Big 12 bylaws vs. Nebraska/Colorado

[RSSBot]

The rumbling about Nebraska and Colorado being withheld their conference revenue after announcing their intentions to leave the conference is still pretty quiet. Outside of Nebraska chancellor Harvey Perlman saying he didn't believe withholding the money would be "appropriate" and Big 12 commissioner Dan Beebe adding that he was "curious" as to the Huskers' case in the matter, there hasn't been much heard from either party.

What do the bylaws say in the matter? Let's take a look, piece by piece, skipping to the important, applicable sections of the 14-page document.

No Member Institution shall be entitled to distribution of the then-current revenues from the Conference after the effective date of its withdrawal, resignation, or the cessation of its participation in the Conference...​

English translation: Once you tell the conference you're leaving, you can't have any more of the conference's money.

That seems pretty clear, but Nebraska seems to believe it should receive its full share for the yet-to-be-played 2010 season, which would contradict this.

If a Member Institution gives proper Notice pursuant to Section 3.1 (a “Withdrawing Member&rdquo, then the Members agree that such withdrawal would cause financial hardship to the remaining Member Institutions of the Conference, and that the financial consequences cannot be measured or estimated with certainty at this time.​

English translation: You left. We all agree we're going to have less money, but we don't know how much we're going to lose.

This is where things start to get complicated, and may have to be sorted out in court. Tom Shatel at the Omaha World-Herald noted last week the use of the word "damages" later in the bylaws, and how the schools would have to prove that in court, according a few lawyers he spoke with. Clearly, the Big 12's survival hinged on the fact that there would not be financial damages, and everyone was better off. But in the bylaws, it states that the schools "agree" that there would be "financial hardship," though those hardships can't be measured.

So which is it? Sounds like one side is going to get lawyer'd.

The bylaws also lay out the timeline of what schools would have to pay. Colorado's exit reportedly may come earlier than 2012, but Nebraska gave over a year's notice for their exit, so they would be subject to giving up 80 percent of their conference revenue. They've set a date of July 1, 2011 for the move to take effect, and announced the move on June 11, 2010.

Also, a quick reminder: The Forgotten Five did agree to offer up their money from Nebraska and Colorado to Texas, Oklahoma and Texas A&M, but Texas has publicly rejected the offer and it's currently off the table. Presumably, any fees paid by Nebraska and Colorado would be distributed equally.

The Member Institutions agree that such reduction in the amount of revenues distributed to a Withdrawing Member is reasonable and shall be in the form of liquidated damages and not be construed as a penalty.​

English translation: By signing this document, you believe these penalties are reasonable.

This is where the lawyers would really be needed. It doesn't necessarily say the conference must prove damages, but all the positive talk about moving forward into more prosperity for each of the teams could become Nebraska and Colorado's out. If this case ends up in court, which I suspect it might, I imagine the main point of contention will be there. Beebe made a strong case, and has contended that the league's revenues will rise in the coming years. But check the wording in his most recent statement: He's clearly confident and media-approved, but he avoided mentioning finances. I can't help but chuckle a little bit at the clear irony of losing millions of dollars just by saying you will do the opposite, but I don't have any money to lose in the case. I doubt any of the administrators from the remaining 10 Big 12 schools are laughing with me.

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[Junction]

I think he's got one thing screwed up there....

What do the bylaws say in the matter? Let's take a look, piece by piece, skipping to the important, applicable sections of the 14-page document.

No Member Institution shall be entitled to distribution of the then-current revenues from the Conference after the effective date of its withdrawal, resignation, or the cessation of its participation in the Conference...

English translation: Once you tell the conference you're leaving, you can't have any more of the conference's money.

That seems pretty clear, but Nebraska seems to believe it should receive its full share for the yet-to-be-played 2010 season, which would contradict this.

There's no contradiction there. You don't get any current money after the effective date of your withdrawal, resignation or cessation of participation. He seems to think that's the date they told the conference they were leaving. I think, and maybe the legal beagles here can correct me, that the effective date is the date they are actually finished in the conference. Probably June 30, 2011, if they both make the move for the 2011 seasons. Why CU and UNL will stick around and play in the conference in 2010 but not get any share of the 2010 money makes no sense at all...

 

[Deleted member 807]

There is some serious jockying going on. CU has accepted an invitation to join the Pac 10 with the 2012 season.
CU provided 2-year notice that they would no longer be part of the Big 12 beginning in 2012.

This means that CU is still a current member of the Big 12.

A four corner read of the by-laws is that CU gave the necessary 2-years notice, and therefore CU would only be entitled to 50% of their share for the remaining two years of the contract.
2010: 50% of approx 8.6M = $4.3M
2011: 50% of approx $8.8M = $4.4M
CU nets $8.7M and the other $8.7M is distributed to the remaining Mack 10 members.

Nebraska also gave notice they were leaving, but theirs is a 1-year notice. This seemingly would entitle NU to a 20% allocation of conference revenue.
2010: 20% of approx $10M = $2.0M for NU. $8.0M for the Mack 10.
2011: Mack 10 gets full $10.2M

With Nebraska gone in 2011, this makes a hash out of the Big12 schedule. With Nebraska out of the way, how would an 11 team conference operate? How would the conference champion be determined? Is it easier to have only 10 teams in 2011? The Big 12 and CU are in a stand-off as these questions linger. If CU says they are leaving in 2011, then it would seem CU would only be entitled to 20% of their 2010 revenue.
2010: CU - $1.7M, Mack 10 - $6.9M
2011: Mack 10 - $8.8M.
If CU blinks first, it will cost the Buffs $7M in B12 revenues.

But the Big 12 might tell CU that the conference prefers only 10 members in 2011, and CU must go following the 2010 season. CU would argue that the Buffs are entitled to the 50% provision because they are being forced out in 2011, and have not voluntarily left. CU would expect to collect the $4.3M share of this season's take. The Mack 10 would naturally like to kiss CU goodbye and pay out $1.7M.

Things get ugly from there. Nebraska is making the arguement that their notice of defection was due to instability caused by Mizzou and due to Colorado's decision to join the Pac10. Because Beebe and the Mizzou governor have publically gone on record in one way or another indicating that the conference is not harmed by Nebraska's exit, then Nebraska should be paid 100% of their 2010 share.

Well, if Nebraska gets 100%, then a precident will have been sent. CU would also declare an entitlement to 100% payout in 2010.

This leaves the Mack 10 and the two defectors to negotiate a settlement. Going to court is the last thing any party wants to do, as the discovery could get messy for everyone involved.

A settlement would require CU and the Big 12 to come to terms on 2010. Will it be 100% ($8.6M), 50% ($4.3M) or 20% ($1.7M). The answer to this settlement completely depends on how Nebraska's claims are resolved.

An arbitrator might decide that 100% is too much to pay Nebraska, and 20% is too little. Split the difference and pay Nebraska 60%.

Then Colorado would be asked if they'd take 60% ($5.2M) in 2010 on the condition that they are leaving in 2011.

This is what should happen, in my opinion.