Inside the legal strategy to extricate Florida State from ACC 'barbed wire fence'
Florida State University wants out of what it sees as a raw deal with the Atlantic Coast Conference – and it is not going to go quietly and doesn't want to pay more than a half-billion dollars to do it.
FSU filed a scathing lawsuit with the 2nd Judicial Circuit in Leon County Friday against the ACC, asking the court to decide if it is bound to its contract with an organization that it says has "fumbled" its core mission of generating "substantial revenues” for members and providing "competitive opportunities for student-athletes."
After the board voted to file the lawsuit, the Tallahassee Democrat analyzed how the school hopes to escape what it sees as a "draconian" ACC deal that holds an ascendant Seminole athletics program hostage. It also spoke with a source involved in discussions who explained FSU's legal strategy.
In seeking a declaratory judgement, FSU wants the court's "guidance" on if the conference’s grant of rights and exit penalty tied to members across 12 states are enforceable in the state of Florida.
"Florida State is a victim of chronic mismanagement by ACC leadership and finds itself unable to effectively evaluate alternatives while the severe withdrawal penalties ... hang over Florida State’s head," the lawsuit states. "Therefore, those penalties effectively prevent Florida State from realizing its market worth."
ACC files its own lawsuit – a day earlier
As it turns out, the ACC, obviously aware of the Seminoles' suit, filed a lawsuit against FSU Thursday in Mecklenburg County, North Carolina. The ACC's suit maintains that FSU "intends to breach its contractual obligations" and is asking a judge to rule that its contract and penalties are enforceable.
In a joint statement released Friday from ACC Commissioner Jim Phillips and Chair of the ACC Board of Directors Ryan Chair, the pair said, “Florida State’s decision to file action against the Conference is in direct conflict with their longstanding obligations and is a clear violation of their legal commitments to the other members of the Conference.”
The two are confident the grant of rights, “which has been honored by all other universities who signed similar agreements, will be affirmed by the courts and the Conference’s legal counsel will vigorously enforce the agreement in the best interests of the ACC’s current and incoming members.”
How the snub fueled FSU legal action against the ACC
The 38-page lawsuit, approved by FSU’s Board of Trustees during Friday’s special meeting and filed locally by Greenberg Traurig, P.A., comes three weeks after FSU became the first undefeated major conference champion to be left out of the College Football Playoff – a snub that the university blames squarely on the ACC.
"The stunning exclusion of the ACC’s undefeated football champion from the 2023-2024 College Football Playoff (“CFP”) in deference to two one-loss teams from two competing Power Four conferences crystalized the years of failures by the ACC to fulfill its most fundamental commitments to Florida State and its members," the lawsuit states.
Still, lawyers say the legal action is not just a knee-jerk reaction to the snub, and rather represents a response to a culmination of failures by the ACC that undermine "its members’ capacity to compete at the elite level."
A favorable judgment for the Seminoles could potentially pave the way for an FSU exit of the conference it joined in 1991 without financial penalty and with ownership of its lucrative grant of rights.
FSU’s formal notice of withdrawal, according to the lawsuit, would be retroactive to Aug. 14, 2023. That would allow the school to leave the league by having a contractually-obligated year's notice in place.
Where FSU might land in ongoing conference realignment if that does happen remains a big question.
“At some point we have to wonder who is benefitting, and it seems to us like a brick wall with barbed wire fence on top, intended to keep everyone inside, instead of making the grounds happy, comfortable and lucrative where people want to stay,” a source who has been involved in the furious discussions that led to the legal broadside told the Democrat.
FSU claims ACC breached its commitments and contractual obligations
FSU in its lawsuit claims the ACC has breached its commitments and contractual obligations to the school dating back to the last decade.
"Indeed, through chronic fiduciary mismanagement and bad faith, the ACC has persistently undermined its members’ revenue opportunities including by locking them into a deteriorating media rights agreement that will soon result in a vast annual financial gap between the ACC and other Power Five (soon to be Power Four) conferences," lawyers for the university contend.
Under the current agreement with ESPN, each full-time ACC member is expected to be paid approximately $33 million in 2023.
FSU, for instance, has argued it deserves more money because it generates higher television ratings and viewership than its ACC peers. According to the Nielsen ratings in 2023 FSU ranked in the top-10 in viewership per game, averaging 4.16 million viewers. That was the most viewers of any ACC school, and ahead of Notre Dame, Florida and Miami.
The athletics department in the past has presented numbers that show it brings in 15% of the value to the TV deal but get only 7% of the revenue.
No ACC school has ever legally challenged the grant of rights, a legal document between the ACC and its members. In return for their media rights, schools receive shares of the conference's revenue.
ACC officials have previously refused to alter the arrangement, describing the grant of rights as "ironclad."
