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Wednesday, July 29, 2009
Catching Up on Gillispie v. University of Kentucky Athletic Association

One increasingly interesting, sports-related lawsuit which hasn't garnered much attention here is Gillispie v. University of Kentucky Athletic Association Inc., the suit filed by former University of Kentucky men's basketball coach Billy Gillispie. As most are probably aware, Gillispie was fired by Kentucky on March 27, 2009, after completing two years of a seven-year agreement valued at $1.5 million per year.

For the next two months, Gillispie and the University attempted to negotiate an amicable resolution to the remaining term of the contract, until Gillispie finally filed suit in the United States District Court for the Northern District of Texas on May 27, 2009. In his Complaint, Gillispie asserts four causes of action: (i) breach of contract, (ii) fraud, (iii) fraudulent misrepresentation and inducement, and (iv) tortious interference with prospective contract. The breach of contract claim asserts that Kentucky failed to agree to pay Gillispie the $1.5 million/year he was owed under the agreement for 4 years following his termination without cause. The other claims effectively allege that the University fraudulently induced Gillispie to sign with the University in 2007, insofar as the University had never intended to pay Gillispie post-termination.

The day after Gillispie filed suit in Texas, the University of Kentucky itself filed suit against Gillispie in a Kentucky state court, seeking a declaratory judgment that the University never entered a formal contract with Gillispie, and therefore does not owe him any additional compensation.

One of the initial issues which must be resolved is whether the litigation should proceed in Texas or Kentucky. The University of Kentucky Athletic Association filed a motion to dismiss in late June in the Texas action, asserting that the court lacked personal jurisdiction. Alternatively, the Athletic Association asked that the case be moved to Kentucky.

Once the courts determine the proper forum for the litigation, the parties will likely focus their attention on two primary issues. First, the parties dispute whether Gillispie ever entered a formal contract with Kentucky. Rather than execute a formal written employment agreement, Gillispie and the University instead allowed their relationship to be governed by the initial two-page Memorandum of Understanding entered in April 2007. In his complaint, Gillispie cites correspondence from the University stating that the MoU "can itself serve as the employment contract" for Gillispie. Meanwhile, the University's declaratory judgment complaint alleges that the MoU is not an enforceable contract, as it expressly left material terms to be negotiated between the parties. According to the University's complaint, the parties were still negotiating a formal employment agreement as recently as February of this year.

A second issue which will be disputed by the parties is whether Gillispie was actually employed by the University of Kentucky or the University of Kentucky Athletic Association, and thus which is the proper party for purposes of the suit. Gillispie has asserted that he was employed by the University of Kentucky Athletic Association, the tax-exempt, non-profit organization which manages Kentucky's athletic operations. The University of Kentucky denies this allegation, and asserts instead that it employed Gillispie itself. The significance of this distinction is the fact that the University of Kentucky is a state agency, whereas the Athletic Association is a private corporation. Therefore, if Gillispie was employed by the University itself, the University would be able to invoke the doctrine of sovereign immunity in its defense, potentially limiting Gillispie to only his breach of contract claim. Meanwhile, if Gillispie was in fact employed by the Athletic Association, the doctrine of sovereign immunity will not be available, and Gillispie will be free to proceed with his fraud and tort claims.

The Lexington Herald-Leader has been tracking the litigation, and earlier this month reported that the University of Kentucky Athletic Association's 2007 tax return listed Gillispie as the organization's highest-paid employee. As the newspaper noted, this disclosure places the University and the Athletic Association in an awkward position. If Gillispie was in fact employed by the University of Kentucky, and not the Athletic Association, then the Association may be found to have submitted false information to the IRS, an action which could potentially threaten its tax-exempt status. Alternatively, if the Athletic Association was in fact Gillispie's true employer, then the sovereign immunity defense will be unavailable to the University, increasing its potential exposure in the suit.

With so many fundamental issues in dispute, it will be interesting to watch how this litigation unfolds in the coming months.


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