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“Mismanaging media rights, ‘draconian’ exit fees:” Details of FSU Board of Trustees lawsuit vs. the ACC

Lawsuit against conference alleges antitrust and breach of contract, amongst other charges.

Charles Mays/Tomahawk Nation

Florida State University took its first steps in separating from the ACC on Friday, December 22, with the Board of Trustees filing a lawsuit against the conference that alleges antitrust and breach of contract, amongst other charges.

“The underperformance by the ACC has ramped up dramatically in just the last few years,” FSU Board of Trustees Chairman Peter Collins said in a statement. “The ACC has also unfairly — and we believe illegally — sought to prevent members from exploring their fundamental right to withdraw by threatening to impose an astounding and pernicious half-billion-dollar penalty. It’s simply unconscionable.”

From the lawsuit:

Indeed, through chronic fiduciary mismanagement and bad faith, the ACC has persistently undermined its members’ revenue opportunities including by locking them into a deteriorating media rights agreement that will soon result in a vast annual financial gap between the ACC and other Power Five (soon to be Power Four) conferences. Those failures have, by design, coalesced with the ACC’s efforts to effectively deprive ACC members of their fundamental right to withdraw, through the combination of an unconscionable Grant of Rights provision and a prohibitive Withdrawal Penalty that are unparalleled in the history of intercollegiate athletics.

The ACC’s hotly contested vote last September to add three new members, instead of increasing the value of its existing members’ media rights will further dilute these values and diminish the ACC’s already deemed inadequate “strength of schedule” rating going forward. This will necessarily handicap ACC members vying for a position in future CFPs against peers from the other Power Four conferences, including peers with inferior won-loss records. Perhaps the most telling metric of the lack of media caché those new ACC members carry, one has forfeited all media payments otherwise due it as a “member” of the ACC, while the other two forfeited approximately 66% of that payout . . . for the next several years. In sum, the ACC has negotiated itself into a self-described “existential crisis,” rendered itself fiscally unstable and substantially undermined its members’ capacity to compete at the elite level. In doing so, the ACC violated the contractual, fiduciary and legal duties it owed its members.

The ACC’s failures transcend this single national championship opportunity lost or even just football. The ACC’s incompetence at the bargaining table unfairly impedes the overall institutional advancement of all its members, including FLORIDA STATE. By depriving its members of the full media value of their football programs the ACC has undermined its members’ ability to fund other vital sports such as women’s and Olympic sports as well as soccer, lacrosse, and tennis. FLORIDA STATE relied on the advice, expertise and representations of the ACC and its media consultant with regard to media rights. The ACC, however, appeared dedicated to selfpreservation and self-perpetuation over the fiscal well-being of its members. A conference so dedicated cannot endure. FLORIDA STATE has continually challenged the ACC to be better for all its members yet the ACC has rebuffed FLORIDA STATE’s efforts.

Atlantic Coast Conference commissioner Jim Phillips issued his own statement in response to the lawsuit, saying the decision is “a clear violation of their legal commitments to the other members of the Conference.”

“This filing became necessary due to an unwillingness by the ACC and some of our fellow conference members to seriously consider remedies for this situation,” Florida State athletic director Michael Alford said. “It is with great regret that we enter this phase, but it has become clear that we have no other recourse.”

FSU is charging seven different counts:

  • The ACC punishments are unenforceable under Florida law as unreasonable restraint.
  • The ACC punishments are unenforceable penalties.
  • The ACC materially breached its contracts with Florida State.
  • The ACC breached its fiduciary duties to Florida State.
  • Fundamental failure or frustration of contractual purpose.
  • The ACC GoFR is unenforceable for several other reasons.
  • The ACC punishments violate Florida public policy and are unconscionable.

Florida State issued a press release announcing the decision:

The Florida State University Board of Trustees today filed suit against the Atlantic Coast Conference in response to years of mismanagement that has left its member schools trapped in a deteriorating multi-media rights agreement while preventing them from joining other conferences because of “draconian” withdrawal penalties.

The suit, filed in Leon County Circuit Court, says the ACC has failed to fulfill its stated obligations to “generate substantial revenues” and “maximize athletic opportunities” for its members. It details how the ACC’s mishandling of negotiations with ESPN has deprived members of tens of millions in annual revenues and put them behind other Power Four schools in the competition for educational advancement and to appear in elite athletic championships.

Rather than fix those problems, the lawsuit says, the ACC has tried to prevent its members from leaving the Conference by threatening to impose “draconian” withdrawal penalties of at least $572 million — the most onerous in collegiate sports.

The complaint accuses the ACC of restraint of trade, breach of contract and a failure to perform. It also challenges the legality of its withdrawal penalties.

FSU Board of Trustees Chairman Peter Collins said the lawsuit “represents the response to a long list of failures by the ACC, and while Florida State has challenged the ACC to be better for its members, the Conference has responded with inaction.”

“The underperformance by the ACC has ramped up dramatically in just the last few years,” said Collins. “The ACC has also unfairly — and we believe illegally — sought to prevent members from exploring their fundamental right to withdraw by threatening to impose an astounding and pernicious half-billion-dollar penalty. It’s simply unconscionable.”

