In other news...

[M-I-Coug]

Mountain West seeks to dismiss Pac-12 lawsuit over $55 million poaching penalty​

Jon Wilner
Nov. 25, 2024 at 12:53 pm

Two months after the Pac-12 took the Mountain West to court over the legality of the so-called poaching penalty in the scheduling agreement between the conferences, the defendant fired back.

In a filing Monday in the Northern District of California, the Mountain West asked the court to dismiss the case and claimed the Pac-12 failed “to allege any harm to competition or to itself.”

The Pac-12 has until Jan. 13 to file its opposition to the motion, according to a case timeline approved by U.S. Magistrate Judge Susan van Keulen. A hearing on the motion to dismiss is scheduled for March 25.

At stake: Tens of millions of dollars in penalties the Mountain West believes it should receive from the Pac-12 after the latter approved membership in September for Boise State, Colorado State, Fresno State, San Diego State and Utah State.

The penalty was included in a scheduling agreement for the 2024 season that provided Washington State and Oregon State with six games each against Mountain West schools. (The option to extend the deal into the 2025 season was not exercised.)

According to the Mountain West’s motion, the scheduling agreement gave the Pac-12 three long-term options:

“(1) [M]erge with the MWC under the “Pac-12” banner; (2) offer membership in the Pac-12 to some, but not all, of the MWC’s schools; or (3) dissolve the Pac-12 and allow its members to join any other conference.

“The Pac-12 chose the second option, and now complains that the fees it unconditionally guaranteed to pay the MWC for damaging the integrity of the MWC by cherry-picking select MWC schools violate the law.”

According to the agreement, the Pac-12 owed the Mountain West a starting amount of $10 million for any school that joined the Pac-12 and an additional $500,000 for each subsequent school that made the jump.

The total amount for the five schools that are set to join the Pac-12 in the summer of 2026 is $55 million.

(Gonzaga, which is also joining the Pac-12, is not part of the lawsuit as a member of the West Coast Conference.)

Mountain West commissioner Gloria Nevarez defended her conference after the lawsuit was filed in September, stating: “The (poaching) provision was put in place to protect the Mountain West Conference from this exact scenario. … At no point in the contracting process did the Pac-12 contend that the agreement that it freely entered into violated any laws.”

A letter to Nevarez from Pac-12 commissioner Teresa Gould in September, and obtained by the Hotline through a court-record request, indicates the Pac-12 opposed the poaching penalty in real time.

Gould wrote that the Mountain West imposed the fees “over the Pac-12’s objection” during the fall of 2023, when WSU and OSU were “desperate to schedule football games” and “had little leverage to reject this clear restraint on competition.”

Gould added that the circumstances did not “make these penalties any less unlawful.”

In its complaint, the Pac-12 called the poaching penalty “anticompetitive” and asked the court to declare it “invalid and unenforceable.”

The lawsuit argues that the penalty was designed “to stifle” competition and create an “artificial barrier to entry” for schools to join the Pac-12 — a barrier that, the complaint states, also harms the Mountain West’s own members by limiting their market value in college football realignment.

The Pac-12 is not seeking damages.

Any reduction in, or elimination of, the penalties could clear cash for the Pac-12’s pursuit of an eighth football-playing school by July 1, 2026 to comply with NCAA membership requirements.

The Mountain West is counting on the poaching penalty to compensate its remaining schools for the damages caused by the defections of the five members.

The Mountain West’s motion rejects the Pac-12’s claims about competitiveness:

• “The Pac-12 does not allege the existence of any defined market”;
• “The Pac-12 has not alleged that the MWC exerts any power over any market”; and
• “The Pac-12 admits that Section 7.01 of the Scheduling Agreement is ancillary to a legitimate, pro-competitive purpose.”

That section of the scheduling agreement, which was announced in December 2023, is titled “Termination fees” and states:

“Accordingly, as a material inducement to MWC’s willingness to enter into and perform its obligations under this Agreement, the Pac-12 covenants and agrees that, if (A) at any time prior to the two year anniversary of the expiration or termination of this Agreement pursuant to Article IV (the “Withdrawal Fee Period”), the Pac-12 makes an offer to any MWC Member Institution … which any such MWC Member Institution accepts, or announces that it will accept, during the Withdrawal Fee Period … the Pac-12 shall pay liquidated damages to MWC in the form of the termination fee as set forth on Schedule 7.”

