NC Court of Appeals rejects Maryland's Motion to Dismiss 52 million lawsuit

[anomander]

I thought Maryland was strapped for cash? What happens if the exit fee is upheld?

 

[im4cuse]

I am licensed in NC and yes I believe MD will absolutely want to move the case from NC Guilford County Superior Court to Middle District of North Carolina Superior Court. The reasons are because the Guilford County judges are elected and not appointed and will have to face the voters in the Fall and remember this case deals with Tarheels, Wolfpack, etc. and the pressure will be there. Second, all the judges from Guilford County are graduates of Duke, UNC, Wake Forest law schools that helps even though the judges will say that won't matter and even though many of the judges from the Federal Court are grads of those 3 schools they tend to be more conservative than the state judges and MD lawyers would want Federal Judges over State Judges or they are dumb.

How does this help? The Federal Court would be applying state law. And there's a well reasoned decision already published that holds for the ACC under state contract law. I don't think, in fact I know, that Federal Courts are not too fond of overt forum shopping by losing litigants.

I think UMd needs to call their UnderArmor dude to get the checkbook out.

 

[Crusty]

Liquidated damage provisions in my study have rarely been ignored I am sure they get amended, but in the ACC cases they are following the bylaws of the conference which are agreed to by each partner in the conference. The Court would look at the fact MD is withdrawing from this partnership and is claiming the exit fee is excessive when it was agreed to by a 3/4 majority which is required by the bylaws. The FSU procedure violation argument is one that would have merits IMO.

I have probably had 25 cases with liquidated damages totally ignored by district judges. They don't even bother to comment on them. My attorneys have all told me that the judges will only uphold them in very specific circumstances. I told them that just couldn't be but they were right. I forget all of the circumstances but I remember one was that the damages had to be such that they could not be foreseen (determined) at the time of the agreement. For that reason they had to be reasonable and not penal in nature. If MD can convince the NC Court (good luck) that the LD is simply a penalty that is well beyond any damages they could theoretically prevail. Personally, I don't think they have a chance in hell for the reasons you mentioned.

Didn't the court just rule against their procedural argument or is there a different one?

 

[OrangePA]

I disagree with this because the 52 million dollar liquidated damages is what the 14 ACC schools agreed to and even if Maryland didn't like the exit fee increase the fact they claim its punitive is irrelevant IMO. The ACC By-laws require 75% for any change to get amended and 12 of 14 schools agreed to the increase. Somebody from FSU I was talking with told me that FSU voted no not because they disagreed with the increase, but because the ACC wasn't following the ACC bylaws and required a certain amount of days of notice before any vote to change the bylaws, and their reasoning made sense to me because if the ACC had to provide the schools 14 days notice of any votes to amend the bylaws and the ACC didn't follow that procedure and the vote occurred anyway then FSU was protecting themselves by voting no. My reading of the MD-ACC lawsuit MD hasn't made this very argument in their pleadings which if they did would clarify the matter and honestly is the only MD could win this lawsuit which would be on procedural grounds. The ACC could easily show the conference has lost 52 million dollars from MD leaving because they could cook the books by showing losses in sponsors from the MD area and TV markets for an ACC network.

MD can't stay they signed the B1G GOR and have B1G schedules released for 2014-2019 the ACC and B1G both know MD has announced where it plans to play in the future. MD can't stay because they would be worthless to ACC without GOR and the B1G would have a major headache.

I'm not sure if the agreement to the amount necessarily matters.

If the fee does not represent the fair cost of the loss of MD, then it may constitute an impermissable penalty.

 

[Hoo's That]

I thought Maryland was strapped for cash? What happens if the exit fee is upheld?

I think UMd needs to call their UnderArmor dude to get the checkbook out.

The conference is withholding all money due to UMd this year in anticipation of judgement.

Kevin Plank, the owner of UnderArmor, supposedly said at the outset that he won't put up any money.

 

[DoctorBombay]

 

[Crusty]

View attachment 5674

I have always enjoyed your screen name but I had no idea how articulate you can be.

 

[Alsacs]

I'm not sure if the agreement to the amount necessarily matters.

If the fee does not represent the fair cost of the loss of MD, then it may constitute an impermissable penalty.

Listen, unless you understand Contract and Business Association Law what you are saying is the macro level argument.

While what you are saying is technically correct under law the court can always determine in either parties favor as to whether the fee represents a fair cost of loss argument. However,you are saying the ACC has to prove that MD withdrawal is worth 52 million dollars and that is not 100% correct. The Court would likely look at the fact the ACC is a partnership that each member willingly on its own joins and has a list of bylaws for joining or withdrawing from the partnership. Each member is treated to equal power, and has its own procedures for amending the withdrawal or joining bylaws. Since the ACC decided to up the exit fee then Maryland is screwed even though it voted against the increase the bylaws required 3/4 majority to amend, and unless the ACC violated its own procedures to amend them then Maryland's argument on its face will likely lose. If the ACC has to prove that MD withdrawing is worth 52 million dollars then what you are saying in the future is that GOR are worthless and can be breached because those penalties are punitive because GOR are way more powerful than a 52 million dollar fee. Anyway you slice this IMO, Maryland will be paying 52 million dollars to the ACC unless the ACC decides the billable hours to whichever firm they are paying aren't worth the hassle.

