ACC, Maryland exit lawsuit before NC appeals court

RALEIGH, N.C. (AP) -- Judges in North Carolina will weigh in on the big-money game of musical chairs involving universities, athletics conferences and billions of dollars in broadcast revenues.

North Carolina's Court of Appeals is hearing arguments Thursday into whether the University of Maryland will pay a $52 million exit fee for leaving the Atlantic Coast Conference. A ruling could take several months, and any decision could be appealed to the state Supreme Court.

The ACC sued Maryland in North Carolina, where the conference is headquartered, after the school said in November it is leaving for the Big Ten Conference. The university responded by suing 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.

Coming court decisions will set the size of a likely financial settlement as well as help develop ground rules on financial penalties tied to shifting sports allegiances, said Paul Haagen, a Duke University law professor and co-director of the school's sports law center.

"Exit fees are here. They're here to stay and they're here basically to prevent schools from capitalizing on their own short-term self-interest at the expense of the other schools in the conference," he said.

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 multi-million dollar annual losses.

Maryland's ACC departure is scheduled for July.

Maryland's attorneys argue in court filings that North Carolina courts have no jurisdiction because the school is an arm of the state, and states enjoy sovereign immunity that protects them from lawsuits. The ACC's lawyers dispute that argument, contending sovereign immunity doesn't exist across state lines or in contract claims.

These are preliminary issues before courts have to decide the bigger issue - whether the exit fee's size is justifiable, Haagen said.

The ACC's exit fee was around $12 million to $14 million before September 2011. That's when the league announced it would add Pittsburgh and Syracuse from the Big East, which led the league to raise the cost to $20 million. The fee was raised again last September with the addition of Notre Dame in all sports except football. The revised fee is equal to three times the conference's $17 million annual operating budget.

Maryland argues the increased exit payment provision adopted about two months before it announced it is leaving - over the votes of Maryland President Wallace Loh and Florida State University - is invalid.

If a settlement isn't reached, the dispute could have a lasting influence by setting a guidepost on how athletic conferences can enforce unity, Duke University's Haagen said. Courts will have to decide whether the ACC exit provision was set by estimating the damages to other schools when conference members depart, or is an illegal penalty clause, he said. For example, while a home construction contract with a builder can make the builder responsible for hotel bills if the job isn't done by an expected date, it can't seek to simply punish the builder with an extreme penalty, Haagen said.

"Here the amounts are very high. Is it really what the ACC and other institutions will lose as a result of losing Maryland in terms of scheduling, planning, damage to the brand?" Haagen said. "Or, is this an attempt to hold them in or punish them for leaving that has nothing to do with the actual harm suffered?"

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Emery Dalesio can be reached at http://twitter.com/emerydalesio

Scalia expects NSA wiretaps to end up in court

AP Photo/Manuel Balce Ceneta

McLEAN, Va. (AP) -- Supreme Court Justice Antonin Scalia says the courts will ultimately have to determine the legality of wiretapping by the National Security Agency.

And he's not sure that's a good thing.

Scalia addressed NSA wiretapping Wednesday in a speech to the Northern Virginia Technology Council when he was asked about technology companies' role in protecting customers' privacy when their data has been unconstitutionally collected.

Scalia said the high court originally ruled that there were no constitutional prohibitions on wiretaps because conversations were not explicitly granted privacy protection under the Fourth Amendment, which protects against Americans against unreasonable search and seizure of "their persons, houses, papers, and effects."

That 1928 opinion, in Olmstead v. U.S., was overturned nearly 40 years later by the Warren court, which found, Scalia said, "there's a generalized right of privacy that comes from penumbras and emanations, blah blah blah, garbage."

"The consequence of that is that whether the NSA can do the stuff it's been doing ... which used to be a question for the people ... will now be resolved by the branch of government that knows the least about the issues in question, the branch that knows the least about the extent of the threat against which the wiretapping is directed," he said.

He also said the Constitution calls for a balancing test to determine whether any search or seizure is reasonable, and that depends on the threat that is posed - another question he said courts are ill-equipped to answer.

He talked about the pat downs and other searches that occur at airports as an example of that balancing act.

"That's a terrible intrusion of privacy," he said. "But you're willing to do it because of the seriousness of the threat."

As for the question about tech companies' obligations to inform clients about an illegal intrusion of their information, Scalia said that, yes, a company should speak up if it knows a customer has had its data illegally seized. "But it's pretty hard to know that. ... If it's a governmental wiretap, presumably it's been approved by somebody, some lawyer expert in the field who said it was OK, and you better be damn sure you're right before you blow the cover."

In July, following the disclosures by NSA leaker Edward Snowden about the extent of the agency's surveillance programs, the Electronic Privacy Information Center filed a direct appeal to the Supreme Court asking it to bar NSA from collecting phone call records on millions of U.S. customers. The court has not yet decided whether to hear the case.

Earlier this year, the Court ruled in a 5-4 vote that clients represented by the American Civil Liberties Union lacked standing to challenge a 2008 law under which the NSA conducts aspects of its surveillance. Scalia voted with the majority to turn away that challenge to the law.