Monthly Archives: December 2012
By: Shanette D. Buford-Brazzell
The holidays came early for some huge college football fans. On Tuesday, December 6th, the UCLA Athletic Department released a press release stating that several donors of the Wooden Athletic Fund made additional donations. The donations were made to ensure the purchase of some 650 student tickets for the Bridgepoint Education Holiday Bowl, by helping lower the ticket prices from $65 to $25. The donors wish to remain anonymous.
“It’s wonderful that several of our donors have generously come forward to ensure our students have the opportunity to attend the Holiday Bowl,” said Dan Guerrero, UCLA Athletic Director, in a press release on the athletic website.
The generous contributions came after a recent announcement that the UCLA’s Wooden Athletic Fund had set fundraising records in 2012, with contributions from UCLA’s 5000 alumni, fans, and friends. The Wooden Athletic Fund already receives more than $11 million in cash contributions. This is helped by the fact that the 5,000 members each donated at least $100 to the athletic fund this year.
There have been rumors that other universities’ donors, such as those at Notre Dame, Northern Illinois, and Duke, have made similar donations to their respective universities. For example, according an article from Yahoo! Sports, one of Notre Dame’s donors made a $375,000 donation, which caused ticket price to be fall from $300 to $150 for the BCS National Championship Game. In a recent interview, Josh Berlo, Senior Assistant Athletics Director of Guest Relations, Ticketing, and Event Marketing at Notre Dame, told ESPN’s Darren Rovell that their donor wants to remain anonymous as well. On the other hand, Northern Illinois, who will play Florida State in the Orange Bowl, announced that it will give every student a free ticket to the game.
The donations that are received through the athletic fund will go directly to support the needs of all of the UCLA student-athletes in its 24 athletic programs. The financial support that donors contribute provides the student-athletes with resources, that they use in the classroom and community and with which to compete in their respective sports. UCLA will face Baylor on Thursday December 27, 2012 at 6:45pm (PST), in the 35th edition of the Holiday Bowl at the Qualcomm Stadium in San Diego, Calif. The Bruins went 9-4 this season and were the Pac-12 Conference South Division Champions.
The International Alliance of Theatrical Stage Employees, a union who represents freelance technical crew members, has established a strike against the Pac-12 Networks. The union is one of the largest in Hollywood. The strike began on Saturday when union members picketed outside games at USC, Arizona State, Oregon State, Oregon and Washington.
Reports say approximately 100 union members picketed outside the USC-Minnesota game.
The impact on Pac-12 Networks isn’t immediately known. Reports indicated fewer cameras were used for the USC-Minnesota game, presumably as a result of the strike.
The IATSE says the Pac-12 Networks uses both union and non-union labor at sporting events it covers. Non-contract workers receive lower wages and no benefits according to the IATSE. The union is looking for Pac-12 Networks to establish standard wages and benefits for all workers represented by IATSE.
A group of University of Washington students, United Students Against Sweatshops, has convinced the school’s advisory committee to end their relationship with Adidas over unfair labor practices in Adidas factories in Indonesia.
Washington becomes the third known school to sever ties with Adidas. Cornell and Oberlin College have also done so, and as I wrote earlier, the University of Wisconsin is currently involved in litigation to terminate their agreement with Adidas for the same reason.
UW’s athletic teams wear Nike uniforms and the Adidas licensing contract was one of the school’s smaller deals, bringing in about $3K a year, so the financial ramifications are minimal. However, concern on Adidas’ part has to be increasing as schools are not content to let this issue be swept under the rug.
A number of Division I conferences have recently increased the fees a member school must pay when it withdraws from the conference. These fees are commonly referred to as exit fees. The ACC is one of the conferences that recently increased its exit fees. And its exit fee provision has been receiving a lot of attention lately because of Maryland’s departure to the Big Ten.
The ACC actually increased its exit fees twice in the span of a year. The ACC first upped the fees from around $12-14 million to $20 million in September 2011 when it announced it would add Syracuse and Pittsburgh. The fees were then upped again this September after the conference added Notre Dame (in all sports except football and hockeyl).
