Mediator assigned in Maryland vs. ACC lawsuit

[Excalibur]

This is like having the local guy that handled your refi explain a billion dollar plus media contract. He is mostly missing the point of the GOR. A GOR simply means that the rights to a schools games are sold in return for some amount of money. Revoking a GOR is roughly equivalent to selling your house, and then trying to get it back a couple of years later because someone else will pay you more for it. Once the media right are sold, they are sold. There is no getting them back.

Aerosmith, Boston and George Michael flushed years of the prime of their careers in pissing matches over rights that they ended up losing. Someone on this board once used Prince as an example of an artist that beat his rights contract, but he never beat Warner Brothers. He just rushed a bunch of albums out the door to finish off his contract. Billy Joel got out of his deal only when a larger studio threatened to break Joel's producers' legs. There is no equivalent way to beat a GOR in college athletics to do what Billy Joel or Prince did. The only time the talent wins is when there is a dispute over the accounting (James Garner and the Rockford Files is an example).

Unless there is something inside these particular GOR's that we are not aware of, there is no getting out of them.

I don't think the royalty analogy works here. In the case of the bands, the consequence of assigning ownership of your work for pennies is that so long as the pennies are paid, the other party still owns the work. If the GOR was structured like this, the B12 couldn't prevent someone from leaving, but they would still have to pay out whatever monetary consideration was promised to enforce the GOR. The new conference would not be able to sell broadcast rights to the new member's home games, which is the real deterrent in this scenario, but the old conference would still have to make the payout to its previous member.

However, the B12 GOR doesn't actually make any reference to monetary consideration. The grant is not given in exchange for the conference's TV payout to its members, at least not expressly. This avoids the question of the payment of ongoing consideration, but raises some others regarding whether the consideration is adequate and how a non-breaching party is made whole.

 

[Fairfield_1st]

If the GOR holds and a school does leave, the GOR only covers that school's home games, correct?
Also, if the school leaves and the prior conference retains the rights, are they allowed not to pay that school for those rights going forward? I'm sure this is a naive question, but I won't even pretend to understand the GOR.

 

[CL82]

I wonder how much the legal fees and ediscovery costs are for Maryland. This could also be driving arbitration and potentially settlement.

I'm sure that they are considerable, but just a drop in bucket when compared to the cost of the suit and the counterclaim. Unlike our friends from south of the Mason-Dixon line, I think that Maryland has the better argument.

 

[upstater]

The ACC is not concerned about this. It lost Maryland's market, but gained Louisville's and Louisville has a lot of fans watching.

 

[HuskyHawk]

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.

A lease is very different. Courts will routinely enforce a lease by specific performance, because to do otherwise is actually more difficult than assessing damages, and involves evicting a tenant. Typically the tenant has personal property on site etc. Also, a lease, though it is a contract, is governed by property law rather than contract law. It is a right to real property.

This person is correct that there is virtually no change that any court would require specific performance of the GOR contract. Meaning that the school can take its media rights with it, it just has to compensate the prior conference. In calculating those damages, the normal duty to mitigate will indeed apply. So in the case of Maryland for example, where it was replaced by Louisville, it is difficult to calculate damages. The ACC could argue that the DC market is more valuable etc. Now if you lost a valuable property, say Texas, and replaced them with the best you could do...say Colorado State, the damages would be quite high. The reality of this is that the more valuable the media rights of the school, the more the GOR will restrict them. Wake Forest could probably walk pretty easily.

 

[kyleslamb]

I don't think the royalty analogy works here. In the case of the bands, the consequence of assigning ownership of your work for pennies is that so long as the pennies are paid, the other party still owns the work. If the GOR was structured like this, the B12 couldn't prevent someone from leaving, but they would still have to pay out whatever monetary consideration was promised to enforce the GOR. The new conference would not be able to sell broadcast rights to the new member's home games, which is the real deterrent in this scenario, but the old conference would still have to make the payout to its previous member.

However, the B12 GOR doesn't actually make any reference to monetary consideration. The grant is not given in exchange for the conference's TV payout to its members, at least not expressly. This avoids the question of the payment of ongoing consideration, but raises some others regarding whether the consideration is adequate and how a non-breaching party is made whole.

Good post, and I think you raise some valid points. That said, while it does avoid expressing the consideration is payment, it's spelled out in the bylaws how/why members receive consideration for media rights. Since the television agreement is an extension of the bylaws, and the Grant of Rights is dependent upon the television agreement being fulfilled, it would be hard for them to argue that the conference payout wasn't the 'consideration' for the rights being given. I do agree with you they purposely omitted it from the GOR likely to leave consideration vague, but they'd still have a hard time arguing that money wasn't it.

 

[bingethinker]

The ACC is not concerned about this. It lost Maryland's market, but gained Louisville's and Louisville has a lot of fans watching.

It certainly got the better athletic program, but the markets don't remotely compare. It's not (just) about the eyeballs properties bring to the table. In this instance, the ACC certainly lost out on some particularly wealthy eyeballs and replaced them with the second option in Kentucky.

 

[nelsonmuntz]

A lease is very different. Courts will routinely enforce a lease by specific performance, because to do otherwise is actually more difficult than assessing damages, and involves evicting a tenant. Typically the tenant has personal property on site etc. Also, a lease, though it is a contract, is governed by property law rather than contract law. It is a right to real property.