The complaint indicates the poaching penalty “saddles the Pac-12 with exorbitant and punitive monetary fees for engaging in competition by accepting MWC member schools into the Pac-12” and therefore violates California’s Unfair Competition Law. It also notes that “Schools have departed from the MWC for other conferences in recent years. In none of those instances did the new conference pay the MWC ‘poaching penalties.’ ”

Jon Wilner: jwilner@bayareanewsgroup.com

 

[95coug]

Questions this raises to me:

- did the agreement indicate what court has jurisdiction over conflicts? Goes to the relevance of the California unfair competition law.
- can the Pac-12 point to precedent, where a MWC team has jumped conferences and not paid poaching fees? More importantly, can they point to a case where this happened and there was language that allowed a fee but it wasn’t charged?
- if the fees are declared invalid, can the MWC afford the signing bonuses it promised its remaining members, especially UNLV and Air Force?

The fact that the PAC-12 protested against the fees at the time may not be relevant, because they signed the agreement. They’re clearly trying to make the case that it was coercive, and their only option was to agree to unfair terms due to their desperate situation. There’s certainly some truth to that, but its validity and enforceability will depend on governing law and whether a judge thinks their claim is valid.

If it gets tossed and the MWC can’t afford its payments, I’d say that’ll invalidate the remaining teams’ commitments…and free us up to approach others. Honestly, I’d feel better about it if we had filed immediately to challenge the validity, rather than waiting a year, terminating the agreement and invoking the penalties and then filing.

 

[Suudy]

If it gets tossed and the MWC can’t afford its payments, I’d say that’ll invalidate the remaining teams’ commitments…and free us up to approach others. Honestly, I’d feel better about it if we had filed immediately to challenge the validity, rather than waiting a year, terminating the agreement and invoking the penalties and then filing.

That's the issue, though, with standing. Preemptive suits against alleged harm cannot be sustained unless there is actual harm. I think its crap that you have to wait until you are actually harmed to file suit. But that seems to be the case here. The P12 couldn't file a suit about the poaching fees until it was actually harmed by them.

 

[COUGinNCW]

I can only think of BYU (independent and WCC) and Utah that have left the MWC.

 

[Loyal Coug1]

IMHO this lawsuit is complete BS. Yeah the MW had us over a barrel. So what? We signed the agreement, we should have done the reverse merger, we choose to go another direction with full knowledge of what that would mean. Then we call foul after doing so? The Pac-2 looks stupid on this one. Kind of like a NDA for an employee when they get a job?

 

[CougInSpain]

According to the Mountain West’s motion, the scheduling agreement gave the Pac-12 three long-term options:

“(1) [M]erge with the MWC under the “Pac-12” banner; (2) offer membership in the Pac-12 to some, but not all, of the MWC’s schools; or (3) dissolve the Pac-12 and allow its members to join any other conference.

“The Pac-12 chose the second option, and now complains that the fees it unconditionally guaranteed to pay the MWC for damaging the integrity of the MWC by cherry-picking select MWC schools violate the law.”

If the language states that one of the long-term solutions was to offer "some" of the schools membership within the Pac-12, then the case should go through and the Pac-12 handed the W.

 

[Loyal Coug1]

According to the Mountain West’s motion, the scheduling agreement gave the Pac-12 three long-term options:

“(1) [M]erge with the MWC under the “Pac-12” banner; (2) offer membership in the Pac-12 to some, but not all, of the MWC’s schools; or (3) dissolve the Pac-12 and allow its members to join any other conference.

“The Pac-12 chose the second option, and now complains that the fees it unconditionally guaranteed to pay the MWC for damaging the integrity of the MWC by cherry-picking select MWC schools violate the law.”

If the language states that one of the long-term solutions was to offer "some" of the schools membership within the Pac-12, then the case should go through and the Pac-12 handed the W.

What do you mean? Yes, that was option 2, and option 2 included the poaching penalties. Which the Pac-2 agreed to. Why then would we win? The MW was under no obligation to save our asses. So what if we were F-ed otherwise? Not their fault. They threw out a lifeline which included a pretty shitty set of stipulations, and we jumped on it. Now we cry foul after doing exactly what the agreement was crafted to account for.

P.S. Teresa is an idiot. And where is our 8th team, and how come the Pac seems to be out of money after our giant windfall?