Guest Post: Florida State vs. the ACC - Part 1

TwistNHook is back with a deep dive into your favorite kind of drama: LEGAL DRAMA!

Editor’s note: Blogger emeritus TwistNHook Esq. is back again! After briefing us on the basics of ACC contract law, Twist has spent the last month entirely focused on Florida State’s attempts to extricate themselves from the ACC. Will those attempts bear fruit? READ ON!

- Nick

In this post, I want to discuss the FSU v. ACC lawsuit.  I plan on also drafting a post regarding the ACC v. FSU lawsuit.  This will be a 2 part post because there is so much to discuss.  

INTRODUCTION

I am hoping to keep this top level, while also getting into the weeds.  There is a lot of complexity here.  Before jumping into the lawsuit, it is important to understand the larger context that FSU is filing in here.  

FSU wants more money and they feel that they do not get enough money in the ACC.  They feel that they can get more money in the Big Ten.  This is demonstrably true.  FSU feels that the ACC signed a dumb agreement and locked all ACC teams into a terrible deal.  This is also somewhat true.  

The problem FSU is running into is that it agreed with everything every step of the way.  Even if it held its nose as it did it, FSU signed every contract asked of it.  FSU has a team of highly paid attorneys to ensure that the contracts work.  The FSU that signed onto these contracts had many good reasons to do so.  Now, the contracts do not make as much sense and FSU wants out.  However, it cannot really come out and say that it wants to renege on its deals because they do not make as much sense anymore.  

As such, FSU has to come up with some legal argument that could be used to void the Grant Of Rights contract.  They did not do so.  This is my main take away from reading the lawsuit.  

RELEVANT CONTRACTS

Let me help you understand the 3 relevant contracts here.  

1.  Grant Of Rights.  Outside of Notre Dame, no other football team negotiates its TV deals directly with a TV company.  All other teams assign their intellectual property rights in the media deals to a 3rd party middle man known as a conference.  This is what the Grant Of Rights aka GOR is.  
   
   This is also the document that FSU wants out of.  I did a deep dive on the publicly available GOR, which you can find here:

2. ACC Bylaws:  These are the underlying document organizing the ACC itself.  I am not sure how relevant this outside of potentially determining venue for a lawsuit and determining how the ACC enters into media deals

3. ESPN Media Deals - This is how the ACC makes money.  It bundles the IP rights given to it by the member schools and then sells them to ESPN in exchange for money.  The lawsuit focuses a lot on these deals, although I am not sure how relevant they are to voiding the GOR.  

DECLARATORY JUDGMENT

The title of the document is “Complaint For Declaratory Judgment.”  What does this mean?  This basically means that FSU is filing a lawsuit for the Court to give them an instruction.  The instruction requested is that the GOR is a void contract.  Failing that, the instruction requested is that the withdrawal penalties under the GOR are void and not enforceable.  

Basically, FSU wants a judge to tell it that it can leave the ACC without having to pay any money.  That is what this is all about.  FSU calculates the withdrawal penalty at approx. $572,000,000.00.  As you can imagine, they want to pay approximately $572,000,000 less than that.  The ACC does not agree to that, so to the lawsuits we go.  

To understand why the withdrawal penalty is so high, you have to understand the history of the ACC in the early 2010s.  At that time, the withdrawal penalty was much less than it is today.  Maryland wanted to leave to go to the Big Ten (which they ended up successfully doing).  The ACC sued Maryland and had a big fight at that time.  

It appears that after Maryland left, the ACC jacked up the withdrawal penalty to avoid that.  The withdrawal penalty functionally relates to two portions:  the withdrawal fee and the rights buyback.  The withdrawal fee used to be 1.25x the ACC budget, but after Maryland left it went to 3x.  

The rights buyback is the sum of money that the ACC pays to FSU per years remaining on the GOR.  The GOR lasts until 2036 and the rights are between 33-40 mil per.  After Maryland left, the ACC got its member institutions to extend the GOR to 2036, so this makes it extremely difficult for any team to leave.  If they leave, they have to pay the value of the rights back.  

