The ACC faces another lawsuit brought by a member school, as Clemson sued the conference Thursday, following on an earlier suit from Florida State. The latest suit contends the conference has misrepresented Clemson’s media rights and its obligation to pay the ACC should it withdraw from the 15-member conference.
The lawsuits indicate members are exploring the prospect of exiting or reconfiguring the conference in ways that would not trigger massive penalties and accompanying litigation.
The complaint, filed in a South Carolina court of common pleas, demands a three-part judiciary declaration, saying the court should rule that media rights Clemson granted to the ACC would not include Clemson games should the Tigers leave the ACC; that Clemson is not obligated to pay the ACAA a withdrawal penalty—thought to be $140 million—on grounds it is unenforceable “in violation of public policy”; and that the university neither owes duties to the ACC nor has breached any obligation by suing.
Florida State and the ACC are battling over a similar set of issues related to media rights and the fallout from a school leaving the conference. In late December, FSU sued the conference claiming that its exit rules are unenforceable and a violation of antitrust law. At the time, FSU’s lawyers claimed the total cost for FSU to buy out of the conference would be $572 million. The ACC later responded, accusing FSU’s board of breaching obligations.
Like Florida State, Clemson acknowledges it has “granted certain media rights” to the conference as part of its membership. Conferences require members to assent to certain controls as a means of advancing the conference and member schools’ collective interests.
But Clemson charges the ACC has inaccurately portrayed media rights. Clemson says the only media rights it furnished the conference were those “necessary” for the ACC to meet its contractual obligations. As Clemson sees it, this interpretation includes contracts between the ACC, its member schools and ESPN but not for schools that leave the conference.
Clemson also argues it should not have to pay a withdrawal fee should it exit. The school says the fee is more than $140 million. FSU, meanwhile, described the exit fee as more along the lines of $130 million, though it also insisted a total “penalty package” balloons to $572 million when including forfeited media rights and unreimbursed broadcast fees.
For its part, Clemson says the fee is “unconscionable,” since the high figure is “not connected to any economic harm” the ACC might suffer. The fee is also described as “significantly larger” than other comparable conferences. The ACC says the Big Ten has no fee; the Big 12 requires an amount equal to two years of revenue distribution payments; and the SEC requires, at most, $45 million in the event no notice is provided.
Clemson further insists the ACC has exaggerated fiduciary duties member schools owe to the conference. Clemson argues none of the conference’s operating agreements, including the constitution and bylaws, contemplate the kinds of duties of good faith and fair dealing the ACC envisions. As Clemson sees it, the ACC is misrepresenting fiduciary duties as a means to deter schools from attempting to exit.
ACC commissioner Jim Phillips and board chairman Jim Ryan said in a joint statement that they were “confident” the league’s agreements would be affirmed in court. “Clemson, along with all ACC members, voluntarily signed and re-signed the 2013 and 2016 Grant of Rights, which is binding through 2036.”
In addition, “Clemson agreed to the process and procedures for withdrawal,” they said. “The conference’s legal counsel will vigorously enforce the agreement and bylaws in the best interests of the ACC’s current and incoming members.”
In the coming weeks, the ACC will answer the complaint and raise several defenses. Expect the conference to insist that Clemson, like FSU and other members, voluntarily entered into contractual agreements that contemplated a give-and-take. The school gained access to conference membership, and the prospect of gaining exposure and sharing revenue from conference-wide television and marketing deals, and in return the conference obtained certain rights from those members. The ACC will portray Clemson as trying to renege on its promises.
The ACC will further maintain it has lawfully interpreted and applied contractual agreements with member schools. Courts generally defer to membership organizations in their interpretation of rules so long as those interpretations are not arbitrary or capricious—a very deferential standard.
The ACC might also maintain the lawsuit is not yet ripe. Unless and until Clemson moves to leave the conference, the ACC could argue the legal controversy is more hypothetical than actual. Clemson would attempt to rebut that defense by asserting its ability to make decisions on behalf of its community members is hampered by uncertainty over its contractual rights and obligations vis-a-vi the ACC.
When taken together, the Clemson and FSU lawsuits hint at a troubled future for the ACC. Once safely situated among the college sports elite, the ACC is now at risk of falling behind. FSU and Clemson are two of its highest-profile members, particularly on the football side, where the bulk of revenue is generated in college sports. The ACC is expanding—adding Cal, Stanford and SMU—but those new members would not offset the departure of its more valuable members, particularly if FSU or Clemson were to join the SEC or Big Ten, the two leagues that appear to be distancing themselves from the rest of college sports.
Clemson v. ACC and FSU v. ACC also highlight a growing feeling across college sports that as power and money begins to shift, the next few years will determine who remains in the industry’s upper class, and who gets left behind. That was the main drive behind the rapid exodus of schools from the Pac-12, which left that league with just two members starting in July. It’s also manifested in lobbying at state legislatures for permissive NIL statutes that effectively permit NIL to function as play-for-pay.
(This article has been updated in the 10th and 11th paragraphs with a statement from ACC officials.)