 

[Alsacs]

How does this help? The Federal Court would be applying state law. And there's a well reasoned decision already published that holds for the ACC under state contract law. I don't think, in fact I know, that Federal Courts are not too fond of overt forum shopping by losing litigants.

I think UMd needs to call their UnderArmor dude to get the checkbook out.

Federal Judges are better than State Judges. While the Federal Judge would be applying NC state law whenever I can use diversity jurisdiction I will because the cases go a lot faster in Federal Court because there are fewer cases on the docket and the judges want to move the cases along. No court is fond of forum shopping but if the cases is decided in NC first the MD court will not touch the case it would be appealed in NC and up the ladder.

 

[Lou_C]

I think it's starting to become apparent how this will play out. I believe that by the time Maryland actually exits, they will have had about $30M withheld. They'll be gone before the ACC can withhold $52 Million.

I think that will be the settlement. Otherwise the ACC has to try to get a $22M check out of Maryland, and that's never going to happen and would be tied up in litigation for years. I think Maryland does what it can to try to void the thing, but it doesn't look like that's likely. I think when Maryland leaves, whatever has been withheld will be the exit fee.

 

[Crusty]

Listen, unless you understand Contract and Business Association Law what you are saying is the macro level argument.

While what you are saying is technically correct under law the court can always determine in either parties favor as to whether the fee represents a fair cost of loss argument. However,you are saying the ACC has to prove that MD withdrawal is worth 52 million dollars and that is not 100% correct. The Court would likely look at the fact the ACC is a partnership that each member willingly on its own joins and has a list of bylaws for joining or withdrawing from the partnership. Each member is treated to equal power, and has its own procedures for amending the withdrawal or joining bylaws. Since the ACC decided to up the exit fee then Maryland is screwed even though it voted against the increase the bylaws required 3/4 majority to amend, and unless the ACC violated its own procedures to amend them then Maryland's argument on its face will likely lose. If the ACC has to prove that MD withdrawing is worth 52 million dollars then what you are saying in the future is that GOR are worthless and can be breached because those penalties are punitive because GOR are way more powerful than a 52 million dollar fee. Anyway you slice this IMO, Maryland will be paying 52 million dollars to the ACC unless the ACC decides the billable hours to whichever firm they are paying aren't worth the hassle.

In the end, I will bet that a NC court, state or federal, will not let MD off the hook. Moreover, this is an important case and will certainly set a precedent for ACC disputes in the future including any involving GOR.

I have repeatedly been advised that a liquidated damages clause that is considered disproportionate to the actual harm is unenforceable on grounds of public policy as a penalty. It seems to me that it is clear the ACC can't set a totally arbitrary exit fee. It has to be based on some reasonable determination of damages. If the exit fee was a billion dollars the court would certainly not enforce it so the ACC certainly has to defend the amount on some basis. I doubt the ACC lawyers are going to simply say the exit fee is the exit fee and we don't have to defend the amount.

We always tried to set LD clauses as reasonably as possible and still had no success - judges just don't like them.

From what I can tell, this is the main issue remaining in the case and the only hope that MD has to get the amount reduced. (I have no idea why they did not pursue the procedural issue.)
While,

The GOR will also be subject to the same issue, however I would guess that those damages are easier to quantify.

 

[Alsacs]

In the end, I will bet that a NC court, state or federal, will not let MD off the hook. Moreover, this is an important case and will certainly set a precedent for ACC disputes in the future including any involving GOR.

I have repeatedly been advised that a liquidated damages clause that is considered disproportionate to the actual harm is unenforceable on grounds of public policy as a penalty. It seems to me that it is clear the ACC can't set a totally arbitrary exit fee. It has to be based on some reasonable determination of damages. If the exit fee was a billion dollars the court would certainly not enforce it so the ACC certainly has to defend the amount on some basis. I doubt the ACC lawyers are going to simply say the exit fee is the exit fee and we don't have to defend the amount.

We always tried to set LD clauses as reasonably as possible and still had no success - judges just don't like them.

From what I can tell, this is the main issue remaining in the case and the only hope that MD has to get the amount reduced. (I have no idea why they did not pursue the procedural issue.)
While,

The GOR will also be subject to the same issue, however I would guess that those damages are easier to quantify.

I don't know who your contracts were with that contained LD clauses, but the ACC is a partnership and dissolution from a partnership is different from a contract. Your correct that the figure has to be a reasonable determination of damages, and I am sure the ACC has ways to show losses of revenue from Maryland's departure, but if the Court rules 52 million dollars is punitive then GOR are worthless on the paper they are signed because that is punitive then a flat 52 million dollar exit fee, and we will have conference free agency if that happens.

