Mediator assigned in Maryland vs. ACC lawsuit

[kyleslamb]

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.

I think that's certainly the intention on their part, but legally it won't hold up and they know it and other leagues know it. They're only hoping it's not worth the hassle of the prolonged legal battle. Your point earlier about leaving the consideration absent from the agreement was a good one, but failing to name what exactly they were giving in exchange for the rights, it's hard to conclude it was anything other than money.

 

[nelsonmuntz]

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.

Tom Selleck would not be allowed to work again, would not get paid under his contract with CBS, AND would be liable for all damages related to the loss of the TV show. He has already sold his services. George Michael tried what you are saying and got his ass beat pretty badly in court, and flushed the prime of his career down the toilet in the process. Going back to the 70's, Redd Foxx had endless feuds with the producers of Sanford and Son which usually went Redd Foxx's way. That was 40 years ago and I imagine that the contracts have become a little tighter since.

Let's say Kansas wants to join the Big 10. They tell the Big 12 they are leaving, the Big 12 says "oh no you aren't" and files an injunction to prevent Kansas from playing in another league, which Kansas has almost definitely already agreed to allow the Big 12 to do. Any contract that has specific performance requirements stipulates injunctive relief. The Big 10 may decide it still wants Kansas, but now the Big 10 would be subject to a pretty clearcut tortious interference case because it would be violating an injunction. That could result in both civil AND criminal penalties. No one is going to do that. And while Kansas was pulling this stunt, it would not be receiving any revenue from the league and would be liable for lost revenue to the other members. In other words, no one is going to try to beat the GOR, UNLESS there is a built in trap door that we do not know about.

A GOR is completely different from an exit fee. An exit fee is a pre agreed upon liquidated damages. Both sides agree up front that if things don't work out, this is what it costs to leave. A GOR is a sale contract. You don't get to undo the sale. Lots and lots of people have tried, and I don't have any examples of a success. I would imagine Kansas, in my example would have to show fraud or that the GOR is illegal or some other form of recission to beat the GOR. That hurdle is pretty high.

 

[AZHuskiePop]

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

If Louisville had a stretch like Maryland had ,they never will be heard from again.
Having the state in you name means you have fans in waiting. Louisville has few fans in Kentucky outside of Louisville.

 

[UConnJim]

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.

Lease is bad example. If someone wanted out of a lease and found someone to take over the remainder of the lease, or the landlord quickly found someone to lease the property on similar terms, there are virtually no damages. Judges would find little or no damages if the landlord sued.

If Billy Joel wanted out of his contract and he offered the record label Paul McCartney to finish his contract, there are no damages. If Maryland is replaced by Louisville, there are virtually no damages and some may argue the ACC actually gained as ESPN improved their contract even after Maryland announced their departure.

 

[nelsonmuntz]

I think that's certainly the intention on their part, but legally it won't hold up and they know it and other leagues know it. They're only hoping it's not worth the hassle of the prolonged legal battle. Your point earlier about leaving the consideration absent from the agreement was a good one, but failing to name what exactly they were giving in exchange for the rights, it's hard to conclude it was anything other than money.

Of course it would hold up, and there is a ton of case law to support anyone withholding payments to a violating party under a media rights agreement.

 

[CTMike]

Can someone explain why this analysis of the GOR is incorrect?

http://msn.foxsports.com/college-fo...erage/myth-of-the-big-12s-grant-of-rights.php

 

[nelsonmuntz]

Lease is bad example. If someone wanted out of a lease and found someone to take over the remainder of the lease, or the landlord quickly found someone to lease the property on similar terms, there are virtually no damages. Judges would find little or no damages if the landlord sued.

If Billy Joel wanted out of his contract and he offered the record label Paul McCartney to finish his contract, there are no damages. If Maryland is replaced by Louisville, there are virtually no damages and some may argue the ACC actually gained as ESPN improved their contract even after Maryland announced their departure.

