Florida State University has filed a strong lawsuit against the Atlantic Coast Conference on Friday, which could shake up college sports and lead to another wave of conference realignment if the Seminoles succeed in withdrawing from the Atlantic Coast Conference after winning in court.
What is Florida State University’s lawsuit about?
The lawsuit arises from Florida State University’s dissatisfaction with the Atlantic Coast Conference as the revenue gap between it and competing conferences like the Big Ten and Southeastern Conference continues to widen. The university accuses the Atlantic Coast Conference of incompetence and mismanagement and asks the court to declare that its agreements with the Atlantic Coast Conference have been violated on several points, including diminishing its members’ ability to compete for championships, such as the college football championship. The university blames the Atlantic Coast Conference for excluding the Seminoles from the championship despite their status as undefeated champions of the conference.
What does Florida State University seek from the Atlantic Coast Conference?
The lawsuit does not explicitly state that it plans to withdraw from the Atlantic Coast Conference but wishes for the current penalties the Seminoles would face if they left the Atlantic Coast Conference now to be lifted:
- A withdrawal penalty of $130 million, calculated by doubling the Atlantic Coast Conference’s operating budget for 2023, which was $43.3 million.
- $429 million in forfeited media rights under the media rights grant agreement with the Atlantic Coast Conference until 2036, at a rate of $33 million annually.
The lawsuit adds that these penalties and $13 million in non-refundable broadcasting fees amount to a total withdrawal penalty of $572 million. It requests the court to rule against the Atlantic Coast Conference declaring that the withdrawal penalty and the media rights grant agreement are illegal restraints on trade, unenforceable, and should be voided. It also seeks a ruling declaring that the Atlantic Coast Conference has breached its contractual obligations to Florida State University, “thereby relieving Florida State University of any performance obligations under those contracts.”
Florida State University also requests to be considered as having “issued its official notice of withdrawal from the Atlantic Coast Conference” starting from August 14, 2023, the day it was supposed to announce its withdrawal from the league for the following year.
If the Seminoles are freed from these hefty withdrawal penalties, they may be invited to join another conference.
The lawsuit describes these penalties as “unacceptable” and considers them an unreasonable restraint on trade as they deprive Florida State University of the fruits of its labor and prevent it from marketing its media rights to obtain their fair market value. It notes that Florida State University’s dissatisfaction with the Atlantic Coast Conference over the years has stemmed from falling significantly behind the Big Ten and Southeastern Conference in media rights revenue – about $33 million per school in the Atlantic Coast Conference in 2024 under its agreement with ESPN, compared to about $60 million in those competing conferences, according to the lawsuit.
What is the Atlantic Coast Conference’s position on this lawsuit?
The lawsuit was filed on Friday by the firm Greenberg Traurig, P.A. after approval from the university’s Board of Trustees in an emergency meeting. The Atlantic Coast Conference stated on Friday that Florida State University’s decision to sue it is a “clear violation of their legal obligations to other conference members.”
“All members of the Atlantic Coast Conference, including Florida State University, voluntarily and knowingly signed the current media rights agreement in 2016, which is fully enforceable and binding until 2036,” according to a statement from the Atlantic Coast Conference. “Every university has benefited from this agreement, receiving millions of dollars in revenue, and Florida State University or any other institution has not challenged its validity.”
In
In 2016, the president of Florida State University and others voted to extend their media rights to the Atlantic Coast Conference until 2036, effectively making the school forfeit its media rights revenue until that date if it departed. This agreement was a way to ensure stability for the conference and prevent its members from being poached by other conferences.
In its lawsuit, Florida State University stated that it voted this way at the time because it relied on the legitimacy of the Atlantic Coast Conference’s statements and was facing a penalty of $234 million at the time “if it did not comply.”
The lawsuit indicates that there was also pressure from ESPN, which holds the conference’s media rights.
“The Atlantic Coast Conference verbally informed its members that ESPN had issued a threat: unless every Atlantic Coast Conference member signed an extension to the Atlantic Agreement (granting rights) from 2027 to 2036, nine full years after the expiration of the then-current ESPN Tier I agreement, ESPN would not sign any further media rights agreements with the Atlantic Coast Conference,” according to the lawsuit.
