According to an email obtained by CBS Sports, the Big East was notified today that West Virginia University has filed a suit against the Big East to attempt to avoid giving the 27 months notice required by conference bylaws. The suit claims a "lack of leadership, breach of fiduciary duties by the Big East and its Commissioner, and voting disparity between the football and non-football schools resulted in the Big East football conference no longer being a viable and competitive football conference."
West Virginia could leave the Big East at any time, but risks a breach of contract suit if they fail to comply with the notice requirement. The Big XII will need a 10th member next fall if the Missouri Tigers are able to complete their move to the SEC in time. The Big East, however, has taken a hard line approach to the exit notice provision and has refused to negotiate with the Mountaineers at this time.
Nothing will stop the Mountaineers from leaving the Big East for the 2012-13 season. Even if the Big East were to sue them for breaching the contract, they would not be likely get a court to order them to play two more seasons of Big East sports. Instead, this is about how much they will have to pay. If West Virginia wins the suit, they wouldn’t pay anything, but there is more to it than that.
Why this is brilliant for WVU
Filing this suit was a calculated decision on the part of WVU. Even without winning the suit they could benefit in two ways: (1) the suit is now initiated in West Virginia state courts forcing the Big East to litigate the matter there, and (2) the initiation of this suit might force the Big East to the negotiating table. I’ll unpack those two points further.
First, it is clear that WVU needs to leave the Big East at the end of this academic year. They likely promised the Big XII that they could or would join that conference at that time and have now made public representations as to that intent. Doing so, however, would breach their contractual relationship with the Big East under that conference’s bylaws, opening them up for a lawsuit by the conference.
The claims asserted in their suit are pretty standard counterclaims that would be asserted by a party charged with breach of contract. Asserting that they weren’t bound by the contract because the other party breached it first, along with other legal excuses.
By filing a suit against the Big East, however, WVU gets to choose the court in which it will be heard. This is especially true here because WVU is an "alter ego" of the State of West Virginia, which means that the case cannot be moved to a Federal Court (without getting too deep into federal jurisdictional law: you can’t sue a state in federal court unless the plaintiff alleges federal legal questions). The Big East now must assert its breach of contract claims against WVU in West Virginia’s state courts, and if it goes to trial, a jury comprised of the residents of Monongalia County, where WVU is located, will decide the facts of the case.
West Virginia also has elected judges in their trial courts. Imagine finding against the state university in a year when you were up for reelection.
The second point is a simpler one. The first instinct of any litigator when handed a case is to contemplate settlement. Depending on the type of case, those discussions might come sooner rather than later. Here, the Big East and WVU could be poised for a very lengthy (and therefore expensive) discovery process and motion practice before the legal issues are ever actually decided. The potential expense of that litigation would likely cause most attorneys to advise their client to explore options to settle — a move that would bring the Big East to the bargaining table where WVU can try to negotiate an early exit.
Why this could backfire
The Big East clearly wasn’t eager to lawyer up and file suit immediately upon hearing West Virginia’s intentions to leave without notice. The conference litigated in 2003 in response to the ACC inviting three Big East members and crippling the football conference, but the legal fees the league had to pay outweighed the proceeds of that suit.
West Virginia, by initiating the suit, forces the conference to obtain legal counsel to litigate these issues, but that in itself opens another can of worms.
First of all, there will without question be one or more counter-suits against West Virginia. Anticipatory breach of contract, breach of their implied covenant of good faith and fair dealing, breaching any non-disclosure agreements that might have existed and anything else they can cook up. It won’t stop with counterclaims against West Virginia though.
Lawyers are trained by grueling and unforgiving law school exams to spot issues, and there is one glaring issue that WVU’s suit raises: tortuous interference against the Big XII. If I am the Big East, I’d undoubtedly bring them into this suit now.
The ACC is free and clear of tortuous interference for the most part because the Big East bylaws contemplate the withdrawal of members to join other conferences by including the exit fee and notice requirements. The ACC, however, has not encouraged Pittsburgh or Syracuse to breach these provisions and has stated that they are happy to wait for both schools to give their contractual notice unless the Big East wishes to let them leave sooner.