You are looking at the lease from the wrong direction. Once a landlord leases space, they can't turn around and lease it to someone else because that person will pay more. A school can't turn around and resell media rights it has already sold.

These media contracts don't account for "equivalent" value. They are SALE CONTRACTS.

 

[HuskyHawk]

Tom Selleck would not be allowed to work again, would not get paid under his contract with CBS, AND would be liable for all damages related to the loss of the TV show. He has already sold his services. George Michael tried what you are saying and got his ass beat pretty badly in court, and flushed the prime of his career down the toilet in the process. Going back to the 70's, Redd Foxx had endless feuds with the producers of Sanford and Son which usually went Redd Foxx's way. That was 40 years ago and I imagine that the contracts have become a little tighter since.

Let's say Kansas wants to join the Big 10. They tell the Big 12 they are leaving, the Big 12 says "oh no you aren't" and files an injunction to prevent Kansas from playing in another league, which Kansas has almost definitely already agreed to allow the Big 12 to do. Any contract that has specific performance requirements stipulates injunctive relief. The Big 10 may decide it still wants Kansas, but now the Big 10 would be subject to a pretty clearcut tortious interference case because it would be violating an injunction. That could result in both civil AND criminal penalties. No one is going to do that. And while Kansas was pulling this stunt, it would not be receiving any revenue from the league and would be liable for lost revenue to the other members. In other words, no one is going to try to beat the GOR, UNLESS there is a built in trap door that we do not know about.

A GOR is completely different from an exit fee. An exit fee is a pre agreed upon liquidated damages. Both sides agree up front that if things don't work out, this is what it costs to leave. A GOR is a sale contract. You don't get to undo the sale. Lots and lots of people have tried, and I don't have any examples of a success. I would imagine Kansas, in my example would have to show fraud or that the GOR is illegal or some other form of recission to beat the GOR. That hurdle is pretty high.

There is no way in hell that any court will issue an injunction for violation of a GOR or insist on specific performance. It simply won't happen. No court is going to tell Kansas what conference they will play in. You cannot compare it to record deals either, as the deal is not with the artist, but rather with a group. For example, if Journey has a record deal, and Steve Perry leaves, by Journey produces an album, the contract is not breached in the same way it is if an actor walks or George Michael doesn't live up to his solo album requirements. Still in all those cases, the remedy is damages, not an injunction. And damages have to be proven, and actual.

So in my Journey example, losing Steve Perry is like the Big XII losing Texas. The conference still exists, it still plays the games for the network and provides the content, but the value of the content is decreased. Now if the bass player for Journey leaves...nobody can even tell the difference. What are the damages? Nothing. That is how the GOR will work with these conferences. Remember, the contract each school has is with the conference, not with the network. George Michael broke a contract with the label, the equivalent of a network. In the GOR situation that does not happen. That contract is not breached. Instead it is like the contract a band member has with a band. Ever see anybody quit a band? Happens all the time.

 

[nelsonmuntz]

Can someone explain why this analysis of the GOR is incorrect?

http://msn.foxsports.com/college-fo...erage/myth-of-the-big-12s-grant-of-rights.php

That is what this whole thread is about. Message board posters and a handful of sports bloggers seem to think that GOR's can be broken. They ignore that there is a lot of relevant case law that says these agreements can't be broken.

 

[kyleslamb]

Of course it would hold up, and there is a ton of case law to support anyone withholding payments to a violating party under a media rights agreement.

That shows ignorance of what a Grant of Rights actually is.

There is no "violating party" in this case. If a school leaves a conference, it isn't in "violation" of anything. The GOR specifically states it's in effect for a set duration regardless of conference affiliation. Withholding payments to a school that leaves would be the violation, not the school leaving. If Kansas left the Big 12 for the Big Ten, it isn't "violation" since the agreement specifically states it doesn't matter whether a school is a conference member... the agreement remains in full force.

