By Dr. Kyle Conkle
In Young Harris College v. Peach Belt Athletic Conference, Inc. (Ga. Ct. App. 2025), the Georgia Court of Appeals addressed whether an exit fee imposed by a collegiate athletic conference constituted a valid liquidated damages clause or an impermissible contractual penalty. The dispute arose after Young Harris College, a member institution of the Peach Belt Athletic Conference (PBAC), announced its intent to withdraw from the conference and declined to pay the exit fee mandated under PBAC’s Constitution. When Young Harris joined PBAC in 2012, it agreed to adhere to all current and future conference governing documents. After losing several member institutions between 2016 and 2020, PBAC undertook a financial analysis to project the economic consequences of member withdrawal, including potential losses in NCAA distributions as well as reduced sponsorship and event revenues. In addition, the conference really honed in on increased costs associated with seeking replacement members. Following this analysis, PBAC decided to amend its Constitution in July 2020 where they established a flat exit fee equal to the initiation fee for schools providing at least two years’ notice, and twice that amount for those offering less than two years’ notice. The amendment stated that the exit fee served to “reimburse the Conference and its member institutions for anticipated costs and expenses incurred by reason of such withdrawal.”
When Young Harris notified PBAC in November 2022 of its intent to depart it offered to pay $52,000 which was the fee under the previous exit-fee structure, rather than the new $240,000 requirement. The notification came less than two years before the effective withdrawal date. Subsequently, PBAC sued for breach of contract. Young Harris’s response was that the fee didn’t reflect actual damages but that it was more like a financial slap on the wrist for deciding to leave the conference, and therefore shouldn’t be considered valid or enforceable. Therefore, the central legal issue before the Court of Appeals was whether the exit fee functioned as valid liquidated damages or as a penalty designed to inhibit member withdrawal.
Under Georgia law, liquidated damages are enforceable if three conditions are met: (1) the injury from breach is difficult to estimate accurately at the time of contract formation; (2) the parties intended the clause to provide compensation rather than punishment; and (3) the amount is a reasonable pre-estimate of the probable loss. This “tripartite test,” articulated in Aflac, Inc. v. Williams (1994) and restated in J.P. Carey Enterprises, Inc. v. Cuentas, Inc. (2021), guided the court’s reasoning. The court explained that although the labels matter regarding interpretation, what truly matters is the intent behind those words. That intent must first be determined by looking directly at the language of the agreement. If the contract does not clearly express what the parties meant, the court then turns to other reliable sources like witness testimony and documentation that shows how and why the agreement was created.
Applying the law, the court held that the exit fee satisfied all three prongs. First, damages like future NCAA distributions and competition scheduling costs arising from institutional withdrawal were inherently difficult to calculate at the time of the amendment. Second, the amendment clearly defined the fee as reimbursement, not punishment, and credible testimony from the Commissioner established that deterrence played no role in the fee determination. Third, because PBAC undertook a financial analysis prior to adopting the amendment and the exit fee amount closely corresponded with projected financial losses, the amount constituted a reasonable estimate of damages. As a result, the court rejected Young Harris’s assertions and affirmed summary judgment in favor of PBAC. The conference then tried to get additional sanctions under state law, but the court refused to grant them.
Beyond the legal outcome, this case offers some significant takeaways for sport administrators and anyone involved in conference governance. The court’s decision makes it clear that if organizations are worried about members leaving, they need to plan ahead. A well-written liquidated damages clause that’s backed up by real financial projections and plain, direct language about what the fee covers has a much better chance of withstanding if litigation is pursued. In other words, it’s not enough to just put a number in the contract. You have to be able to show how you got there and why it represents actual costs.
The case also highlights the importance of fairness and transparency. When athletic conferences make policy decisions that involve financial commitments, members need to feel included in the process and confident that terms are rooted in reimbursement, not punishment. The ruling essentially tells member institutions that courts aren’t going to bail them out later if they agreed to the rules and now don’t like them because circumstances changed.
For administrators, it’s a cue to take another look at the policies and agreements already on the books. Exit fees, penalties, or other financial requirements should be grounded in a clear, reasonable calculation of potential harm and not used as a scare tactic to keep members from leaving. This case shows that when conferences can point to financial modeling and clear contract language, courts are much more likely to enforce those provisions.
With conference realignment becoming more common across college sports, the precedent here provides a practical roadmap for protecting organizational stability. Strong documentation, transparent communication, and data-driven decisions aren’t just best practice, but they are becoming essential legal safeguards. Ultimately, this ruling encourages thoughtful planning on the front end to avoid conflict and litigation later, ensuring equitable treatment for the governing body and its member schools alike.
