anything in open court too. I do not see an early settlement on this but there will be one. And I see MD paying almost 100% of the fee because the ACC went to school and learned from the mistakes of the BE and B12.

That's a great analysis. My questions are then 1. Isn't this still a breach of contract case? 2. And if so, doesn't the ACC have a duty to mitigate their damages, and 3 wouldn't bringing Notre Dame in indicate no pecuniary loss?

 

[businesslawyer]

That was the point with West Virginia though. Could they leave before settling their business with the BE? Would the B12 take a team with unsettled business?

Lots of lawyers opined that whoever took them might be open to becoming a party in a lawsuit for taking a team prior to settling their exit with their old conference.

This just wasn't right. The issue in the WVU case that involved the XII was that the XII was demanding they leave before their contract with the Big East allowed them to leave. The Big Ten's offers to both MD and RU was clearly come when you can. As far as the conferences go, those situations could not be more distinct.

 

[upstater]

This just wasn't right. The issue in the WVU case that involved the XII was that the XII was demanding they leave before their contract with the Big East allowed them to leave. The Big Ten's offers to both MD and RU was clearly come when you can. As far as the conferences go, those situations could not be more distinct.

I didn't say the situations were exactly similar. Read my first post before taking this out of context. I wrote that Maryland might be extended by the length of the suit because if they leave prior to resolving their exit, it may embroil the B1G. I never said the B1G needed Maryland to leave now. I only pointed out that Maryland has incentive to settle this because they may not be able to leave until it's settled, and that's why I cited the West Virginia case.

 

[WestHartHusk]

I think there may be a few suits in Pittsburgh and Bristol squirming if this thing goes to discovery.

 

[06029]

That's a great analysis. My questions are then 1. Isn't this still a breach of contract case? 2. And if so, doesn't the ACC have a duty to mitigate their damages, and 3 wouldn't bringing Notre Dame in indicate no pecuniary loss?

No, it is withdrawal from a conference in accordance with agreed upon procedures and fees. The contract is being breached by MD who does not want to pay what it is contractually obligated to pay. The ACC has a mechanism to allow withdrawal of membership. It has a notification period and a dollar amount. MD does not want to pay what they have to according to those rules/contract. MD sued first and the ACC countered saying, leave but follow the rules of the conference that were put in place while you were a member of the conference. Adding ND or Lville has nothing to do with MD exercising their right to withdraw. The economic impact of MD leaving is not the basis of the lawsuit. It is just a simple fact that MD does not want to pay and the ACC saying follow the rules and procedures.

 

[Fairfield 1st]

I think there may be a few suits in Pittsburgh and Bristol squirming if this thing goes to discovery.

I'd love to take those deposition

 

[Excalibur]

B1G is liable in the same way that the B12 was liable last year in the West Virginia case. If Maryland doesn't settle with the ACC, it can't leave.

That is simply not true.

 

[Excalibur]

That was the point with West Virginia though. Could they leave before settling their business with the BE? Would the B12 take a team with unsettled business?

Lots of lawyers opined that whoever took them might be open to becoming a party in a lawsuit for taking a team prior to settling their exit with their old conference.

The accelerated timeline was the issue in the WVU case. The Big East was seeking specific performance of the 27-month waiting period. The ACC is seeking performance of an obligation to pay. The remedy is not keeping MD in the ACC. The only available remedy is Money.

 

[Excalibur]

No, it is withdrawal from a conference in accordance with agreed upon procedures and fees. The contract is being breached by MD who does not want to pay what it is contractually obligated to pay. The ACC has a mechanism to allow withdrawal of membership. It has a notification period and a dollar amount. MD does not want to pay what they have to according to those rules/contract. MD sued first and the ACC countered saying, leave but follow the rules of the conference that were put in place while you were a member of the conference. Adding ND or Lville has nothing to do with MD exercising their right to withdraw. The economic impact of MD leaving is not the basis of the lawsuit. It is just a simple fact that MD does not want to pay and the ACC saying follow the rules and procedures.

But if the fee is not related to the economic impact, the argument is that it is not enforceable.

 

[btstimpy]

No, it is withdrawal from a conference in accordance with agreed upon procedures and fees. The contract is being breached by MD who does not want to pay what it is contractually obligated to pay. The ACC has a mechanism to allow withdrawal of membership. It has a notification period and a dollar amount. MD does not want to pay what they have to according to those rules/contract. MD sued first and the ACC countered saying, leave but follow the rules of the conference that were put in place while you were a member of the conference. Adding ND or Lville has nothing to do with MD exercising their right to withdraw. The economic impact of MD leaving is not the basis of the lawsuit. It is just a simple fact that MD does not want to pay and the ACC saying follow the rules and procedures.

