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

[tzznandrew]

I get where Matt is coming from. We all hoped that WVU wouldn't get out so quickly because they signed on the the 27 month thing. And yet they were in the B12.

Maryland isn't paying $50M. FSU won't have to pay $50M. I don't know about anyone else, but it will kill the ACC if they litigate it and the court finds that it is punitive. If that happens, everyone can leave...

 

[caw]

IM, you're letting your personal feelings shape your argument. The $50 mil. will not be upheld in any form because it is punitive. $10-$20 million may not be but $50 mil. is and does not represent the "harm" caused to the ACC. That "harm" is far less than $50 mil. and is probably less than $10 mil.. Neither the ACC nor UMD will let this get to court, you know this and I know this. There will be a settlement of far less than $50 mil. and probably less than $20 mil. In fact, it may be only $10 mil.. It is interesting that the ACC now finds itself in a BE position and those who previously would have sided with BC now side with the conference involved. ACC may try to drag this out a little but that might only postpone the inevitable. The wolves smell blood and the ACC will lose more schools, sooner or later.

See here is where Maryland's vote may come into play. Didn't they vote for the increase to $20 million. I assume they would be held to that at a minimum.

 

[uc1974]

And WVU voted for 27 months and look what happened to that. I know one is bondage and one is money but I do not think that voting for something or not will be a valid argument here. You're not going to be able to go for 50, have that nixed and then say I want 20 because.. If 50 is out the board is clear. I would be loath to consider that type of argument valid. We'll see.

 

[caw]

And WVU voted for 27 months and look what happened to that. I know one is bondage and one is money but I do not think that voting for something or not will be a valid argument here. You're not going to be able to go for 50, have that nixed and then say I want 20 because.. If 50 is out the board is clear. I would be loath to consider that type of argument valid. We'll see.

True.

 

[MattMang23]

See here is where Maryland's vote may come into play. Didn't they vote for the increase to $20 million. I assume they would be held to that at a minimum.

No. They voted against the increase. They and FSU were the only two.

 

[caw]

No. They voted against the increase. They and FSU were the only two.

The $20 million not the $50.

 

[MattMang23]

The $20 million not the $50.

Oh sorry. Yes I think they voted for the increase to $20M.

 

[Fishy]

You are all very bad lawyers.

We are five pages into this thread and no one has used the phrase 'ipso facto'.

All good lawyers use that phrase. You are not good lawyers.

 

[businesslawyer]

You are all very bad lawyers.

We are five pages into this thread and no one has used the phrase 'ipso facto'.

All good lawyers use that phrase. You are not good lawyers.

Wow fishy. You just took what I thought was the worst week ever and made it worse. Res ipso loquitor my friend..

 

[brasssbonanzaa]

I get where Matt is coming from. We all hoped that WVU wouldn't get out so quickly because they signed on the the 27 month thing. And yet they were in the B12.

Maryland isn't paying $50M. FSU won't have to pay $50M. I don't know about anyone else, but it will kill the ACC if they litigate it and the court finds that it is punitive. If that happens, everyone can leave...

The ACC doesn't want this going to court. That will free up everyone and their brother involved in recent and previous ACC expansion to be deposed into hell by Maryland lawyers, with the wonderful factoid that Maryland already knows what happened in the past. I'm not sure Swofford or other ACC school officials/presidents want to be deposed. This reeks of a settlement under $50 million.

 

[IthacaMatt]

IM, you're letting your personal feelings shape your argument. The $50 mil. will not be upheld in any form because it is punitive. $10-$20 million may not be but $50 mil. is and does not represent the "harm" caused to the ACC. That "harm" is far less than $50 mil. and is probably less than $10 mil.. Neither the ACC nor UMD will let this get to court, you know this and I know this. There will be a settlement of far less than $50 mil. and probably less than $20 mil. In fact, it may be only $10 mil.. It is interesting that the ACC now finds itself in a BE position and those who previously would have sided with BC now side with the conference involved. ACC may try to drag this out a little but that might only postpone the inevitable. The wolves smell blood and the ACC will lose more schools, sooner or later.

We'll see. I think there are a few issues in the ACC's favor, just talking as a lawyer here. The vote was taken and was passed. Therefore it becomes binding on the members. The members options are what - withdrawal and protest. Neither was done. And they continued to accept the benefits of membership.