This person is correct that there is virtually no change that any court would require specific performance of the GOR contract. Meaning that the school can take its media rights with it, it just has to compensate the prior conference. In calculating those damages, the normal duty to mitigate will indeed apply. So in the case of Maryland for example, where it was replaced by Louisville, it is difficult to calculate damages. The ACC could argue that the DC market is more valuable etc. Now if you lost a valuable property, say Texas, and replaced them with the best you could do...say Colorado State, the damages would be quite high. The reality of this is that the more valuable the media rights of the school, the more the GOR will restrict them. Wake Forest could probably walk pretty easily.

Since it is so easy to break a rights sale arrangement, where are all the examples?

 

[BlueHen]

Since it is so easy to break a rights sale arrangement, where are all the examples?

You remind me of Ned Stark at the end of Game of Thrones season 1, trying to stop Joffrey from becoming King with a piece of paper.

 

[nelsonmuntz]

You remind me of Ned Stark at the end of Game of Thrones season 1, trying to stop Joffrey from becoming King with a piece of paper.

If Joffrey was trying to break a GOR, Ned Stark would still be alive.

 

[nelsonmuntz]

I don't think the royalty analogy works here. In the case of the bands, the consequence of assigning ownership of your work for pennies is that so long as the pennies are paid, the other party still owns the work. If the GOR was structured like this, the B12 couldn't prevent someone from leaving, but they would still have to pay out whatever monetary consideration was promised to enforce the GOR. The new conference would not be able to sell broadcast rights to the new member's home games, which is the real deterrent in this scenario, but the old conference would still have to make the payout to its previous member.

However, the B12 GOR doesn't actually make any reference to monetary consideration. The grant is not given in exchange for the conference's TV payout to its members, at least not expressly. This avoids the question of the payment of ongoing consideration, but raises some others regarding whether the consideration is adequate and how a non-breaching party is made whole.

The recording contracts I cited are multi-album contracts. Prince got out of his by averaging over an album a year for like a 5 year period, thereby producing the requisite number of albums to satisfy the contract with the label. I suspect that contracts today are written such that a stunt like that won't work again.

It is an almost perfect analogy for what we are talking about, selling future entertainment in advance of its production. Many artists have sued to beat these deals, and the label always wins. At least I can't find an example where the artist won.

 

[TerryD]

I have been predicting a settlement of about $27 million for about a year now.

As a litigator, I think that people seriously overestimate how much discovery (or shutting down discovery) drives parties to settlement.

This case is proceeding just like most civil cases. Over 95% of them settle. This case is not unique just because sports fans are interested in the outcome.

 

[dayooper]

If Joffrey was trying to break a GOR, Ned Stark would still be alive.

Wait . . . Ned Stark died?

 

[Excalibur]

The recording contracts I cited are multi-album contracts. Prince got out of his by averaging over an album a year for like a 5 year period, thereby producing the requisite number of albums to satisfy the contract with the label. I suspect that contracts today are written such that a stunt like that won't work again.

It is an almost perfect analogy for what we are talking about, selling future entertainment in advance of its production. Many artists have sued to beat these deals, and the label always wins. At least I can't find an example where the artist won.

I think I just read the forum equivalent of putting your fingers in your ears and screaming "LALALALALA CAN'T HEAR YOU!!!!!"

 

[Excalibur]

It certainly got the better athletic program, but the markets don't remotely compare. It's not (just) about the eyeballs properties bring to the table. In this instance, the ACC certainly lost out on some particularly wealthy eyeballs and replaced them with the second option in Kentucky.

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

 

[HuskyHawk]

Since it is so easy to break a rights sale arrangement, where are all the examples?

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.

 

[CL82]

...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. ....

This is what I think many are missing in their analysis of a GOR. It is essentially a liquidated damages provision and thus will be subject to the same standard of review.

 

[kyleslamb]

This is what I think many are missing in their analysis of a GOR. It is essentially a liquidated damages provision and thus will be subject to the same standard of review.

I agree, but the thing is, the Grant of Rights, if enforced as it's supposed to be, doesn't have any damages.

If a school leaves, the conference and network both keep the rights wherever the team goes. If they continue to compensate for the rights, no one is losing any value. The network retains the inventory and the league continues to retain the revenue. It's only if the old league attempts to withhold payment does the damages accrue.

The GOR is binding and enforceable if both parties continue consideration. I chuckle at those who act like a school leaving the conference is treated like a kicker that puts the Grant of Rights in full force as if it were a penalty. It's actually the opposite, the Grant of Rights applies regardless of conference affiliation, so a team leaving the league should not change what is being given in exchange for the rights (while not explicitly stated, very clearly that is: money).

 

[Excalibur]

I agree, but the thing is, the Grant of Rights, if enforced as it's supposed to be, doesn't have any damages.

If a school leaves, the conference and network both keep the rights wherever the team goes. If they continue to compensate for the rights, no one is losing any value. The network retains the inventory and the league continues to retain the revenue. It's only if the old league attempts to withhold payment does the damages accrue.

The GOR is binding and enforceable if both parties continue consideration. I chuckle at those who act like a school leaving the conference is treated like a kicker that puts the Grant of Rights in full force as if it were a penalty. It's actually the opposite, the Grant of Rights applies regardless of conference affiliation, so a team leaving the league should not change what is being given in exchange for the rights (while not explicitly stated, very clearly that is: money).

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.

 

[nelsonmuntz]

I think I just read the forum equivalent of putting your fingers in your ears and screaming "LALALALALA CAN'T HEAR YOU!!!!!"

I see that you don't have a rebuttal for my argument.

 

[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)