FSU files lawsuit, asks court to declare ACC Grant of Rights, $500 million-plus penalty 'unenforceable'

Less than three weeks after being snubbed by the College Football Playoff selection committee despite being an undefeated Power 5 conference champion, Florida State University filed a lawsuit against the Atlantic Coast Conference on Friday, alleging the school has been damaged by, “chronic fiduciary mismanagement and bad faith.”

In a 38-page complaint (see document) filed with Leon County circuit court, FSU is asking for a “declaratory judgment” that could pave the way for the school to exit the ACC without paying more than $570 million in fees and lost media rights outlined in the school’s contracts with the conference.

The lawsuit, which was prepared by Greenberg Traurig, an international law firm with offices in Tallahassee, was filed on Friday following a meeting of the Florida State Board of Trustees. The board voted to go through with the action during an emergency meeting that was called on Thursday and came just 19 days after FSU’s football team was stunned by becoming the first undefeated Power 5 champion to be left out of the lucrative college playoff.

According to the complaint, which was obtained by Warchant.com, Florida State holds the ACC at least partially responsible for the snub due to years of poor decisions that have harmed the league’s member schools.

A university source familiar with the matter told Warchant that the complaint has been in the works for months and likely would have been filed even if Florida State had been invited to the playoff.

“The snub certainly accelerated things a little bit,” the source said.

The final 11 pages of the 38-page document outline Florida State’s seven legal challenges to the ACC’s “withdrawal penalty” and accompanying Grant of Rights, which could cost the university hundreds of millions of dollars if it attempts to leave for another conference. According to the filing, FSU would owe the conference $130 million (three times the ACC’s annual operating budget) plus another $442 million in media rights and broadcast fees over the next 13 years.

The lawsuit does not explicitly mention Florida State leaving the ACC, but this is believed to be the first step toward making that a reality.

In the first count of the complaint, the university claims the ACC’s, “punishments are unenforceable under Florida law as unreasonable restraint of trade under Florida Statute 542.18.”

“The punitive instruments of the ACC violate Section 542.18 because they prevent Florida State from competing in the marketplace to obtain the best economic terms for its athletic media rights, its student-athletes, and its athletics programs in the relevant market,” the complaint states. “The punitive instruments are grossly excessive, overly broad, excessively long in duration and their anticompetitive effects vastly outweigh any alleged procompetitive benefits.”

A university source familiar with the suit told Warchant the school will argue that the ACC’s penalties are “unreasonable” because they don’t serve as a means for compensating the league for a school’s departure. They are instead primarily designed to lock the member schools in place with excessive exit fees.

The complaint details how the ACC had no prescribed exit fee in place until 2011, when it was determined to be about $21.8 million (1.25 times the conference’s operating budget at the time). One year later, it was raised to three times the operating budget, or over $52 million. Then it soared to more than $230 million a year later with the signing of the original Grant of Rights, and now it stands at $572 million.

These accompanying charts were included in the lawsuit:

While Florida State in 2013 willingly signed the ACC’s original Grant of Rights, which was tied to the league’s television contract with ESPN, school officials point out that was designed to expire in 2027 at the conclusion of that media deal.

They say the GOR was extended three years later when ACC schools were told that ESPN would not move forward with a proposed ACC Network on cable television — similar to ones created by the SEC and Big Ten several years earlier — if that pact wasn’t extended.

From the complaint: “The ACC verbally represented to its members that ESPN had issued an ultimatum: unless each ACC member executed an extension of the ACC GofR, from 2027 to 2036, a full nine years beyond the then-expiration of ESPN’s Tier I agreement, ESPN would enter into no further media rights agreements with the ACC.”

Florida State’s then-president, John Thrasher, signed off on the extension, but FSU officials contend it was under false pretenses. According to the complaint, they believe the ACC “feigned” the ultimatum from ESPN in order to preserve the conference as long as possible.

“We were already in handcuffs,” an FSU source said. “Then they decided they were going to apply a second set of handcuffs.”

Many Florida State supporters criticized the university’s decision to sign the original Grant of Rights in 2013, but then-FSU President Eric Barron said at the time the school had no good options, other than staying with the ACC. The Big Ten and Southeastern Conference were not interested in expanding at the time, and the financial benefit to joining the Big 12 was not seen as significant enough to outweigh geographical challenges and other hurdles.

