Sporting News: Realignment far from over, FSU source: If MD reduces exit fee, like "free agency"

[HuskyHawk]

Scratch this thought. UVa voted for the $50MM. They basically have no case to beat it. They may be able to negotiate it down a little just because that's how these things work, but there is no chance of materially cutting it down.

Point is, either UVa is going to move on their own or they won't. The exit fee will not be changing any time soon, and UVa is unlikely to get it materially reduced.

And if they move my best guess is (1) UNC moves with them and (2) it is to the SEC, not B1G. There is a very clear north-south divide emerging. The SEC east is a pretty decent academic conference, with Vandy, Florida and UGA. The SEC would lock up the entire southeast. Not sure what the B1G would do. Maybe go after BC and Pitt. Maybe Kansas and K-State. The ACC and B12 teams would all be fair game, and whoever is left would cobble together a league of some kind.

 

[caw]

i agree. thats why i was waiting for the freak out here but its not worthy as we are in a good position. we still have b10 chances w/e they are % wise and the acc will always be there...

It's still an "IF" for UVA. I think it is the most likely but still a big IF.

There is a worst case scenario where UVA goes B1G with UNC (for example) then the ACC takes everyone and their mother before UConn. Of course by the time that happens it's likely Cuse and Pitt have voting rights and the ACC is a bit friendlier to UConn.

 

[nelsonmuntz]

How a school actually voted, whether to increase the money or not, will not be an argument in court.

Why not? If two sophisticated parties agree to a contract, why can't the fact that both parties agreed to all the terms be evidence? I was just talking to a lawyer who agreed with that position. I saw an argument somewhere that imposing liquidated damages after a contract is already underway is weaker than imposing them at the beginning of the contract, but I would be interested in why you think the fact that Maryland voted against the exit fees and Virginia voted for them would not be relevant if both parties end up in court.

 

[UConn Esq]

Why not? If two sophisticated parties agree to a contract, why can't the fact that both parties agreed to all the terms be evidence? I was just talking to a lawyer who agreed with that position. I saw an argument somewhere that imposing liquidated damages after a contract is already underway is weaker than imposing them at the beginning of the contract, but I would be interested in why you think the fact that Maryland voted against the exit fees and Virginia voted for them would not be relevant if both parties end up in court.

There are a few reasons. First of all, UMD is part of the ACC. The ACC runs itself like a corporation. You have a quorum, and minimum number of necessary votes, annual meetings, etc. The schools agree that all bylaws or ratifications will be met by a supermajority. In this case, the proposition to raise the amount was agreed to. UMD as a member of the ACC is forced to follow whatever the majority issues. UMD cannot just pick and choose which rules it wishes to follow, just like any stock holder who loses out on a company vote cant just still choose to disobey that law. And to a similar extent, lets say I vote for the right to bear automatic weapons and it doesn't pass.. I cant just disobey that and start carrying automatic weapons under the pretense that I voted for it, nor is how I voted evidence that I broke the law any less. Simply a rule is a rule, once it becomes a rule. If UMD doesn't like the rule then they can take LEGAL ways to get out (See: Next Paragraph):

Sure, the ACC is more of a "club" than our democratic democracy in the 'automatic-weapons' example. But, UMD then could have also made the case immediately after the increase was ratified. Maryland could have plead to a court saying i need to get out of the ACC because I can't afford this fee or for whatever reason. They could have LEGALLY tried to break their contract with the ACC. Instead, they continued accepting all the benefits of the ACC. The continued to receive ACC money and continued to brand themselves as an ACC member. They accepted the $50 million bylaw and are therefore bound by it (in an ideal world.

With that being said, this is going to court. UMD is going to argue that their contract with the ACC shouldnt be enforceable, that specific $50 million clause isnt enforceable, and the hailmary, even if it is enforceable $50 million is not reasonable. With that being said, what is their vote evidence of IN COURT. It's not evidence of anything. They tacitly accepted the new buyout, whether they agreed to it or not.

I can tell you however, from extensive experience, Courts almost always tend to favor the government, municipality, school, whathaveyou, that has to PAY the money. Courts do not like public universities wasting public funds. They tend to side with the UMDs of the world in these scenarios merely because our Courts want to save tax payer money. Even if the Courts disagree with UMD they are still likely to do something to appease ALL parties, including UMD.