Now, turning to whether or not $50M is a reasonable approximation of damages - it's less than 2 years' payout from the Big 10; hardly crippling. The university probably has a billion dollar endowment. You can make the argument that it's a state institution so it's against the interest of the taxpayers to have to pay anything for leaving a conference.

Well, that's precisely the same situation as West Virginia, right? And when they went to court, were they able to successfully pay LESS than the amount in the Big East contract (as they tried to argue, before a West Virginia court, no less)? No, of course not. The exit fee (and length of notice) was upheld, and so they had to pay MORE than the stated exit fee to incur their early exit.

So, as you were saying?

 

[IthacaMatt]

The ACC doesn't want this going to court. That will free up everyone and their brother involved in recent and previous ACC expansion to be deposed into hell by Maryland lawyers, with the wonderful factoid that Maryland already knows what happened in the past. I'm not sure Swofford or other ACC school officials/presidents want to be deposed. This reeks of a settlement under $50 million.

The same thing was said about West Virginia and the Big East (especially with the very public role that ESPN played in the killing of the Big East). That didn't hold water in the WVU case, either. I don't see that Swofford has anything to be afraid of in terms of testimony in court.

 

[IthacaMatt]

No. They voted against the increase. They and FSU were the only two.

So what? The resolution passed. As long as they remain members, they are bound by the rules of membership. And if they want to terminate their membership, there are rules and procedures to be followed. This isn't that hard, folks. There is plenty of precedent on the books to support the ACC's position.

Just look at the Big East - they are the worst run conference by far, and even they didn't lose to they type of argument you are now making.

 

[WestHartHusk]

We'll see. I think there are a few issues in the ACC's favor, just talking as a lawyer here. The vote was taken and was passed. Therefore it becomes binding on the members. The members options are what - withdrawal and protest. Neither was done. And they continued to accept the benefits of membership.

Now, turning to whether or not $50M is a reasonable approximation of damages - it's less than 2 years' payout from the Big 10; hardly crippling. The university probably has a billion dollar endowment. You can make the argument that it's a state institution so it's against the interest of the taxpayers to have to pay anything for leaving a conference.

Well, that's precisely the same situation as West Virginia, right? And when they went to court, were they able to successfully pay LESS than the amount in the Big East contract (as they tried to argue, before a West Virginia court, no less)? No, of course not. The exit fee (and length of notice) was upheld, and so they had to pay MORE than the stated exit fee to incur their early exit.

So, as you were saying?

Matt, I think you have this totally backwards. First, it doesn't matter that the damages were voted on and passed. If it did no court would ever invalidate any liquidated damages clause because it is, by definition, a part of a negotiated contract. So the next question is: at the time of signing, or at the time of breach, are the damages reasonable? The damages don't relate to the breaching party (Maryland) but to the non-breaching party (ACC). Taking the question at the time of breach it is pretty clear the damages are not reasonable. There are/were a number of reasonable alternatives (e.g. UConn / L'Ville) available as replacements, the TV contract wasn't impacted and there are no scheduling impacts.

The harder question is were the damages reasonable at the time of signing. By all accounts this was a last ditch effort to hold the conference together so that reaks of punitive damages, despite calling it a liquidated damages clause. Moreover, the environment at the time showed a number of schools expressing interest in the league (too many to list). The question the ACC will have to answer is what changed in September of 2012 to warrant increasing the damages clause by $30M? The inclusion of ND? Shouldn't that help to mitigate the damages?

I also question the fact that many people see this as a litmus test. One could argue that regardless of what fee Maryland negotiates the next departing party will have caused irreparable harm to the league and the $50M will become effective (e.g. who is an appropriate replacement for FSU?). It will be interesting to see how this plays out, but I can't see Maryland paying much more than the original fee, so lets say $22-$25M.

 

[businesslawyer]

We'll see. I think there are a few issues in the ACC's favor, just talking as a lawyer here. The vote was taken and was passed. Therefore it becomes binding on the members. The members options are what - withdrawal and protest. Neither was done. And they continued to accept the benefits of membership.

Now, turning to whether or not $50M is a reasonable approximation of damages - it's less than 2 years' payout from the Big 10; hardly crippling. The university probably has a billion dollar endowment. You can make the argument that it's a state institution so it's against the interest of the taxpayers to have to pay anything for leaving a conference.

