The $50M

[Noexcuse]

I understand what you're saying but we'll have to agree to disagree. To emphasize, my point about the third party is simply that the third parties are essentially trying to force all schools to stay because of the fee and because of that dynamic, it might well matter that it's not just two parties. This is something I've seen asserted from a few contract attorneys, so it's not just solely my own opinion.

I've drawn up a few contracts and had them vetted before due to my work in freelance and it's always been explained to me that for a clause to be enforceable, it has to be mutually beneficial to all parties involved. If a clause is being imposed by other signors in order to put one or other parties at a disadvantage, that to me is very relevant.

The clause wasn't put there specifically to put Maryland at a disadvantage, and it is mutually beneficial to all parties including Maryland had say Florida State or Clemson decided to bolt.

 

[upperdeck]

seems like the amount means nothing since its has varied across every exit fee the conferences have added and it hasnt stopped anyone. in addition does the fact that as Bees said , most have paid the fee and negotiated additional fees to leave even earlier show the fees do not hinder teams from leaving.

also haven't most conferences started adding teams long before the other teams actually left so why should this be any different just because the amount is larger? there were no exit fees for years and it jumped to millions is jumping from 5-10 million to 50 million really any different in the larger scope since teams are still looking to jump.

 

[kyleslamb]

The clause wasn't put there specifically to put Maryland at a disadvantage, and it is mutually beneficial to all parties including Maryland had say Florida State or Clemson decided to bolt.

Let's be realistic here, the fee was raised to that amount because it was hoped the amount would bind the institutions to the conference without being able to afford the penalty. That was the intent; it was meant to be restrictive to each school. Now whether that intent is shown in court or not is a different story. But that was the goal. These fees are supposed to be designed to merely compensate a conference for appropriate damages for a school leaving, not bind an institution to the league indefinitely because of the steep fee.

 

[IthacaMatt]

"The distinction between a reasonable exit fee and an exorbitant exit penalty will be important in determining how much Maryland is legally obligated to pay, legal experts said."

Hmmm... does this sound like an exorbitant penalty when described later by this guy?:

“It’s possible we pay,” Brian S. Ullmann, Maryland’s assistant vice president for communications, said of the exit fee. “We took that into account and we were still far, far ahead.”

I think that in light of the ten to twenty million dollars a year that's at stake after expansion of the Big 10 network into new cable households resulting from this move, a $50M exit fee is eminently reasonable.

What is the price that the ACC has paid already to its stability and its future television negotiations?

 

[Crusty]

Remember liquidated damages must roughly equal the actual damages the non-breaching party will suffer. These cannot be hypothetical damages - they must be actual damages. If the TV contract is not changed there may not be any damages.

This is a close call and it will depend of the proclivities of the judge. I really do not see any way to forecast this. The other cases involved early exit which are different from this case.

 

[syr02esq]

I understand what you're saying but we'll have to agree to disagree. To emphasize, my point about the third party is simply that the third parties are essentially trying to force all schools to stay because of the fee and because of that dynamic, it might well matter that it's not just two parties. This is something I've seen asserted from a few contract attorneys, so it's not just solely my own opinion.

I've drawn up a few contracts and had them vetted before due to my work in freelance and it's always been explained to me that for a clause to be enforceable, it has to be mutually beneficial to all parties involved. If a clause is being imposed by other signors in order to put one or other parties at a disadvantage, that to me is very relevant.

This is not how it works in practice. Rarely is a contract "mutually beneficial for all parties". Even if a contract is heavily favored for one party, that doesn't make the contract unenforceable. There just has to be an exchange of consideration. THAT IS IT.

 

[syr02esq]

SyrEsq what is your opinion of what I have said and what KylesLamb has said as it pertains to this lawsuit?

I may not follow your posts to one another but I think you both have it right that this will boil down to whether the liquidated damages provision will be enforced. I honestly don't know all the facts including which "contract" we are talking about here (or are we talking about the bylaws)? I think when answering the question, you have to think whether (i) the amount of damages roughly approximates the damages, and (ii) the damages must be sufficiently uncertain at the time of contract formation. I don't think (ii) is in question here, but really (i). Even still, a "rough approximation" seems to be a very low standard to prove.

