This university’s move to the Big Ten will be anything but quick and smooth after the state filed a lawsuit last week against the ACC to avoid paying a steep $52.26 million exit fee.
The countersuit comes nearly two months after the ACC announced it was suing the university to ensure it paid the entirety of its exit fee. State Attorney General Douglas Gansler announced Friday he had taken action to determine whether the conference violated this state’s antitrust laws. Additionally, he moved to dismiss the ACC’s court action in North Carolina by claiming the university is an entity of the state, meaning a “North Carolina court has no jurisdiction” over the state and its public universities, according to a news release.
The case’s first hearing will be on Feb. 18 in Greensboro, N.C., the site of ACC headquarters. As of Tuesday, the ACC had not received the state’s official lawsuit, said David Paulson, a spokesman for Gansler.
Although university officials said they don’t expect a quick resolution, legal experts said history shows the two sides will likely come to a settlement.
“The ACC is just playing hardball to strengthen their hand as much as possible,” said Bradley Shear, a Bethesda sports lawyer, adding the ACC is working to maintain stability and discourage other universities from leaving the conference.
To the surprise of many, university President Wallace Loh announced in November the university was leaving the ACC after helping found the conference nearly 60 years ago to join the Big Ten, a revenue-sharing conference. The move came on the heels of the ACC Council of Presidents’ September meeting, in which it voted to bring in Notre Dame as its 15th member and hike its exit fee from $20 million to $50 million, more than three times the conference’s operating budget. Loh, citing “legal and philosophical” reasons, and Florida State President Eric Barron were the only two dissenting votes in increasing the fee more than 250 percent.
The state’s countersuit responds to a Dec. 14 letter, in which the ACC informed Athletic Director Kevin Anderson it had already begun withholding the university’s share of television revenue from the conference’s 15-year, $3.6 billion contract with ESPN to begin paying for the university’s exit fee. That amounts to more than $3 million the university will not receive this year.
“Our lawsuit calls the ACC’s ‘exit fee’ what it really is — an antitrust violation and an illegal penalty,” Gansler said in a statement. “Our motion in North Carolina will ensure that a Maryland court will rule on the case.”
The university is projected to make more than $100 million more in the Big Ten than it would have in the ACC by 2020, according to documents obtained by Sports Illustrated. If the university is slapped with the record-breaking fee, the Big Ten could help in its payment, either through a loan or deferred payment, said Ellen Zavian, a sports law professor at George Washington University.
The state claims the ACC violated its own bylaws by immediately enforcing the exit fee, which should not have gone into effect until July 1, 2013, according to the lawsuit. Since this school announced its exit in November 2012, the fee should not apply, the lawsuit argues.
The state also claims the ACC is excluding university officials from participating in conference meetings and preventing university coaches from participating in athletic scheduling and planning meetings, according to the lawsuit.
But an ACC source said university officials have been invited to attend every meeting regarding ACC matters until the university officially leaves the conference in July 2014, according to a Washington Post report.
Conference shifts and exit fees have become the norm in college athletics, but if the university pays its full exit fee, it would be the highest in NCAA history. Last year, West Virginia University paid about $20 million to expedite its exit from the Big East for the Big 12, and Pittsburgh and Syracuse each paid $7.5 million in exit fees.
The ACC’s withdrawal penalty “provides some measure of financial protection against potential damages and losses for members of the ACC that remain after withdrawal by one or more other members,” according to the ACC’s lawsuit.
It’s a high price to pay if a university leaves the ACC, Shear said. But if the state can negotiate a settlement, other ACC members could follow this university’s lead and leave for other conferences, he said, adding the SEC could be appealing to football powerhouses Florida State and Clemson.
No matter what the university has to pay to exit, Loh said a potential $50 million fee was taken into account when considering the move.
Based on statements in the state’s lawsuit filing, “you start to realize Maryland has a legitimate complaint,” Shear said. “I think Maryland has a strong legal hand to play here.”