 

[businesslawyer]

Why not? If two sophisticated parties agree to a contract, why can't the fact that both parties agreed to all the terms be evidence? I was just talking to a lawyer who agreed with that position. I saw an argument somewhere that imposing liquidated damages after a contract is already underway is weaker than imposing them at the beginning of the contract, but I would be interested in why you think the fact that Maryland voted against the exit fees and Virginia voted for them would not be relevant if both parties end up in court.

Maryland will argue that becoming a member of a voluntary association with bylaws does not empower the other members, over its objection, to change the bylaws to tell Maryland that it is subject to an exit fee of a previously unprecedented amount. They will go further and say "what if the bylaws were amended so only Maryland would have to pay the fee?" And they will then say and we are a branch of a sovereign state -- the threshhold for imposing fees on us without our consent should be higher than if we were a collection of for profit businesses. This is all in addition to the argument you set forth that liquidated damages, to be enforceable, can not be punitive.

Not saying who will win, but without research that is what I would argue.

 

[UConn Esq]

Maryland will argue that becoming a member of a voluntary association with bylaws does not empower the other members, over its objection, to change the bylaws to tell Maryland that it is subject to an exit fee of a previously unprecedented amount. They will go further and say "what if the bylaws were amended so only Maryland would have to pay the fee?" And they will then say and we are a branch of a sovereign state -- the threshhold for imposing fees on us without our consent should be higher than if we were a collection of for profit businesses. This is all in addition to the argument you set forth that liquidated damages, to be enforceable, can not be punitive.

Not saying who will win, but without research that is what I would argue.

I agree completely with those arguments had they made those arguments after they lost the vote instead of only raising those arguments after they themselves are being sued.

 

[businesslawyer]

I agree completely with those arguments had they made those arguments after they lost the vote instead of only raising those arguments after they themselves are being sued.

None of us know what they said to the ACC after the vote. I would be very surprised if they didn't put the ACC on notice that they didn't think the league had the power to impose that fee on them without their consent.

 

[caw]

It has only been 2 months since the vote and Maryland has been pretty clear on why they voted against it. Maybe not official notice, but...

 

[UConn Esq]

None of us know what they said to the ACC after the vote. I would be very surprised if they didn't put the ACC on notice that they didn't think the league had the power to impose that fee on them without their consent.

Again, they never took any action. Keep in mind, the ACC is suing UMD not vice versa. The ACC is the one trying to enforce the contract/bylaws, not UMD. If UMD had issues they could have raised them at the appropriate time. They didnt. Nonetheless, we both know the law isn't perfect and I'd be surprised if they made them pay the full 50.

 

[UConn Esq]

It has only been 2 months since the vote and Maryland has been pretty clear on why they voted against it. Maybe not official notice, but...

It took less than a week for the ACC to put a lawsuit against UMD together.

 

[businesslawyer]

Again, they never took any action. Keep in mind, the ACC is suing UMD not vice versa. The ACC is the one trying to enforce the contract/bylaws, not UMD. If UMD had issues they could have raised them at the appropriate time. They didnt. Nonetheless, we both know the law isn't perfect and I'd be surprised if they made them pay the full 50.

Huh? If Maryland took the position that the by law change wasn't effective against it, it had no legal obligation to immediately file a lawsuit. It was only a few months ago.

 

[nelsonmuntz]

Huh? If Maryland took the position that the by law change wasn't effective against it, it had no legal obligation to immediately file a lawsuit. It was only a few months ago.

I am with b-lawyer on this. A majority can't impose excessive fees or penalties on other shareholders just because they are the majority. And similar to an invalid non-compete, the affected party is under no obligation to immediately challenge the offending bylaw or contract. In fact, most corporate contracts, including incorporation documents, have an explicit "no waiver" section whereby each party does not waive its rights simply by failing to exercise them.

Virginia has an uphill fight. They need to make the argument that "the ACC made me vote this way". Not a great case to make.

 

[UConn Esq]

Huh? If Maryland took the position that the by law change wasn't effective against it, it had no legal obligation to immediately file a lawsuit. It was only a few months ago.

UMD can't pick and choose what bylaws count against them. Why would any of the schools vote for the 50mill if it would only apply to some of the schools. It's all or nothing. Do you think Louisville isn't consider in UNCs ACC since UNC presumably didnt vote for them to join? of course not - it's a typical corporate structure. If UMD didnt wish to honor the 50mill then of course UMD would have an immediate legal obligation to do something about it.