The (i) amount of damages will be considered punitive in nature only if the sum is disproportionate to the amount of harm. Here is where the battle will be had. I haven't been keeping up with the economics of ACC membership but my uninformed opinion is that a $50MM exit fee is not disproporationate to the amount of harm other ACC members will incur if Maryland leaves. Looks to me to be reasonable in amount.

 

[Alsacs]

I may not follow your posts to one another but I think you both have it right that this will boil down to whether the liquidated damages provision will be enforced. I honestly don't know all the facts including which "contract" we are talking about here (or are we talking about the bylaws)? I think when answering the question, you have to think whether (i) the amount of damages roughly approximates the damages, and (ii) the damages must be sufficiently uncertain at the time of contract formation. I don't think (ii) is in question here, but really (i). Even still, a "rough approximation" seems to be a very low standard to prove.

The (i) amount of damages will be considered punitive in nature only if the sum is disproportionate to the amount of harm. Here is where the battle will be had. I haven't been keeping up with the economics of ACC membership but my uninformed opinion is that a $50MM exit fee is not disproporationate to the amount of harm other ACC members will incur if Maryland leaves. Looks to me to be reasonable in amount.

We agree, but I don't think the loss of Maryland alone would be 50 million dollars in damages, because the remedy of replacing Maryland with just Louisville or UConn wouldn't lessen the ACC Contract distributions. I think though that if other schools leave then the 50 million will be enforceable.

 

[PoppyHart]

They did not accept this contract.

Someone suggested that they could have simply left right before the vote. Really? In September they could have just packed things up and bolted? Say they decided to shut down their athletics department in September? What would have happened? Right, the ACC would have sued them. Yet, but staying and announcing 7 weeks later their intent to leave in 22 months they are liable?

I'd love to argue this case. There's no way in hell they pay the full $50 million. No way.

 

[Alsacs]

They did not accept this contract.

Someone suggested that they could have simply left right before the vote. Really? In September they could have just packed things up and bolted? Say they decided to shut down their athletics department in September? What would have happened? Right, the ACC would have sued them. Yet, but staying and announcing 7 weeks later their intent to leave in 22 months they are liable?

I'd love to argue this case. There's no way in hell they pay the full $50 million. No way.

Poppy when your in a partnership agreement you can't claim you didn't accept the contract. The ACC is a partnership thus each party gets 1 vote by the bylaws. You need to have taken a Business Associations class to understand what you are saying. Maryland may win because the liquidated damages provision is punitive and the actual damages done to the ACC by breaching do not add up to 50 million dollars. If the ACC replaces Maryland with Louisville it is doubtful the ACC has suffered 50 million dollars in damages, but if Florida State or others leave as well then you are damn right Maryland will pay 50 million dollars.

 

[rrlbees]

They did not accept this contract.

Someone suggested that they could have simply left right before the vote. Really? In September they could have just packed things up and bolted? Say they decided to shut down their athletics department in September? What would have happened? Right, the ACC would have sued them. Yet, but staying and announcing 7 weeks later their intent to leave in 22 months they are liable?

I'd love to argue this case. There's no way in hell they pay the full $50 million. No way.

I know they voted against it but didn't they agree to be bound to it via acceptance if the leagues by laws which reflect on how matters are voted on and accepted?

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[PoppyHart]

Poppy when your in a partnership agreement you can't claim you didn't accept the contract. The ACC is a partnership thus each party gets 1 vote by the bylaws. You need to have taken a Business Associations class to understand what you are saying. Maryland may win because the liquidated damages provision is punitive and the actual damages done to the ACC by breaching do not add up to 50 million dollars. If the ACC replaces Maryland with Louisville it is doubtful the ACC has suffered 50 million dollars in damages, but if Florida State or others leave as well then you are damn right Maryland will pay 50 million dollars.

B.A. law also emphasizes minority rights, and things like being able to bought out at fair value.

I would argue that Maryland actually did the ACC a favor by not dropping out immediately, as would be their right if they didn't like the terms of the increased exit fee.

 

[Alsacs]

B.A. law also emphasizes minority rights, and things like being able to bought out at fair value.

