Why Does FSU's Lawsuit Makes Sense

The Lawsuit

Florida State, in its lawsuit, has seven counts of allegations of misconduct by the ACC:

• Count I: The ACC punishments are unenforceable under Florida Law As ‘unreasonable restraint of trade’ under Florida Statute 542.18
• Count II: The ACC punishments are unenforceable penalties
• Count III: The ACC materially breached its contracts with FSU
• Count IV: The ACC breached its fiduciary duties to FSU
• Count V: Fundamental failure or frustration of contractual purpose
• Count VI: The ACC Grant of Rights is unenforceable for several other reasons
• Count VII: The ACC punishments violate Florida public policy and are unconscionable 

Why It Makes Sense

Florida State begins its lawsuit citing the ACC punishments violate Florida Statute 542.18 which states “Restraint of trade or commerce.—Every contract, combination, or conspiracy in restraint of trade or commerce in this state is unlawful.”

The purported figure alleged by Florida State for the Seminoles to leave the ACC is $572 million. To put that number into perspective, the total endowment has total assets valued (as of September 30, 2023) at $983 million. Writing a check isn’t in the University’s best interest, but Florida State is trying to convey that the punitive instruments the ACC uses to keep members from would indeed restrict the university from being competitive in the national space both on and off the field.

The move Florida State is trying to facilitate is to maintain its brand among the Top 10 in the nation. As media deals become more and more lucrative, the ACC contract no longer competes. It is that money that keeps facilities, coaching talent, and other resources on par or better than their competition. It is all a race to attract top talented students and athletes to further the FSU brand.

If the school would loan the athletic department the $572 million to pay the ACC to leave, the long-term impact would harm the school’s ability to maintain its academic and athletic resources that attract top students and athletes.

FSU analogized the ACC’s failures to renegotiate with ESPN, similar to that of the Pac-12, of which we all saw the demise. The university began to show the disparity ACC teams receive in media rights in comparison to the SEC and Big Ten. The 2024 per-member media rights revenues show the ACC around $35 million per member, while each of the Big Ten and SEC schools are north of $60 million. While the ACC’s will remain flat, both conferences will grow exponentially and both will be in a new contract again prior to the 2036 ACC contract expiring.

Using the Pac-12 precedent and the growing disparity in media rights, the university feels the conference breached its contract for the following reasons:

• Failing to exploit Florida State’s athletic program’s media rights, diluting those rights going forward, and failing to enrich Florida State’s athletic programs to maintain their competitiveness
  
• Failing to achieve “responsible fiscal management” and “further fiscal stability” of the “enterprise” so that the ACC now faces an “existential crisis”
  
• Granting and then grossly mishandling the Unilateral ESPN Nine-Year Option with respect to Florida State’s Tier I media rights
  
• Amending the 2016 ACC Tier I Agreement without securing the approval of two-thirds of its Directors required under ACC Bylaw 2.10.3
• Extending for no consideration the Unilateral ESPN Nine-Year Option under the 2016 ACC Tier I Agreement in August of 2021
  
• Committing the ACC to a Tier I 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
  
• Undertaking the ill-conceived expansion of the ACC to include Stanford, Cal, and SMU for the purpose of maintaining (in the event of a withdrawal of one or more members) the minimum number of members required by the ESPN agreements with the ACC, despite the absolute dilution in the per-member value of the ACC’s media rights
  
• Diminishing the members’ ability to compete in championships
  
• Failing to protect the student-athletes' hard-earned right to participate in championships.

I feel Florida State is going to have a tough time proving the ACC diminished the members’ ability to compete in championships when the ACC has been one of the more successful conferences in national championships in the last decade.

Plus the last bullet point shows FSU is really going to milk the College Football Playoff omission for all it is worth. It’s also hard to deny and something the ACC will have to defend is what fiscal responsibility it has demonstrated. In my mind, the ACC let ESPN off the hook for the nearly three-year delay to launch the network and did not use the leverage it had to renegotiate Tier I market levels.

The most alarming is the “Nine Year Option” where if ESPN does not activate a renewal by February 2025, it can opt-out, and the ACC would have no guaranteed network revenue and walk away. 

This insecurity considering the massive successes of the Big Ten and SEC Networks to me is the fiduciary breakdown here with the ACC. With the ACC already undervalued, this was a golden opportunity for the conference to prudently take care of the assets of its league and get what it was worth with a great deal. 

Conclusion

The omission from the College Football Playoff only added fuel to the FSU inferno of discontent. Florida State knows it can ill afford to stay where they are at and remain part of the national picture.

It isn’t just one year, or missing the College Football Playoff this year. It is another 13 years of being between $30 and $40 million short. What nearly $400 million more an SEC or Big Ten school will receive during that time over Florida State can change the trajectory of programs. This is the heart of the matter.

Some will say, Florida State signed a contract, I get that, but it seems two things happened:

1. Florida State in its lawsuit has demonstrated discontent and has documented a near-decade of poor business dealings that have now impacted the school
2. The ACC did not act in the best interests of all of its members with its actions, putting Florida State at harm.

Before we even can consider where Florida State may go whether it is one of the other three Power 4 conferences, it has to break free first. I feel the Seminoles have a legitimate case, and the history of missteps by the ACC will leave Commissioner Jim Phillips reeling here.

We actually might get to know the tightly sealed and protected ACC Grant of Rights contract that is under lock and key and strict supervision in ACC Headquarters.

For now, the Florida State case makes sense.