Florida State Vs. The ACC - Contract Lessons For All Of Us
This smack-down has lessons for business owners too
Last week it was widely reported that Florida State University sued the Atlantic Coast Conference (the ACC).
What was less reported was that prior to that the ACC had sued Florida State.
The ACC sued in its home state, North Carolina. Florida State sued in its home state, Florida.
Both lawsuits are about essentially the same thing. Can Florida State leave the ACC conference?
The ACC’s suit is more tempered and, obviously, concludes “no”. (A link to both lawsuits is below - it took me a while to find the full text of each).
Florida State’s lawsuit gets a little more accusatory.
Litigants often like to litigate in their home court so no surprise each party filed in their home state. There seems to be some difference in North Carolina and Florida law here behind the scenes because the ACC relies heavily on North Carolina law while Florida State relies on Florida law. It’s not always the case that your home state has better law, but here each litigant seems to want to use their home state’s law.
I think the biggest lessons on better contracts for business come from the Florida State lawsuit so we are going to focus on that. Our lessons will still apply regardless of where this litigation goes. These two cases are probably going to end up in one court system or the other - the two courts won’t like the idea of two cases going on at the same time that could have different outcomes.
In the legal complaint Florida State really goes after everything they say the ACC did wrong. At the end of the complaint we see Florida State’s real legal arguments they are attempting to bring:
Count I - ACC Punishments are Unenforceable Under Florida Law as an Unreasonable Restraint on Trade
Count II - The ACC Punishments Are Unenforceable as Penalties
Count III - The ACC Materially Breached Its Contracts With Florida State
Count IV - The ACC Breached Its Fiduciary Duties to Florida State
Count V - Fundamental Failure or Frustration of Contractual Purpose
Count VI - The ACC Grant of Rights Is Unenforceable for Other Reasons
Count VII - The ACC Punishments Violate Florida Public Policy and are Unconscionable
This can be boiled down to Florida State saying the ACC: (1) had unenforceable punishments in the contracts, (2) the ACC didn’t do what it said it would do or was supposed to do, or (3) the contract is so bad, unfair or unworkable that it shouldn’t be enforced.
As a business lawyer I see the types of contract issues that my clients (that are generally smaller than Florida State or the ACC) face regularly that can be a lesson “for the rest of us”.
First, contracts can’t generally have penalties. Contracts can have damages - meaning that if someone violates a contract there can be payments for that - but courts generally don’t like to enforce contracts that go beyond covering a parties losses (damages) and get into financial penalties. Here the amount of money the ACC wants from Florida State is a lot. Florida State has estimated it to be over $500 million. Will a court view that as a penalty? Florida state argues it should.
Next, and other common issue smaller businesses see, is did each of the parties to the contract do their job. Really simplifying Florida State’s complaints they say the ACC didn’t do its job. Some of the language in the contracts suggests the ACC is supposed to get good deals for the conference and its teams and Florida State is saying they didn’t do that.
Finally Florida State argues that, basically, a court shouldn’t uphold these agreements because they are unfair or unworkable. There are cases where courts will throw out contracts that are very unfair or when they are not the types of contracts the courts want to associate with enforcing (this is what they call violating public policy).
The Florida State vs. ACC battle obviously has very unique facts and circumstances. I expect more interesting litigation filings to continue as this works its way through the courts.
Comment with your questions and thoughts - and if the desire is there I’ll likely do more coverage on this case.
Sources:
https://news.fsu.edu/ACClawsuit/
https://drive.google.com/file/d/194qyBfV24gCCTHMob0Sf4wVq0zLI1eGE/view
Shawn
NOTE: While legal issues are discussed this is education and is not legal advice. It is not a substitute for the advice of an attorney. Please consult your own attorney on your situation and get legal advice about your circumstances. Courts are unpredictable and may disagree with the author’s opinions.
This is not financial or investment advice.
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