University of Maryland President Wallace D. Loh has asserted repeatedly that the school would not end up paying the full exit fee of more than $50 million to the Atlantic Coast Conference. Loh, a Yale law graduate, has said the court would throw that penalty out.
The ACC may test his theory. The athletic conference has sued the University of Maryland, seeking a declaration that the school owes the full $52,266,342 stipulated by the conference’s constitution.
It’s more likely, though, that the suit will hasten negotiations and lead to a settlement before Maryland’s planned departure to the Big Ten in July 2014.
The complaint filed Monday in a North Carolina state court in Greensboro, home of the ACC offices, references Loh’s comments.
Loh was not available for an interview Tuesday, nor was University System of Maryland chancellor Brit Kirwan. The lawsuit also names the USM Board of Regents. A school spokesperson emailed a “no comment.”
ACC commissioner John Swofford issued a statement.
“We continue to extend our best wishes to the University of Maryland; however, there is the expectation that Maryland will fulfill its exit fee obligation,” he said. “On Friday, the ACC Council of Presidents made the unanimous decision to file legal action to ensure the enforcement of this obligation.”
Maryland officials downplayed the possibility of paying the full sum immediately after acknowledging they had negotiated a move to the Big Ten, but Loh had publicly doubted the penalty’s legality in September when he was one of two ACC presidents to vote against it.
Christian Dennie, a Texas lawyer who has worked both in contract and sports law, said the lawsuit was not unexpected.
“It’s a very, very common strategy within college athletics right now when it comes to conference realignment,” Dennie said. “There is a question mark about the amount — $50 million is a pretty handsome buyout compared to what the conference was paying out — and legally, the court can decide whether it is fair. But they won’t get that far down the road.”
Dennie said that if the court perceives the buyout as a penalty, it would be unenforceable. It would not be difficult for Maryland’s lawyers to build that argument, he said; the ACC has raised its fees drastically in each of the last two years as conference instability increased.
Loh voted against raising the withdrawal payment from 1.25 times the conference’s annual operating budget — about $17.5 million, or the same amount the ACC distributes to each school — to 3 times that amount in September because he viewed the drastic increase as a penalty that would dissuade possible new members. During a press conference last week, Loh referenced his 30 years working as a law professor and his work studying liquidated damages.
There are two factors that enter into negotiations between conferences and the schools trying to leave them: buyout fee and exit date. So far, Maryland has shown no indication that it would prefer to join the Big Ten earlier than planned. The school’s payment is due to the ACC within 30 days of its actual departure date, a spokesperson for the conference said.
West Virginia paid $20 million to leave the Big East for the Big 12, but agreed to a premium price so it could leave immediately. When Pittsburgh announced its decision to leave the Big East for the ACC, the Big East tried to force the school to wait 27 months. Pitt sued the Big East and settled by paying $7.5 million; it will join the ACC next summer. Syracuse reached a similar deal.
Missouri and Texas A&M, who moved to the SEC, ended up paying about $12.5 million, significantly less than the $19 million they were receiving each year from the conference.
Loh has shrugged off questions of whether a multi-million dollar buyout would hamstring the school, citing the long-term financial stability offered by the Big Ten. All payments made to the ACC will come from the athletics fund, which includes donations. Maryland’s most prominent booster, Kevin Plank, has said that, while he favored the move, he is not planning to pay the buyout.
Maryland’s move to the Big Ten was consummated over only a few weeks, culminating with a press conference last Monday that left many boosters and fans feeling left out of the process.
But the financial windfall of the switch — Sports Illustrated has reported documents reviewed by Maryland officials show the school stands to make $100 million more through 2020 — eased trepidation about leaving the basketball-focused ACC for what traditionally has been a Midwestern football conference.
The Big Ten clearly saw in Maryland an entry to the large Mid-Atlantic television market for its lucrative cable sports network.
Meanwhile, conference realignment continued, with Tulane and East Carolina announcing moves to Big East Tuesday. The Big East must try to stay relevant amid reports that the ACC could target Louisville and Connecticut.
North Carolina athletic director Bubba Cunningham, meanwhile, took the unusual step of sending an email to school supporters pledging loyalty to the ACC. The Tar Heels, like the Terps, were founding members of the ACC. UNC has strong appeal in a growing television market and some pundits suggested it and other schools such as Georgia Tech, Virginia and Boston College could be courted by the Big Ten, whose commissioner, Jim Delany, is a UNC alumnus.