Pac-12 sues Mountain West over 'poaching penalty'

The Pac-12 Conference lodged an antitrust lawsuit on Tuesday against the Mountain West Conference's "poaching penalty," claiming that over-the-top fees blocked competition among NCAA member schools.

"The MWC imposed this poaching penalty at a time when the Pac-12 was desperate to schedule football games for its two remaining members and had little leverage to reject this naked restraint on competition. But that does not make the poaching penalty any less illegal, and the Pac-12 is asking the court to declare this provision invalid and unenforceable," Keker Van Nest & Peters LLP partner Eric H. MacMichael wrote in the complaint filed in federal court in San Jose. 

In a statement, Mountain West Commissioner Gloria Nevarez said the Pac-12 was challenging a contractual provision that it expressly agreed to and acknowledged was essential to Mountain West's willingness to enter into the agreement, "all while advised by sophisticated legal counsel.  The provision was put in place to protect the Mountain West Conference from this exact scenario."

Only months ago, the Pac-12 was in critical condition as several member schools, including UCLA and USC, left the conference. At one point, the conference only had two member schools. However, Pac-12 leaders announced on Sept. 12 that four new colleges, including California State Fresno and San Diego State University, would join the conference for the 2026-2027 school year. 

Nevarez said in her statement that it was obvious to her team that the Pac-12 would try to rebuild and that the fees at issue "were included to ensure the future viability of the Mountain West and allow our member institutions to continue providing critical resources and opportunities for our student-athletes. At no point in the contracting process did the Pac-12 contend that the agreement that it freely entered into violated any laws."

According to Tuesday's filing, the Pac-12 was in a discouraging position and had months to salvage its program when it agreed to Mountain West's poaching penalty. MacMichael said the arrangement saddled his client with exorbitant fees to accept Mountain West member schools into its conference. Pac-12 Conference v. Mountain West Conference, 5:24-cv-06685-SVK (N.D. Cal., filed Sept. 24, 2024). 

"Knowing that the Pac-12 was running out of time and short on leverage, the MWC not only charged the Pac-12 supra-competitive prices to schedule football games -- over $14 million for OSU and WSU to play just six games each -- but it also forced the Pac-12 to accept an unprecedented poaching penalty provision wholly unrelated to scheduling football games and designed to limit the Pac-12's ability to compete with the MWC for years into the future," MacMichael wrote. 

He added that the poaching penalty functioned much like the no-poach, no-hire, and non-solicitation contract provisions declared unlawful as suppressing competition in the Northern District of California and other federal court districts around the country. 

At least three decisions out of California federal courts in the past six years have invalidated employee non-solicitation clauses and other similar provisions. Important changes to California noncompete laws took effect this year, expanding on existing statutes to provide broader protections for employees. 

"There is no legitimate justification for the poaching penalty. In fact, the MWC already seeks to impose tens of millions of dollars in 'exit fees' on MWC schools that depart from the conference. To the extent the MWC would suffer any harm from the departures of its member schools, these exit fees provide more than sufficient compensation to the MWC," said MacMichael, adding that the agreement threatened the Pac-12's ability to remain a viable competitor in the NCAA.

This lawsuit comes after Senior U.S. District Judge Claudia Wilken sent the NCAA and plaintiffs suing over the league's name, image, and likeness (NIL) restrictions back to the drawing board this month to work out a revised settlement. 

The parties reached a groundbreaking $2.8 billion agreement to retroactively compensate players and revise the NCAA's rules to allow some forms of monetary NIL compensation moving forward. The prospective relief would be paid out over the next decade and the plaintiffs' lead counsel at Winston & Strawn LLP said eligible athletes would receive up to $20 million during the coming school year. 

However, Wilken expressed concern at a Sept. 5 hearing about the settlement's restrictions on booster payments to athletes, which the NCAA's attorneys at Wilkinson Stekloff LLP have maintained is a key part of the deal. 

"Taking things away from people is usually not too popular," Wilken told the parties.