 

[businesslawyer]

UMD can't pick and choose what bylaws count against them. Why would any of the schools vote for the 50mill if it would only apply to some of the schools. It's all or nothing. Do you think Louisville isn't consider in UNCs ACC since UNC presumably didnt vote for them to join? of course not - it's a typical corporate structure. If UMD didnt wish to honor the 50mill then of course UMD would have an immediate legal obligation to do something about it.

We see it completely differently. I have made my point and you are free to disagree with it.

 

[noeynox]

I am with b-lawyer on this. A majority can't impose excessive fees or penalties on other shareholders just because they are the majority. And similar to an invalid non-compete, the affected party is under no obligation to immediately challenge the offending bylaw or contract. In fact, most corporate contracts, including incorporation documents, have an explicit "no waiver" section whereby each party does not waive its rights simply by failing to exercise them.

Virginia has an uphill fight. They need to make the argument that "the ACC made me vote this way". Not a great case to make.

Hell, UConn should pay Virginias 50 million, if that is what it takes for UConn to end up in the B1G with them.

 

[Danzz]

what legal basis is there for reducing the exit fee?

It called a signed contract but apparently that doesn't mean much these days.

 

[UConn Esq]

We see it completely differently. I have made my point and you are free to disagree with it.

Fair enough. ::shakes hand::

 

[uc1974]

B-L is correct on his interpretation. I especially like the argument that UMD is a state (sovereign) entity. I may be retired but I still like a good legal argument. Disclaimer: I have done no legal research on this at all and don't plan to!

 

[Jericho]

Maryland will argue that becoming a member of a voluntary association with bylaws does not empower the other members, over its objection, to change the bylaws to tell Maryland that it is subject to an exit fee of a previously unprecedented amount. They will go further and say "what if the bylaws were amended so only Maryland would have to pay the fee?" And they will then say and we are a branch of a sovereign state -- the threshhold for imposing fees on us without our consent should be higher than if we were a collection of for profit businesses. This is all in addition to the argument you set forth that liquidated damages, to be enforceable, can not be punitive.

Not saying who will win, but without research that is what I would argue.

But Nelson was talking about other schools, not Maryland. Maryland at least has a plausible argument to make since they voted against the fee. But Virginia, or anyone that's not Maryland or FSU, voted for the fee. They have a tougher argument to make. This isn't a consumer protection issue. These are sophisticated entities entering into a business deal. I don't know how Virginia can make a believeable argument that they wanted to bind themseelves and others to a $50 million exit fee and then turn around and say it really should not be enforced because I no longer like it and feel it should be illegal.

I'd also add, the idea that $50 million is "punitive" becomes less believeable the more money these schools make on athletics. It wasn't that long ago the Big 10 was distributing $10 million per school. In a few years that figure could be $40 million. In light of that info and the crazy money being paid for TV rights, it no longer seems that punitive to ask a school to pay $50 million.

 

[businesslawyer]

But Nelson was talking about other schools, not Maryland. Maryland at least has a plausible argument to make since they voted against the fee. But Virginia, or anyone that's not Maryland or FSU, voted for the fee. They have a tougher argument to make. This isn't a consumer protection issue. These are sophisticated entities entering into a business deal. I don't know how Virginia can make a believeable argument that they wanted to bind themseelves and others to a $50 million exit fee and then turn around and say it really should not be enforced because I no longer like it and feel it should be illegal.

I'd also add, the idea that $50 million is "punitive" becomes less believeable the more money these schools make on athletics. It wasn't that long ago the Big 10 was distributing $10 million per school. In a few years that figure could be $40 million. In light of that info and the crazy money being paid for TV rights, it no longer seems that punitive to ask a school to pay $50 million.

You are correct, I am talking about Maryland and FSU. If you voted for it, you still get to argue that it's punitive and thus not enforceable, but not the rest of it.

 

[HuskyHawk]

Maryland will argue that becoming a member of a voluntary association with bylaws does not empower the other members, over its objection, to change the bylaws to tell Maryland that it is subject to an exit fee of a previously unprecedented amount. They will go further and say "what if the bylaws were amended so only Maryland would have to pay the fee?" And they will then say and we are a branch of a sovereign state -- the threshhold for imposing fees on us without our consent should be higher than if we were a collection of for profit businesses. This is all in addition to the argument you set forth that liquidated damages, to be enforceable, can not be punitive.

