Maryland files $157 million counterclaim against ACC, says conference tried to recruit Big Ten schools
By By Jeff Barker
The Baltimore Sun|
Jan 14, 2014 | 8:02 PM
As the University of Maryland's athletic teams are winding down their membership in the Atlantic Coast Conference, the school is considerably ramping up legal efforts — and making new allegations — aimed at ending the 61-year partnership on its own financial terms.
The counterclaim asks a North Carolina court to order the ACC to provide Maryland $16 million owed in shared revenue, plus $157 million in compensatory damages for alleged violations of Maryland antitrust laws. The $157 million is three times Maryland's $52.2 million exit fee imposed by the ACC, a multiplier customary for antitrust claims.
The 53-page document repeats many claims Maryland made last year in a suit in Prince George's County. That case alleged that the conference's exit fee was random and punitive. It was placed on hold while the ACC's suit against Maryland — which had been filed earlier, in November 2012 — was permitted to proceed in a North Carolina court. Maryland's counterclaim appears to be at least partly an attempt to air the claims that it was unable to assert in its own state.
"Our lawsuit calls the ACC's 'exit fee' what it really is — an antitrust violation and an illegal activity," Maryland Attorney General Douglas Gansler said in a statement.
The counterclaim also contains a new allegation that — while perhaps not legally significant — could score points for the school in the public-relations war.
It says that, after Maryland announced it was leaving for the Big Ten, athletic department representatives of Pittsburgh and Wake Forest sought to recruit a pair of Big Ten schools to join the ACC.
The document alleges a representative of Wake Forest and Pitt "each contacted a Big Ten university in an attempt by the ACC to recruit at least two Big Ten schools to leave the Big Ten and join the ACC." It does not identify the Big Ten schools.
The counterclaim said Maryland believes "these actions were part of the ACC's competitive reaction to Maryland's announcement that it planned to leave the ACC." It said the ACC was hoping to extract "more lucrative terms from potential broadcast partners" such as ESPN, which has a multi-year deal with the conference.
Maryland announced its departure from the predominantly southern ACC — a move effective this July — during a period when many conferences and schools were shopping for new partners. Maryland, which had to cut seven sports programs in 2012, left because of greater financial opportunities in the Big Ten.
In making the claim that Big Ten members were then being recruited by the ACC, Maryland seemed to suggest that it would therefore be unreasonable to be strongly discouraged from leaving the ACC.
Gansler was not made available for further comment on the counterclaim.
ACC commissioner John Swofford said on a North Carolina radio show Tuesday that Maryland's counterclaim "really isn't a whole lot different than what was thrown out of court in the State of Maryland."
"Jurisdictionally, that case will now be heard in the state of North Carolina," Swofford said on the David Glenn radio show, broadcast on stations around North Carolina. "I'll leave it at that, and you can read between the lines."
The ACC had no further comment on Maryland's claims, saying only that it would allow the legal process to take its course.
Alan Duncan, an attorney for the ACC in North Carolina, referred calls to another lawyer, D. Clark Smith Jr., who was not immediately available at his firm.
Wake Forest and Pittsburgh each declined to comment through athletic department spokesmen.
The ACC struck first in the legal tangle, filing suit in November 2012 and asking a court in Guilford County, N.C., to declare that Maryland is subject to the full exit fee — $52,266,342.
Maryland followed with its own suit in Prince George's County alleging that the exit fee is anti-competitive and should not be enforced. That suit was placed on hold after the ACC argued that the Maryland and North Carolina cases raised similar issues.
Maryland's principal argument — in both the original suit and the counterclaim — is that the ACC has no legal right to withhold shared conference revenues as a means of trying to extract the exit fee. The school says it has been left with a vast budget hole because of the withholdings.
Maryland argued in its counterclaim that the ACC's exit fee "lacks any legitimate economic justification." The school claims the conference violated its constitutional provisions by not submitting the fee as an amendment in writing to its Constitution and Bylaws Committee for review, and not circulating the plan to members at least 15 days before the meeting.
The exit fee was raised in 2012 to $52 million — three times the conference's operating budget. Maryland and Florida State voted against the increase.
Maryland's counterclaim arose partly from what the document calls an "investigation" of the ACC. The school said the ACC's desire to expand is driven "in large part on counsel and direction that the conference received from ESPN."
"Whether that guidance was given formally or informally," the document alleges, ESPN has "incentivized the ACC to compete more aggressively in the market for conference affiliation/membership."
ESPN responded with a brief statement Tuesday: "As we've said many times, decisions about potential realignment and expansion were made by the individual schools and conferences."
Maryland said the ACC began withholding shared revenues even before the school formally provided its withdrawal notice to the conference last June.
The ACC has characterized Maryland's legal efforts as an attempt to skirt an exit fee it says was binding on all of its members.
"The bottom line is, they don't want to pay the $52 million," James D. Smeallie, an attorney for the ACC, told the Maryland court last year.
The ACC has pointed to comments made by Maryland president Wallace Loh in November 2012 challenging the validity of the exit fee. The implication is that the conference believed Maryland was unwilling to pay on its own.