Maryland v. ACC could have far-reaching precedent
Posted January 15, 2014
The case may take months or years to be completely decided, but Maryland’s lawsuit against the ACC will be closely monitored by colleges and their lawyers throughout the nation. At stake, potentially, is the perceived stability conferences thought they had achieved through the relatively recent arrival of grants of television rights covenants.
The ACC formed such an union in April of 2013, roughly six months after Maryland announced it would leave the league after 2013-14 to join the Big Ten, which also has a grant of rights treaty among its members. So does the Big 12 Conference. The ACC pact runs through the length of its television contract with ESPN in 2027.
In theory, grant of rights agreements bind each conference member to its partners through what roughly works like a communal banking account.
The $156.8 million lawsuit filed Tuesday by the Maryland attorney general’s office is not related to any sort of grant of rights agreement. It originated with Maryland's resistance to a $52.2 million ACC exit penalty – an agreement Maryland ratified as an ACC member in September of 2012.
The state and the school allege that the exit penalty should not apply as a result of procedural incidents and that the ACC has no right to withhold revenue shares from the school as the case plays out. But since the crux of the suit goes to the subject of conference/school agreements, it’s not out of the question that grant of rights pacts could be tangentially affected by the eventual court ruling or even an out-of-court settlement.
Here’s why, through a completely hypothetical example:
Let’s say UNC, just to pick an ACC school, leaves the league and is accepted as a member of the Big Ten two or three years from now.
The ACC obviously would sue, claiming its authority via the grant of rights television covenant. But in joining the Big Ten, UNC would have entered a second grant of rights union and there are few, if any, legal precedents in such matters involving television networks, colleges, conferences and chain of command. At some point, given that scenario, the NCAA would be drawn into the fray since members of both the ACC and Big Ten are also bound to NCAA agreements regarding sports eligibility.
It’s entirely possible that after a long court fight, judges could rule any number of ways:
- UNC’s media income could be ruled to be jointly owned by the ACC and Big Ten.
- UNC could be ruled a sovereign sports entity and the sole owner of its product rights.
- The entire matter could be shipped directly to arbitration, thereby assuring that both conferences would suffer some degree of disappointment.
- Both conference covenants could be ruled illegally restrictive on free trade and completely voided.
There’s an old saying that no contract is ironclad. Whether that statement is accurate or not, it’s certain that there’s no way to stop any school or any conference from suing for its freedom (in the case of a school) or antimony (conference).
If recent history has taught us anything, it’s that there is no predicting where and when the conference realignment process will go, much less where and when it will end.
The outcome of Maryland’s suit over the exit-fee issue will serve as an important indicator of how the courts will view what has become a collegiate sports wild west show, complete with border raids, shot-gun weddings and financial range wars.
Collectively, college sports has become a billion-dollar-a-year industry that shows no sign of tapering. In fact, given the current growth rate of sports marketing and likelihood that more sports-oriented media outlets will emerge as technology advances, current TV contracts could be seen as pocket change in the future.
With so much money on the table, more lawsuits are likely to flare up. That much is inevitable, which is why Maryland v. the ACC will be must-see action in the boardrooms. And, of course, for law students from the Ivies to the Pac-12.