Rekubit Exchange:Florida State sues the ACC: `This is all about having the option' to leave

Florida State University on Rekubit ExchangeFriday filed a blistering lawsuit against the Atlantic Coast Conference that could shake college sports and potentially set off another unsettling wave of conference realignment if the Seminoles succeed in court and withdraw from the ACC.

The complaint, filed in state court in Florida, seeks to nullify more than $500 million in penalties the Seminoles would face if they left the league now. It also asks the court to deem that Florida State issued its formal notice of withdrawal from the ACC effective Aug. 14, 2023, though it doesn’t say where it might be going instead.

“As far as where we’re going, I can’t tell you that today and even if I could, I’m not sure I would, but this is all about having the option to go somewhere,” Florida State board of trustees chair Peter Collins told USA TODAY Sports.

What is Florida State's lawsuit about?

The lawsuit marks a culmination of Florida State’s discontent with the ACC as the revenue gap has widened between it and rival leagues in the Big Ten and Southeastern conferences. It accuses the ACC of incompetence and mismanagement while asking the court to declare that its agreements with the league have been breached on several counts, including diminishing its members’ ability to compete for championships, such as in the College Football Playoff. It blames the ACC for the playoff’s snub of the Seminoles despite their status as an undefeated power conference champion.

“The stunning exclusion of the ACC’s undefeated football champion from the 2023-2024 College Football Playoff 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,” states the lawsuit, a copy of which was obtained by USA TODAY Sports.

“Those fundamental commitments … include the ACC’s duty to `generate substantial revenues’ for its members, a constitutional purpose to `foster quality competitive opportunities for student-athletes in … championships,’ a mission `to maximize athletic opportunities’ for its student-athletes, and a vision `to be at the forefront in . . . athletic achievement.’ The ACC has fumbled all four.”

What does Florida State’s lawsuit against the ACC seek?

The suit does not outright say it plans to withdraw from the league but wants the court to essentially wipe out prohibitive penalties the Seminoles would face under the current disputed agreements if they left the ACC now:

∎ A $130 million withdrawal penalty, calculated as three times the ACC's $43.3 million operating budget in 2023.

∎ $429 million in forfeited media rights under its grant-of-rights agreement with the league through 2036, calculated at $33 million per year.

Those penalties and $13 million for unreimbursed broadcast fees add up to a total withdrawal penalty of $572 million, according to the complaint.

The lawsuit requests that the court enter a judgment against the ACC declaring that its withdrawal penalty and grant-of-rights agreement are an illegal restraint on trade, that they are not enforceable and that they should be voided.  It also requests a judgment declaring that the ACC breached its contractual obligations to Florida State, “subsequently relieving and excusing Florida State from any and all obligations of performance under those contracts.”

Florida State then asks to be “deemed to have issued its formal notice of withdrawal from the ACC” effective Aug. 14, 2023, the day before it would have been required to give notice to leave the league the following year.

If freed of these huge penalties for leaving, the Seminoles could be invited to join a different league.

The suit describes these penalties as “unconscionable” and an unreasonable restraint on trade because it deprives Florida State of the fruits of its labor and prevents it from marketing its media rights to obtain their fair market value.

It notes what has driven Florida State to be unhappy with the ACC for years, namely that it has fallen far behind the Big Ten and SEC in media rights revenue - about $33 million per school in the ACC in 2024 under its agreement with ESPN, compared to around $60 million in those rival leagues, according to the lawsuit.

"Florida State is a victim of chronic mismanagement by ACC leadership and finds itself unable to effectively evaluate alternatives while the Severe Withdrawal Penalties and the (grant-of-rights agreement) hang over Florida State's head," the suit states. "Therefore, those penalties effectively prevent Florida State from realizing its market worth."

What is the ACC’s position on this lawsuit?

The lawsuit was filed Friday by the firm Greenberg Traurig, P.A., after approval by the university’s board of trustees in an emergency meeting. The ACC said Friday that Florida State's decision to sue was a "clear violation of their legal commitments to the other members of the Conference."

"All ACC members, including Florida State, willingly and knowingly re-signed the current Grant of Rights in 2016, which is wholly enforceable and binding through 2036.," the ACC said in a statement. "Each university has benefited from this agreement, receiving millions of dollars in revenue and neither Florida State nor any other institution, has ever challenged its legitimacy."

