Not so 'ironclad'? Legal experts break down Clemson's effort to escape ACC deal (2024)

CLEMSON — Not all that long ago, any mention of the Atlantic Coast Conference’s grant of rights was quickly followed by the word “ironclad.”

That word headlined a CBS Sports article in May 2023, outlining how the “seemingly unbreakable document” — which granted member institutions’ broadcast rights to the league — was essentially holding the ACC together amid the tumult of conference realignment.

There wasn’t much disagreement from Clemson athletic director Graham Neff, who in September 2022 stood in front of the Anderson Area Touchdown Club and clasped his hands as he described the ACC’s grant of rights as “pretty rigid, pretty ironclad.” There would be a “big legal and financial risk,” Neff said, if an institution challenged the contract.

Despite the narrative, legal experts weren’t surprised when Florida State and Clemson found lawyers who could deliver an opposite opinion, arguing the ACC can’t levy a $140 million exit fee and shouldn’t irrevocably own schools’ media rights through the length of an ESPN deal, which could run until 2036.

“As lawyers, we spend a year in school studying contracts to avoid these situations. But I’m not surprised,” said John Holden, a sports law expert at Oklahoma State. “Better contracts than these have holes found in them.”

In September 2023, Holden and Stephen F. Austin’s Drew Thornley co-wrote a forthcoming paper for the Marquette Sports Law Review titled “Rethinking College Football Grant of Rights Agreements,” in part exploring how schools could break free of existing contracts in an era of conference realignment.

They didn’t predict Clemson’s specific argument: That the ACC’s GOR said the conference owns schools’ rights “regardless” of whether they remain in the conference, but that the “regardless” clause should only apply to games Clemson played in the ACC and not future games played in another conference.

But it’s like Jeff Goldblum’s famous line in Jurassic Park, “Life finds a way.”

Anyone with a JD degree knows lawyers do the same.

“Lawyers find novel, interesting, creative ways to approach things,” Thornley said. “People can say contracts are contracts. I’m one of the biggest believers in private contracts and the rights and obligations of the parties. But in business, pretty much everything is negotiable.”

In this view, Clemson’s complaints before a Pickens County judge are just pretext to a negotiation. As Holden puts it, there is a lot of “posturing” right now, as Clemson, FSU and the ACC size up who might have the best hand.

And legal experts seem to agree: Clemson doesn’t need to bluff.

‘Unconscionability’

In Clemson’s initial and amended complaints in March and April, respectively, a specific word was used to describe the ACC’s $140 million exit penalty: Unconscionable.

That word wasn’t used just because it’s strong.

There is a doctrine in contract law termed ”unconscionability,” which states a court can refuse to enforce a contract if it is unfair to one party.

Of course, the ACC argues Clemson agreed to an increased exit fee in 2012 — equal to three times the conference’s operating budget — after Maryland’s exit for the Big Ten. But at that time, the conference’s budget was $17.3 million a year, which amounted to a $52 million fee.

Now the ACC’s budget is $46.8 million, which — times three — is more than $140 million.

“I don’t think a court is going to love a public institution having to pay such an exorbitant fee/penalty,” Thornley said. “I could be dead wrong on that, but I can’t foresee that happening. That’s not a probable outcome in my view.”

Especially because, as Clemson’s lawyers lay out, the ACC’s exit fee is an outlier.

The Big Ten doesn’t have a withdrawal penalty. If a Big 12 program wants to jump, it forfeits two years of media rights distributions. The SEC’s maximum penalty is $45 million, which is only if an institution doesn’t provide notice.

“There is language in contract law that says liquidated damage provisions for breach cannot be punitive,” said Marc Edelman, professor of law at Baruch College’s Zicklin School of Business and director of sports ethics at The Robert Zicklin Center for Corporate Integrity. “For a clause of this nature to be binding, it has to be a good faith estimate of the financial losses of the other venture partners should one leave — and not simply a way of punishing a school for breach of contract.”

This is where both sides will probably need to hire economists, Edelman said, to outline what damages are appropriate. Edelman isn’t going to declare whether $140 million is too high a number.