The Grant of Rights will hold up, yes, but only if the Big 12 continues to honor its end of the consideration (i.e., the payment)

 

[nelsonmuntz]

There is no way in hell that any court will issue an injunction for violation of a GOR or insist on specific performance. It simply won't happen. No court is going to tell Kansas what conference they will play in. You cannot compare it to record deals either, as the deal is not with the artist, but rather with a group. For example, if Journey has a record deal, and Steve Perry leaves, by Journey produces an album, the contract is not breached in the same way it is if an actor walks or George Michael doesn't live up to his solo album requirements. Still in all those cases, the remedy is damages, not an injunction. And damages have to be proven, and actual.

So in my Journey example, losing Steve Perry is like the Big XII losing Texas. The conference still exists, it still plays the games for the network and provides the content, but the value of the content is decreased. Now if the bass player for Journey leaves...nobody can even tell the difference. What are the damages? Nothing. That is how the GOR will work with these conferences. Remember, the contract each school has is with the conference, not with the network. George Michael broke a contract with the label, the equivalent of a network. In the GOR situation that does not happen. That contract is not breached. Instead it is like the contract a band member has with a band. Ever see anybody quit a band? Happens all the time.

Most contracts that require specific performance stipulate injunctive relief. Do you think the GOR does not include language like that? If it doesn't, there is part of your trap door I was talking about. I would be shocked though. The signatories of the GOR have agreed in advance to allow injunctive relief to the league. Try beating that.

In the Journey example, I would assume that there is both a "key man" clause restricting certain members, and a clause restricting the band from reforming under a different name.

You need to stop thinking about the GOR as a contract with damages. It is a sale agreement.

 

[HuskyHawk]

Can someone explain why this analysis of the GOR is incorrect?

http://msn.foxsports.com/college-fo...erage/myth-of-the-big-12s-grant-of-rights.php

It isn't incorrect. It is pretty solid. There is a lot of speculation around ESPN and the practical realities of reduction in payout, but otherwise I agree.

Nelson seems to be ignoring that the contract for rights to broadcast is in the first instance between the Network and the Conference. The school is not a party to that contract. Breaching that contract would be significant. No conference is going to be able to get out of it and sell its rights to somebody else. A GOR is not like that contract.

 

[nelsonmuntz]

That shows ignorance of what a Grant of Rights actually is.

There is no "violating party" in this case. If a school leaves a conference, it isn't in "violation" of anything. The GOR specifically states it's in effect for a set duration regardless of conference affiliation. Withholding payments to a school that leaves would be the violation, not the school leaving. If Kansas left the Big 12 for the Big Ten, it isn't "violation" since the agreement specifically states it doesn't matter whether a school is a conference member... the agreement remains in full force.

The Grant of Rights will hold up, yes, but only if the Big 12 continues to honor its end of the consideration (i.e., the payment)

Can you show me of an example of a media rights dispute that played out the way you are asserting?

 

[kyleslamb]

Grant of Rights agreement, No. 8

Acknowledgment

Each of the Member Institutions acknowledges that the Grant of Rights during the entire Term is irrevocable and effective until the end of the Term regardless of whether the Member Institution withdraws from the Conference during the Term or otherwise ceases to participate as a full member of the Conference in accordance with the Bylaws. [Emphasis mine]

There it is in black and white. If a Big 12 member were to pack up and leave for another conference, it wouldn't be violating anything. The Grant of Rights specifically says the agreement is in full force until termination of the agreement regardless of conference membership. So not honoring the Grant of Rights by withholding payment would be violating the consideration of the retained rights being granted, despite the Big 12's decision to omit that explicitly.

 

[nelsonmuntz]

It isn't incorrect. It is pretty solid. There is a lot of speculation around ESPN and the practical realities of reduction in payout, but otherwise I agree.

