A North Carolina appeals court Tuesday preserved a lawsuit that could force the University of Maryland to pay a $52 million fee for leaving the Atlantic Coast Conference.
The ACC sued Maryland after the school said last November it was leaving for the Big Ten Conference. That lawsuit came after the ACC voted to increase the exit penalty to three times the conference's operating budget, which the appeals court calculated at nearly $52.3 million.
A state Court of Appeals panel rejected Maryland's bid to dismiss the lawsuit. It was filed in Greensboro, where the ACC is headquartered. The three-judge panel's unanimous decision means Maryland has no automatic right to a state Supreme Court appeal. But the higher state court could choose to hear an appeal.
The $52 million fee is the highest penalty ever assessed on a school for leaving an athletic conference and would be nearly equal to the school's yearly athletic budget, Maryland's attorney general's office said in May. The school's athletic department last year cut seven sports teams as it struggled with multimillion-dollar annual losses.
Maryland's representative on the ACC's Council of Presidents, which has the authority to alter the conference's governing constitution, voted against increasing the penalty from what the court calculated would have been a fee of about $17.4 million.
Despite Maryland's negative vote on increasing the exit fee, "each member, including the University of Maryland, has agreed to be bound by the vote of the Council,'' Judge Robert N. Hunter Jr. wrote in the appeals court's decision.
The university sued the ACC in Maryland in January, calling the amount an illegal penalty. A Maryland judge has put the school's lawsuit on hold until North Carolina courts issue a final judgment. Maryland's ACC departure is scheduled for July.
Maryland's attorneys argued in the North Carolina lawsuit that the ACC's lawsuit should be dismissed because the school is an arm of the state, and Maryland and other states enjoy sovereign immunity that protects them from lawsuits. North Carolina's Court of Appeals rejected that argument, saying it doesn't apply to the ACC's claim that the penalty is due because Maryland broke its contract.
North Carolina's courts don't allow state officials to claim they don't have to respect contracts, so the sovereign immunity claim "will not be extended to allow defendants to escape a determination as to their rights and obligations under an alleged contract,'' Hunter wrote.
Maryland officials were considering their options after Tuesday's ruling, said David Paulson, a spokesman for Maryland Attorney General Douglas Gansler. University representatives did not return messages seeking comment.