By Robert E. Freeman, Allyson L. Swartzberg, and Jonathan Mollod, or Proskauer
There is perhaps no relationship stronger and no love greater than that between a Texan and their favorite college football program… or so we thought. In a legal twist this offseason — and on a Thursday, no less — a Texas appellate court dismissed claims for breach of fiduciary duty and good faith and fair dealing related to allegations that the Texas A&M University 12th Man Foundation (the “Foundation”) breached certain promises or agreements with its existing endowed donors (the “Plaintiffs” or “Permanently Endowed Donors”) when it relocated those donors from “the best available seats” and downgraded other game day perks in light of new fundraising priorities surrounding the redevelopment of the Aggies football stadium. (Texas A&M University 12th Man Foundation v. Hines, No. 09-23-00175-CV (Tex. App. – Beaumont June 13, 2024)). In so ruling, the court found that there is no special relationship giving rise to a fiduciary obligation between a group of endowed football program donors and the Texas A&M Foundation that the law would recognize in this case.
The Foundation is a non-profit affiliate of Texas A&M University that raises funds for the University’s athletic programs and manages ticket and parking sales for University athletic events. As alleged in the Complaint, beginning in the 1970s and through the mid-1990s, the Foundation started a fundraising program and entered into purported oral or written endowment contracts with hundreds of Permanently Endowed Donors who offered financial support to the football program in exchange for, among other perks, season football tickets in “best available” seating locations and priority parking, in most cases for life and in some cases for 30 years, at no additional cost. The quality and quantity of seats the Foundation promised depended upon variables including the amount of the donation, the year the donation occurred and the duration of the endowment.
For decades, the Foundation kept its promises to such donors. But, according to the Complaint, the Foundation eventually changed the program by levying certain fees and otherwise allocating certain other benefits based on a new “Priority Point Program” for loyal boosters.
According to the Plaintiffs, a wholesale reseating plan concerning the donors took shape after 2013 when Texas A&M announced a $450 million stadium redevelopment plan for the Aggies stadium, Kyle Field. The announcement coincided with Texas A&M entering the Southeast Conference (or SEC). Per the Complaint, realizing that the Aggies would soon be in the same conference with some of the most successful football programs in the country and competing fiercely in game play, recruiting and fundraising, the University decided to upgrade its facilities and change Kyle Field’s existing donor endowment program to raise new funds for the stadium rebuild.
The renovation would proceed in two phases, each a year long. Kyle Field was scheduled for a grand reopening in August 2015. After redevelopment, Kyle Field would be the largest football stadium in Texas and would have the largest seating capacity in the SEC, topping out at over 102,000. In many ways, the reconstruction plans embodied an “everything’s bigger in Texas” ethos.
(Source: Kyle Field Redevelopment Approved by Texas A&M Board of Regents).
Of course, this redevelopment would be costly. Under the Kyle Field Redevelopment Plan, the Foundation, looking for additional revenue streams and a way to attract new Texas A&M alumni donations, began a “reseating” initiative with its endowed donors. For example, Plaintiffs claimed that Permanently Endowed Donors would have to pay a “significant” premium to keep their priority seating or else lose their “best available” rights in the rebuilt stadium. Even though the Foundation offered the displaced Permanently Endowed Donors the opportunity to have other seats and parking in the rebuilt Kyle Stadium, the Plaintiffs’ claimed those seats and parking were not what they were promised and were in less-desirable locations. Anticipating such dissatisfaction, the Foundation offered to return the Permanently Endowed Donors’ original donation (an offer which was allegedly accepted by some). The putative class of donors that refused this offer brought suit, alleging breach of contract, promissory estoppel and breach of good faith and fair dealing and fiduciary duty and asserted that the Foundation had no right to unilaterally alter the prior agreements with the donors. These Plaintiffs demanded that the court should issue an injunction against the Foundation to prevent the Plaintiffs’ loss of long-time seat assignments, among other relief.
After running multiple plays and obtaining certain favorable rulings in the case, including a 2022 appellate state court ruling reversing a class certification designation, the Foundation moved under Texas state procedure law (akin to an anti-SLAAP motion in other states) to dismiss certain claims, contending that the evidence failed to support a prima facie claim for breach of a fiduciary obligation or duty of good faith and fair dealing. The trial court denied the motion.
The appellate court reversed and granted the motion regarding the fiduciary claims only and remanded the action to determine an award of attorney’s fees related to defending the claims. In particular, the appellate court rejected the Plaintiffs’ argument that a special relationship existed between the Foundation and the Plaintiffs that would have given rise to a fiduciary duty of care based upon “Aggie loyalty” and “Aggie core values.” Ultimately, the Plaintiffs could not establish that team pride and loyalty manifest through monetary donations and statements that they would “be rewarded” with stadium perks for “generous, early and loyal support,” or create a prima facie showing of a fiduciary relationship between the parties. The court stated: “[M]erely because the parties may have expectations in relation to a gift or donation, or whether they had a contractual relationship does not create a duty of good faith and fair dealing, nor does it establish a formal or informal fiduciary relationship. Oral representations in connection with contract claims do not give rise to a ‘special relationship’ that creates a fiduciary duty.”
Due to a procedural issue, the court did not consider the Foundation’s petition to dismiss the Plaintiffs’ breach of contract claims, confirming that the donors may yet find the end zone — just not based simply on legal claims linked to Aggies team loyalty.
The takeaway? While donors’ loyal fandom and commitment to “core values” did not support a legal fiduciary duty in this case, it remains to be seen in the second half of this litigation how the lower court will rule on claims that the Foundation breached certain oral or written agreements with the donors. In this game of inches — and within the changing economics of college football — the biggest question that remains is who will earn the best seats at Kyle Field…the donors who loved the Aggies first or the new generation of fans who helped fund the rebuilt stadium.
