Atl. Coast Conference v. Bd. of Trs. of Fla. State Univ.

1

2024 NCBC 21

ATLANTIC COAST CONFERENCE, Plaintiff, v. BOARD OF TRUSTEES OF FLORIDA STATE UNIVERSITY, Defendant.

No. 23CV040918-590

Superior Court of North Carolina, Mecklenburg

April 4, 2024

Womble Bond Dickinson (US) LLP, by James P. Cooney, III, Sarah Motley Stone, and Patrick Grayson Spaugh, and Lawson Huck Gonzalez, PLLC, by Charles Alan Lawson, for Plaintiff Atlantic Coast Conference.

Bradley Arant Boult Cummings LLP, by Christopher C. Lam, C Bailey King, Jr., Hanna E. Eickmeier, and Brian M. Rowlson and Greenberg Traurig, P.A., by David C. Ashburn, John K Londot, and Peter G. Rush, for Defendant Board of Trustees of Florida State University.

ORDER AND OPINION ON DEFENDANT'S MOTION TO DISMISS OR, IN THE ALTERNATIVE, STAY THE ACTION

Louis A. Bledsoe, III Chief Business Court Judge

1. Plaintiff Atlantic Coast Conference (the "ACC" or the "Conference") initiated this litigation late on the afternoon of 21 December 2023 seeking a judicial determination that two media rights agreements between the ACC and its members are valid and enforceable. The ACC argues that it did so only when it became a practical certainty that Defendant Board of Trustees of Florida State University ("FSU" or the "FSU Board") would file a lawsuit the following day to challenge the enforceability of those agreements, which, by their terms, prohibited the FSU Board from seeking such relief. As the ACC expected, the FSU Board filed suit against the ACC in Florida the next day, allegedly breaching the agreements.

2. This matter is now before the Court upon the FSU Board's Motion to Dismiss (the "Motion to Dismiss") or, in the Alternative, Stay the Action (the "Motion to Stay"; together, the "Motions"), filed on 7 February 2024 in the above-captioned case.^[1] 3. Having considered the Motions, the parties' briefs in support of and in opposition to the Motions, the Complaint for Declaratory Judgment (the "Complaint")^[2] and the First Amended Complaint (the "FAC"),^[3] the appropriate evidence of record on the FSU Board's Motion to Dismiss pursuant to Rules 12(b)(1) and 12(b)(2) of the North Carolina Rules of Civil Procedure (the "Rule(s)"), and the arguments of counsel at the hearing on the Motions, the Court, in the exercise of its discretion and for the reasons set forth below, hereby GRANTS in part and DENIES in part the Motion to Dismiss and DENIES the Motion to Stay.

I. FACTUAL AND PROCEDURAL BACKGROUND

4. The Court does not make findings of fact on the Motions. Rather, the Court recites the allegations asserted and documents referenced in the Complaint and FAC that are relevant to the Court's determination of the Motions.

5. The ACC is a North Carolina unincorporated nonprofit association created under Chapter 59B of the North Carolina General Statutes to "enrich and balance the athletic and educational experiences of student-athletes at its member institutions[,] to enhance athletic and academic integrity among its members, to provide leadership, and to do this in a spirit of fairness to all."^[4] The ACC currently has fifteen members (each a "Member" or "Member Institution"; collectively, the "Members" or "Member Institutions")^[5] and is governed by a Board of Directors. The "most senior executive officer of [each] Member[ ]" serves as a Director on the ACC Board,^[6] and "each Director shall have the right to take any action or any vote on behalf of the Member it represents[.]"^[7] FSU has been a Member of the ACC since 1991.^[8]

6. On 8 July 2010, the ACC entered into a Multi-Media Agreement (the "2010 Multi-Media Agreement") with ESPN, Inc. and ESPN Enterprises, Inc. (together, "ESPN"), granting ESPN exclusive distribution rights to certain ACC Member Institution sporting events in exchange for specified payments.^[9] The ACC Board of Directors unanimously approved this agreement.^[10]

7. In 2012, "collegiate athletic conferences began to experience significant instability and realignment[.]"^[11] The ACC was no exception. Late that year, the University of Maryland announced its withdrawal from the ACC. Shortly thereafter, the ACC elected to add four new Member Institutions.^[12] During this same period, the ACC Board voted to significantly increase the amount a Member must pay if it chose to leave the Conference "to more appropriately compensate the Conference for some of the potential losses[ ]" associated with the Member's withdrawal.^[13] It was against this backdrop in 2013 that the ACC and ESPN agreed to an extension of the 2010 Multi-Media Agreement through 2027.^[14]

8. "[I]n order to secure a long-term media rights agreement and thus ensure the payment of predictable sums over time," the current and incoming ACC Member Institutions, including FSU, entered into an Atlantic Coast Conference Grant of Rights Agreement (the "Grant of Rights") with the ACC in April 2013.^[15] Under the Grant of Rights,

each of the Member Institutions is required to, and desires to, irrevocably grant to the Conference, and the Conference desires to accept from each of the Member Institutions, those rights granted herein[:]

. . . .

