The big news on yesterday’s wire was that the Maryland-ACC exit fee lawsuit took yet another ugly turn when the Maryland Attorney General filed a counter suit against the ACC for $157 million. Jeff Barker of the Baltimore Sun was first to report on the matter, and had some fantastic tweets on the matter:
I got a chance to look at the 52-page suit myself, and since it’s filled with lots of legal jargon that no one wants to read, I’ll gladly break it down for you in layman’s terms. The crux of the argument Maryland’s AG is making is based upon the notion that the exit fee itself is illegal, which is actually not that dissimilar from the case that was thrown out earlier. Why should the exit fee be considered null and void? Before we go into that, it’s worth remembering five very important dates:
- September 11, 2012: ACC announces its “Withdrawl Penalty” of $52.26 million authorized by the ACC Consitution (Maryland and Florida State opposed)
- November 19, 2012: Maryland announces its intention to leave the ACC for the Big Ten, two months after said “Withdrawal Penalty” was enacted
- December 2012: The ACC purportedly withheld revenue from Maryland because of their decision to leave the conference.
- June 26, 2013: Maryland notifies all members of the ACC that it intends to leave for the Big Ten conference.
- July 1, 2013: The day the “Withdrawal Penalty” in the ACC was supposed to go into effect, because according to the ACC Consitution rules may not go into effect until the next season.
These three dates are huge for a lot of reasons. The first is important because, regardless of whether or not Maryland agreed with the exit fee, they were still members of the conference when the fee was decided upon and written into law. That’s a full two months prior to the second date, where Maryland announced its intention to leave the ACC. What complicates things is that the entire statute didn’t go into effect until July 1st, 2013.
That’s the main basis of the argument for Maryland. Even if the “Withdrawal Penalty” were in fact legal (which, as I’ll explain later, Maryland doesn’t believe it is), the Terrapins announce their intentions to leave the conference before it went into effect. An amendment to the ACC Consitution like this has to go through a certain process before it is ratified into law, but Maryland is arguing that the ACC basically expedited the process to punish the school for leaving (as well as other schools thinking about leaving).
What are those procedural requirements? Well Section X-I of the ACC Constitution states that a copy of the proposed amendment has to be passed around to members 15 days before a meeting. Technically, that didn’t happen, so Maryland feels that the entire amendment is null and void in the first place. It also ignored X-2 of the 2012-2013 ACC Constitution, which states that all amendments go into effect July 1st, 2013 following their enactment “unless provided otherwise.” That last part has potentially major problems for Maryland. However, in the September meeting, there was no agreed upon date.
Unfortunately, the ACC applied the amendment in December by withholding revenue from Maryland since it supposedly owed money for their withdrawal. The ACC also made it clear that it would withhold all revenue until that fee was paid in full. Because Maryland is being barred from participation in coaches meetings, scheduling, and planning, the AG is suggesting that this is causing unlawful tortious harm to the “Maryland brand” so to speak, including its student athletes and perception. And more so because they don’t have any money coming in from the ACC despite being in debt. That total from December 2012 to now that the ACC is withholding is $16 million.
As for the fee itself, the Maryland AG is arguing that the entire $52.26 million “Withdrawal Penalty” has no economic justification. In actuality, the fee is three times the operating budget of the conference. The ACC calls Maryland’s (or any school’s) withdrawal “liquidating damage,” and that fee is supposed to make up for the supposed monetary loss of a member. The penalty itself exceeds Maryland’s entire intercollegiate budget for the fiscal year of 2013, and it’s more than three times the 2013 annual distribution of revenue to the entire conference.
Now, one aspect where this gets interesting is that some ACC schools and ESPN were supposedly in cohorts with one another to poach a few other schools from the Big Ten. It’s a legitimate issue here because Maryland kind of feels like they are getting a raw deal considering the ACC intended on doing the same thing. The lawsuit has some incredibly detailed accounts on conference realignment here, and while I could go into it, it would take ages.
The gist of the argument you’ll find above, and while I’m no lawyer, it looks like this counter suit is pretty well thought out here in Maryland’s favor. While I’m not sure they will ever get anything close to their requested amount, I do think that the validity of the argument they made here could spur the judge into suggesting mediation to reach a settlement. All in all, a great read that you can find right here.