Filed: 6/27/2017 12:39 PM

Clerk
Vanderburgh Superior Court 1 Vanderburgh County, Indiana

COMMERCIAL COURT DOCKET

VC
STATE OF INDIANA ) IN THE VANDERBURGH SUPERIOR COURT
) 82D01-1706-PL-003465
COUNTY OF MARION ) CAUSE NO. _________________________

HORIZON LEAGUE, INC., AN INDIANA )

NONPROFIT CORPORATION, )
)
Plaintiff, )
)
v. )
)
THE LUTHERAN UNIVERSITY )
ASSOCIATION, INC., an Indiana )
Nonprofit Corporation d/b/a VALPARAISO )
UNIVERSITY; and THE MISSOURI )
VALLEY CONFERENCE, INC., )
a Missouri Nonprofit Corporation, )
)
Defendants. )

COMPLAINT FOR DAMAGES

(With Demand for Jury Trial)
Plaintiff Horizon League, Inc. (the Corporation), by its attorneys, for its

Complaint against Defendants The Lutheran University Association, Inc.,

d/b/a Valparaiso University (Valparaiso), and The Missouri Valley Conference

(MVC), alleges and states:

Nature of the Case

The Corporation brings this action to enforce a mutual agreement

between Valparaiso and the Corporation that, upon a breach of the one-year

notice requirement for withdrawal from membership in the Horizon League, the

withdrawing institution will pay an agreed sum of liquidated damages. On

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information and belief, the MVC, without legal justification, induced Valparaiso

to breach its contractual commitments.

The Parties

1. The Corporation is an Indiana nonprofit corporation with its

principal place of business and league office located in Indianapolis, Indiana.

The Corporation, through its Board of Directors, governs and provides financial

and staff support to the Horizon League (the League). The League is a

voluntary membership association of collegiate institutions that compete in

NCAA Division I athletics. The Leagues members include Cleveland State

University, University of Detroit Mercy, University of Illinois at Chicago,

Northern Kentucky University, Oakland University, University of Wisconsin

Green Bay, University of Wisconsin Milwaukee, Wright State University, and

Youngstown State University.

2. Defendant Valparaiso is an Indiana nonprofit corporation located

in Porter County, Indiana.

3. Defendant MVC is a Missouri nonprofit corporation with its

principal place of business and conference office located in St. Louis, Missouri.

Its member institutions also compete in NCAA Division I athletics. The MVCs

members include the University of Evansville and Indiana State University.

4. This Court has jurisdiction over the parties and the subject matter.

5. Preferred venue lies in Vanderburgh County under Trial Rule 75(A)

(4) because the University of Evansville is a member and agent of the MVC and

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is located in Vanderburgh County, and this action arises in part from harm to

the Corporation relating to the transfer of athletic event revenues from the

Horizon League and its members to the MVC and its members..

6. This case meets the requirements of Commercial Court Interim

Rule 2.

Valparaisos Relationship with and Commitments to the League

7. Valparaiso agreed to join the League in 2006. At that time, the

League and Valparaiso signed a letter agreement for a period of five years,

beginning July 1, 2007 and extending through July 1, 2012. After that, in

accordance with the Leagues Bylaws, the relationship renewed on an annual

basis unless terminated.

8. The 2006 letter agreement acknowledged that the League is

governed by the Horizon League Articles of Incorporation, Bylaws and

Operating Regulations.

Liquidated Damages for Withdrawal Without One-year Notice

9. The Leagues governing documents have for years provided for the

payment of liquidated damages by a member institution that withdraws from

the League.

10. Such provisions have been amended from time to time, subject to

approval by the Board of Directors of the Corporation, which consists of the

Presidents or Chancellors of the Leagues member institutions.

11. For many years, the liquidated damages provision or exit fee called

for the withdrawing institution to pay $50,000 to the League.

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 12. Before and at the time of the 2012 withdrawal of Butler University,

a former member institution of the League, the Board of Directors engaged in

substantial discussions and debate over the appropriate size and conditions of

the liquidated damages owed by a withdrawing institution.