The Big XII, however, is desperate for new blood. If Missouri leaves that conference as of next season, they will need an immediate replacement to continue their 9-game conference schedule. If they have only 9 members, it means that they will only be able to play 8 conference games, breaching their television contracts (which may cost them millions of dollars each), and causing them to scramble to add another game for each of the next two seasons in football — which could also be an expensive proposition. The Big XII needs West Virginia to join in 2012 to avoid risking that additional expense.
There is nobody following college sport today that doesn’t know about the Big East’s 27-month notice requirement. If you didn’t hear about it in 2003, you certainly heard about it in September, when Syracuse and Pittsburgh withdrew from the conference. If the Big XII didn’t learn of the notice provision through those media reports, then they should have learned of it while doing due diligence on West Virginia. Nonetheless, they invited the school with an entry date of July 2012 — asking WVU to breach their contractual relationship with the Big East — that is the definition of tortious interference, convincing a party to breach a contract with another.
In fact, if the Big East were feeling particularly ambitious, it may be possible to name each of the Big XII member institutions as defendants in that suit (depending upon how the conference is legally organized).
Its all fun and games until you have a chance encounter with the process server. WVU would certainly not be making fast friends in its new conference if it were to get them dragged into costly litigation.
Does WVU’s argument have any merit?
WVU’s complaint doesn’t have much meat to it. Parts of it require significant evidence to be proven and other claims seem entirely baseless.
The factual allegations are questionable as well. Paragraph 19 alleges that the Big East allows the non-football members to vote on football issues, but then contradicts itself by quoting a Big East bylaw provision that specifically denies the non-football members that right.
That error is not the only one in the document, which consistently uses the term "denigrate" inappropriately. It is clear that the drafter of the complaint intended to use the term "disintegrate" instead. The sloppy drafting of the complaint makes it clear that it was a rush job to file something as soon as possible.
Some of the claims contradict themselves as well. The claim that the conference breached a fiduciary duty by failing to be "proactive" in maintaining the level of competition presumably refers to delays in expanding the football side of the conference. That claim comes shortly after a paragraph about inviting TCU to join the conference and is followed by paragraphs claiming that the conference had a duty to maintain an 8-football to 8-non-football split in membership.
The main allegations are as follows:
- The Big East and its commissioner breached fiduciary duties that voided the contractual relationship with WVU by failing to make the football side of the conference stronger and by favoring the basketball schools.
- The Big East is no longer viable as a football conference and therefore the purpose of the agreement for WVU is frustrated.
- The Big East did not make TCU give 27-months notice and has therefore waived that provision of the bylaws.
- WVU enclosed an offer to pay an undisclosed sum of money to the Big East for early withdrawal with its initial withdrawal fee payment of $2.5million and the Big East accepted that offer by cashing the check.
- The 27-month notice provision is impracticable and unduly burdensome to perform and is an unreasonable restraint on trade.
The fifth allegation is actually an amalgam of allegations in counts II, IV and V of the Complaint. These are the most reasonable arguments made by the university. None of them, however, should excuse WVU completely for the breach of contract. However, the enforcement of the 27-month notice very well could be found impracticable, unduly burdensome and an unreasonable restraint on trade. In that case, WVU may be able to escape from giving that notice, but the court should still order them to pay damages, which would be determined by a jury at trial — which means there would not be much in the way of damages.
WVU’s problem, however, is that they voted to enact the 27-month notice provision. They were aware of the rule when they voted it in and it has been applied similarly to other full members who opted to withdraw. If the Big East has any chance to enforce the provision, that factor is paramount to their argument.
They center much of their argument on the claim that the Big East breached the contract first by failing to carry out its fiduciary duties. Those fiduciary duties included the duty to promote the prestige and success of the conference, to take proactive measures to maintain the level of competition, and to maintain a balance of power between the football and non-football interest groups. WVU’s complaint is primarily concerned with the Big East’s duties to WVU.
The problem is that the Big East and its commissioner have a fiduciary duty to serve the interests of all 16 members and not just to West Virginia or to the football schools. This is the primary reason why most major conference decisions are voted on by the university presidents or athletic directors.
While the Big East may have had a duty to maintain certain balances of power, the balance of power was affirmatively shifted in favor of football schools like WVU when an invite was extended to TCU last year. That the balance shifted heavily to the non-football members recently when Syracuse and Pittsburgh withdrew, is not something within the control of the commissioner and was not an affirmative act of the conference.