This can be contrasted with the Pac-12 and Big-12.  There, the GOR/media deals were expiring shortly.  This allowed multiple teams to leave these conferences.  In the Big-12’s situation, Texas and OU only had to pay about $50,000,000 each to get out of their remaining GOR.  In the Pac-12’s situation, the teams didn’t have to pay any money and the league collapsed.

The ACC smartly trapped its teams into a long term GOR.  The problem that FSU outlines is not necessarily that the GOR is long and the withdrawal penalty is too big.  The *real* problem is that the ACC didn’t maximize profits with FSU’s rights.  That is really the issue here.  If the GOR was until 2036, but the ACC was signing billion dollar TV deals like the Big Ten, FSU would not be complaining.  

The story that the FSU tells in its lawsuit is exactly that.  While other conferences (really just SEC/Big Ten) were making more and more money, the ACC media deals suck.  The FSU lawsuit outlines the media deals as being signed in 2012 with minimal increases since that time.  If true, this does sound like idiotic negotiation by the ACC.  The question, however, is whether that is a breach of the GOR.  

The GOR itself is simple.  Rights for money.  The ACC will give FSU hundreds of millions of dollars over the course of its media deals.  Could the ACC have given FSU hundreds more if it didn’t lock in potentially bad deals 10 years ago?  Yes.  Could the ACC have collapsed like the Pac-12 if it failed to lock in deals at all.  Also, yes.  

STATEMENT OF FACTS

To overcome this unfortunate problem for FSU, the lawyers decided to paint a cartoonishly stupid story.  It opens almost immediately with FSU referencing the failure to get into the 2023 CFP.  This has absolutely nothing to do with whether the ACC breached its contract and/or the contract is void, but it will rile up the FSU fans reading it.  

I’ve always felt that the best lawsuit statement of facts sell the reader on the story, while not appearing needlessly antagonistic to the other side.  This is not the case here.  The FSU statement of facts paints the ACC as a big bad bully who pressured FSU into taking terrible deals by lying and cheating every step of the way.  It makes FSU look like a wilting flower who could not deal with the ACC’s aggressive tactics.  

On its face, the story doesn’t make sense.  The FSU is an international organization with a power team of top lawyers and negotiators.  It is not going to just wilt in the face of the ACC. 

Also, the simple reality is that FSU has not always been the elite-level team that it was in 2023.  The disputed GOR extension was signed in 2016.  In the 2015 season, FSU went 10-3 and ended 14 in the nation.  That is very good, but not at the level that Clemson was.  FSU didn’t have any leverage at that time compared to Clemson.  FSU was protected by the GOR extension at that time, because it kept powerhouse Clemson from leaving FSU behind.  This is especially true given that Clemson was an elite team for most of the mid teens into the early 20s.  FSU had a series of mediocre years there and had no leverage in negotiating its deals.   

The statement of facts tries to argue that the ACC failed to “generate substantial revenues” for its members, “maximize athletic opportunities” for its student-athletes, and “foster quality competitive opportunity for student-athletes in...championships.”  Given that it has had teams like Clemson win multiple natties and FSU almost make the playoff this year, these comments are just flat out wrong.  They are also not standards in the GOR that the ACC could theoretically breach.

They also try to argue that bringing in 3 new teams is disastrous for the conference and somehow a breach.  This again does not pass the smell test in its own lawsuit, because the lawsuit repeatedly references the fact that SMU is not taking any TV money and Calford are taking 1/3rd shares.  This means that the ACC will get access to the lucrative Bay Area and Dallas TV media markets on the cheap.  This is a boon for FSU, which plays in the Dallas market as early as the 2024 football season.  

FSU tries to argue that since those 3 teams aren’t very good, it’ll drag FSU down.  However, AND IT PAINS ME TO SAY THIS, not that long ago, Stanford was an elite team.  For years, the ACC would have loved to have Stanford!  This is separate from the fact that these three teams are not invited for their football prowess as much as their media markets.  

The lawsuit also fails to note that the ACC changed its revenue model at the same time as accepting the 3 new schools. Under the new “success model,” the best ACC teams get more TV money.  For a team as amazing as FSU, it would get the lion share of the funds.  You can read about it here.

