The Big 12 expansion groundswell

[statman]

I say we have the state give aTm a couple million, a mandate to stay in the Big 12, and a warm glass of shut the hell up and call it even.

Sums it up quite nicely...

[Pheidippides]

Statman, I'm trying to tell you you are using the word indemnify incorrectly. I am sorry I wasnt more clear. You can't indemnify yourself - that's called paying the bill.

[All-American]

But what happens to BYU's obligation to the Kraft fight hunger and poinsettia bowls?

[statman]

Statman, I'm trying to tell you you are using the word indemnify incorrectly. I am sorry I wasnt more clear. You can't indemnify yourself - that's called paying the bill.

Gotcha.

What's the legal term for "cover your own ass in case something goes badly wrong and someone decides to sue you?"

On a related note - anyone know what the stipulated exit penalties for the Big-12 contract are?

As I noted above, when you run the back-of-the-envelope numbers, the $100 million BYU wanted as an exit penalty (may have only been from TX or OU?) doesn't seem that ridiculous.

[Pheidippides]

Gotcha.

What's the legal term for "cover your own ass in case something goes badly wrong and someone decides to sue you?"

On a related note - anyone know what the stipulated exit penalties for the Big-12 contract are?

As I noted above, when you run the back-of-the-envelope numbers, the $100 million BYU wanted as an exit penalty (may have only been from TX or OU?) doesn't seem that ridiculous.

The term is pretty much what you just said. Or maybe accounting reserves, but that's boring.

[Blueintheface]

As a Tongan... I'll always respect a fighter. Got in some good brawls in the name of BYU back in the day (specifically with Wyoming fans).

And that K-State thread actually feels funny, rather than the nasty feeling I used to get from all the rest of the MWC schools not named Utah (I'm guessing the black people line is TIC). I spent two years in the Midwest and love the good ol' boys out there (they had no idea what a Polynesian was, and all thought I was a big Puerto Rican). Other than my few KKK run-ins, I just got a kick out of the ultra-friendly nature of the flatlands. Hopefully Viking is right and this happens, and sooner rather than later.

If your wrong Vike, you can't go man.

A local radio personality (can't remember which one) told a story the other day about when he was at a game in the South and some friendly folks approached him and asked where his team "could find a bunch of huge Puerto Ricans to play on (his) team."

That right there is good 'ol fashion "ig-nernce"

[Donuthole]

They simply don't have the money to indemnify themselves from the losses that could result from their departure from the Big 12. Do the math - it's a LOT of money!

Here - I'll do it for you...

I dont think there's anyone out there who would say that A&M's departure hasn't made the Big 12 significantly less stable. A&M's departure is also part and parcel to the formation of the first "Super Conference."

What happens to Baylor or Iowa State, if the Big 12 goes tits-up, Super Conference realignment does indeed happen, and they get left out in the cold? They've got demonstrable losses of $10-$15 million a year (plus bowl revenue & Big 12 money from the NCAA BB tourney, etc) that they can directly attribute to A&M breaking its contract with the league. If A&M had just honored the contract that everyone in the Big 12 signed in good-faith, Baylor & Iowa State keep getting their payday. But since they left...


Let's just assume those two schools get left out of the Super Conferences, and that their losses from TV, Bowl & NCAA Tournament revenue is $15 million a year per team. There are 5 years left on their TV contract * $30 million per year = $150 million in direct losses that Baylor and Iowa State could argue A&M caused them. Even if they settle at 50-cents-on-the-dollar, A&M is looking at a $75 million nut - half to each school. That's not chump-change. $100 million sounds like an awful lot of money, but in this case, it doesn't seem unreasonable. Isn't $100 million what BYU wanted inserted into the Big 12 agreement as a penalty for early departure from the conference? It seems a lot more reasonable once you put some numbers behind it...


But a $75 million - $100 million settlement is actually being ridiculously kind to A&M. Baylor & Iowa State could easily argue that their Big 12 membership should have rightfully yielded them $15 million a year in perpetuity, and that changes the loss numbers just a bit...

The value of a $15 million annuity payment to Baylor and Iowa State, over 30 years, with a discount rate of 5%, is $230 million. EACH. If you bump up the discount rate to 10%, the present value drops to "only" $140 million. EACH.