FSU pointed out the league also refuses to provide its members with a copy of the media rights agreements. To gather information for its lawsuit, attorneys on behalf of FSU had to make multiple trips to ACC headquarters in North Carolina to ascertain the "terms" of FSU's media rights within the ACC.
Over the past several years, FSU attorneys say, efforts to work "behind-the-scenes within the ACC enterprise" to develop a better deal for its members have been futile.
"Florida State has had virtually no success in getting the ACC to come to grips with the destructive consequences its media agreements or its many other self-destructive acts," the lawsuit states.
What about the $572 million penalty and how does ESPN fit in?
If FSU wanted to exit the conference, it would have to pay three times the league’s operating budget of $43.3 million ($130 million total). The total penalty including cost related to the grant of rights, would be $572 million.
The ACC agreed to its current deal with ESPN in 2016, believing that was the conference’s best path to launch the delayed ACC Network three years later.
According to the lawsuit, while it has been widely reported the deal expires in 2036, it actually expires in 2027.
ESPN, however, has until February 2025 to extend its option through 2036. But the agreement also does not contain any guaranteed payments to league members beyond June 30, 2027.
The source informed the Democrat that during talks over the regional network, the ACC told member schools ESPN threatened to walk away from the bargaining table unless they extended their grant of rights from 2027 to 2036.
In retrospect, however, that representation by the ACC seems “a little bit nonsensical” since ESPN still hasn’t decided whether it will extend its Tier I contract from 2027 to 2036 as well, the source added.
“It doesn’t add up.”
What else does the lawsuit say?
FSU also stated in the lawsuit the ACC failed to negotiate revenue shares at then-market values dating back to 2012.
Tier I revenue shares for FSU and members have been locked into an annual 4.5 percentage growth since 2012 and reaches $22.7 million in 2026-27, according to the lawsuit.
Schools can also earn revenue from Tier III rights, which are games generally considered regionally significant and could involve less popular sports. Since at least 2016, according to the lawsuit, ESPN and the ACC have recognized that football comprises approximately 80% of the value of each member’s overall athletic media rights.
As a point of contention to FSU, the Big Ten and SEC have signed new, more lucrative media rights contracts during this time. And the conferences will have additional opportunities to renegotiate their contracts before the ACC gets its first in 2036.
"The ACC’s incompetence at the bargaining table unfairly impedes the overall institutional advancement of all its members, including Florida State," the lawsuit states.
According to USA TODAY's annual report of college football teams' revenue and expenses, the Big Ten distributed approximately $58.8 million to 11 of its 14 member institutions during the 2022 fiscal year. The SEC distributed approximately $49.9 million, while the ACC ranked fourth behind the Big 12 at $37.9-$41.3 million.
FSU also believes the ACC mishandled ongoing conference expansion as it did not add schools with valuable football media rights.
The Big Ten recently added Oregon and Washington; the Big 12 Utah, Colorado, Arizona and Arizona State; the SEC Oklahoma and Texas. The ACC gained Cal, Stanford and SMU, which had never been a member in a Power 5 Conference.
FSU in its lawsuit pointed to evidence of the admitted trio's lack of football media value.
The new members were compelled to buy their way into the ACC by agreeing to re-direct either all (in the case of SMU) or most (67% in the case of Cal and Stanford) of the ACC media revenues due them to the other ACC members for the foreseeable future.
FSU, North Carolina and Clemson voted against the additions.
FSU said in its lawsuit the ACC in its decisions over the years was "dedicated to self-preservation and self-perpetuation over the fiscal well-being of its members. A conference so dedicated cannot endure."
What specifically does FSU's lawsuit want the judge to decide
In its lawsuit, FSU asks the court to rule on seven counts:
The ACC punishments are unenforceable under Florida law as unreasonable restraint of trade.
The ACC punishments are unenforceable penalties. "The punitive instruments are grossly excessive, overly broad, excessively long in duration and their anticompetitive effects vastly outweigh any alleged procompetitive benefits," the lawsuit states.
The ACC materially breached its contracts with Florida State.
The ACC breached its fiduciary duties to Florida State.
The ACC has committed "fundamental failure or frustrations of contractual purpose
The ACC grant of rights are unenforceable.
The ACC punishments violate Florida public policy and "are monstrously harsh, shocking to the conscience and the result produces a profound sense of injustice, and thus are unconscionable in practice and in theory."
What's next? And how long could it take to get an answer from the court?
It’s unclear how long it could take to resolve the legal matter, particularly as the situation has now devolved into dueling lawsuits. But if a judgment went against FSU, a potential appeal could take more than a year.
Of course, the ACC and Commissioner Jim Phillips, who began his tenure in 2021 and has started to advocate change, could also opt to address FSU’s issues and settle the lawsuit. But their own legal salvo may indicate a long courtroom fight into next year and maybe beyond.
This article originally appeared on Tallahassee Democrat: FSU football vs. ACC: Trustees' lawsuit blasts 'chronic mismanagement'