Signing the extension through 2036 drew even greater outrage from FSU fans, particularly because it yielded no major financial windfall in return. But it wasn’t until recently that university officials truly realized how bad that deal might have been.

With the SEC poaching Texas and Oklahoma from the Big 12 and the Big Ten snatching USC and UCLA from the Pac-12, those two mega-conferences soon will be distributing to each member school $30 million to $40 million more each year than the roughly $33 million Florida State and other schools receive from the ACC.

“We have always received several million dollars less from the ACC than those other conferences distributed,” a university source said. “But we were able to make that up through fundraising. It wasn’t until the last couple of years, as the disparity got so great, that we decided to really look closer into how we got here and saw the clearer picture.”

Under the direction of FSU President Richard McCullough, who came on board in the summer of 2021, the university sent attorneys on multiple trips to the ACC’s North Carolina offices to examine the Grant of Rights and the league’s media contracts. It was during those visits that Florida State’s attorneys noticed there was no written documentation of ESPN’s “ultimatum” to the league about extending the GOR.

Throughout its court filing, FSU cites other actions by the ACC that it deems to be harmful to member schools, including the recent decision to add Stanford, Cal and SMU beginning in 2024. Instead of being proactive and trying to land football powers that could have created additional revenue and prestige for the conference, the complaint states, the ACC waited until the Big Ten, SEC and Big 12 lured away all of the prime programs and then settled for the cast-offs.

The ACC only acted then, FSU contends, out of fear that Florida State and other schools might leave the conference and thus drop its membership below 15 schools, which is required in its television contract with ESPN.

“The additions by the ACC were in fact self-serving and defensive as opposed to strategic,” the complaint states, “in that the addition of these three schools by the ACC was designed to insulate the ACC from falling below the fifteen member critical mass required by the 2016 ESPN Agreements should any members of the conference exercise their right to exit.”

Along with claiming that the ACC’s exit penalties are unenforceable, Florida State’s complaint also accuses the conference of breaching its contract with FSU and breaching its “fiduciary duties” by not protecting the member schools’ best interests.

These are a few of the many claims of mismanagement by the ACC throughout the 38-page complaint:

• While the Grant of Rights was extended to 2036, FSU points out that ESPN still hasn’t exercised its option to push the media rights contract out that far. “It is a widely repeated misconception that the ACC’s multi-media rights agreement expires in 2036. As explained below, in truth, the multi-media rights agreement expires in 2027 unless ESPN chooses to exercise its unilateral option through 2036.” FSU’s complaint states that ESPN originally faced a deadline to extend the agreement back in 2021, but the, “ACC Commissioner gratuitously extended that option exercise deadline for four additional years, or until February 2025.” So theoretically, ESPN could essentially opt-out of the ACC’s deal in 2027, leaving the league with no guranteed revenue — even after extending the Grant of Rights.
• When the ACC entered into its media agreement with ESPN in 2012, the deal called for an annual increase of 4.5 percent in revenue distribution for Tier 1 rights (broadcast of marquee football games). The original payments per school were $12.3 million in 2012, and they now are at $19.9 million due to those increases. The complaint states that the 15-year duration of that contract and fixed increases of 4.5 percent cost FSU and other member schools the ability to capitalize on the growing college football market.
• Since the ACC reached its agreement with ESPN, other conferences have received much more lucrative television deals, and those conferences will get additional opportunities to renegotiate before the ACC’s Grant of Rights expires in 2036.

Shortly after Florida State’s lawsuit was filed, ACC Commissioner Jim Phillips released the following statement:

“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. 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. 

“As a league, we are proud of the successes of our student-athletes and that the ACC has won the most NCAA National Championships over the past two and half years while also achieving the highest graduation success and academic performance rates among all FBS conferences, so it is especially disappointing that FSU would choose to pursue this unprecedented and overreaching approach.

“We are confident that the Grant of Rights, which has been honored by all other universities who signed similar agreements, will be affirmed by the courts and the Conference’s legal counsel will vigorously enforce the agreement in the best interests of the ACC’s current and incoming members.” 

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