Ouch.

But there's more!

The above assessment assumes no growth in the payments expected from the Big 12 - it's $15 million a year for the next 30 years. But since the league's inception, Big 12 revenues disbursed to member schools have actually grown at an average of 7.6% per year.

If you want to see some SERIOUS loss/damage numbers, use the historical 7.6% annual growth rate on what starts as a 30 year $15 million annuity! With a 5% discount rate, you get a present value of $656 million per team. Using 10%, you get a much more affordable $332 million per team!

I think there's a reasonable chance that Baylor and/or Iowa State could convince a jury that A&M's actions & bad faith directly disrupted an ongoing stream of cashflows of $15 million a year, whose present value is somewhere between $140 million & $230 million to each team ($280 million - $460 million total exposure to A&M). And I don't think it's much of a stretch to envision a damages award that uses the historical revenue growth rate, jacking A&M's potential liability as high as $665 million - $1.312 BILLION.

For A&M to be able to settle for something around $75 - $100 million would be fantastic for them. That's a crap-load of money - and there still isn't any guarantee that either school would accept a settlement at that amount. But a $75 million - $100 million buyout would be a steal!

A&M could, in theory, be on the hook for up to 1.3 billion dollars! Which is exactly why the SEC wants nothing to do with A&M until it gets waivers for any & all losses associated with its departure from the Big 12, from any & all parties who might be able to claim such losses. It's also exactly why the SEC wants NOTHING to do with anything that looks like it could be considered 'tortious interference' - cuz then they could also be on the hook for making teams like Baylor and ISU whole...

Yeah, your continued misuse of the phrase "indemnify themselves" notwithstanding, most of your post is a load of nonsense and speculation far beyond any worst-case scenario. Plus, it fails to take into account each team's duty to mitigate. But thanks for the thoughts.

[Joe Public]

Gotcha.

What's the legal term for "cover your own ass in case something goes badly wrong and someone decides to sue you?"

Liability insurance

[Jarid in Cedar]

Gotcha.

What's the legal term for "cover your own ass in case something goes badly wrong and someone decides to sue you?"

On a related note - anyone know what the stipulated exit penalties for the Big-12 contract are?

As I noted above, when you run the back-of-the-envelope numbers, the $100 million BYU wanted as an exit penalty (may have only been from TX or OU?) doesn't seem that ridiculous.

I don't know what it is legally called, but in Medicine it is called "self-insuring." Any physican can do it in lieu of carrying malpractice insurance.

[Viking]

Bloody vikings...

BTW - The Scottish half is really half Norwegian, as well. That makes you 75% raging Viking and 25% simpering Brit.

My Viking side has already brutally drawn and quartered the Brit side of my personality. All that's left is Norwegian at this point. Ask Doctorcoug...he's still got gentility from the brit side left.

[EuropeanFootballMale]

Gotcha.

What's the legal term for "cover your ass"

Get someone else to indemnify you.

[creekster]

Companies indemnify themselves all the time. They typically do it through a fronting policy of insurance, or under a reimbursement program using a SIR, but the effect is that an indemnity obligation is assumed by a company that is then itself indemnified by the original indemnitee. While statman's use of the term may arguably be incorrect, it is also accurate under some schemes and certainly is not unclear under some circumstances.

[Jacob]

On a related note - anyone know what the stipulated exit penalties for the Big-12 contract are?

Yes. Regardless of what the contract says, the B12 agreed that the exit penalty would be that aTm would receive no shared revenues during the 2011-2012 seasons--approximately $18 million

As I noted above, when you run the back-of-the-envelope numbers, the $100 million BYU wanted as an exit penalty (may have only been from TX or OU?) doesn't seem that ridiculous.

That didn't really happen. Come on now.

[Clark Addison]

Hey, could we spend another 28 posts or so really nailing down the legal definition of indemnify? That would really be great.

Maybe then we could move on to "fiduciary" and "fungible".

[YOhio]

Hey, could we spend another 28 posts or so really nailing down the legal definition of indemnify? That would really be great.

Maybe then we could move on to "fiduciary" and "fungible".

Grumpy!