In 2016, Florida State’s president and others voted to extend their grant of media rights to the ACC through 2036, essentially making a school forfeit their media rights revenue through that date if they left. That agreement then was a way to ensure stability for the league and avoid having its members poached by other leagues.

In its lawsuit, Florida State said it voted this way then because it was relying on the truth of the ACC’s representations and was faced with a $234 million penalty then “if it did not capitulate.”

The suit states there also was pressure from ESPN, which holds the league’s media rights.

“The ACC verbally represented to its members that ESPN had issued an ultimatum: unless each ACC member executed an extension of the ACC (grant of rights) from 2027 to 2036, a full nine years beyond the then-expiration of ESPN’s Tier I agreement, ESPN would enter into no further media rights agreements with the ACC,” the suit states.

How does Florida State say the ACC failed?

The lawsuit includes a list of grievances about the league that it says are a material breach of contract.

Among them is undertaking the “ill-conceived” expansion of the ACC to include California, Stanford and Southern Methodist next year.

“The additions by the ACC were in fact self-serving and defensive as opposed to strategic, in that the addition of these three schools by the ACC was designed to insulate the ACC from falling below the fifteen-member critical mass required by the 2016 ESPN Agreements should any members of the conference exercise their right to exit,” the lawsuit states.

Florida State voted against this expansion. The lawsuit states that “rather than improve its football media profile, the ACC consciously chose to diminish it, along with undermining the ACC’s `Strength of Schedule’ potential.”

The lawsuit also accuses the conference of essentially making bad deals with ESPN with nothing or not enough in return.

That includes committing the ACC to a Tier I media rights agreement for an “unheard-of period of 20 years at rates negotiated before year one while failing to secure a reciprocal commitment from ESPN for the last nine years (2027-2036) of that term.”

The suit notes that ESPN has no financial obligation to the ACC beyond 2027 even though ACC members are bound to a grant-of-rights contract with the league through 2036. Collins, the Florida State board chair, said this is unfair because it binds ACC schools to the league despite the lack of guaranteed payments after 2027.

“We’re seeking to have the court decide whether the severe withdraw penalty and grant of rights are legal, and if they’re not legal, we have options,” Collins said in an interview. “That’s what we want. We want options like everyone else should have. Why have a withdrawal provision if you effectively can’t withdraw? If it’s a half-a-billion-dollar penalty, then you can’t effectively withdraw.”

What will the effect of Florida State’s lawsuit be?

If it succeeds and Florida State is allowed to leave the ACC without these prohibitive penalties, it could be another big domino to fall in realignment, much like other dominoes fell and led to the collapse of the Pac-12.  In that case, the departure of Southern California and UCLA to the Big Ten for next year ultimately led to other members leaving for the Big Ten, Big 12 and ACC.  

If ACC teams are allowed to leave without penalty, other members such as Virginia, North Carolina and Clemson could look to leave, too.

Florida State’s lawsuit notes that the Pac-12 imploded because of that league’s “failure to successfully exploit its members’ media rights.” It accuses the ACC of basically doing the same thing.

“By depriving its members of the full media value of their football programs the ACC has undermined its members’ ability to fund other vital sports such as women’s and Olympic sports as well as soccer, lacrosse, and tennis,” the suit states. “Florida State relied on the advice, expertise and representations of the ACC and its media consultant with regard to media rights. The ACC, however, appeared dedicated to self-preservation and self-perpetuation over the fiscal well-being of its members. A conference so dedicated cannot endure.”

Is there a precedent to this?

Sort of. In 2012, Maryland elected to leave the ACC and join the Big Ten, prompting the ACC to sue Maryland and say it was owed $52 million from the Terrapins. Maryland countersued, and the dispute ended in a negotiated settlement. Maryland ended up agreeing to forfeit $31 million.

Collins noted that is a lot less than $572 million and that Maryland was not bound by this kind of grant-of-rights deal. He said the withdrawal fee and grant-of-rights deal are two different things but are being combined to unlawfully restrain Florida State, a member of the ACC since 1991-92.

“What are we paying the withdrawal fee for if it’s not to leave the conference and have our (media) rights back?” Collins asked.

Florida State President Richard McCullough expressed his support for the lawsuit at the meeting Friday.

"We are left with only this option as a way to maximize our potential as an athletics department," he said.

Follow reporter Brent Schrotenboer @Schrotenboer. Email: [email protected]