Grant of Rights. Each of the Member Institutions hereby (a) irrevocably and exclusively grants to the Conference during the Term . . . all rights (the "Rights") necessary for the Conference to perform the contractual obligations of the Conference expressly set forth in the ESPN Agreement, regardless of whether such Member Institution remains a member of the Conference during the entirety of the Term[.]

. . . .

Acknowledgements, Representations, Warranties, and Covenants. Each of the Member Institutions acknowledges that the grant of Rights during the entire Term is irrevocable and effective until the end of the Term regardless of whether the Member Institution withdraws from the Conference during the Term or otherwise ceases to participate as a member of the Conference in accordance with the Conference's Constitution and Bylaws. . . . Each of the Member Institutions covenants and agrees that . . . it will not take any action, or permit any action to be taken by others subject to its control, including licensees, or fail to take any action, that would affect the validity and enforcement of the Rights granted to the Conference under this Agreement.^[16]

9. The ACC negotiated a Second Amendment to the 2010 Multi-Media Agreement in 2014, incorporating the ACC's new Members and increasing the fees paid to the Conference, which were then distributed to the Member Institutions, including FSU.^[17] In 2016, the ACC "sought to generate additional revenue for its Members through a network partnership with ESPN[ ]" that would "establish the ACC Network, broadcast more ACC events, and share in the revenues of this new network."^[18] To this end, the ACC and ESPN negotiated two new agreements in 2016: an Amended and Restated ACC-ESPN Multi-Media Agreement and an ACC-ESPN Network Agreement (together, the "ESPN Agreements").^[19]

10. ESPN, however, conditioned its participation in the ESPN Agreements on each Member Institution's agreeing to extend the term of the Grant of Rights.^[20] After numerous Board and other meetings, the ACC Members, including FSU, executed a 2016 Amendment to ACC Grant of Rights Agreement with the ACC (the "Amended Grant of Rights"; together with the Grant of Rights, the "Grant of Rights Agreements") on 18 July 2016 that, according to the ACC, extended the term from 30 June 2027 to 30 June 2036.^[21] The ESPN Agreements were executed a few days later.^[22] Both ESPN Agreements "stipulate that their terms and conditions cannot be disclosed to the public and impose a confidentiality obligation on the Conference."^[23]The ACC was permitted to disclose the ESPN Agreements to its Member Institutions, "provided that each [Member] Institution shall agree to maintain the confidentiality" of the agreements.^[24] To maintain the confidentiality of the ESPN Agreements, the ACC allowed its Members to view the agreements only at the Conference's North Carolina headquarters and conditioned access on the Member's promise to maintain the confidentiality of the agreements.^[25]

11. Although FSU's "distributions from the ACC more than doubled" since it entered into the Grant of Rights,^[26] in early 2023, the FSU Board "began to advocate for more money for the university through unequal sharing of revenue[,]" contending that FSU's" 'brand' entitled it to more revenue."^27[] In response, in May 2023, the ACC "endorsed the concept of distributing a larger share of post-season revenues to the Members that generated those revenues[.]"^28[] But FSU continued to push for "an unequal share of all Conference revenue,"^29[] and the FSU Board discussed withdrawing from the ACC at a 2 August 2023 Board meeting.^30[]

12. Events came to a head on 21 December 2023, when the FSU Board notified the public that it would hold an emergency meeting the following day.^31[] The ACC alleges that, "[w]ith the knowledge of [the FSU Board]'s clear intention to breach the Grant of Rights and Amended Grant of Rights[ ]" by filing "a preemptive lawsuit against the ACC in Leon County, Florida,"^32[] the ACC filed its original Complaint under seal in Mecklenburg County Superior Court later that day, seeking a declaration that the Grant of Rights Agreements are valid and enforceable contracts and a declaration that the FSU Board is estopped from challenging or has waived any right to challenge the Grant of Rights Agreements by accepting the benefits thereunder.^33[]

13. According to the ACC, the FSU Board Chair indicated at the 22 December 2023 Board meeting that (i) "each of the [FSU] Board Members had been privy to 'individual briefings' over the course of several months[,]"^34[] (ii) "he had spoken individually with all [FSU] Board Members for the...