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Rutgers’ Conference Fee Case Sent to Rhode Island

(CN) - The American Athletic Conference must face claims that it arbitrarily charged Rutgers University a $5 million withdrawal fee but failed to collect $40 million from others, a federal judge ruled.

Shortly after announcing its jump to the Big Ten Conference, Rutgers sued the American Athletic Conference fka the Big East Conference last year.

The American Athletic Conference's bylaws originally stated that any departing team has to provide 27 months notice and $5 million, the complaint states.

But its new, $10 million withdrawal fee "arbitrarily applies to some, but not all, of the Big East football schools" to penalize certain members, the New Jersey school said.

Rutgers said this unique conference setup, with eight basketball-only and eight-football only schools, led Syracuse, Pittsburgh, West Virginia, Texas Christian (TCU) and Notre Dame to leave in the past decade.

The University of Pittsburgh filed similar claims last May, alleging that, even though the conference "has never required any school to provide" the full notice time, it refused to let Pittsburgh withdraw six months early.

In addition, the Atlantic Coast Conference sued the University of Maryland last year, alleging the school owes $52 million for bolting to the Big Ten.

Rutgers asked the court to declare that the withdrawal requirements and fees are void, and that the conference breached it duty to Rutgers and other members by not collecting about $40 million in fees from other departing schools.

The university also claimed that TCU's departure from the conference and, in turn, from Rutgers' football schedule, cost the New Jersey school $1.3 million.

The conference moved to dismiss or transfer the case to Rhode Island.

U.S. District Judge Michael Shipp refused to dismiss the case on Halloween, but tossed aside Rutgers' claim that it "never entered into a valid arbitration agreement."

"According to the complaint, the conference amended its bylaws during its Nov. 13, 2012 meeting," the unpublished opinion states. "The conference circulated the proposed amendments to the Big East presidents on Sept. 22, 2012, well in advance of the meeting. The conference also circulated a summary of the proposed amendments prepared by counsel prior to the meeting. The complaint alleges that a majority of the presidents approved the bylaws and that they took effect immediately. Here, it is clear from a review of the complaint and the bylaws that plaintiff's claims are subject to an enforceable forum selection clause."

The court also threw out Rutgers' claim that the bylaws do not govern its right to revenue from the loss of the TCU game, holding that the arbitration clause covers "any claim" that "relates in any way to or arises out of these bylaws."

Rutgers' unconscionability allegations also failed.

"Plaintiff did not demonstrate that the forum selection provision unreasonably favors defendant," Shipp wrote.

The judge later added: "The court is also not persuaded by plaintiff's argument that it has a vested right to its preferred choice of forum. While plaintiff cited case law for the proposition that bylaw revisions cannot strip away a vested right, plaintiff failed to cite a single case in which a court held that the amendment of bylaws to include an arbitration provision constitutes the deprivation of a vested right."

Rutgers' claims will be heard in Rhode Island, as the New Jersey court lacks authority to compel arbitration, according to the ruling.

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