Sportsball: Clemson Sues the ACC over $140 Million Exit Fee

The nerve! Clemson University (Clemson) has filed a complaint against the Atlantic Coast Conference (the ACC) because the ACC claims ownership of media rights over home games at member institutions and because the ACC claims entitlement to a $140 million payment should members leave the conference. The audacity! And all this just because Clemson arguably agreed to those terms when it joined the ACC. The impudence!

How can a public educational institution fulfill its mission if saddled with this onerous financial burden?  Or, as Clemson puts it, "Each of these erroneous assertions separately hinders Clemson's ability to meaningfully explore its options regarding conference membership, to negotiate alternative revenue-sharing proposals among ACC members, and to obtain full value for its future media rights." Yeah! Basic science, medical research, training future educators, social workers, professionals, and others who can serve South Carolina and the region. You can do a lot of worthwhile things with $140 million.

And this really is all about money. The complaint details an alleged "revenue gap." The SEC and the Big Ten entered into more lucrative contracts with media companies than did the ACC.  As a result, universities in those leagues get a media share that can be as much as $20 million higher than what Clemson gets through the ACC.

As to the media rights, that is a matter of differing interpretations of this contractual language.  Clemson points out that it granted the ACC only those media rights "necessary for the Conference to perform the contractual obligations of the Conference expressly set forth" in separate agreements between the ACC and ESPN.  Those obligations apply only to members, Clemson alleges, not to former members. I think we'd need to see the language of those other agreements to know whether this is a plausible construction of Clemson's obligations. Alas, the parts of the complaint relating to ESPN have been redacted, apparently into response to ESPN's hissy fit when the details of the ACC's arrangement with ESPN were disclosed in a similar case involving Florida State University, as Chapel Fowler and Ted Clifford explain in The State.

As to the $140 million, the ACC characterizes the amount as "liquidated damages," while Clemson says it is -- you guessed it! -- an unenforceable penalty, and an unconscionable one at that. Much of the complaint is dedicated to showing that the withdrawal fee is too high. It is pegged at three times the ACC's annual operating budget, and that operating budget has grown tremendously in the last decade. But if Clemson's media rights are valued at somewhere north of $40 million/year and the ACC is claiming entitlement to those rights through 2036, $140 million hardly seems disproportionate.  Clemson has an argument for why the ACC is not harmed, but much of it is redacted.

Clemson says the that withdrawal fee arose through a "purported" 2012 Amendment to its rules. The complaint does not clarify in what sense this amendment was merely "purported." Seems hard to imagine that Clemson did not somehow agree to this amendment, and it may even have profited from it when other universities withdrew. Clemson's complaint seeks declaratory judgment under a South Carolina statute. Is that an equitable remedy despite being codified? Unclean Tiger paws?

Contracts are risk-allocation devices. Is there anything more to say here?