The ACC’s current exit fee calls for a withdrawing member to pay an amount equal to three times the conference’s total operating budget at the time of withdrawal. Based on the ACC’s 2012-13 operating budget, this equates to an exit fee of more than $52 million. It is this amount that the ACC is seeking in its lawsuit against Maryland for the school’s move to the Big Ten.
When the ACC and other conferences increase their exit fees, the general thinking is that it further discourages members from leaving the conference. But, because of how courts analyze the legality of these exit fee provisions, increasing the amount of the fee can actually increase the chances of the exit fee provision being deemed unenforceable. So, instead of discouraging schools from leaving, it can actually embolden them to do so.
In legal terms, conference exit fees are known as liquidated damages. Liquidated damages provisions are commonly added to contracts. They set the amount a party to the contract must pay in the event it breaches the contract. Liquidated damages provisions are useful because they theoretically save the parties the time and expense of litigating the amount of damages caused by the breach.
But, the amount of liquidated damages specified in a contract cannot be randomly selected. Courts will generally only enforce liquidated damages provisions if (1) the anticipated damages in the event of a breach are difficult to ascertain at the time of contracting, and (2) the amount of liquidated damages is a reasonable estimate of the actual damages that would likely be caused by a breach. If a liquidated damages provision does not meet this test it is deemed a penalty and is unenforceable.
Assuming that the ACC’s liquidated damages provision fulfills the first element of the test, it is questionable whether it would meet the second element. The requirement to pay three times the conference’s operating budget does not appear to be related in any way to the actual amount of damages the ACC would suffer if a member withdraws. It just seems like an easy way to ensure that the exit fee continues to grow without having to continually vote on it. This makes it look like a penalty.
And the actual number that results from this provision, $52 million, is not a reasonable estimate of the ACC’s actual damages. For example, Maryland’s departure will not result in the ACC’s tv deal being reduced by $52 million. A good argument can be made that the ACC actually suffered no damage when Maryland left. Maryland’s departure allowed the conference to add Louisville. And the general consensus is that the ACC is now stronger athletically as a result (at least in the two sports that matter for tv revenue purposes, football and men’s basketball).
This is consistent with recent realignment history. Over the past two years the Big 12 lost Nebraska, Colorado, Texas A&M, and Missouri. Yet, after adding TCU and West Virginina, the Big 12 signed the most lucrative tv deal in the conference’s history this year. (The one exception to the no damage upon withdrawal argument would be the Big East. The defections in that conference have definitely hurt the value of its tv rights).
When a liquidated damages provision is determined to be invalid, the party attempting to enforce the provision is allowed to instead seek its actual damages from the breaching party. But, as discussed above, conferences often suffer minimal damage when a member withdraws, either because the member added little value to the conference or because the conference quickly replaces it with a new member of equal value (at least in tv executives’ eyes).
As a result, exit fees often leave conferences in a tough position. They have to be high enough to discourage a member from leaving the conference. But, if they are too high they could be declared an invalid penalty. And, if the exit fees are invalid, the conference would then have to prove its actual damages, which are usually much less than the amount of the exit fee. As a result, exit fee disputes have always settled without a court deciding the validity of the liquidated damages provision. Recent examples include the Big 12 settling with Nebraska, Colorado, Texas A&M, and Missouri for less than the mandated amount of exit fees.
So, what is the solution to the problems with exit fees? Grants of television broadcast rights. In these agreements, all of the conference members grant their television broadcast rights to their athletic contests to the conference for a certain period of time. If a member leaves the conference during that time, the conference retains the member’s television rights. Because the value of a school to a conference is the television revenue it can help generate, a grant of rights agreement makes the members essentially worthless to another conference that is looking for new members.
While grant of rights agreements do have potential issues (sovereign immunity issues being the biggest), they are not subject to a subjective test like liquidated damages provisions. Thus, they are much more likely to hold up in court as valid contracts.
Currently, only the members of the Big Ten, the Pac-12, and the Big 12 have executed grant of rights agreements. Other conferences that want to ensure stable membership would be wise to insist on their members signing similar agreements. (Yes, even the mighty SEC should have its members sign grants of rights). If the ACC had one in place, Maryland likely would not be joining the Big Ten.