Zoe Smith

Associate Editor

Loyola University Chicago School of Law, JD 2026

In December 2023, Florida State University’s Board of Trustees filed suit against the Atlantic Coast Conference (ACC) challenging the ACC’s grant of rights and “draconian” exit penalties. About three months later in March 2024, Clemson University filed a complaint against the conference challenging those same exit penalties and grant of rights issues. In response, the ACC filed legal challenges against both schools, arguing they agreed to the contract terms and were not  allowed to leave the conference or challenge those agreements. Courts will have to look to the ACC’s grant of rights agreement, Article 2 of the Uniform Commercial Code, and State antitrust laws in determining who will succeed in this lawsuit. Several other schools have gotten around their conference’s grant of rights agreements in the Big 10, and Pac-12. However, unlike those conferences’ grants of rights agreements expiring in 2024 and 2025, the ACC’s agreement lasts until June 2036. Regardless, it is going to be difficult for these schools to succeed in challenging the agreements in court.

The grant of rights agreement and withdrawal penalties

A grant of rights is a legal agreement where schools transfer their media rights to a conference for a set period of time. The ACC’s original grant of rights was amended in 2016 when the conference extended its media rights with ESPN and Disney with the launch of the conference’s network. The amendment extended the grant of rights, originally set to expire in June 2027, to June 2036. The schools that signed the agreement agreed to transfer their media rights “irrevocably and exclusively,” regardless of whether they remain in the conference until the deal expires. As a result, any school that leaves the ACC will not receive annual distributions from either the ACC or their new conference until the contract expires. Notably, these annual distributions are already significantly less than those received by schools in the SEC and the Big 10. Florida State and Clemson argue that such a provision violates state antitrust laws and public policy, inhibiting their competition of athletic programs and their free exercise of media rights.

According to the ACC manual, if a member is to withdraw from the conference, they will be subject to a withdrawal payment in an amount equal to “three times the total operating budget of the Conference.” This would be an estimated $130 million on top of the forfeiture of revenue from the media rights. Florida State and Clemson argue that such a penalty is also unconscionable for many of the same reasons the grant of rights agreement is. The ACC, however, argues that even though the exit fees are substantial, that does not necessarily make them a restraint of trade.

Choice of law

Which state law governs the grant of rights deal is a key question for any school wishing to challenge it. States will have varying contract and antitrust regulations that may affect the lawsuit, evident in Florida State’s ability to allege the grant of rights violates the state’s antitrust laws. Florida lists its antitrust regulations in Title 33, Chapter 542 – combinations restricting trade or commerce and South Carolina’s is found in Title 39, Chapter 3. The statutes of the two states differ in many aspects. The Florida statute provides that “every contract, combination, or conspiracy in restraint of trade or commerce is unlawful”, whereas the South Carolina statute lists certain contracts between individuals and corporations that are unlawful. Florida State, Clemson, and the ACC are all banking on legal theories, such as state antitrust laws, the success of which depends on where the cases are heard.

Potential outcomes of the litigation

Mark Wilhelm, a lawyer handling corporate mergers and acquisitions, lists four ways to challenge the ACC’s grant of rights and exit fees: (1) for the schools to leave the conference and its rights, paying their exit fee; (2) for the schools to sue; (3) try and negotiate a deal with the conference and its members for an exit fee less than the full amount that would be forfeited; and (4) hope the ACC dissolves and the grant of rights and constitution binding their fees with it. Florida State and Clemson chose the second option – filing suit. Now both schools will need to argue their positions and hope courts rule in their favor.

The ACC recently added two teams from the Pac-12, the conference that was harmed by realignment last year, leaving the ACC unstable. Many are questioning whether there will be a realignment of the ACC. An argument could be made that with new teams joining, there should be another amendment to the contract, leaving these teams with a potential way out.

As previously discussed, both teams argue that their contracts with the ACC inhibit competition, restricting them from leaving the conference to find better opportunities in another such as the SEC or Big 10. The exit fees are large, and their forfeiture of media rights would be even greater. However, both teams did agree to the contract when it was amended back in 2016. It is going to be difficult for either team to have that contract invalidated and sports media experts have stated that the schools’ cases are not very strong. They will have to work hard through a long and taxing litigation process to invalidate the contract or attempt to find another way out.