Florida State sues ACC, setting stage for a fight over its potential exit

The university said the ACC has mismanaged its media rights and prevents member schools from joining other conferences through “draconian” withdrawal penalties. FSU accused the ACC of restraint of trade, breach of contract and failure to perform.

“Through chronic fiduciary mismanagement and bad faith, the ACC has persistently undermined its members’ revenue opportunities including by locking them into a deteriorating media rights agreement that will soon result in a vast annual financial gap between the ACC and other Power Five (soon to be Power Four) conferences,” it said in the complaint.

“Those failures have, by design, coalesced with the ACC’s efforts to effectively deprive ACC members of their fundamental right to withdraw, through the combination of an unconscionable Grant of Rights provision and a prohibitive Withdrawal Penalty that are unparalleled in the history of intercollegiate athletics.”

Florida State joined the ACC in 1991, but over the past year-plus, it has been the most vocal among member schools raising concerns over the league’s growing revenue gap in relation to the Big Ten and SEC. Florida State President Rick McCullough said in August, “Without increasing revenue, we will face major challenges to be able to compete in football.”

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Last year, the Big Ten unveiled a seven-year media rights agreement worth more than $1 billion per year, which is expected to bump its annual revenue distributions per school to around $70 million. The SEC could raise its per-school payouts to similar levels when Texas and Oklahoma officially join the league next year.

The ACC’s annual allotments have steadily risen, but still, it offered an average distribution of $39.4 million to its members for the 2021-22 school year. For comparison, the Big Ten ($58.8 million), SEC ($49.9 million) and Big 12 ($42 million to $44.9 million) distributed more money to their schools during that same period, according to USA Today. The Pac-12 was last among the Power Five conferences at $37 million.

(The ACC in September voted to add Stanford, California and SMU to its ranks beginning next school year; Stanford and Cal will receive reduced television-revenue shares over their first nine years in the ACC, while SMU will receive no TV money at all in that span).

Within the context of college football, the grant of rights is a legal document that transfers the ownership of media rights from member schools to the conference for a set length of time.

After the Big Ten poached Maryland from the ACC during a period of extensive realignment through 2013, ACC schools in response signed a grant of rights to keep the league intact and to preclude remaining members from leaving. The original agreement ran through June 2027, but in 2016, members extended their grant of media rights through 2036.

By this past summer, Clemson, Miami, North Carolina, North Carolina State, Virginia, Virginia Tech and Florida State had all probed the grant for potential loopholes.

With Friday’s decision, which follows Florida State’s recent exclusion from the College Football Playoff, the school is taking the first step in plotting a potential exit from the conference.

ACC Commissioner Jim Phillips and Virginia President Jim Ryan, chairman of the league’s board of directors, lamented Florida State’s legal action Friday, arguing that the school “willingly and knowingly re-signed the current Grant of Rights.” In a statement, they expressed confidence “that the Grant of Rights, which has been honored by all other universities who signed similar agreements, will be affirmed by the courts.”

“Florida State’s decision to file action against the Conference is in direct conflict with their longstanding obligations and is a clear violation of their legal commitments to the other members of the Conference,” they said. “All ACC members, including Florida State, willingly and knowingly re-signed the current Grant of Rights in 2016, which is wholly enforceable and binding through 2036. Each university has benefited from this agreement, receiving millions of dollars in revenue and neither Florida State nor any other institution, has ever challenged its legitimacy.”

Florida State estimates a total exit fee of $572 million, a sum that includes the ACC’s $130 million withdrawal fee, plus an additional $442 million related to the university’s forfeiture of media rights and unreimbursed broadcast fees.

The ACC will have an opportunity to respond to the complaint. If a judge grants declaratory judgment in Florida State’s favor, the school would be free to depart the conference without paying the penalties.

In its statement regarding the lawsuit, Florida State added that the ACC “continued to erode its media rights position by rushing to admit three new schools with weak media rights values.” The school argued those actions further hurt the conference’s ability to negotiate for increases in revenue payments when its contract is up for renewal.

“This filing became necessary due to an unwillingness by the ACC and some of our fellow conference members to seriously consider remedies for this situation,” Florida State Athletic Director Michael Alford said. “It is with great regret that we enter this phase, but it has become clear that we have no other recourse.”