'Left no choice': FSU suing ACC over exit fee
Florida State is suing the ACC over the league's grant of rights and $130 million withdrawal fee, becoming the first school to challenge a grant of rights in court.
Andrea Adelson, ESPN Senior Writer
The Florida State board of trustees voted unanimously Friday to sue the ACC to challenge the legality of the league's grant of rights and its $130 million withdrawal fee, a necessary first step to plot the school's future and potential exit from the conference.
The 38-page lawsuit, filed in Leon County Circuit Court in Tallahassee, Florida, seeks a declaratory judgment against the ACC to void the grant of rights and withdrawal fee as "unreasonable restraints of trade in the state of Florida and not enforceable in their entirety against Florida State."
The university alleges "chronic fiduciary mismanagement and bad faith" in the way the ACC has handled its multimedia rights agreements and undermined its members' revenue opportunities. Florida State is also accusing the ACC of breach of contract and failure to perform.
"I believe this board has been left no choice but to challenge the legitimacy of the ACC grant of rights and its severe withdrawal penalties," board chair Peter Collins said. "None of us like being in this position. However, I believe that we have exhausted all possible remedies within the conference and we must do what we believe is best for Florida State not only in the short term but in the long term."
Florida State is now in unprecedented territory. No school has ever challenged a grant of rights in court.
ACC officials have previously used the word "ironclad" to describe the document, and that has been the operating assumption from leagues across the country -- believing the language in the document is so rigid it would prevent schools from leaving. But because no school has ever challenged the document in court, nobody actually knows whether it is, indeed, as ironclad as described.
ACC commissioner Jim Phillips and Virginia president Jim Ryan, chair of the ACC board of directors, lamented Florida State's "unprecedented and overreaching approach" in a statement.
"Florida State's decision to file action against the Conference is in direct conflict with their longstanding obligations and is a clear violation of their legal commitments to the other members of the Conference," the statement said. "All ACC members, including Florida State, willingly and knowingly re-signed the current Grant of Rights in 2016, which is wholly enforceable and binding through 2036. Each university has benefited from this agreement, receiving millions of dollars in revenue and neither Florida State nor any other institution, has ever challenged its legitimacy."
The ACC also made a preemptive legal maneuver Thursday by filing a complaint for declaratory judgment against the Florida State board of trustees in state court in Mecklenburg County, North Carolina.
"In light of Florida State's clear intention to take action, the ACC proactively filed a declaratory action yesterday in defense of the Grant of Rights, the Conference and each of its members," an ACC spokesperson said of the conference's filing.
At issue in Florida State's complaint is what the school has described over the past year as not only growing revenue gaps with the SEC and Big Ten, expected to be $30 million annually per school, but disagreements over the way media rights money should be distributed within the ACC. Although the ACC recently adopted success initiatives to reward teams for performance in football and men's and women's basketball, Florida State has pushed for television money to be distributed unevenly based on media value to the conference. The ACC has refused.
"This is not where I would prefer to have ended up," university president Richard McCullough said. "I would prefer a different pathway, but I feel in many ways we've exhausted all other options, and you can't wish and hope that somehow they'll get fixed."
What happened Friday did not materialize over the past three weeks. Although the College Football Playoff snub earlier this month was seen as a last straw, Florida State's legal counsel and an outside law firm have been reviewing the grant of rights for well over a year and began working on legal arguments this summer -- spurred forward after an August board of trustees meeting in which trustees demanded a plan of action by the following August.
At that meeting, Florida State made it clear it would consider leaving the ACC over its concerns.
"Our actions today are less about the events of the last two weeks and far more about the actions of the ACC leadership over the past 10 years and what confronts FSU in the ACC over the next 13 years," Collins said.
Florida State and all other ACC members signed a grant of rights with the league that runs through 2036, the length of its television contract with ESPN. The grant of rights gives the conference control over its media rights -- including television revenue and home game broadcasts in all sports. In addition, any school that wants to leave the ACC would have to pay an exit fee of three times the league's operating budget, or roughly $130 million.
All told, the university estimates the total exit fee, including the forfeiture of television revenue, would be $572 million.
David Ashburn, managing shareholder of Greenberg Traurig in Tallahassee, the outside law firm handling the case, walked trustees through the lawsuit during Friday's meeting, detailing what the university believes is fiduciary mismanagement in the way the ACC has handled its media rights agreements with ESPN and withdrawal penalties going back to 2010.
The university alleges that when the ACC reached an extension of its media rights with ESPN in 2016, the agreement granted the network a unilateral option to extend the deal an additional nine years beyond its expiration on June 30, 2027, or until 2036. Florida State also alleges the ACC told its members that ESPN had issued an ultimatum: Unless the members extended the grant of rights from 2027 to 2036, ESPN would not enter into further media agreements with the conference. FSU said it agreed to the grant of rights extension based on this representation.
In addition, the university alleges the 2016 extension locked in league members to the same rates negotiated in the previous 2012 multimedia rights contract with ESPN. That left league members with the same revenue package for 24 years -- all while other conferences had the ability to renegotiate their contracts and increase their revenue.
If a judge grants declaratory judgment in favor of Florida State, the school would be able to leave the ACC without penalty. The departure would have to be effective Aug. 14, 2023, backdated to ensure Florida State could leave the conference in the event of new bylaws being put into place. If the judge declines to issue a judgment in favor of either side, Florida State and the ACC could be sent to mediation to negotiate a resolution.
On Thursday, the ACC asked a judge to declare that the grant of rights signed by Florida State in 2013 and 2016 "is valid and enforceable" and will remain so through June 30, 2036.
"Florida State made a deliberate choice to transfer its media rights to the ACC for a specific term in order to negotiate different and increasingly lucrative multi-media agreements with ESPN, knowing that the transfer of those rights for a specific term would continue even if it ceased to be a Member Institution or chose to withdraw from the Conference," the ACC's complaint said.
The conference argued in its complaint that Florida State is subject to the laws of North Carolina because of "its continuous and systematic membership and governance activities within the ACC."
ESPN's Mark Schlabach contributed to this report.
