Three North Carolina appellate judges ruled unanimously yesterday morning against the state and university’s bid to dismiss an ACC lawsuit to force the university to pay a $52 million exit fee when it leaves for the Big Ten in July, as first reported by the Associated Press.
The university has argued that the exit fee is unreasonably high, and with the court’s dismissal, that argument with the conference will continue until the parties reach an agreement or North Carolina’s judiciary does so for them.
In September 2012, about two months before the university announced it would move to the Big Ten, the ACC’s Council of Presidents voted to increase the conference’s exit fee from about $17.4 million to $52.3 million, valued by the appellate court at three times the conference’s annual operating budget.
University President Wallace Loh voted against the increase, but the court ruled that each of the conference’s schools, including this university, have agreed to hold to the greater fee.
David Paulson, a spokesman for state Attorney General Doug Gansler, said the state was still deciding a path forward, but it has joined the case to defend the university.
“The appeals court ruling in North Carolina remains under review, and the state is looking at its options,” Paulson said. “It’s considering options moving forward.”
The state and university could appeal the appellate ruling by trying to send the case to North Carolina’s supreme court, or they could accept this ruling. If the appellate ruling goes uncontested, the case will proceed toward trial.
The university has also filed its own suit against the ACC in Upper Marlboro. University officials said the conference has been withholding the university’s share of conference revenue since the university announced its exit from the ACC. That case stagnated pending resolution of the North Carolina case.
The fundamental issue is whether the university will be forced to pay the original $17 million exit fee, the increased $52 million or somewhere in the middle.
“The bottom floor for them is $17 million and change. Anything above that is really gravy for them,” said Bradley Shear, a sports lawyer and sports management professor at George Washington University. “At the end of the day, it’s not in dispute that Maryland’s going to owe at least $17 million.”
Shear added that the university should remain well positioned as the lawsuit moves forward.
He cited the ACC’s constitution for the 2012-13 academic year, which says that conference rule changes become effective the July 1 after enactment. Because the fee increase was approved in September 2012 and the university announced its move in November 2012, Shear said, the tripled fee shouldn’t apply.
“Maryland has a superior long-term hand in this,” Shear said.
But critics can make a strong argument as well, he said. The university is not officially leaving the ACC until next year, long past July 1, 2013, and the ACC could argue that the $52 million fee is in effect, he said.
Shear said the case has become a turf war between the Big Ten and the ACC, which is frustrated over the Midwestern conference’s “poaching” of the Terrapins.
“That’s what a lot of the media has really missed, in my opinion,” he said, describing the ACC’s thought process as, “‘You poached Maryland; OK, that’s fine. We’re going to take this as far as we can.’”
According to Shear, the parties should settle the dispute themselves — as usually occurs in this sort of case — because “the only people winning if this drags on are the lawyers,” he said, adding that the conference and university could better invest their time and money in students and student-athletes.
“At the end of the day, the only people that lose are the students because they’re the ones whose resources were put toward this mess of litigation,” he said.