Well, that's precisely the same situation as West Virginia, right? And when they went to court, were they able to successfully pay LESS than the amount in the Big East contract (as they tried to argue, before a West Virginia court, no less)? No, of course not. The exit fee (and length of notice) was upheld, and so they had to pay MORE than the stated exit fee to incur their early exit.

So, as you were saying?

The reasonableness has to be measured against the damage to the ACC, not the benefits to the departing school. Good luck convincing anyone that the ACC was damaged by replacing MD with LV in a weeks time. Other than the cost of the conference calls and the Krispy Kremes that Swofford gave out to the staff before the 7:00 call, exactly what were the ACC's quantifiable damages?

 

[bmayuc]

The reasonableness has to be measured against the damage to the ACC, not the benefits to the departing school. Good luck convincing anyone that the ACC was damaged by replacing MD with LV in a weeks time. Other than the cost of the conference calls and the Krispy Kremes that Swofford gave out to the staff before the 7:00 call, exactly what were the ACC's quantifiable damages?

How about image/reputation/stability/brand.

Those are things that every enterprise holds near and dear.

Sent from my DROID RAZR using Tapatalk 2

 

[The Funster]

The reasonableness has to be measured against the damage to the ACC, not the benefits to the departing school. Good luck convincing anyone that the ACC was damaged by replacing MD with LV in a weeks time. Other than the cost of the conference calls and the Krispy Kremes that Swofford gave out to the staff before the 7:00 call, exactly what were the ACC's quantifiable damages?

So you're saying that the ACC would have been better served by waiting to add a replacement for MD, right?

 

[businesslawyer]

How about image/reputation/stability/brand.

Those are things that every enterprise holds near and dear.

Sent from my DROID RAZR using Tapatalk 2

Damages to the ACC's image and brand absolutely count, if you can show what they are.

I don't think damages for lack of stability count, because you can't force anyone to stay in a contractual relationship forever in the first place. It's just not a proper business purpose.

 

[businesslawyer]

So you're saying that the ACC would have been better served by waiting to add a replacement for MD, right?

I don't think I'm saying that. The Court's inquiry should be what were the ACC's damages assuming that the ACC used its best efforts to limit them.

The problem here is that the ACC easily found a replacement school with better athletics. We can all make up vague and inchoate damage claims, but that's different than convincing the court they exist.

And it would be different, for example, than the Big East claiming it was damaged by LV's departure when the best replacement is ECU.

 

[The Funster]

I don't think I'm saying that. The Court's inquiry should be what were the ACC's damages assuming that the ACC used its best efforts to limit them.

The problem here is that the ACC easily found a replacement school with better athletics. We can all make up vague and inchoate damage claims, but that's different than convincing the court they exist.

And it would be different, for example, than the Big East claiming it was damaged by LV's departure when the best replacement is ECU.

Let's assume the ACC didn't invite anybody before this went to court (if it even gets that far). Is it possible that the ACC would have had a better damage argument if they could have said, "Maryland was a charter member and we've been unable to determine what replacement school could possibly match it's status." I'm not trying to pin you down, I'm just trying to get some insight as to how a judge may view the respective arguments.

 

[businesslawyer]

Let's assume the ACC didn't invite anybody before this went to court (if it even gets that far). Is it possible that the ACC would have had a better damage argument if they could have said, "Maryland was a charter member and we've been unable to determine what replacement school could possibly match it's status." I'm not trying to pin you down, I'm just trying to get some insight as to how a judge may view the respective arguments.

Well, maybe. But it wouldn't have taken a rocket scientist representing Maryland to point out that UConn and Louisville were publicly interested.

 

[brasssbonanzaa]

Well, maybe. But it wouldn't have taken a rocket scientist representing Maryland to point out that UConn and Louisville were publicly interested.

This, plus I have to think MD would subpoena the living crap out of every document in the ACC office where I'm sure it says somewhere that UL, UConn and whoever else were/are on their list of replacement targets.

 

[The Funster]

I guess the crux of the argument would be if ville or UConn replace the alleged value of Maryland as a member institutuion.

 

[gioff23]

Fla state doesn't leave unless its for the sec. The big 12 is not immune & is not that safe either.

