UM Athletics Moves to Big Ten in 2014, Must Pay $50 Million Penalty to Exit ACC

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COLLEGE PARK – The deal the Big 10 conference offered the University of Maryland to leave the ACC is so lucrative that Maryland will pay an unprecedented $50 million exit fee if it is forced to, a university spokesman said Tuesday.

When Notre Dame joined the ACC in September, conference presidents voted 10-2 to raise ACC exit fees to three times the conference’s total operating budget — about $50 million this year. Maryland is expected to try to reduce the fee through negotiations with the conference.

“It’s possible we pay,” Brian S. Ullmann, Maryland’s assistant vice president for communications, said of the exit fee. “We took that into account and we were still far, far ahead.”

Last year, Big 10 members each received $24 million from the conference, except for first-year member Nebraska. Maryland received about $17 million from the ACC last year.

The Big 10 currently has 12 members, but Rutgers announced Tuesday that it was also planning to join Maryland in the Big 10. If the Big 10 had 14 members last year, the payout per school would have been about $19 million.

The financial outlook the Big 10 prepared for Maryland, however, showed a much bigger financial gain.

“We would not be doing this if there was only a $2 million gain,” Ullmann said. “This was not done without analysis.”

Ullmann declined to share the financial projections from the Big 10. “Believe me, my job would be much easier if I could show you the numbers,” he said.

Sports Illustrated, citing numbers obtained from Big 10 commissioner Jim Delany, reported that Maryland will make an additional $100 million by 2020 by joining the Big 10. Big 10 officials did not return phone calls seeking comment.

The Big 10 will renegotiate its television contract in 2017 and is expected to get a substantial increase in revenues.

If Maryland is forced to pay the full $50 million exit fee, it would take a substantial bite out of revenue gained by the university from the move. But legal experts said that number may fall in negotiations between the university and the ACC.

The dispute is unlikely to end in a courtroom, said Michael McCann, director of the Sports Law Institute at Vermont Law School.

“Even if there are lawsuits filed, these (types of cases) don’t go to trial,” McCann said. “Ultimately this will be decided by Maryland and the conference, not the judge and jury.”

Maryland and Florida State were the only ACC schools to vote against raising the exit fee. At the time, Maryland president Wallace Loh, a lawyer, argued that the $50 million exit fee was so exorbitant that it constituted an “exit penalty” that went far beyond the actual financial damage caused by a school’s exit from the conference.

“You talk about damages, not penalties, and it has to be a reasonable estimate. That’s the law. We live in a free economy. We want people to move freely in and out of relationships. That’s the philosophical principle. What constitutes reasonable? That’s for a court to decide,” Loh told the Washington Post in September, adding that Maryland had no plans to leave the ACC. Ullmann said Tuesday that the idea of joining the Big 10 was first discussed four weeks ago, in October.

The distinction between a reasonable exit fee and an exorbitant exit penalty will be important in determining how much Maryland is legally obligated to pay, legal experts said.

“If punitive damages don’t bear enough of a relationship to actual damages that are caused, they’re in violation of due process of law under either the 5th or the 14th Amendment,” said William S. Dodge, a professor and associate dean at the University of California, Hastings College of Law.

But determining how much financial damage Maryland’s exit will cause the ACC will be difficult, said Brian Porto, Vermont Law School professor and the author of The Supreme Court and the NCAA.

“Is that fee fair or reasonable? The answer to that would come from taking a hard look at the costs that Maryland’s departure would cause to the ACC. It’s going to upset the scheduling. Certainly in basketball it would reduce the marquee value of the ACC a bit. In football it would require the ACC to substitute someone for Maryland and if the substitute is someone who has less of a marquee value obviously there are going to be costs to the ACC,” Porto said.

McCann said he thinks Maryland will have a tough time backing out of the exit fee agreement.

“I think the members are sophisticated business actors and they agreed to the set terms and they were known before agreeing to them. This isn’t like a fraud case where the consumer finds out the terms after the fact,” he said.

The University of Maryland office of legal affairs declined to comment on the exit fee.

An ACC official, who declined to be named because of the sensitivity of the issue, said the conference is “very satisfied” that the $50 million exit fee is legally sound.

If Maryland is forced to pay the full $50 million, it would be by far the largest conference exit fee in college sports history.

Just last year West Virginia left the Big East Conference for the Big 12. Conference rules dictated they pay an exit fee of $5 million, but that would have required that they wait 27 months before switching conferences.

“We wanted to leave more expediently,” said Mike Parsons, deputy athletic director at West Virginia.

So West Virginia paid $20 million, but was allowed to switch conferences immediately.

“Everybody is trying to protect their best interest, and it was necessary for us to leave early,” Parsons said.

By — David Gutman
Capital News Service

Letters to Editor

  1. So-called Big 10 will have 14 members.
    More attention to sports and $$$ than to second-grade arithmetic?
    And to Tobacco Road, bye, y’all…

  2. Joe Diamond says:

    It has been a long time so I checked,

    U of M students now pay $1700.00 per year ($850.00 per semester) for fees….mandatory fees. One of them is an athletic fee. I couldn’t find exactly how much but the athletic fee is there to “support” the athletic department. It is mandatory. Students are encouraged to participate in the varsity program or go watch. I gotta wonder how they fund the $50 million bucks to not play football? If the athletic department comes out ahead after the change do they lower the fee?

    Joe

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