Added FSU President Richard McCullough: “I fully support the Board’s decision to take this legal action against the ACC. It is becoming painfully apparent that Florida State’s athletic ambitions and institutional priorities are no longer served by the ACC’s leadership.”

The lawsuit says the College Football Playoff’s “stunning decision” to exclude the undefeated Seminoles from the 2024 championship “crystalizes” years of ACC failures that threaten the conference’s fiscal viability. Trustees said at a Board meeting today, however, that they’ve been considering taking legal action for more than a year because of the ACC’s overall mismanagement.

“The ACC has negotiated itself into a self-described ‘existential crisis,’ rendered itself fiscally unstable and substantially undermined its members’ capacity to compete at the elite level,” it says. “In doing so, the ACC violated the contractual, fiduciary and legal duties it owed its members.”

The ACC struck its initial media rights agreement with ESPN in 2011 and renegotiated it in 2012 to include a schedule of annual Tier I cash payments for nationally broadcast football games through 2027. ACC members currently receive roughly $33 million each in Tier I payments and payments for regionally broadcast games.

Rather than wait to negotiate better terms in 2027, however, the ACC granted ESPN a unilateral option to extend the Tier I contract until 2036 without receiving additional compensation.

Yet at the same time, ESPN was negotiating shorter, more lucrative contracts with the other conferences. Under those contracts, the rival conferences have opened a revenue gap of tens of millions of dollars a year, putting the ACC at a disadvantage in both fiscal impact and prestige.

Rather than fix those problems, the ACC has taken steps to prevent schools from defecting to conferences with the more lucrative broadcast contracts, the lawsuit says.

It adopted a secretly developed Grant of Rights provision that obligated members to forfeit their media rights through 2036 if they were to leave the Conference. While the provision doesn’t put a value on those, they are currently worth at least $442 million, the lawsuit says. FSU agreed to the extension in 2016, the lawsuit says, based on the ACC’s verbal claim that ESPN had threatened to walk away from the conference without the concession.

The ACC also ramped up its “severe withdrawal fees,” to three times its annual operating budget or $130 million. Added to the loss of broadcast rights, a school now faces a cumulative withdrawal penalty of $572 million in fees and forfeited revenues.

The ACC continued to erode its media rights position by rushing to admit three new schools with weak media rights values, dimming the prospect of the ACC winning significant increases in revenue payments when its contract is up for renewal.

FSU Athletic Director Michael Alford said he supported the Board’s action, adding that “this filing became necessary due to an unwillingness by the ACC and some of our fellow conference members to seriously consider remedies for this situation. It is with great regret that we enter this phase, but it has become clear that we have no other recourse.”

Florida State University is represented by a team of attorneys at Greenberg Traurig, LLP, led by David Ashburn, managing shareholder of the firm’s Tallahassee office.

As well as a letter to the FSU community:

Dear Seminole Family,

Today the Florida State University Board of Trustees voted to file a lawsuit against the Atlantic Coast Conference (ACC) in response to years of underperformance and mismanagement related to the handling of multi-media rights and broadcast revenues.

While the decision to file the lawsuit wasn’t an easy one, the Board vote was unanimous. It represents a turning point in our 30-plus year relationship with the ACC, which we believe has failed in its stated contractual, fiduciary and legal obligations to maximize athletic opportunities, generate significant revenues, and put its members at the forefront of athletic achievement.

The ACC’s underperformance has locked FSU and other ACC schools into an inferior broadcast contract that leaves them with less revenue, visibility, prestige, and leverage than other Power Four conferences. As a result, the ACC will soon be tens of millions of dollars behind other Power Four conferences— a gap that will widen over time and put FSU at a distinct disadvantage in the national competition for dollars to fund institutional advancement and to appear in the most elite athletic championships.

Meanwhile, the ACC’s Grant of Rights and severe withdrawal penalty prevent FSU from exploring its fundamental right to realign with another conference, and thus capture the full market value of its own marquee brand. The combined effect of these draconian measures would cost a member $572 million to leave.

FSU’s leadership has tried repeatedly to resolve these issues with the ACC, but we have been met with inaction. This legal action has become necessary as it is painfully apparent that Florida State’s athletic ambitions and institutional priorities are no longer being served by the ACC’s leadership. We would be derelict in our duty if we didn’t act.

The lawsuit claims restraint of trade, breach of contract, and a failure to perform. It also challenges the legality of the withdrawal penalties. Without the Court’s ruling on these key issues, we cannot reasonably assess whether to exercise our fundamental right to withdraw from the ACC as allowed by its Constitution. To read the lawsuit, go to news.fsu.edu/ACClawsuit.

In closing, we want to thank you for your whole-hearted support of FSU Athletics and the University. As stewards of this great University, we are determined to make sure nothing detracts from the respect, revenues, and reputation that we and those before us have fought hard to earn.

Sincerely,

Peter Collins, Chair Florida State University Board of Trustees

Richard McCullough, President Florida State University

FSU vs. ACC Lawsuit

University News Release, Dec. 22, 2023 (PDF)

Letter to FSU Community, Dec. 22, 2023

Legal Complaint, filed Dec. 22, 2023

Board of Trustees meeting, Dec. 22, 2023

2013 ACC Grant of Rights Agreement

2016 Amendment to Grant of Rights

ACC Manual (2020-2021)