When discussing the parties to the matter, FSU notes a few key things that may undercut it.  

It notes that FSU itself is a public body per Florida Statutes 1001.72.  

This states, in relevant part:

Each board of trustees shall be a public body corporate by the name of “The (name of university) Board of Trustees,” with all the powers of a body corporate, including the power to adopt a corporate seal, to contract and be contracted with, to sue and be sued, to plead and be impleaded in all courts of law or equity, and to give and receive donations

Note that it states that FSU can be sued in all courts of law or equity.  I discussed the relevant venue in my prior piece here.  The ACC will try to force this matter into North Carolina, while FSU will try to keep it in provincial Leon County, FL where FSU itself is.  The assigned Judge is a FSU alum (similar to how the judge for the Pac-12 case was a former president of the Washington State fan club).  ACC wants to get this case up to NC and 1001.72 has some relevance to that.

Separately, the section describing the ACC notes that its “principal place of business” is in Charlotte, NC.  

FSU argues that venue is proper in Leon County, FL per FS 47.011, which states:

47.011 Where actions may be begun.—Actions shall be brought only in the county where the defendant resides, where the cause of action accrued, or where the property in litigation is located. This section shall not apply to actions against nonresidents.

Note the 2nd sentence there.  This section is inapplicable to non-residents.  The lawsuit states that the ACC is headquartered in a different state and that may be part of the definition of non-resident in the FS.  

Fans like us learn quite a bit from the statement of facts.  A few key items here:

1. FSU does not have a signed copy of the GOR itself.  The ACC will not allow people to keep a copy of the GOR.  You have to fly to Charlotte to read it in a private room with ACC staff watching you.  It is absolutely bizarre.

2. While the GOR lasts until 2036, the ESPN Media deal lasts until 2027.  ESPN has a one sided option to extend until 2036.  FSU makes a *big* deal out of this to support its argument that ACC breached its GOR.  A few thoughts on it, however:

   1. This may be a bad negotiation, but it does not strike me as a breach of the GOR itself.  Under the GOR, FSU will give up its rights and receive money.  It could receive more money, but it receives hundreds of millions under the current deal.

3. FSU argues that there is no guaranteed money after 2027, but also complains that the guaranteed money ACC negotiated is too low.  They cannot have it both ways.  No guaranteed money after 2027 means that the ACC could re-sell the rights.  This is good for FSU, because the rights payments could reset under mid 20s valuations.  In reality, ESPN will probably extend, but that has not yet happened.  

4. One item that may be valid is FSU argues that the ACC Bylaws require a 2/3rds majority to enter into a TV deal.  FSU argues that the ACC president solely approved part of this deal and it is in violation of the ACC Bylaws.  I looked at the Bylaws and FSU is correct regarding the 2/3rds requirement.  This may be valid, but it remains unclear to me how this would be viewed as a breach of the GOR itself as compared to a breach of the Bylaws.
   
   Also, again, this would theoretically help FSU.  If part of the TV deal is invalid for being in breach of the ACC Bylaws, then the TV deal could be re-negotiated.  Ultimately, FSU does not want re-negotiation as much as they want the Big Ten TV deal (which the ACC could never get).  That is a problem for FSU, insomuch as a resolution to their problems does not give them what they want.  They cannot just ignore that reality, however.  

5. FSU tries to argue that the ACC lied to them to force them to sign the GOR extension in 2016.  This may be true but FSU does not provide any real evidence.  The lie, according to FSU, is that if the ACC didn’t extend its GOR till 2036, ESPN would not sign a media deal.  The only evidence that they seem to provide is that the terms of the media deal itself do not seem to reflect that ESPN made any such demand.  If true, FSU knew about this years and years ago, but did nothing about it.  That does not lead one to believe that there is validity to this allegation of the ACC lying.  

CONCLUSION

In the next post, I will look at the specific counts (aka the actual basis for the lawsuit).  FSU alleges 6 different counts, so there is a lot to go over.  Interestingly enough, “sovereign immunity” is not one of them.  In this post, we can see that FSU is throwing a temper tantrum legally.  We can see that they have presented a cartoonish statement of facts that is not super close to reality.