Trustees Of Boston College v. Big East Conference

2004-MBAR-340

The Trustees of Boston College v. The Big East Conference

No. 034818BLS

Superior Court of Massachusetts

August 18, 2004

As-is Docket Number: 03-4818 BLS

Venue Suffolk

Judge (with first initial, no space for Sullivan, Dorsey, and Walsh):van Gestel, J.

Opinion Title: MEMORANDUM AND ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

This matter comes before the Court on cross motions for summary judgment. Both the plaintiff, The Trustees of Boston College ("Boston College"), and the defendant, The Big East Conference ("Big East"), assert that there are no material facts in dispute and that what is basically involved is the interpretation of the Amended and Restated Constitution of The Big East Conference (the "Constitution").

The situation that underlies this case is a poster child for the dilemma faced by America's colleges and universities in maintaining the proper balance between their primary mission of academic excellence and the operation of big-time intercollegiate athletic programs.^[1] Boston College has chosen to leave the Big East Conference, in which it is one of the Football Schools, and join the Atlantic Coast Conference. At issue is the validity of efforts by the Big East to quintuple the economic penalty and more than double the pre-withdrawal notice period, all designed to discourage Conference members from leaving the Conference and punishing them if they do so. In the litigation process spawned,^[2] respected college and university presidents charge each other with bad faith, with breaches of fiduciary duties, with misrepresentations and with worse. And any penalty, particularly one of $5 million must be paid from funds that otherwise would be available for the academic program or scholarship aid.

While not presented before this Court, it must be observed that there are serious legal questions surrounding the enforceability of the penalties involved. It is not at all apparent that the withdrawal payment of $1 millionùto say nothing of $5 millionùcan be characterized as liquidated damages. In his deposition, the Commissioner of the Big East gave the following testimony.

Q. You intended this amendment to make it more difficult for Boston College to join the ACC, is that correct?

A. Yes.

Q. And you were going to make it more difficult for Boston College by requiring them to pay more money and wait longer before they could leave, is that right?

A. Yes.

Earlier in the deposition, the Commissioner said:

Q. Why was [the language dealing with downgraded programs] not included in the faxed amendment?

A. There was no urgency on this particular issue.

Q. So it would have been considered in the ordinary course on November 4th?

A. Yes.

Q. The urgency was the amount of the penalty and the notice period?

A. Yes.

Q. And that was related to BC possibly leaving?

A. Yes.

For the withdrawal fee to be acceptable as liquidated damages, the amount should provide no more than the protection needed must approximate the actual loss suffered, and cannot be insufficiently related to the harm involved. If the exit payment is otherwise, it would constitute an unreasonable penalty which would be void and legally unenforceable. See, e.g., Wilson v. Clarke, 470 F.2d 1218, 1222 (1st Cir. 1972); Perfect Solutions, Inc. v. Jereod, Inc., 974 F.Supp. 77, 82-83 (D.Mass. 1997); Security Safety Corp. v. Kuzniki, 350 Mass. 157, 158 (1966); A-Z Servicenter, Inc. v. Segall, 334 Mass. 672, 675 (1956).

BACKGROUND

The Big East is a non-profit corporation formed under the laws of the District of Columbia. It is an athletic conference whose members are colleges and universities who participate in intercollegiate athletics in the National Collegiate Athletic Association ("NCAA").

The Big East was formed in 1979. In 1991, several existing Big East members, along with certain "affiliate members," formed the Big East Football Conference (individually, the "Football Schools," and collectively, the "Football Conference"). Although the Big East and the Football Conference originally operated as separate entities, the two eventually merged and adopted a single Constitution to govern the surviving corporation. This Constitution is dated April 24, 2000, and is entitled the Amended and Restated Constitution of the Big East Conference. Boston College is included as a Charter Member. This post-merger Constitution and amendments are at issue in this litigation.

In addition to the Football Schools, there also is a group of colleges and universities in the Big East referred to as the "Basketball Schools."