13. After taking steps to raise the liquidated damages amount to $1

million, Loyola University Chicago, another former member institution,

provided notice that it was withdrawing from the League to join the MVC. In

that process, issues were raised by the Board of Directors about the

appropriate level of liquidated damages for a members withdrawal.

14. At its semi-annual meeting in Chicago in June 2013, the Board of

Directors engaged in an extensive discussion and evaluation of the liquidated

damages provision, then located in Bylaw 2 of the Leagues Bylaws.

15. At that point the member institutions had experienced two

withdrawals that substantially affected the scheduling of athletic games and

other events, and the financial and other harms associated with those changes.

Thus, a focus of the Boards discussion at that June 2013 meeting was the

magnitude, and difficulty of measuring, the harm that flows from an

unplanned withdrawal, based on the Leagues actual experience.

16. The President of Valparaiso specifically suggested a formulation for

an amendment to Bylaw 2, calling for a withdrawing institution to, among

other things, pay liquidated damages in the form of an exit fee of $500,000 if it

fails to comply with its obligation to provide the League with at least one years

written notice of withdrawal. Valparaisos President further suggested that the

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liquidated damages provision should not apply if the member institution

complied with the one-year notice provision, because advance notice might

allow the League and its member institutions to manage or avoid much of the

ensuing financial and other harms.

17. The Board of Directors directed the preparation of amendments to

Bylaw 2 that incorporated the terms suggested by Valparaiso.

18. Those amendments to Bylaw 2 were duly approved by a

unanimous vote at a Board of Directors meeting in August 2013, and became

applicable to all League member institutions at that time.

19. A true and correct copy of Bylaw 2 is attached hereto as Exhibit A.

Valparaiso Announces Withdrawal to Join MVC

20. On May 25, 2017, Valparaiso announced that it had accepted an

invitation to join the MVC and, necessarily, withdraw from the League.

21. Valparaisos announcement, attached hereto as Exhibit B, states

that this change became effective as of July 1, 2017. Accordingly, Valparaiso

elected to breach its obligation to provide one-years advance notice to Horizon

League under Bylaw 2.

22. Under Bylaw Section 2.5.3.1, Valparaisos payment of liquidated

damages to the League in the amount of $500,000 was due and payable no

later than June 24, 2017. The payment was not made.

23. Valparaisos failure to provide the required notice already has

caused the League members to adjust their schedules for a nine-team rotation

and deal with substantial costly disruptions, including the potential loss of at

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least one valuable home basketball game at each institution, as well as the

related revenue.

MVC Induced Valparaiso to Breach its One-Year Notice Obligation

24. On information and belief, the MVC knew of Valparaisos

obligations to the League under Bylaw 2.

25. The MVC, having recently lost its former member, Wichita State

University, to the American Athletic Conference, had its membership reduced

to nine and wished to avoid precisely the kind of disruption and harm that will

accrue to the League due to Valparaisos withdrawal without adequate notice.

26. On information and belief, the MVC specifically induced Valparaiso

to join the MVC for the 2017-2018 academic year and thereby to breach its

obligations to the Horizon League.

27. The MVC had no legal justification for such conduct.

Valparaisos Stated Excuses for Breach

28. In a written memo to the Board, Valparaisos President (the same

President who proposed the governing liquidated damages provision in Bylaw

2) asserted that Valparaiso should not have to pay the $500,000 sum because

(a) the above-referenced 2006 letter agreement called for Valparaiso to pay a

different sum if it left the League before July 2012, and (b) Valparaiso believes

it has a never-before-asserted equity or ownership interest in the assets of the

nonprofit Corporation.

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 29. As for the liquidated damages, the letter agreement expired as of

July 1, 2012, in favor of year-to-year membership governed by the applicable

Bylaws of the League, and did not purport to govern any period beyond July 1,

2012. The only effect of the letter agreement on liquidated damages was to

impose an amount higher than the Bylaws then provided, generally, for a

period of five years.

30. The letter agreement did not grant, and could not have granted, to

Valparaiso an equity or ownership interest in the Corporation.