This is my understanding of the case as well. This case is not about whether this is a penalty, damages, etc. at all. This case is about whether the ACC By-Laws and the Procedures for Creating them and modifying them by the votes of the ACC Council of Presidents is in fact a Valid Contract in the State of North Carolina and that the University of Maryland is bound by the terms of the Contract since they were a member of the ACC.

Once the ACC By-Laws are determined to be a binding Contract. Then the exit fee provision is just a term of the contract that Maryland is bound by regardless of what it's about. Maryland may not have voted for it, but the Contract also has a provision for amendment that requires 75% vote or something. Once the By-Laws are determined to be a binding Contract, then Maryland is bound by the voting rules as well.

It's all about whether those By-Laws are in fact a contract. If it is a contract, then Maryland is paying.

 

[businesslawyer]

I didn't say the situations were exactly similar. Read my first post before taking this out of context. I wrote that Maryland might be extended by the length of the suit because if they leave prior to resolving their exit, it may embroil the B1G. I never said the B1G needed Maryland to leave now. I only pointed out that Maryland has incentive to settle this because they may not be able to leave until it's settled, and that's why I cited the West Virginia case.

Maryland does not need to stay longer than it agreed to by contract whether there is an amount in dispute or not and the Big will not be involved or have any liability unless they are requiring Maryland to leave early

 

[Excalibur]

This is my understanding of the case as well. This case is not about whether this is a penalty, damages, etc. at all. This case is about whether the ACC By-Laws and the Procedures for Creating them and modifying them by the votes of the ACC Council of Presidents is in fact a Valid Contract in the State of North Carolina and that the University of Maryland is bound by the terms of the Contract since they were a member of the ACC.

Once the ACC By-Laws are determined to be a binding Contract. Then the exit fee provision is just a term of the contract that Maryland is bound by regardless of what it's about. Maryland may not have voted for it, but the Contract also has a provision for amendment that requires 75% vote or something. Once the By-Laws are determined to be a binding Contract, then Maryland is bound by the voting rules as well.

It's all about whether those By-Laws are in fact a contract. If it is a contract, then Maryland is paying.

If the by-laws are a contract, then the court must decide the issue of whether the exit clause is a clause relating to the breach of that contract or part of the consideration paid by the membership schools for the performance of the contract. I think that the latter is a pretty weak argument.

 

[btstimpy]

If the by-laws are a contract, then the court must decide the issue of whether the exit clause is a clause relating to the breach of that contract or part of the consideration paid by the membership schools for the performance of the contract. I think that the latter is a pretty weak argument.

If the exit clause is part of the contract, Maryland would be in breach by not paying it. If Maryland wants to make the case that the ACC is in breach regarding another part of the contract and the ACC's performance, Maryland is free to do so. That's part of what WVU was arguing against the Big East. Not knowing the full terms of the contract, wouldn't know at this point.

Maryland is arguing now that: North Carolina doesn't have juridiction, ACC is not performing because they are holding back collateral, and ACC is excluding Maryland from information that other members are receiving while they are still a member and haven't submitted their official withdrawal. These actually seem very weak.

 

[HuskyHawk]

If the by-laws are a contract, then the court must decide the issue of whether the exit clause is a clause relating to the breach of that contract or part of the consideration paid by the membership schools for the performance of the contract. I think that the latter is a pretty weak argument.

Agreed. Even if it is a contract, liquidated damages clauses will not always be enforceable. I am sure Maryland is arguing both that it is not bound by the change at all, that the fee increase is not binding and separately that if it is binding it is an unenforceable penalty rather than a reasonable liquidated damages clause that seeks to set damages that would otherwise be difficult to determine. If they aren't arguing both those things, they need new lawyers.

 

[bingethinker]

MD sued first and the ACC countered saying, leave but follow the rules of the conference that were put in place while you were a member of the conference. Adding ND or Lville has nothing to do with MD exercising their right to withdraw. The economic impact of MD leaving is not the basis of the lawsuit. It is just a simple fact that MD does not want to pay and the ACC saying follow the rules and procedures.

Maryland didn't sue first, the ACC did. It filed a suit on November 27, 2012. The Maryland AG filed a suit on January 18, 2013. Also, according to Maryland's complaint, it's not saying that it doesn't think it should have to pay an exit fee. It's saying that the most recent exit fee it voted against is arbitrary and capricious.