West Virginia would have to prove that the current status of Big East football expansion is being so controlled by the non-football members that it is to the detriment of the conference. The proposed addition of basketball non-entities such as SMU as well as far-flung institutions such as Boise State, are hardly basketball decisions, however.
West Virginia argues that these breaches of fiduciary duties "presumably forced" the trio of Pitt, ‘Cuse and TCU to withdraw from the conference. "Forced" is a strong word, which makes it harder to prove. That allegation requires internal documents from each of those schools and knowledge of their internal debate over conference realignment. WVU would have to prove that Pittsburgh had no other option but to join the ACC – a preposterous claim.
The claim that the Big East is no longer viable as a football conference is also a specious claim. It was perfectly viable and still is for the time being, and certainly would be during the 27-month period that all three departing members would remain in the conference. Furthermore, the Big East’s impending invitations to new football member schools would also presumably help it to remain viable in that sport going forward.
At worst that claim is frivolous and at best it is not yet ripe for litigation until it is known whether the Big East will be able to expand on the football side.
That the Big East did not hold TCU to a 27-month notice is an interesting claim that would depend on the unique legal situation of TCU. Almost certainly there was a contract signed between the Big East conference and TCU wherein their contractual relationship with the conference was defined. The terms of that document would be informative regarding the basis for this claim.
However, it can be assumed that since TCU had no voting rights in the Big East at the time of their withdrawal that they were not legally a part of the conference or bound by the bylaws at that time, making their situation potentially distinguishable from that of the other three schools. The lack of 27-month notice for TCU would only potentially constitute a waiver if they were bound by the bylaws at the time.
Finally, WVU’s claim that the Big East accepted their offer of money-for-immediate-exit by cashing a check for one half of their withdrawal fee is completely baseless. Unless their payment was above and beyond the $5 million that was owed as a fee for withdrawal, it would not be sufficient consideration.
Why not? When it comes to consideration in contract law, almost anything will do. $1 is sufficient to sell fifty acres of property in New York City if the parties freely bargain for it. Where consideration can fail, however, is when that consideration is nothing more than what you were already obligated to do.
For example: If I offer to use my blinker whenever I make a left-hand turn on Constitution Avenue for the next two months in exchange for your Rolex, even if you agree to that deal, I cannot enforce it since I was legally obligated to use my blinker anyway.
Here, WVU was contractually obligated to pay the Big East $5million dollars when withdrawing from the conference. If they sent a check of $5million or less to the Big East with an offer to pay that amount in exchange for the 27-month notice to be waived, the Big East can cash that check, but no contract is formed. If the check was for $6 million, John Marinatto may have a problem, however.
Reports last week were that the payment tendered, was only $2.5 million.
That forum nonsense
The suit was filed in a state court in Monongalia County, West Virginia. The Big East will need to have its attorneys look into a way of moving the suit to another jurisdiction. If WVU were a private school like Villanova, the Big East could bring a suit into the federal court system by exercise of the "removal jurisdiction." That is available where a case that can otherwise be heard in the federal courts is first filed in state court.
Two types of civil cases can normally be brought in the federal courts: (1) an action between two parties from different states (assuming the value of the case is high enough); or (2) any case involving a question of federal or constitutional law. The second portion, however, does not apply to counterclaims, only the initial pleading.
In this case, there is no federal legal question at hand, and though the parties are from different states (the Big East is incorporated in Washington D.C. and headquartered in Rhode Island), removal is unavailable under a loophole in federal jurisdiction. That loophole is the rule that a sovereign state is not subject to removal jurisdiction under diversity of citizenship. WVU is a state university and as such it is for legal purposes the State of West Virginia.
What that means, is that unless some very smart lawyers can find a way to get the case out of West Virginia, it will likely be held there. The only way for a federal judge to hear this case might be on appeal to the U.S. Supreme Court – which would be many years and millions of dollars in legal fees away.
Brace yourselves for some protracted and messy litigation. The potential bright side is that the discovery process in this case could put more than a few formerly confidential documents onto the public record. Minutes of Big East meetings, emails from school and conference officials, and contracts between various parties could all be on display.
Then again, maybe that is the reason why this suit is likely to settle.