Not saying who will win, but without research that is what I would argue.

This is close to how I am looking at it. This voluntary association put forth a unprecedented penalty for leaving the association, that was targeted at only certain members. There was not even any time period to impose it. UMD could argue that such a penalty is even more unreasonable if a reasonable time period to withdraw from the ACC was not available.

The other issue neither of you raise is antitrust. The $50M effectively acts as a perpetual restraint on the market for universities. Combined with the GORs these provisions amount to collusive behavior. It's similar to non compete clauses in employment contracts and no hire agreements between competitors.

Sent from my Nexus 7 using Tapatalk 2

 

[FfldCntyFan]

Maryland will argue that becoming a member of a voluntary association with bylaws does not empower the other members, over its objection, to change the bylaws to tell Maryland that it is subject to an exit fee of a previously unprecedented amount. They will go further and say "what if the bylaws were amended so only Maryland would have to pay the fee?" And they will then say and we are a branch of a sovereign state -- the threshhold for imposing fees on us without our consent should be higher than if we were a collection of for profit businesses. This is all in addition to the argument you set forth that liquidated damages, to be enforceable, can not be punitive.

Not saying who will win, but without research that is what I would argue.

 

[Doggie Style]

There are a few reasons. First of all, UMD is part of the ACC. The ACC runs itself like a corporation. You have a quorum, and minimum number of necessary votes, annual meetings, etc. The schools agree that all bylaws or ratifications will be met by a supermajority. In this case, the proposition to raise the amount was agreed to. UMD as a member of the ACC is forced to follow whatever the majority issues. UMD cannot just pick and choose which rules it wishes to follow, just like any stock holder who loses out on a company vote cant just still choose to disobey that law. And to a similar extent, lets say I vote for the right to bear automatic weapons and it doesn't pass.. I cant just disobey that and start carrying automatic weapons under the pretense that I voted for it, nor is how I voted evidence that I broke the law any less. Simply a rule is a rule, once it becomes a rule. If UMD doesn't like the rule then they can take LEGAL ways to get out (See: Next Paragraph):

Sure, the ACC is more of a "club" than our democratic democracy in the 'automatic-weapons' example. But, UMD then could have also made the case immediately after the increase was ratified. Maryland could have plead to a court saying i need to get out of the ACC because I can't afford this fee or for whatever reason. They could have LEGALLY tried to break their contract with the ACC. Instead, they continued accepting all the benefits of the ACC. The continued to receive ACC money and continued to brand themselves as an ACC member. They accepted the $50 million bylaw and are therefore bound by it (in an ideal world.

With that being said, this is going to court. UMD is going to argue that their contract with the ACC shouldnt be enforceable, that specific $50 million clause isnt enforceable, and the hailmary, even if it is enforceable $50 million is not reasonable. With that being said, what is their vote evidence of IN COURT. It's not evidence of anything. They tacitly accepted the new buyout, whether they agreed to it or not.

I can tell you however, from extensive experience, Courts almost always tend to favor the government, municipality, school, whathaveyou, that has to PAY the money. Courts do not like public universities wasting public funds. They tend to side with the UMDs of the world in these scenarios merely because our Courts want to save tax payer money. Even if the Courts disagree with UMD they are still likely to do something to appease ALL parties, including UMD.

Thats great information, thank you for posting that!!!

 

[businesslawyer]

True story for you FCF. In a firm meeting recently, sitting next to a partner of mine and a male, 25ish attorney just starting out. I don';t know what the lead in was, but someone led me to an obvious "Well, you can say what you want about me but I'm not going to sit here and let you badmouth the United States of America. Gentlemen." My partner laughed. The youngster looked at us like we had two heads. I asked him if he didn't remeber the scene. He told me he had never seen Animal House.

Seriously, I have less and less hope for this country's future.

 

[FfldCntyFan]

I believe that.

About five years ago I was talking with a new hire about I don't remember what and something that led to an Animal House reference came up. He said he started watching it on video once but turned it off after a couple of minutes because it looked lame. He then told me that there was no way it could have been a better movie than Old School.

The youth of today have me very concerned.