Florida State suing ACC over grant of rights, withdrawal fee

The Florida State Board of Regents voted unanimously Friday to sue the ACC to challenge the legality of the league's rights grant and its $130 million opt-out fee , a necessary first step in planning the school's future and potential exit from the conference.

The 38-page lawsuit, filed in Leon County Circuit Court in Tallahassee, Fla., seeks declaratory relief against ACC to vacate the grant of rights and withdrawal fees as “unreasonable restraints on trade.” in the State of Florida and not enforceable in their entirety. against Florida State.

The university accuses “chronic fiduciary mismanagement and bad faith” in the way ACC managed its multimedia rights agreements and undermined its members' revenue opportunities. Florida State also accuses the ACC of breach of contract and non-performance.

“I believe this board had no choice but to challenge the legitimacy of the ACC's grant of rights and its severe withdrawal sanctions,” said the board chairman, Peter Collins. “None of us like to find ourselves in this position. However, I believe we have exhausted all possible avenues within the conference and must do what we believe is best for the State of Florida , not only in the short term but in the long term.”

The State of Florida now finds itself in an unprecedented situation. No school has ever challenged the granting of rights in court.

ACC officials have already used the word “ironclad” to describe the document, and that is the starting assumption of leagues across the country: believing that the document's language is so rigid that it would prevent schools to leave. But since no school has ever challenged the document in court, no one really knows whether it is indeed as robust as the one described.

ACC Commissioner Jim Phillips and Virginia President Jim Ryan, chairman of the ACC Board of Directors, deplored Florida State's “unprecedented and excessive approach” in a communicated.

“Florida State's decision to take action against the Conference is in direct conflict with its long-standing obligations and is a flagrant violation of its legal commitments to other members of the Conference,” the statement said. “All members of the ACC, including the State of Florida, voluntarily and knowingly resigned to the current grant of rights in 2016, which is fully enforceable and binding through 2036. Every university has benefited from this agreement, receiving millions of dollars in revenue and neither the State of Florida benefited from this agreement nor any other institution has ever challenged its legitimacy.”

The problem is what Florida State has described over the past year as not only growing revenue gaps with the SEC and Big Ten, expected to reach $30 million per year per school, but also disagreements over how media rights money should be distributed within the ACC. Although the ACC recently passed initiatives to reward teams for performance in football and men's and women's basketball, Florida State has pushed for television money to be distributed in a manner unequal depending on the media value of the conference. The CAC refused.

“This is not where I would have preferred to end up,” said university President Richard McCullough. “I would prefer a different path, but I feel like in many ways we've exhausted all other options, and you can't wish and hope that one way or another they will be corrected.”

What happened on Friday has not happened in the last three weeks. Although the denial of the College Football Playoff earlier this month was considered the straw that broke the camel's back, Florida State's legal counsel and an outside law firm are reviewing the granting of rights for more than a year and began working on legal arguments this summer – spurred after an August board meeting in which trustees demanded an action plan by following August.

At that meeting, Florida State made it clear that it would consider leaving the ACC due to its concerns.

“Our actions today are less about the events of the past two weeks and more about the actions of ACC leaders over the past 10 years and what lies ahead for FSU in the ACC over the next 13 years ” Collins said.

Florida State and all other ACC members signed a rights franchise with the league that runs through 2036, the duration of its television contract with ESPN. The rights grant gives the conference control of its media rights, including television revenues and broadcasts of home games in all sports. Additionally, any school wishing to leave the ACC would have to pay an exit fee equal to three times the league's operating budget, or approximately $130 million.

In total, the university estimates that total exit costs, including lost television revenue, would be $572 million.

David Ashburn, managing shareholder of Greenberg Traurig in Tallahassee, the outside law firm handling the case, explained the lawsuit to trustees at Friday's meeting, detailing what the university considers fiduciary mismanagement in the how the ACC has handled its media rights deals with ESPN and opt-out penalties dating back to 2010.

The university alleges that when the ACC entered into an extension of its media rights with ESPN in 2016, the agreement granted the network a unilateral option to extend the agreement for an additional nine years beyond its June 30 expiration 2027 or until 2036. also alleges that the ACC told its members that ESPN had issued an ultimatum: unless the members extended the rights grant from 2027 to 2036, ESPN would not enter into further media agreements with the conference. FSU said it agreed to the granting of an extension of rights based on this representation.

Additionally, the university alleges that the 2016 extension limited league members to the same rates negotiated in the previous 2012 media rights deal with ESPN. This left league members with the same revenue package for 24 years, while other conferences had the option to renegotiate their contracts and increase their revenues.

If a judge issues a declaratory judgment in favor of Florida State, the school could leave the ACC without penalty. The departure is expected to be effective August 14, 2023, backdated to ensure Florida State can leave the conference if new statutes are put in place.

The ACC will have the opportunity to file a response to the complaint. If the judge refuses to enter judgment in favor of either party, the State of Florida and the ACC could be sent to mediation to negotiate a resolution.