The Big East’s Lawsuit Against TCU

Today in the United States District Court for the District of Columbia, the Big East filed a lawsuit against TCU.  The lawsuit alleges a cause of action for breach of contract based upon TCU’s decision to not join the Big East, as it agreed to in 2010, and rather, move to the Big 12 by way of the Mountain West Conference.

The brief lawsuit filed by the Big East (the pleading is only six-pages long) notes that on November 29, 2010, the Big East and TCU entered into a membership expansion agreement, whereby TCU was invited to become a full-conference Big East member with all fourteen of its sports beginning on July 1, 2012.  According to the Big East, per the membership expansion agreement, the parties agreed that if TCU did not join the conference on July 1, 2012, the Big East would be damaged.  According to the pleadings, the parties could not specify the exact amount by which the Big East would be damaged if TCU did not join the conference.  However, in the membership expansion agreement, the parties apparently agreed that the Big East would be damaged by a reasonable estimate of $5 million if TCU did not join the conference on July 1, 2012.  Additionally, the Big East claims that in the membership expansion agreement, TCU agreed to pay the Big East this estimated damage amount of $5 million if it failed to join the conference by July 1, 2012.

In the complaint, the Big East alleges that on October 6, 2011, TCU “reneged” on the membership expansion agreement by announcing that it would instead join the Big 12 Conference on July 1, 2012.  Subsequent to this announcement, the Big East asked TCU to pay it the $5 million estimated damages amount per the membership expansion agreement.  According to the Big East’s lawsuit, “. . . TCU has refused to make that payment or acknowledge its obligation to do so.”  As such, the Big East alleges that TCU has breached the membership expansion agreement and the Big East is seeking monetary damages in the amount of $5 million, attorney’s fees, costs and other relief as the court deems appropriate.

It is to be seen whether the Big East’s lawsuit will stand up in court.  However, from the outset, there appears to be several issues with it.  First, TCU will likely argue that a claim is not ripe at this point.  In the legal world, a case must be “ripe” in order for a court to hear it, meaning that an actual controversy exists.  Here, it is arguable that this case is not ripe, as it was filed on June 11, 2012–which is before TCU was set to join the Big East and before it joined the Big 12.  Thus, albeit unlikely, TCU could still join the Big East, which would mean that it did not breach its contract with the Big East.  As such, TCU will likely argue that this lawsuit should be dismissed because it is not ripe.

The Big East has plausible arguments against the dismissal of the case for ripeness.  The Big East can argue that TCU’s actions, such as announcing its intention to join the Big 12 and its athletic director’s acknowledgement that TCU would have to pay the Big East a sum of money for not joining the conference, constitute an anticipatory breach of contract.  While the breach of contract technically has not occurred, since July 1, 2012 has not passed, the Big East can nonetheless assert that it believes TCU will fail to perform its part of the contract.  Under the legal theory of anticipatory breach, the Big East can terminate the contract and sue TCU for damages.  This would counteract TCU’s ripeness argument.

The other glaring issue with the Big East’s lawsuit is its calculation of damages.  In the lawsuit, the Big East first noted that both parties “. . . acknowledged and agreed that. . . damages would be difficult to determine if TCU did not follow through on its agreement to join the Big East on the Effective Date. . . ”  Damages based upon an event that may occur in the future which are “difficult to determine” are called “speculative damages.”  TCU will likely argue that the damages are speculative, because in contract cases like the one at hand here, speculative damages cannot be recovered by a plaintiff.  However, one exception to this rule exists.  That exception provides that plaintiffs can recover damages up to an amount that is reasonably likely to occur if the occurrence causing the speculative damages is reasonably likely to occur.  In this instance, because it appears that the parties agreed upon the $5 million damage amount in the agreement, it is arguable that the reason causing the speculative damages (i.e. TCU not joining the Big East) was reasonably likely to occur and that $5 million was the amount by which the Big East would be reasonably damaged.  Given this, it appears that the Big East can also successfully argue against a defense raised by TCU that the $5 million prayer for relief amounts to speculative damages.

Overall, it is likely that a jury will find in favor of the Big East.  However, the question remains as to whether a jury will award the full $5 million in damages the Big East has requested.  This lawsuit should serve as guidance for other universities testing the conference realignment waters.  Universities seeking to move to a new conference should fully investigate their options, so they do no agree to join one conference only to join another and face the risk of a lawsuit later.