Nelson seems to be ignoring that the contract for rights to broadcast is in the first instance between the Network and the Conference. The school is not a party to that contract. Breaching that contract would be significant. No conference is going to be able to get out of it and sell its rights to somebody else. A GOR is not like that contract.

What all the message board Johnnie Cochranes are missing is that very smart lawyers have gone over these agreements ad nauseum. Either they are all wrong, or you are.

I explained why I think the GOR is a sale agreement and can not be broken. You think a school can walk away any time they want. I gave lots of examples that support my case. You have none. I am confident that 5 and 10 years from now, no school will have beaten a GOR. You seem to think someone will. We shall find out.

 

[kyleslamb]

Can you show me of an example of a media rights dispute that played out the way you are asserting?

It's more appropriate for you to show an example where someone didn't have to keep paying for rights it was being granted. Time and time again in the recording industry when there were legal disputes over royalties, publishers didn't get to keep the rights to works without compensating for them. This is slightly different in that the contract was not stated that money is the consideration, but it is. It always has been. Conferences since tv contracts started in the early 80's are granted schools' rights to home games and in return, distribute funds from the media contract. The Big 12's Grant of Rights is no different from that concept except a) they apply a set term that rights are granted rather than indefinitely as a league member and b) they omit language from the GOR so they can try to withhold funds if a school leaves. But since they were paying for the rights before, they will be in violation of the agreement once they stop paying for them.

 

[nelsonmuntz]

Grant of Rights agreement, No. 8

Acknowledgment

Each of the Member Institutions acknowledges that the Grant of Rights during the entire Term is irrevocable and effective until the end of the Term regardless of whether the Member Institution withdraws from the Conference during the Term or otherwise ceases to participate as a full member of the Conference in accordance with the Bylaws. [Emphasis mine]

There it is in black and white. If a Big 12 member were to pack up and leave for another conference, it wouldn't be violating anything. The Grant of Rights specifically says the agreement is in full force until termination of the agreement regardless of conference membership. So not honoring the Grant of Rights by withholding payment would be violating the consideration of the retained rights being granted, despite the Big 12's decision to omit that explicitly.

That is not what it says. I got to get back to work though. Read it again.

 

[kyleslamb]

What all the message board Johnnie Cochranes are missing is that very smart lawyers have gone over these agreements ad nauseum. Either they are all wrong, or you are.

I explained why I think the GOR is a sale agreement and can not be broken. You think a school can walk away any time they want. I gave lots of examples that support my case. You have none. I am confident that 5 and 10 years from now, no school will have beaten a GOR. You seem to think someone will. We shall find out.

Here's the problem: you don't seem to understand why the Grant of Rights is in place. It's not to keep teams from 'walking away.' It's not, nor has it ever been, meant to be a punitive measure or something that restricts trade.

The reason the GOR was put in place was to give security to the television network that if they're paying a certain amount to the league (which saved the league from destruction), that it would continue to get the value it was paying for in the number of teams. A GOR is not to keep a team bound to a league. It's to protect the media partners' long-term investment.

 

[sdhusky]

That is not what it says. I got to get back to work though. Read it again.

How did you have so much time to get a law degree while posting non-stop about why academics don't work hard?

It's inspirational to see a champion of making every moment count.

PS: Where did you go to law school?

 

[HuskyHawk]

That shows ignorance of what a Grant of Rights actually is.

There is no "violating party" in this case. If a school leaves a conference, it isn't in "violation" of anything. The GOR specifically states it's in effect for a set duration regardless of conference affiliation. Withholding payments to a school that leaves would be the violation, not the school leaving. If Kansas left the Big 12 for the Big Ten, it isn't "violation" since the agreement specifically states it doesn't matter whether a school is a conference member... the agreement remains in full force.

The Grant of Rights will hold up, yes, but only if the Big 12 continues to honor its end of the consideration (i.e., the payment)

Exactly. And the practical effect of this is what? Chaos. Kansas home games under the Big XII contract, and road games in the Big 10. Unlike the media examples Nelson mentions, Kansas is still producing the content, and the right to sell the broadcast rights to it still belongs to the Big XII, regardless of conference affiliation. They haven't violated anything.

