Tuesday, February 21, 2012

West Virginia and the Big East Break-Up on Valentine’s Day

Valentine’s Day 2012 marked the end of the twenty-one year relationship between West Virginia University (WVU) and the Big East Conference, and while no love was lost, the parties did manage to reach a settlement agreement. The agreement settled both the lawsuit that WVU filed against the Big East at the end of October 2011 in West Virginia and the Big East’s subsequent countersuit filed against WVU less than a week later in Rhode Island. WVU sued the Big East claiming breach of fiduciary duty and the Conference brought an action claiming that WVU breached its contractual obligations to the Big East.

The settlement agreement enumerates the terms of payments to be made and requirements to be fulfilled by both parties. When WVU announced it was leaving the Big East in October 2011, it initially paid the Big East $2.5 million, only half the amount of the buyout that was stipulated in the Big East bylaws at the time. However, this buyout amount was subsequently raised to $10 million, as the Big East sought to inoculate itself from further conference poaching. The agreement calls for WVU to pay the Big East a lump sum of $8.5 million, much of which will likely come from University donors by way of the WVU Foundation, a private fundraising organization that recently set up a “Big 12 Transition Fund.”

The agreement also provides that a “Forecasted Amount” of $9 million will be forfeited by WVU, with the Big East paying WVU any amount that it is entitled to receive from 2011-2012 Conference revenues beyond that $9 million figure. The settlement also sets forth numerous other terms and conditions, including review and mutual agreement on the terms of a financial reconciliation report to be composed by the Big East at the end of the fiscal year. WVU will be required to pay any additional amounts owed to the Conference to effectuate its full release.

WVU certainly encountered several obstacles on its path to the Big 12, but it will now officially become a member of the Conference as of July 1, 2012 (pending its compliance with the settlement agreement). While this particular suit has been resolved, its precedential effect bears monitoring. Following the settlement, the Big East released a statement that reads, in part, “West Virginia University has acknowledged and agreed that the Court in Monongalia County, West Virginia, will enter a judgment that the Big East Conference Bylaws are valid and enforceable, and will dismiss with prejudice all of West Virginia’s claims against the Conference.”

However, the West Virginia Court only recognized the validity of the bylaws as part of the consent decree it issued as a result of the parties’ settlement. This recognition is not a binding declaration that every provision of the Big East bylaws is valid and enforceable against remaining members. This could leave the Big East vulnerable should another university follow in WVU’s footsteps and challenge the Conference in court. For a conference that has been particularly susceptible to departures during this recent phase of realignment, the financial settlement with West Virginia may prove illusory its ongoing pursuit of stability.

Certainly, Syracuse University and the University of Pittsburgh are watching closely as institutions leaving the Big East for the Atlantic Coast Conference (ACC), but as of now, both the Orange and the Panthers have pledged to wait the full twenty-seven months (pursuant to Big East bylaws) prior to joining the ACC, which would be the 2014-2015 season. While the Big 12 enjoys a greater individual member payout than the ACC (currently, approximately $15 million versus $13 million), the “lame duck” status and monetary gains in a move to the ACC (current Big East payout is approximately $3 million for football members*) may prove too great a temptation for the Mountaineers' former Big East brethren.

*Note that these figures are through 2013, and Big East basketball/non-football schools receive an even smaller television payout, but that this amount will assuredly go up as the market dictates despite the departure of WVU, Syracuse and Pitt.

Hat tip to law clerks Brian Konkel and Gabriela Schultz for their assistance on this piece.