 

[Crusty]

I don't know who your contracts were with that contained LD clauses, but the ACC is a partnership and dissolution from a partnership is different from a contract. Your correct that the figure has to be a reasonable determination of damages, and I am sure the ACC has ways to show losses of revenue from Maryland's departure, but if the Court rules 52 million dollars is punitive then GOR are worthless on the paper they are signed because that is punitive then a flat 52 million dollar exit fee, and we will have conference free agency if that happens.

As I understand it, the whole idea behind a GOR is that it is stronger and does not suffer from the LD issue. GOR is simply the purchase and sale of an asset. This ruling will have precedential value on certain of the issues already adjudicated and the LD issue but the latter will not be an issue to the GOR.

I don't quite follow the partnership liquidation point. Are you saying that "public policy" does not extent to partnership agreements? (Is the ACC in partnership form?).Why would LD clauses in a partnership (which is nothing more than a contract) be treated differently than any other contract?

 

[SWC75]

The conference is withholding all money due to UMd this year in anticipation of judgement.

Kevin Plank, the owner of UnderArmor, supposedly said at the outset that he won't put up any money.

They may have to go back to their old uniforms.

I hope something can be worked out so Maryland stays. They are a natural rival, yet one we can beat. And we need all such schools we can get on our schedule.

 

[Crusty]

They may have to go back to their old uniforms.

I hope something can be worked out so Maryland stays. They are a natural rival, yet one we can beat. And we need all such schools we can get on our schedule.

Hard to imagine that happening. B1G would never allow that kind of embarrassment.
Most think we are better off with L'ville anyway.

 

[OrangePA]

Hard to imagine that happening. B1G would never allow that kind of embarrassment.
Most think we are better off with L'ville anyway.

I would rather have MD, but as you have observed, it seems that the die is cast.

 

[Scooch]

They may have to go back to their old uniforms.

I hope something can be worked out so Maryland stays. They are a natural rival, yet one we can beat. And we need all such schools we can get on our schedule.

No chance.

At all.

 

[Scooch]

Hard to imagine that happening. B1G would never allow that kind of embarrassment.
Most think we are better off with L'ville anyway.

It has nothing to do with embarrassment. The B1G would sue the ever-loving-bejeesus out of Maryland if they tried to back out. They have a decade-long business plan in place built upon access to a couple million TV households in the Baltimore/DC metropolitan area.

 

[SU2NASA]

It has nothing to do with embarrassment. The B1G would sue the ever-loving-bejeesus out of Maryland if they tried to back out. They have a decade-long business plan in place built upon access to a couple million TV households in the Baltimore/DC metropolitan area.

And of that, the tens of thousands who actually care about Maryland.

 

[elimunelson]

It has nothing to do with embarrassment. The B1G would sue the ever-loving-bejeesus out of Maryland if they tried to back out. They have a decade-long business plan in place built upon access to a couple million TV households in the Baltimore/DC metropolitan area.

well the B1G may have to pony up some cash if Maryland needs to cut this check. I don't see why the ACC would back down and if Maryland HAS to go to the B1G the party that can make it happen financially is the B1G.

 

[GFTakedown]

What percent would come to the schools in the ACC? Would it be 1/13th of the fees after attorney fees with Louisville being left out?

 

[im4cuse]

Federal Judges are better than State Judges. While the Federal Judge would be applying NC state law whenever I can use diversity jurisdiction I will because the cases go a lot faster in Federal Court because there are fewer cases on the docket and the judges want to move the cases along. No court is fond of forum shopping but if the cases is decided in NC first the MD court will not touch the case it would be appealed in NC and up the ladder.

Actually Federal courts (in Md and elsewhere) are jammed at the District Court level (drug case, immigration, other matters where the US Attorney's office controls the flow, etc). Civil cases between private parties go to die on Federal court dockets. UMd might want this just as a delay strategy and ultimate settlement leverage once (and if) they cash a B10 check, but not sure it would survive a 12(b)(6) motion. Again, there's ALREADY a decision, and a ready avenue for the losing litigant to pursue in the state system.

 

[SWC75]

Hard to imagine that happening. B1G would never allow that kind of embarrassment.
Most think we are better off with L'ville anyway.

I like having Louisville in the conference. I'd like to keep Maryland, get rid of "one foot in, one foot out" Notre Dame and bring in West Virginia or Connecticut and then go north-south.

But I recognize that what i want and will happen are two different things.

 

[Orangepace]

I'm not sure why... but I love reading lawyers banter back and forth... Some interesting stuff in here.

 

[Crusty]

I like having Louisville in the conference. I'd like to keep Maryland, get rid of "one foot in, one foot out" Notre Dame and bring in West Virginia or Connecticut and then go north-south.

But I recognize that what i want and will happen are two different things.

I think ND is simply too important long term. As for UConn, well you know the answer to that! West Va is simply too far down the academic ladder to suit UNC and UVA.