ACC, Terps prepare to fight in court over Maryland's $52M exit fee

ablythe@newsobserver.comSeptember 14, 2013 

Big Ten Expansion Maryland Football

University of Maryland President Wallace Loh speaks at a news conference in fall 2012 in College Park, Md., to announce Maryland's decision to leave the ACC and move to the Big Ten conference.


  • Who’s in, and when?

    New ACC schools this year: Pitt, Syracuse, Notre Dame (for all sports except football)

    Leaving next year: Maryland

    Coming next year: Louisville, Notre Dame (for five football games a year)

    Totals next year: 14 full-time football members, 15 for basketball

The University of Maryland might have thought it could get out of the Atlantic Coast Conference as easily as former Terps basketball coach Gary Williams used to toss off his suit jacket during a tough game.

But the ACC has refused to be cast off so freely.

The league continues to push ahead with its legal fight to collect a disputed $52 million exit fee from Maryland as it departs for the Big Ten.

The contest, which goes before the N.C. Court of Appeals on Sept. 26 for a preliminary skirmish, is being watched with great anticipation by major colleges and universities thinking about conference shopping and hopping.

A ruling against Maryland could be seen as a major toll on the increasingly common practice of conference hopping, slowing or ending a new trend in which league alignments shift so frequently that even the hardest-core fans have difficulty recounting which teams are in a league.

“In the broader picture, I think all the conferences are looking to see if the courts are going to recognize the validity of a conference protecting itself,” said Clark Smith Jr., a Greensboro lawyer on the team representing the ACC. “This is all about money. I don’t think anyone would dispute that.”

Maryland, despite its much-ballyhooed departure, remains in the ACC until July 1, 2014.

ACC Commissioner John Swofford has said that Maryland will be treated like other schools in the league during its farewell year. But court documents offer a picture of a strained relationship, including Maryland’s list of the many ways it sees the Big Ten as a better partner – in athletics, academics and economics.

The first issue for the courts to untangle: On whose turf will the feud be heard?

Lawsuits have been filed in North Carolina and Maryland. Attorneys for the ACC contend North Carolina, the birthplace of the 60-year-old conference, is the proper place for sorting out what they describe as a “contract dispute.”

The Maryland Board of Regents has asked for the case to be dismissed in North Carolina with hopes that a home crowd in the Maryland courts will settle the spat.

A Maryland judge put the lawsuit there on hold earlier this summer until the North Carolina courts rule on the proper venue.

That’s what will be argued before a three-judge N.C. Court of Appeals panel on Sept. 26, but it could be weeks or months before a ruling is issued and the more substantive issues fully addressed.

Is Big Ten better?

The case dates back to November 2012, when cash-strapped Maryland blindsided the ACC with news that it would cast aside 60 years of tradition for promises of a bigger payday from the Big Ten. The school in College Park, Md., was in such financial straits in its athletic department that seven sports teams were cut and a hunt for more lucrative opportunities was underway in the fall.

To its suitors, Maryland touted its presence in the TV markets of Baltimore and Washington, D.C., which when combined would be the country’s fourth largest.

The Big Ten Network, launched in August 2007, can reach an estimated 80 million households through agreements with more than 300 cable, satellite and telco affiliates in all 50 states and Canada, according to a June 2013 report from a university commission. All that exposure could be worth millions a year more to the school.

Maryland would be the southernmost school in a conference that includes traditional football powers such as Penn State, Ohio State, Nebraska and Michigan. Rutgers University is scheduled to join in July 2014, along with Maryland.

As Maryland shopped around for a new league, the ACC attempted to protect itself from a departure that could wreak havoc on its budget.

In September 2012, ACC hiked its departure fee to $52 million – three times the ACC’s $17.4 million operating budget and more than double the nearly $20-million exit fee on the books since 2011.

Maryland has argued in its court filings that the 2012 increase – opposed by Maryland President Wallace Loh and Florida State – was done outside proper procedures.

Maryland argued in its lawsuit in Prince George’s County that the ACC violated antitrust laws and its constitutional bylaws when it raised its exit fee. The Maryland courts have tossed out the antitrust claims, but haven’t ruled on other issues.

Since Loh announced Maryland’s plans not to pay the fee, the ACC has been withholding millions of dollars in normal disbursements to the school – more than $10 million.

Maryland contends many factors went into its decision to leave the ACC, and in court documents maintains that the Big Ten outstrips the league the Terrapins are leaving behind.

“First, the Big Ten Conference is highly competitive in numerous sports and can provide Maryland superior competitive opportunities, visibility and reputational benefits that are superior to those available from the ACC,” the Maryland suit against the ACC states. “Second, membership in the Big Ten Conference brings with it academic and research resources that are vastly superior in comparison to the ACC and that will enrich the experience of Maryland’s students and faculty and help fulfill the university’s core academic mission.

“Third, membership in the Big Ten conference will provide Maryland with superior economic benefits and permit it to stabilize initially, and ultimately enhance, the overall competitiveness and breadth of its athletic offerings.”

Will they settle?

The ACC argues in its North Carolina lawsuit that Maryland’s departure weakened it financially. A withdrawal, the ACC has argued, can lead to conference instability and might hamper negotiations for lucrative TV deals.

The ACC, at the time, had not joined the many conferences that required teams to relinquish their media rights upon departure. In other conferences, departing schools couldn’t go negotiate other television deals.

This past April, though, ACC Commissioner John Swofford persuaded the conference’s members – including new additions Syracuse, Pittsburgh and Louisville – to hand their media rights over to the conference until 2027.

No matter the outcome of the lawsuit, it appears that Maryland will leave. Swofford, meanwhile, has helped the ACC regain its footing by adding new members. Legal experts say either side could benefit from avoiding a lengthy legal fight.

“It seems like it behooves both sides to settle,” said Bradley S. Shear, a sports lawyer based in Bethesda, Md., and sports management professor at George Washington University who has been following the case. “Usually, these lawsuits settle.”

There were similar lawsuits when West Virginia left the Big East for the Big 12 in 2011. The university filed a suit to forgo its waiting period, and the Big East filed a suit in Rhode Island, where that conference is headquartered.

West Virginia ultimately settled that case, agreeing to pay $20 million to the Big East as the Mountaineers headed to the Big 12. Most disputes over exit fees have been settled out of court, attorneys say.

The ACC-Maryland suit, Shear said Friday, could slow the rush to look for new leagues.

“Obviously with this type of lawsuit,” he said, “it will make schools think twice about whether they want to jump conferences.”

Blythe: 919-836-4948

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