But that situation isn't in the interest of the conference or the network, and so it would be resolved, and damages would be determined to compensate the conference and more importantly the network. The GORs were cooked up by the networks as a means to ensure that if the conference content changed, and the value of their deal with the conference changed, they could recover comensurate damages. Otherwise they wouldn't issue these long term, high value contracts to the leagues. As I said before, what it really means for them is that the big properties, who would yield big damages (and Kansas is probably one) are less able to move.

The article takes it a step further and argues that if a school moves from one ESPN conference to another ESPN conference, the damages to ESPN, and thus to the conference are effectively zero. I don't buy that, because the payout to the league, duration of the contract etc. are different. ESPN could either come out ahead or behind in that scenario, depending on the specifics.

 

[UConnJim]

You are looking at the lease from the wrong direction. Once a landlord leases space, they can't turn around and lease it to someone else because that person will pay more. A school can't turn around and resell media rights it has already sold.

These media contracts don't account for "equivalent" value. They are SALE CONTRACTS.

I'm glad you are not my real estate lawyer. Leases can and have been broken by both sides. Specific reasons for breaking leases vary by state, but the landlord can break leases FOR CAUSE and NO FAULT. And, if ESPN is the "landlord" in this case, Maryland is still going to be under contract with ESPN in the Big 10.

Without reading specific contracts (and referenced documents), it is impossible for anyone to know what the ACC/Big 10/Big 12... GOR are. The one thing I have learned in business over time is that mutually beneficial contracts that both parties want are the only real enforceable contracts as there are many ways to void a contract.

 

[Chin Diesel]

It comes down to this. If the ACC was hellbent on getting the full $50M from Maryland then having a mediator assigned is bad news for the ACC.

I'm with those who expect a number around $25M-$35M. Based off of nothing more than a hunch.

 

[IMind]

I think the only reason a GOR hasn't been "broken" is because no one has tried... in the end I bet they'll be as useful as exorbitant exit fees have proven to be... for the exact same reason because they parties will settle before the GOR has been put to the test in court. I think the reason expansion hasn't continued has far less to do with the GOR and far more to do with ESPNs money drying up as it's become apparent that NBC and CBS aren't paying the huge money for content everyone thought they were going to.. why should ESPN continue to pay top dollar to the ACC for content it already owns (us). I still think they'll be another round of consolidation mostly because the Big 12 wont stay at 10 schools because everyone else will get sick of both Texas and Oklahoma continually being in the playoffs... you already saw this when the B1G didn't have a title game.... much less likely will be because the B1G or SEC decides to add more.

 

[FfldCntyFan]

IMind is basically correct in that nobody (within the universe of collegiate athletic conferences) has yet tried to get out of a grant of rights agreement. The day that the reward appears to be worth the risk that will change.

Mosre important to the point however is that it will not be broken nor will it need to be broken. Anything (through courts of law) can be monetized at at some point an agreement (or settlement if you will) will be reached in which a school will pay however many dollars both sides agree upon to allow that school to leave for another conference.

 

[Excalibur]

That shows ignorance of what a Grant of Rights actually is.

There is no "violating party" in this case. If a school leaves a conference, it isn't in "violation" of anything. The GOR specifically states it's in effect for a set duration regardless of conference affiliation. Withholding payments to a school that leaves would be the violation, not the school leaving. If Kansas left the Big 12 for the Big Ten, it isn't "violation" since the agreement specifically states it doesn't matter whether a school is a conference member... the agreement remains in full force.

The Grant of Rights will hold up, yes, but only if the Big 12 continues to honor its end of the consideration (i.e., the payment)

You beat me to it.

Still, it's an enormous logistical roadblock to inter-conference movements, and one nobody is going to be in a hurry to navigate.