31. Indiana law governing nonprofit corporations does not permit such

ownership interests in or financial gain from the activities of the Corporation,

other than through support of, as in this instance, athletic activities recognized

under Section 501(c)(3) of the Internal Revenue Code.

32. The 2006 letter agreement referred to equity and basketball unit

buy-in fees because the revenue of NCAA Division I conferences depends

largely on mens basketball units derived from the tournament performance

of members, and may lag several years based on such performance. Sharing

such revenues with a new member immediately upon joining a league would

not be equitable without some form of entry fee payment.

33. Valparaiso and its President never suggested, over ten years of

membership and Board participation, that it held any form of ownership

interest in the nonprofit Corporation.

34. Valparaiso and its President approved financial statements of the

Corporation each year that reflected no ownership interests in the member

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institutions, and no contingent obligations to pay anything to such member

institutions upon their potential withdrawal from the League.

35. Valparaiso is itself a large nonprofit corporation whose officers

know that any expectation of an ownership in the Corporation would be

inherently unreasonable.

COUNT 1
Breach of Contract by Valparaiso

36. Plaintiff incorporates as if fully restated herein all of the foregoing

allegations.

37. Under Indiana law, the duly approved Bylaws of a nonprofit

corporation or voluntary association constitute an enforceable contract

between the corporation or association and its members and among the

members themselves.

38. The League Bylaws, including Bylaw 2, constitute a valid written

contract enforceable against Valparaiso.

39. Valparaiso has breached and continues to breach that contract.

40. Valparaisos breaches have caused and continue to cause damages

to the League and its member institutions.

41. The Horizon League is entitled to recover the $500,000 in

liquidated damages under Bylaw 2.5.3, as well as other damages proximately

caused by Valparaisos breaches, plus statutory prejudgment interest at a rate

between 6% and 10% to be set by the Court.

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 Wherefore, the Corporation prays for judgment in its favor and against

Defendant Valparaiso, for liquidated damages plus an additional amount of

damages to be proven at trial, for attorneys fees and costs, and all other

appropriate relief for the Corporation.

COUNT 2
Tortious Interference with Contract by MVC
42. Plaintiff incorporates as if fully restated herein all of the foregoing

allegations.

43. The MVC, with knowledge of Valparaisos contractual obligations

under the League Bylaws, and without legal justification, induced Valparaiso to

withdraw from the League without complying with its duty to provide one years

advance notice of withdrawal.

44. The MVC tortiously induced Valparaiso to breach its contract with

the League and its member institutions.

45. The MVCs conduct caused, and continues to cause, damage to the

League and its member institutions.

Wherefore, the Corporation prays for judgment in its favor and against

Defendant MVC, for an award of damages to be proven at trial, for its attorneys

fees and costs, and all other appropriate relief for the Corporation.

COUNT 3
Declaratory Judgment Against Valparaiso
46. Valparaiso asserts that it is entitled to liquidate an equity interest

in the Corporation.

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 47. Valparaiso neither holds, nor could hold under applicable Indiana

law, such an ownership interest in the Corporation or its assets.

48. A voluntary association may condition a prospective members

admission into the association on the payment of consideration.

49. A justiciable dispute exists between Valparaiso and the Horizon

League as to Valparaisos assertion that it owns such an ownership interest.

Wherefore, the Corporation prays for a declaratory judgment in its favor

and against Defendant Valparaiso, for its attorneys fees and costs, and for all

other appropriate relief for Plaintiff.

Demand for Jury Trial

Plaintiff demands a trial by jury on all claims, defenses, and issues so
triable.
Plaintiff Horizon League, Inc.
By Its Attorneys:

_/s/ Waune C. Turner

Wayne C. Turner, Atty. #2289-49
Christopher Wagner, Atty. #32189-82
HOOVER HULL TURNER LLP
1 1 1 Monument Circle, Suite 4400
PO. Box 44989
Indianapolis, IN 46244-0989
Tel: (317) 8224400; Fax: (317) 8220234

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