I would argue that Maryland actually did the ACC a favor by not dropping out immediately, as would be their right if they didn't like the terms of the increased exit fee.

Until I can read the ACC partnership agreement I can't tell you what the procedure is if you ceased having an athletic department, but something tells me the ACC has that covered in the agreement. Maryland can't claim the penalty doesn't apply because they didn't vote for it when your in a partnership each party has an equal interest. The argument they must make is what I and Syr02Esq have been saying.

 

[PoppyHart]

I know they voted against it but didn't they agree to be bound to it via acceptance if the leagues by laws which reflect on how matters are voted on and accepted?

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I think its likely a matter of first impression, as they in the law. In what other situations are entities potentially suing each other for damages caused by a desire to flee a voluntary membership in non-profit organization. Would you get sued if your country club's board of trustees raised dues and you left the following month?

In general, I think exit fees are acceptable mechanisms, but I think the timing (after the school year started), their refusal to accept the terms of the increase, and their quick reaction (leaving 2 months later) certainly weigh in their favor. In all the other conference realignment situations, I believe the exit fees were in place for several years.

 

[PoppyHart]

Until I can read the ACC partnership agreement I can't tell you what the procedure is if you ceased having an athletic department, but something tells me the ACC has that covered in the agreement. Maryland can't claim the penalty doesn't apply because they didn't vote for it when your in a partnership each party has an equal interest. The argument they must make is what I and Syr02Esq have been saying.

So you really think it's the Hotel California? Check out any time you like but you can never leave?

What if they knew a school's athletic department was in tatters, and that they were dropping sports left and right? These voluntary, non profit associations are not supposed to be predatory.

 

[syr02esq]

We agree, but I don't think the loss of Maryland alone would be 50 million dollars in damages, because the remedy of replacing Maryland with just Louisville or UConn wouldn't lessen the ACC Contract distributions. I think though that if other schools leave then the 50 million will be enforceable.

Again, the ACC just has to show a rough approximation of the damages. It doesn't need to show damages are exactly $50MM even after Uconn replaces MD. That is why you have liquidated damage provisions. If the dollar amount was $1BB then you have a point.

 

[syr02esq]

I think that in light of the ten to twenty million dollars a year that's at stake after expansion of the Big 10 network into new cable households resulting from this move, a $50M exit fee is eminently reasonable.

What is the price that the ACC has paid already to its stability and its future television negotiations?

I think this is spot on.

 

[jsshap]

This is not how it works in practice. Rarely is a contract "mutually beneficial for all parties". Even if a contract is heavily favored for one party, that doesn't make the contract unenforceable. There just has to be an exchange of consideration. THAT IS IT.

Indeed, and as they say, consideration can be a peppercorn.

 

[SmilinBob]

Again, the ACC just has to show a rough approximation of the damages. It doesn't need to show damages are exactly $50MM even after Uconn replaces MD. That is why you have liquidated damage provisions. If the dollar amount was $1BB then you have a point.

So the ACC will have to pay the Big 10?

 

[kyleslamb]

This is not how it works in practice. Rarely is a contract "mutually beneficial for all parties". Even if a contract is heavily favored for one party, that doesn't make the contract unenforceable. There just has to be an exchange of consideration. THAT IS IT.

Isn't that saying the same thing? An exchange of consideration is a mutually beneficial arrangement. It doesn't mean the considerations have to be of equal value, nor is that what I'm saying, but both parties have to benefit from it.

 

[SmilinBob]

Could the ACC just simply hand ND the 50 and say join and it's yours?

 

[orange79]

I think it just blows that what's going on in college conference associations can't be discussed without having a law degree. Oh Lord

 

[syr02esq]

Isn't that saying the same thing? An exchange of consideration is a mutually beneficial arrangement. It doesn't mean the considerations have to be of equal value, nor is that what I'm saying, but both parties have to benefit from it.

Well both parties have to agree to something that is why you call it an "agreement". One party may be willing to contract where the benefit they receive is so minuscule compared to the other party. So respectfully, I don't think it is the same thing.

 

[PoppyHart]

Is the law in this area really as settled as I'm led to believe?