Florida State, Clemson Test Antitrust and Contract Attack on ACC

One of the largest college sports conferences, the Atlantic Coast Conference, is defending aggressive antitrust and contract theories brought by Florida State University and Clemson University, two football powerhouses, and is fighting for home-field advantage in a North Carolina state court.

The stakes are high for the ACC and other conferences, which could see more claims like these from disgruntled teams if the conference doesn’t successfully beat them down. In these suits alone more than half a billion dollars in television broadcast rights and contract penalties are on the line.

On March 22, the Atlantic Coast Conference and Florida State University faced off in the North Carolina Business Court as teams of lawyers argued whether the school’s nearly $600 million fight to exit the conference should be heard in the ACC’s home base of North Carolina or in Florida state court.

Both the schools and the conference are banking on shaky legal theories, lawyers say, where the choice of venue could help tip the scales.

The ACC preemptively filed a lawsuit in North Carolina to bar FSU from leaving the conference. FSU followed with its own litigation in Florida state court. Those suits’ core issue—whether fees to exit the conference are so high that they’re illegally anti-competitive or unconscionable—was complicated by a pile-on $140 million complaint filed on March 19 by Clemson University in South Carolina state court echoing FSU’s claims.

“The Clemson complaint was very carefully, strategically located. They’re trying to pick up whatever is left if Florida blows it up,” said Peter Carfagna, the director of the Sports Law Clinic at Harvard Law School. “It’s almost like a pincer attack.”

Courthouse Sprint

Learning that FSU was planning to sue, the ACC fired first in North Carolina on December 21, 2023. The Tallahassee-based university was planning to break deals it entered with the conference over the last 13 years, the suit said, endangering an organization earning 14 universities hundreds of millions of dollars annually.

The next day FSU fired back with its complaint in Florida, arguing that “draconian” exit fees and rights to game broadcasts lock schools into a conference that’s underperforming. Poor leadership, they claim, also led to FSU’s undefeated college football team missing out on last season’s playoffs and the payouts that came with that opportunity.

“Those failures have coalesced with the ACC’s efforts to effectively deprive ACC members of their fundamental right to withdraw” from an “unconscionable” contract or face monetary penalties “that are unparalleled in the history of college athletics,” the school said in its amended complaint.

The universities claim that the ACC’s long-term TV deals have lost the conferences’ teams hordes of cash compared with the deals struck by other conferences. The ACC is locked into broadcast deals through 2036 with payouts dwarfed by the cash received by schools in other conferences, such as the Big 10 and the SEC.

The ACC contract mandates universities who leave the organization forfeit cash from game broadcasts for the next 12 years, along with a withdrawal penalty of $130 million, totaling $572 million, FSU claims. That makes the exit fee an unlawful restraint on trade, FSU says, arguing these deals limit market competition and violate state antitrust laws—laws that recently the Florida Attorney General leveraged to squeeze a deal that could equate to $80 million in penalties for Spirit Airlines when the company sought a merger.

Clemson hammered home that ACC members make roughly $30 million less per year than schools in the Big 10 and SEC, and with penalties far higher than the SEC’s $45 million fee for defectors. The Big 10 does not levy a fee on schools that leave.

“Judged against these comparators, the Withdrawal Penalty that the ACC insists a member institution must pay to leave the Conference today has ballooned to a point that was unimaginable in 2012, and is unconscionable, unenforceable, and in violation of public policy, especially when sought to be imposed on a public university like Clemson,” the school said.

‘Only So Long as it Chooses’

However disadvantageous the deals may look, the ACC argues that the schools signed on to these agreements, making them “irrevocable” and “exclusive” through 2036.

It cannot be that Florida State is “bound by a contract only so long as it chooses,” the conference said in its amended complaint.

Hal K. Litchford, a senior counsel at Baker Donelson and antitrust expert, said a contract isn’t necessarily illegal just because the terms are harsh and prevent a party from seeking better terms on the open market. Such arguments are often the downfall of antitrust plaintiffs, he added.

“The allegation from the antitrust standpoint is the contract restrained FSU’s ability to make the best deal it can, but we don’t have a well-defined market,” he said. “FSU is being restrained from participating, but so is every other ACC school and every other SEC school and Big 10 school, so that’s not really a cognizable claim.”

Additionally, the theory that the contract’s penalties are unconscionable is one that’s generally used by consumers facing down big corporations, or former employees trying to get out of penalties in noncompete agreements where damage to a business is hard to calculate. Here FSU and Clemson helped participate in the ACC as it was reaching these TV deals, and the cash on the line is clear.

The schools also run into another problem—the conferences themselves are arguably “pro-competition,” said antitrust expert Jordan Ludwig, a partner at Crowell & Moring LLP.

“There’s a body of US Supreme Court precedent saying in order for a league or conference to function they have to come together and set rules,” he said. “That’s how you develop a league product.”

The ACC said that it wouldn’t comment on the Florida case beyond its statements in the court briefs, but it said in a statement that it “remains confident that its agreements with all its members will be affirmed by the courts.”

Home-Field Advantage

Home-field advantage in these cases could have a big impact on schools nationwide.

Carfagna, Litchford, and Ludwig agreed the likeliest outcome is that the litigants negotiate a settlement for the universities to buy out of the conference, similar to deals cut by other schools shifting allegiances in recent decades. But if parties stick it out and leave it to courts to decide, where and how the case comes down will send a message.

“If FSU prevails here, other schools that think they have the opportunity to make more money will use that as a precedent to leave a conference,” Ludwig said. If the ACC wins, that could lead to less turmoil among the conferences as the organizations hold sway over members.

But the ACC has a weakness in its armor: it filed its complaint preemptively against FSU in hopes of keeping the litigation in North Carolina, opening itself to attacks that it didn’t have the legal ability to block a breach that hadn’t yet occurred. Now the courts have to decide who gets to litigate in their backyard.

“If cases are centered in the universities’ home towns they’re more likely to get a favorable ruling because the schools are what make these communities tick,” Carfagna said.

The cases are Atl. Coast Conf. v. Bd. of Trustees of Florida State Univ., N.C. Super. Ct., No. 2023CVS40918, hearing held 3/22/24, Florida State Univ. Bd. of Trustees v. Atl. Coast Conf., Fla. Cir. Ct., No. 2023-CA-2860, hearing scheduled 4/9/24, and Clemson Univ. v. Atl. Coast Conf., S.C. Ct. Com. Pl., No. 2024CP3900322, complaint filed 3/19/24.