The ACC certainly didn't do itself any favors by adding Notre Dame early. No chance swapping Maryland for Notre Dame and Louisville caused anyone $50 million in damages. I can't wait to see the ACC this up like it effs everything else up.

 

[Excalibur]

If the exit clause is part of the contract, Maryland would be in breach by not paying it. If Maryland wants to make the case that the ACC is in breach regarding another part of the contract and the ACC's performance, Maryland is free to do so. That's part of what WVU was arguing against the Big East. Not knowing the full terms of the contract, wouldn't know at this point.

The argument is not over whether it's part of the contract, it's over the nature of the clause. Liquidated damages provisions are very much "a part" of the contracts in which they appear.

 

[freescooter]

Don't know all the parts of this deal but I do know that liquidated damages have recently been overturned in several places because they were deemed by the court to be unrelated to the actual damages suffered, and even despite the fact that both parties agreed to them by contract. In fact recently almost all of our contracts which have liquidated damages clauses contain language saying that the parties agree not to challenge the amount of these damages even if they challenge other aspects. The only argument is over whether they are due, not the amount.

 

[btstimpy]

The argument is not over whether it's part of the contract, it's over the nature of the clause. Liquidated damages provisions are very much "a part" of the contracts in which they appear.

It's a clause proposed via motion by the University of Maryland, Dr. Loh himself. And it was originally passed unanimously by all of the Council of Presidents. Maryland voted against increasing the amount, but the Clause is a Maryland proposed addition to the contract itself.

 

[Fairfield 1st]

Don't know all the parts of this deal but I do know that liquidated damages have recently been overturned in several places because they were deemed by the court to be unrelated to the actual damages suffered, and even despite the fact that both parties agreed to them by contract. In fact recently almost all of our contracts which have liquidated damages clauses contain language saying that the parties agree not to challenge the amount of these damages even if they challenge other aspects. The only argument is over whether they are due, not the amount.

Right, and that's where the negotiations start

 

[B1GALUM]

"ACC’s motion to dismiss Maryland lawsuit scheduled for hearing next week" "Next week might bring some clarity to the legal battle between Maryland and the ACC."
http://www.washingtonpost.com/blogs...land-lawsuit-scheduled-for-hearing-next-week/

 

[specialisthusky]

"ACC’s motion to dismiss Maryland lawsuit scheduled for hearing next week" "Next week might bring some clarity to the legal battle between Maryland and the ACC."
http://www.washingtonpost.com/blogs...land-lawsuit-scheduled-for-hearing-next-week/

The article serves as a nice recap of what has occurred. The important ruling was the North Carolina court denying Maryland's mtd. As long as the original damages case in north Carolina is open this suit means little more than complicating the matter.

 

[CL82]

What if the court were to find that the penalty clause was in violation of the commerce clause? Would that pave the way for GORs to be throw out? Just a thought.

 

[TerryD]

What if the court were to find that the penalty clause was in violation of the commerce clause? Would that pave the way for GORs to be throw out? Just a thought.

A North Carolina court is not going to decide this case on Federal constitutional grounds. All courts, including the U.S. Supreme Court, try to avoid constitutional questions and decide cases on other grounds (constitutional questions are decided only as a sort of last resort).

My semi-educated guess (over 26 years as a civil litigation lawyer) is that the discovery phase will take a year or more.

The trial may not be for another year and a half, perhaps longer.

The parties will end up settling, but not just yet. The lawyers have a lot of billable hours to earn. The ACC may want to try to wear Maryland down a bit or just keep the lawsuit going to show they are "vigorously" defending the exit fee provision.

 

[CL82]

A North Carolina court is not going to decide this case on Federal constitutional grounds. All courts, including the U.S. Supreme Court, try to avoid constitutional questions and decide cases on other grounds (constitutional questions are decided only as a sort of last resort).

My semi-educated guess (over 26 years as a civil litigation lawyer) is that the discovery phase will take a year or more.

The trial may not be for another year and a half, perhaps longer.

The parties will end up settling, but not just yet. The lawyers have a lot of billable hours to earn. The ACC may want to try to wear Maryland down a bit or just keep the lawsuit going to show they are "vigorously" defending the exit fee provision.

I don't disagree but both parties are claiming Federal issue, anti-Trust vs. commerce clause, so it may be hard to avoid. I do agree that it will settle, maybe sooner than we think, since the $50M is no longer the ACC's primary defense against defection.