IMO, you are 1/2 right. I have long believed the B12 is vulnerable. My view is they are one call from Larry Scott away from losing OU (and OSU).

However, the SEC wants NOTHING to do with FSU, period. They would be interested in OK or TX and VT and a NC school, but not FSU, UM, or Clemson. Their members are very strong opponents of giving any credibility to in-state rivals not part of the conference today. UFand USCe would flip - in fact, they make the Flipper blanche the way they would brag about keeping out their in-state rivals.

 

[ctchamps]

I don't think I'm saying that. The Court's inquiry should be what were the ACC's damages assuming that the ACC used its best efforts to limit them.

The problem here is that the ACC easily found a replacement school with better athletics. We can all make up vague and inchoate damage claims, but that's different than convincing the court they exist.

And it would be different, for example, than the Big East claiming it was damaged by LV's departure when the best replacement is ECU.

You got to be kidding me. The BE will have to show damages to a judge in North Carolina.

 

[IthacaMatt]

Matt, I think you have this totally backwards. First, it doesn't matter that the damages were voted on and passed. If it did no court would ever invalidate any liquidated damages clause because it is, by definition, a part of a negotiated contract. So the next question is: at the time of signing, or at the time of breach, are the damages reasonable? The damages don't relate to the breaching party (Maryland) but to the non-breaching party (ACC). Taking the question at the time of breach it is pretty clear the damages are not reasonable. There are/were a number of reasonable alternatives (e.g. UConn / L'Ville) available as replacements, the TV contract wasn't impacted and there are no scheduling impacts.

The harder question is were the damages reasonable at the time of signing. By all accounts this was a last ditch effort to hold the conference together so that reaks of punitive damages, despite calling it a liquidated damages clause. Moreover, the environment at the time showed a number of schools expressing interest in the league (too many to list). The question the ACC will have to answer is what changed in September of 2012 to warrant increasing the damages clause by $30M? The inclusion of ND? Shouldn't that help to mitigate the damages?

I also question the fact that many people see this as a litmus test. One could argue that regardless of what fee Maryland negotiates the next departing party will have caused irreparable harm to the league and the $50M will become effective (e.g. who is an appropriate replacement for FSU?). It will be interesting to see how this plays out, but I can't see Maryland paying much more than the original fee, so lets say $22-$25M.

You make a reasonable argument. I don't think the fee is going to be reduced, though.

 

[IthacaMatt]

The reasonableness has to be measured against the damage to the ACC, not the benefits to the departing school. Good luck convincing anyone that the ACC was damaged by replacing MD with LV in a weeks time. Other than the cost of the conference calls and the Krispy Kremes that Swofford gave out to the staff before the 7:00 call, exactly what were the ACC's quantifiable damages?

That argument is shallow and knee-jerk. The Big East replaced departing teams quickly, too, but do you think the overall product was diminished? I think that part is pretty apparent. The potential damage to the ACC is on full view when you just look at the Big East. The measure of whether the damages are reasonable is a factor that has to be looked at from both sides, not just from the ACC's point of view. How do you measure something that, by definition, is difficult to measure? The harm to the ACC can be approximated, at least in part, by the benefit to the departing member, and also on the impact on future TV negotiating posture, and the financial risks of conference instability.

 

[IthacaMatt]

How about image/reputation/stability/brand.

Those are things that every enterprise holds near and dear.

Sent from my DROID RAZR using Tapatalk 2

Absolutely. "Good will." The ACC's brand was really harmed by the constant chirping about members leaving, and then one of them being successfully poached.

 

[IthacaMatt]

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.

Looking at your shareholders argument, what do you think the management of corporations do all the time with these excessive compensation packages? That money comes out of the shareholders' pocket, so to speak. It could be paid as a dividend, instead of a multi-million dollar bonus to the CEO.

 

[IthacaMatt]

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.

Doesn't the ACC have a right to ask of its members to commit to the common cause? And isn't putting in place a strong disincentive to leaving a rational thing to do? Look at the Big East - after the first raid, they said "let's put in place an exit fee and a waiting period, to prevent others from leaving, too." You want to know that others are committed to membership. Look at the Big 10. Do you think their grant of TV rights is oppressive and unenforceable?