ACC files lawsuit against Maryland Monday

Updated at 10:45 p.m.

The Big Ten/ACC Challenge got a little spicier this week.

The ACC filed a lawsuit against Maryland in North Carolina state court after the Terrapins announced last week their intentions to join the Big Ten conference. The case was filed in the Greensboro courthouse Monday, according to a copy of the complaint obtained by The Chronicle.

The lawsuit concerns the payment of the $52 million required to leave the ACC. The exit fee was raised to that figure Sept. 11, 2012 prior to the addition of Notre Dame to the conference as a partial member. Maryland and Florida State were the only two schools to vote against the increase.

“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,“ ACC Commissioner John Swofford said in a statement. “On Friday, the ACC Council of Presidents made the unanimous decision to file legal action to ensure the enforcement of this obligation.”

The unanimous decision means that Florida State, the other school to vote against the fee’s increase, voted to file the action against Maryland.

The complaint seeks declaratory judgment requiring Maryland to pay the full ACC exit fee, which equals three times the ACC’s annual operating budget, according to a copy of the document obtained by The Chronicle. The 2012-2013 ACC operating budget is $17,422,114, according to the lawsuit.

“The Council of Presidents, following consideration of the types and amounts of financial and other harm that would potentially occur in the event of a member’s withdrawal, concluded the sum of three times the annual operating budget of the ACC was a fair and reasonable approximation of the potential financial and other harm resulting from withdrawal,” paragraph 21 of the complaint states.

The complaint alleges Maryland President Wallace Loh proposed raising the exit fee in 2011 before voting against the increase at the beginning of this fall.

The primary legal issue at hand is whether the exit fee is a liquidated damage or penalty. Penalty clauses are not enforceable while liquidated damages are—Maryland likely believes the fee, at least in part, is penalizing in nature, Paul Haagen, a Duke Law professor who specializes in sports contracts said.

“A liquidated damage is an attempt to estimate the harm, a good-faith attempt to estimate damage,” Haagen said. “A penalty is an effort to prevent somebody from engaging in a breach by discouraging you from breaching... that it’s well beyond any harm the league would suffer.”

Legal chess likely motivated the ACC to file the complaint, Haagen said, because by filing before Maryland, the conference was able to choose the location of the court, in this case their home district of Greensboro, North Carolina.

“You’re in the forum of your own lawyers, so it’s an advantage to [the ACC],” Haagen said. [Greensboro] is in the heart of the ACC, so there’s a greater sense of the importance of the viability of the ACC. You’re not going to have the same sensitivity in a Maryland jurisdiction. If you can get jurisdiction that’s to your advantage.”


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