Originally Posted by Baylor187 http://www.baylorfans.com/forums/ima...post-right.png
Baylor Lawyer here. Basically these are the pleadings filed by the ACC against Maryland. This is essentially the ACC stating that UM is refusing to pay the full amount of the exit fee which thereby gives the ACC grounds to seek a judgment from the court that orders UM to pay the exit fee. Keep in mind that you can pretty much allege anything in your pleadings, but this appears to be pretty accurate factually.
The problem the ACC is going to have is that you generally cannot contract for liquidated damages (ie, predetermined damages) that are punitive (ie, punishing/deterrent) in nature, and there is a very good chance the court (or the court of appeals) will rule that this provision of the ACC bylaws are unenforceable.
To give you an example, say you sign an apartment lease for two years but you want to break the lease after only one year. A lease is a contract, and breaking the lease is essentially a breach of contract. The lease can assess a penalty , such as charging a couple of months rent to offset the cost of having to find another renter. These are referred to as "liquidated damages." However, if the land lord tried to ***** 3 years worth of rent as a penalty for breaking a lease one year early, its very unlikely such a provision would ever be enforced by the court. There has to be some reasonable correlation between the financial loss of the breach and the amount of liquidated damages in the contract.
Here, it is pretty clear that the +50 mil exit fee is intended to serve as a deterrent to keep teams from leaving the ACC and is not for the purpose of compensating the conference for the expenses incurred in finding a replacement member. The ACC has to be careful here. A court could strike down the provision entirely which would allow schools to get out of the ACC by only paying the amount of the actual amount of $ incurred by the ACC in the defection. With UConn waiting in the wings and the TV contract already in place, that number could be relatively low.
*disclaimer - My primary area of expertise is not contract law.
Another Baylor lawyer checking in. This is a pretty accurate description of the basic concepts surrounding liquidated damages clauses. The only thing that I would add is that the "reasonableness" of the liquidated damages clause is not based on the actual harm that did happen. As mentioned above, Maryland leaving the conference probably didn't do much, if any, actual harm to the remaining members of the ACC and the ACC itself. However, that doesn't matter as much for a liquidated damages clause. All that matters is that the amount of the liquidated damages clause be reasonable at the time that it is created
. That's why the ACC put Paragraphs 22 and 23 in the Complaint. They are trying to show that the amount was reasonable based on the consistently changing landscape of college football, and they are showing that, historically (when the danger and potential harm was lower) the number was lower, but that things have changed and created the potential for more harm.
The critical facts are going to be:
1. Whether or not the ACC could have easily brought another school in to replace a leaving member (keep in mind, the timeframe we are working with is not when Maryland left and Louisville quickly stepped in but is actually when the exit fee was voted on and adopted). If it was pretty clear (at the time of the adoption of the exit fee) that the ACC would be able to cherry pick another roughly equivalent school to fill their roster if one of the schools left, then it's hard to argue that the ACC reasonably thought that they would suffer damages that are as significant enough to charge a school $52 mil to leave.
2. The value of the TV contract at the time the 3x OB exit fee was voted vs. the value of the TV contract the last time an exit fee was voted on (probably the 1.25x OB exit fee). If the number for the former is MUCH larger (disclosure, I don't know much about the ACC contract) than the latter, then it could easily be argued that the potential for harm dramatically increased and necessitated a larger liquidated damages clause. If, however, the numbers were the same or close to the same, it's very hard to argue that the potential harm increased dramatically. As an additional note, this would go for all revenue streams the ACC has, but I used the TV contract because it is probably one of the largest revenue streams, and possibly the one that changed the most in the timeframe (again, I do not know much about the specifics of the ACC TV contract).
There are probably some other factors that are critical, but off the top of my head, that's the basic stuff. If I have some time this weekend, I might be able to revisit this and flesh it out a little more.