The Constitution was amended on April 16, 2001. The amendments involved seven substantive changes, including eliminating reference to Temple University, which had been a member of the Football Conference, changes in the entitlement to vote on any waiver of certain member responsibilities and covenants, and the suspension, expulsion or probation of a member. These amendments were accomplished by the execution of a "Joint Consent" mailed by the Big East Commissioner to the Presidents/Chancellors of the constituent colleges and universities. There was no separate meeting regarding these amendments.^[3]

Because of overtures in the spring, summer and early fall of 2003, by the Atlantic Coast Conference ("ACC") to, and the consequent withdrawals of certain of the Football Schoolsùparticularly the University of Miami and Virginia Polytechnic Institute and State Universityùconcerns were expressed by many Big East members about "stabilizing" the conference. One proposal being considered was the adoption of a constitutional amendment calling for a $5 million penalty, 27-month withdrawal provision. The penalty/withdrawal provision then in place called for a $1 million penalty and a 12-month withdrawal notice period.

Boston College, at least until shortly after an October 1, 2003 meeting^[4] of the subcommittees from the Football Schools and the Basketball Schools, had consistently expressed its agreement with the $5 million penalty, 27-month withdrawal provision. Indeed, by July 9, 2003, nine of the twelve Presidents/Chancellors of the Big East had expressed their favorable response to this proposition. However, no action to amend the Constitution to effectuate this change was attempted until October 2003.

At the October 1, 2003 subcommittees meeting, William P. Leahy, S.J ("Father Leahy"), the President of Boston College, is recorded in the minutes as having spoken "to the potential of a possible marriage between Boston College and the ACC." Father Leahy is further recorded as explaining "that because of recent media reportsùand at his board's urgingùhe must determine how genuine the ACC's reported interest in Boston College as a potential 12th member is before he is willing to commit BC to an exit penalty larger than the already agreed to $5M."^[5] Shortly before that time, the University of Notre Dame had suggested imposing an even larger withdrawal penalty, but no action on that suggestion was taken at the October 1, 2003 subcommittees meeting.

On October 6, 2003, Father Dobbin, President of Villanova University, as Chair of the Big East Presidents, submitted by facsimile transfer to the other Presidents/Chancellors an explanatory memorandum and a ballot, to be returned also by facsimile, requesting a vote on a proposed amendment to the Constitution to include the $5 million penalty, 27-month withdrawal provision. This voting-by-facsimile process relied upon Section 5.05 of the Constitution. The proposal received the requisite number of favorable votes according to a report from the Big East Commissioner dated October 6, 2003, and sent on October 7, 2003. However, the vote was not unanimous, as both Boston College and Notre Dame abstained.

On October 12, 2003, Boston College, in writing, notified each member of the Big East, as well as the Big East Commissioner, that it was withdrawing from The Big East Conference effective as early as possible under the Constitution. According to the provisions of the April 21, 2001, Constitution, before the purported October 6, 2003, amendment, Boston College's withdrawal would be effective as of June 30, 2005, and its withdrawal fee would be $1 million to be paid by June 1, 2005. If the October 6, 2003, amendment is valid, Boston College's withdrawal date would not be effective until June 30, 2006, and the withdrawal fee would be $4 million larger.

Certain parts of the Big East Constitution apply to the present situation. They read as follows.

3.06. Withdrawal of Member

(a) A "Conference Year" begins July 1 and ends June 30. All withdrawals shall be effective at the beginning of the Conference Year. A Member may withdraw from the Conference by providing written notice to each of the other Members and the Commissioner at least one year in advance of the start of the Conference Year for which the withdrawal shall be effective. For example, a withdrawal effective for the Conference Year commencing July 1, 2002 must be given no later than June 30, 2001.

(b) If such withdrawal notice is timely given in accordance with subsection (a) above, the withdrawing Member shall pay the Conference a withdrawal fee of $1 million.

(c) If such withdrawal notice is not timely given in accordance with subsection (a) above, the withdrawing Member shall pay the Conference a withdrawal fee of $2 million.

(d) The withdrawal fee shall be paid in full prior to June 1 of the last Conference Year during which the withdrawing school shall be a Member. For example, for the Member who gives notice of withdrawal effective July 1, 2002, such withdrawal fee shall be paid no later than June 1, 2002.

.á.á.

(f) A withdrawing Member shall cease to have voting rights under this Constitution on the date a...