Maryland-ACC suit brings business of college sports to spotlight again
The bitter divorce between the University of Maryland and the Atlantic Coast Conference took another harsh turn last night as the Office of Maryland Attorney General Doug Gansler filed a $157 million suit against the ACC in a North Carolina court. The filing represents a counter-claim to a $52 million lawsuit filed by the ACC against the University of Maryland, which will join the Big Ten Conference on July 1, 2014. Last January the University of Maryland separately sued the ACC in a Maryland court, but a judge there postponed hearing any arguments until the North Carolina litigation plays out.
This latest filing maintains that the University of Maryland and the state of Maryland have suffered massive damages. The litigation centers on whether Maryland is contractually obligated to pay the ACC a $52 million fee to exit the ACC. The ACC insists the conference's constitution, which Maryland was legally obligated to follow, clearly stated that a member school can only withdraw by paying a fee of three times the ACC's annual budget.
Maryland, however, stresses that this exit fee was not always in the conference constitution. In fact, according to Maryland, the fee reflects a roughly 300 percent increase of the prior exit fee, a change made only after Maryland announced its intent to leave the ACC. Maryland thus portrays the ACC as deceptive and exploitative. Both Maryland and the ACC contend the other has wrongly followed their own contracts.
Maryland's case against the ACC extends to antitrust law. The ACC and its members have allegedly joined hands to damage the marketplace for membership in college conferences. Enlarging the exit fee is described as an anticompetitive device to discourage members from leaving a conference and punishing those that do.
Maryland asserts ACC members have covertly reached out to schools in the Big Ten and encouraged them to join them. The latest filing also portrays the ACC as beholden to ESPN directives and a desire to maximize television money at all costs. The filing highlights a published remark by then-Boston College athletic director Gene Defilippo in 2011: "We always keep our television partners close to us . . . ESPN is the one who told us what to do." DeFilippo later apologized for the remark and said he misspoke.
There are three key takeaways from the Maryland-ACC litigation.
First, both sides hope to litigate before home-state courts, with the ACC holding the "home-court" advantage for the time being. The North Carolina-headquartered ACC is surely appreciative to litigate before North Carolina jurors and a judge elected by North Carolina voters. Maryland, in contrast, would prefer to litigate before a Maryland court, which would feature Maryland jurors and a judge who, though initially appointed by the governor, must face Maryland voters to be retained.
While the law must be applied fairly by the courts of all states, trial attorneys are mindful that local biases can sometimes play a crucial difference in close cases. Should the ACC win in North Carolina, watch for Maryland to attempt to convince a Maryland court to hear similar claims.
Second, in spite of the two sides' intense bickering, their dispute will probably end in a settlement. Maryland is going to join the Big Ten. Whether Maryland wants to do so free and clear of the ACC or under a cloud of litigation remains to be seen. Maryland may have to wait years for its litigation to play out in two states. Alternatively, it can try to find a mutually-acceptable dollar number with the ACC and gain closure.
This may be especially important since litigation raises uncertainty with television and radio networks. It makes business sense for both Maryland and the ACC to resolve their dispute out-of-court and move on.
Also, settling early would eliminate the need for pretrial discovery, which could require university administrators, conference staff and television executives to answer unwanted questions under oath.
Third, the litigation reinforces the increased willingness of conferences to pursue their own business agendas. Whether it be in court or in contract dealings, conferences are acting more as independent entities and less as NCAA affiliates.
A recent proposal from Wake Forest president Nathan Hatch (the Division I board chair) would, if approved by the NCAA, empower conferences to act even more autonomously. With greater power, expect conferences to wage in more court battles over memberships and other attributes that separate them in the eyes of consumers and businesses.
Michael McCann is a Massachusetts attorney and the founding director of the Sports and Entertainment Law Institute at the University of New Hampshire School of Law. He is also the distinguished visiting Hall of Fame Professor of Law at Mississippi College School of Law.