ACC’s $50 million exit fee went info effect ‘immediately’

November 18, 2012

UPDATE (3:23 p.m.): According to a person with knowledge of the situation, the ACC’s legal counsel was present during the September presidents’ meeting, listened to discussions concerning the exit-fee increase and is “satisfied that the increased payment amount approved by the presidents is legally binding.” 

The official text of the ACC’s official bylaw, Section IV-5, titled “Withdrawal of Members” is listed below. It is not, however, printed in the 2012-13 ACC rule book, as it did not go into effect until after it the books were printed. 

To withdraw from the conference a member must file an official notice of withdrawal with each of the conference members and the commissioner on or before August 15 for the withdrawal to be effective June 30 of the following year. Upon official notice of withdrawal, the member will be subject to a withdrawal payment, as liquidated damages, in an amount equal to three times the total operating budget of the Conference (including any contingency included therein), approved in accordance with Section V-1 of the Conference Bylaws, which is in effect as of the date of the official notice of withdrawal. The Conference may offset the amount of such payment against any distributions otherwise due such member for any Conference year. Any remaining amount due shall be paid by the withdrawing member within 30 days after the effective date of withdrawal. The withdrawing member shall have no claim on the assets, accounts or income of the Conference. (Revised: September 2012)

 

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ORIGINAL POST:

A person with knowledge of the situation confirmed Sunday that the ACC’s new exit fee, which was raised to around $50 million in mid-September, “absolutely went into effect immediately” after the conference’s university presidents approved the hike in a 10 to 2 vote. There had been some confusion over whether the increased penalty took effect immediately or would be implemented next year.

The new exit fee, which amounts to about three times the annual revenue dispersed to each conference team, would present a substantial financial roadblock should the University of Maryland move from the ACC to the Big Ten. The school has had serious talks with the Big Ten about such a move.

Previously, the ACC’s exit fee was around $20 million. Maryland will also need to give the ACC 10 months’ notice before leaving the conference.

How Maryland plans to pay that exit fee figures to elicit concern from the University System of Maryland’s Board of Regents, who will be briefed on the situation late Sunday afternoon on a conference call with Maryland President Wallace Loh before voting at a closed-door meeting Monday morning, according to multiple sources.

One ACC athletics director, who like others contacted for this story requested anonymity because of the situation’s sensitivity, speculated that Maryland could receive financial help from the Big Ten to help alleviate the exit-fee burden. Another potential scenario brought up by the individual involves Maryland and the ACC settling out of court for less than $50 million.

In September, Maryland University President Wallace Loh told The Post that he voted against the exit fee increase based on “legal and philosophical grounds,” citing his belief that, if  necessary, a court would find the fee illegal.

“The law says that when you have liquidated damages, and in advance you anticipate a breaching of the contract, we will decide what the damages will be,” Loh said then. “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.

“But if the damages are so huge that it prevents the mobility, the free movement of people, then I think it’s not good for society. Others may not be looking at it from this principle, and that’s their prerogative.”

Multiple ACC athletic directors contacted by The Post were unsure about the timing of the new exit fee’s implementation, citing only a widespread impression that it was immediate, given that only university presidents were present for the vote.

One athletic director said the rest of ACC was blindsided by the news, and talks between Maryland and the rest of the conference have been minimal.

“It’s a surprise,” the individual said. “No one anticipated this. I think it’s fair to assume that everyone is very surprised by it. The fact that there’s been minimal communication at this point with Maryland is an indication, probably, of the direction that it’s going.”

Alex Prewitt covers the Washington Capitals. Follow him on Twitter @alex_prewitt or email him at alex.prewitt@washpost.com.
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Alex Prewitt · November 18, 2012