How does Florida State claim the Atlantic Coast Conference has failed?
The lawsuit includes a list of complaints about the conference that it claims constitute a material breach of the contract.
Among them is the expansion of the Atlantic Coast Conference to include California, Stanford, and Southern Methodist next year.
The lawsuit states that “the Atlantic Coast Conference additions were actually instead beneficial and defensive rather than strategic, as the addition of these three schools was designed by the Atlantic Coast Conference to insulate the Atlantic Coast Conference from falling below the minimum of 15 members required under the ESPN 2016 agreements if any member of the conference exercised its right to exit.”
Florida State University voted against this expansion. The lawsuit claims that “instead of improving its media profile for football, the Atlantic Coast Conference consciously chose to diminish it, along with undermining the ability to schedule strong games for the Atlantic Coast Conference.”
The lawsuit also accuses the conference of making bad deals with ESPN without anything or not enough in return.
Among that is the commitment the Atlantic Coast Conference made to a tier one media rights agreement for “unprecedented 20 years at rates negotiated prior to the first year without securing a mutual commitment from ESPN for the last nine years (2027-2036) of that period.”
The lawsuit notes that ESPN has no financial obligation to the Atlantic Coast Conference after 2027 even though members of the Atlantic Coast Conference are bound to a grant of rights contract with the conference until 2036. Collins, chair of the Florida State University Board of Trustees, stated that this is unfair because it binds Atlantic Coast Conference schools to the conference despite the lack of guaranteed payments after 2027.
Collins said in an interview: “We are seeking to have the court determine whether the severe withdrawal penalties and grant of rights are legal, and if they are not legal, we have options. That’s what we want. We want options like anyone else should have. Why should there be a withdrawal clause if you can’t effectively withdraw? If it’s a penalty of half a billion dollars, you can’t effectively withdraw.”
What would be the impact of Florida State University’s lawsuit?
If Florida State University succeeds in being permitted to leave the Atlantic Coast Conference without these crippling penalties, it could be another big domino falling in the reshuffling, just as other dominoes have fallen leading to the collapse of the Pac-12. In this case, the departure of the University of Southern California and UCLA joining the Big Ten next year ultimately led to the exit of other members to join the Big Ten, Big 12, and Atlantic Coast Conference.
If
Coastal Atlantic members were allowed to leave without penalty, and other members like Virginia, North Carolina, and Clemson may also consider departure.
The lawsuit from Florida State University indicates that the Pac-12 collapsed due to its “failure to successfully leverage the media rights of its members.” It accuses the Coastal Atlantic of doing something very similar.
The lawsuit states: “By depriving its members of the full value of their football programs, the Coastal Atlantic weakened its members’ ability to fund other vital sports like women’s sports, Olympic sports, soccer, and tennis,” adding, “Florida State University relied on the advice, expertise, and statements of the Coastal Atlantic and its media consultants regarding media rights. However, it appears that the Coastal Atlantic is devoted to preserving itself and continuing at the expense of the financial well-being of its members. A conference dedicated to this degree cannot continue.”
Is there a precedent for this?
To some extent. In 2012, the University of Maryland decided to withdraw from the Coastal Atlantic and join the Big Ten, prompting the Coastal Atlantic to sue Maryland, claiming it owed $52 million. Maryland responded by suing, and the dispute ended in a negotiated settlement. Ultimately, Maryland agreed to forfeit $31 million.
Collins noted that this is significantly less than $572 million and that Maryland was not bound by this type of grant of rights agreement. He stated that the withdrawal fee and the grant of rights agreement are two different things, but they come together to unlawfully suppress Florida State University, a member of the Coastal Atlantic since 1991-92.
Collins asked, “Why are we paying a withdrawal fee if the goal isn’t to leave the conference and reclaim our (media) rights?”
Florida State University President Richard McCullough expressed his support for the lawsuit at the meeting on Friday.
Source: https://www.aol.com/florida-state-sues-acc-having-163306267.html
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