Clemson sues the ACC, challenging ‘unenforceable’ exit penalty. Here’s what we know

After roughly two years of speculation, Clemson University has followed the strategy of Atlantic Coast Conference member Florida State and formally filed a lawsuit against the ACC to challenge its strict “grant of rights” and exit penalties.

For Clemson, it’s a first step toward exiting the conference, a move primarily aimed at improving athletics and football funding.

According to online court filings in Pickens County, South Carolina, where Clemson is located, the university filed a 28-page lawsuit against the ACC early Tuesday morning in Common Pleas Court seeking a declaration that:

• “The media rights Clemson granted to the ACC do not include any Clemson games that are played after Clemson ceases to be a member of the ACC”;

• “Clemson is not required to pay the ACC the withdrawal penalty, as such a payment is an unenforceable penalty in violation of public policy”;

• “Clemson owes no fiduciary duties to the ACC or its other members and has breached no legal duty or obligation it might owe to the ACC by filing this lawsuit.”

The lawsuit calls the ACC’s total withdrawal fee, which has been ballparked at $572 million, as “unconscionable and unenforceable,” and most notably says the ACC has made “erroneous assertions” in publicly claiming that it “irrevocably owns the media rights of member institutions” to home games played through 2036, even if a school ceases to be a member of the ACC, and that member schools “must pay an exorbitant $140 million penalty to leave the Conference.”

“College athletics is at a crossroads,” the lawsuit reads, and the ACC’s “erroneous assertions” all “separately (hinder) Clemson’s ability to meaningfully explore its options regarding conference membership, to negotiate alternative revenue-sharing proposals among ACC members, and to obtain full value for its future media rights.”

Tuesday’s lawsuit does not specifically mean that Clemson is leaving the ACC for another conference today. But, if successful, Clemson’s challenge would significantly reduce the monetary amount required to the leave the ACC for another conference at some point in the future.

Over the past two years, various national reports have formally linked Clemson to both the SEC and the Big Ten as a potential expansion candidate. The SEC will jump from 14 to 16 schools with the additions of Oklahoma and Texas from the Big 12 this summer, and the Big Ten will jump from 14 to a stunning 18 this summer with Southern Cal, UCLA, Oregon and Washington all joining.

The expansion moves of those two schools have stoked fears of a “Power Two” setup where the SEC and Big Ten wield significantly more influence, have far better resources and dominate competition in the revenue-generating sports of football and basketball compared to other high-major schools such as Clemson.

Formal statements on the lawsuit from Clemson leadership are expected later Tuesday, a school spokesperson told The State.

Clemson will ‘fall behind,’ lawsuit says

It’s a monumental step for Clemson, which is a 71-year charter member of the ACC dating back to 1953, and third-year athletic director Graham Neff, who has long said publicly that Clemson will remain a good faith member of the conference but will always prioritize what’s best for the school in the long run.

Clemson and other ACC schools have fallen behind rival SEC and Big Ten schools in terms of their conference payouts (which are distributed by school and help support athletic departments, revenue-generating football teams and other sports) as those conferences have signed new television deals worth hundreds of millions of dollars.

Clemson’s lawsuit cites 2022 statistics that the Big Ten’s total revenue “from its media deal and other sources” was reportedly $845.6 million; the SEC’s total revenue from the same sources was reportedly $802 million; and the ACC’s was $617 million. That led to roughly the following annual revenue payouts to each member school of the three conferences, according to:

• Big Ten schools: $58.8 million per school (three schools agreed to take less)

• SEC: $49.9 million per school

• ACC: Between $37.9 million to $41.3 million per school

“As a result of the lucrative media deals struck by the Big Ten and the SEC ... the revenue gap between them and the other college athletic conferences, including the ACC, will grow larger with the passage of time,” an estimated average of $30 million per member institution per year, Clemson’s lawsuit says. “As the revenue gap widens over the coming years, Clemson will fall behind its peer institutions.”

That revenue gap is specifically of interest to Clemson because it’s home to one of the conference and nation’s most relevant football programs. Coach Dabo Swinney’s program made six straight College Football Playoffs from 2015-20 and won CFP national championships in 2016 and 2018. The Tigers’ football program remains the flagship sport on campus and a massive revenue generator for the school.

This is the second lawsuit the ACC is facing over its grant of rights penalty, as Florida State (which has been vocal about its displeasure with the conference) filed a similar lawsuit against the conference in December.

In the final two pages of its lawsuit, Clemson says it “respectfully requests” that the court enter declaratory judgments that:

• “The media rights Clemson granted to the ACC did not include any Clemson games that are played after Clemson ceases to be a member of the ACC”;

• The ACC’s withdrawal penalty is “void as an unconscionable and unenforceable penalty ... and Clemson is not required to pay the Withdrawal Penalty”;

• That Clemson “does not owe any fiduciary duties to the ACC and has not breached any legal duty or obligation” by filing Tuesday’s lawsuit.

According to documents, Clemson is working with the Greenville-based law firms Nelson Mullins Riley & Scarborough and Willson Jones Carter & Baxley on the lawsuit, as well as Massachusetts-based law firm Ropes & Gray.

Why was Clemson ACC lawsuit redacted?

Key portions of Clemson’s lawsuit concerning contract agreements between the ACC and ESPN were redacted in the public version of the suit filed in Pickens County. In a “motion to seal,” filed Tuesday along with the lawsuit, Clemson’s lawyers asked the court to allow them to proactively redact portions of their suit that concerned these agreements, which ESPN has argued are trade secrets.

Were they to publicize these agreements, Clemson lawyers say that they would “risk becoming embroiled unnecessarily in avoidable litigation.”

This issue became a flashpoint during the ACC’s lawsuit against Florida State University, when the school included unredacted provisions of the contract agreements in their court filing (including, among other details, the league’s full grant of rights). The ACC allows representatives of member schools to inspect the agreements in person at the ACC’s headquarters in Charlotte (formerly Greensboro).

These agreements contain competitively sensitive financial terms, such as rights fees and royalties that ESPN will pay, as well as sensitive, non-public, non-financial terms such as the parties’ future rights and obligations, per the lawsuit against FSU.

In a blistering motion filed by ESPN, the sports network’s lawyers argued in February that these agreements were “highly confidential, commercially sensitive trade secrets” and their disclosure would “irreparably threaten their business interests.”

In asking to redact portions of the lawsuit, Clemson’s lawyers said Tuesday that ESPN raised the “specter of criminal liability” when they questioned whether FSU’s attorneys had committed a felony by breaking Florida’s public records law by disclosing trade secrets.