But judges have to weigh the broader ramifications of their decisions, Thornley said, and $140 million is a lot of money to ask a taxpayer-funded institution to pay. And it’s oft-noted in Clemson’s complaints that it is a public university.

“They should — they need — to beat that drum,” Thornley said.

‘Frustration of purpose’

It is debatable whether a judge will buy Clemson’s argument that the “regardless” clause in the ACC’s grant of rights only applies to games the Tigers play in the conference, which would allow the university to regain control over a decade-plus of future broadcast dollars.

But Thornley likes Clemson’s argument that it doesn’t owe the ACC a “fiduciary” duty, which Clemson allegedly violated just by taking the conference to court.

“Just because you’re dating someone, it’s not that you have to keep dating them. You can break up at any time,” Thornley said. “There might be some fallout. Some fee or whatever. But they don’t owe them anything. The filing of the lawsuit, none of that, to me, is bad faith.”

Agreeing to “date” for 20 years — the total length of the ACC’s television contract, if ESPN picks up its reported option for 2027-36 — could also be viewed as impractical in a market as volatile as college sports.

Clemson could make a ”frustration of purpose” argument, Thornley said. Basically, Clemson can say it wouldn’t have signed the grant of rights if it knew what dominoes would fall in conference realignment and how much Big Ten and SEC broadcast revenues would outpace the ACC in the years to come.

“This is fundamentally apples and oranges,” Thornley said. “What made sense then doesn’t make sense now.”

Edelman isn’t as convinced by that line of reasoning, because it’s not like conference realignment was born after the ACC’s last television deal. The possibility of schools shuffling and broadcast dollars changing would have been considered before the grant of rights was signed.

Regardless, Holden wonders if conferences like the ACC might want to opt for shorter television deals from now on because it’s almost inevitable one school or another will become unhappy with a contract by the end of a 20-year term. Clemson and FSU, the ACC’s top football brands, were bound to be disgruntled earning $10-$20 million less than schools in the Power 2.

“I certainly don’t think the schools getting into these deals are without blame. They are looking to lock up certainty. When you lock up certainty, you pay a price for that,” Holden said. “But I think (Clemson and FSU) have a strong case that, financially, they’ve gotten the short end of the stick here.”

The end game

Ultimately, it’s hard to know how a judge will rule.

It’s even harder to know what an appellate judge might rule after that.

But that’s why 90 percent of cases settle before they reach a jury or mediator. Neither side wants to pay the expense of a yearslong battle — or risk losing.

“Much more likely than not these lawsuits are efforts to muddy the water enough to ultimately reach a settlement that would allow for departure in exchange for a fee that’s far greater than zero,” Edelman said, “but, at the same time, less than the amount that the remaining ACC schools are contending they are entitled to.”

Cards are still being dealt at the poker table, because it was only a couple of weeks ago Clemson gained possession of a copy of the ACC’s media deal with ESPN, which previously could only be viewed by schools’ lawyers by visiting the conference’s headquarters in Charlotte.

There is a question as to whether the ACC’s contract with ESPN specifically lists Clemson and FSU as parties — or just the ACC — which could be another means for the schools to argue the ACC doesn’t need them to fulfill the contract.

A “ridiculous” level of secrecy regarding the ESPN-ACC deal has, in Holden’s view, already muddied the waters.

“There’s real questions about what’s in there, who agreed to what,” Holden said. “It’s not as clear as you agreed to a bad deal, you’re stuck with it.”

Whether the wording of the ACC-ESPN deal strengthens Clemson and FSU’s hand or not, it could be argued the ACC’s predicament is so existential that it can’t settle. Other teams could bolt for the door after Clemson and FSU open it.

But it’s not a “great look,” Holden said, for the ACC’s brand to become synonymous with court battles that aren’t on hardwood.

“Here’s the great irony: Whatever they do to damage Clemson ultimately damages themselves,” Thornley said, “because their value comes from the value of the individual parts of their whole.”

At some point, it might serve both parties to stop fighting and just break up.

They just need to agree on a number between zero and a half-billion dollars to escape what was previously described as an unbreakable agreement.

“If (Clemson and FSU) want to find a way to avoid sticking this out, having to endure this through 2036, they are going to find a way,” Thornley said. “Ironclad? I’m a little hesitant about that word.”