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Tuesday, June 21, 2011
Kent State University Sues Its Former Men's Basketball Coach

Last month, various media outlets reported that Kent State University had filed a lawsuit in Ohio state court against both its former head men's basketball coach Geno Ford and Bradley University, after Ford left Kent State in March to take the same position at Bradley. The suit alleges that Ford breached his contract with Kent State by accepting the Bradley position without the university's consent, and seeks $1.2 million from Ford pursuant to the liquidated damages clause in his contract (i.e., his prior salary of $300,000/year for each of the four years remaining on his contract). In addition, Kent State asserted a $25,000 tortious interference with contract claim against Bradley, alleging that the school wrongfully induced Ford to breach his contract with Kent State.

Earlier this month, Coach Ford and Bradley each filed responses to Kent State's complaint. Ford denied the allegations and asserted 14 affirmative defenses, perhaps most notably arguing that the liquidated damages provision in his contract was unconscionable. Meanwhile, Bradley asserted that Kent State unconditionally consented to its interviewing Ford for the coaching position, thereby waiving any right to a contractual interference claim.

Lawsuits by jilted universities seeking to enforce liquidated damages provisions against former coaches are not uncommon, and typically settle out of court. For instance, one of the most notable recent examples was the $4 million settlement West Virginia University reached with its former head football coach Rich Rodriguez in 2008.

However, if the parties cannot reach a settlement in this case, Kent State has a favorable judicial precedent it can rely on in support of its claim against Ford. Specifically, in Vanderbilt University v. DiNardo, the Sixth Circuit Court of Appeals ruled that the liquidated damages clause in former Vanderbilt head football coach Gerry DiNardo's contract was enforceable, after DiNardo left Vanderbilt to become the head coach at Louisiana State University. Like Ford, DiNardo had argued that the provision was unconscionable, insofar as it required him to pay Vanderbilt his net salary for each remaining year under the contract. The Sixth Circuit rejected DiNardo's argument, holding that the provision was not an unlawful penalty given the difficulty in measuring Vanderbilt's actual damages from DiNardo's breach.

In light of the DiNardo precedent, Kent State's attempt to enforce the liquidated damages in Ford's contract does not appear to be unreasonable. Accordingly, I suspect that Coach Ford will eventually agree to settle the case out of court.


Nice post and update. Question: how do you feel if Bradley paid the liquidated damages amount total to Kent State entirely? Does that make a mockery of liquidated damages clauses in this context as it serves no real deterrent for athletic departments which can afford it as merely a cost of doing business? Can you name one college that decided against hiring the coach they wanted because of a liquidated damages clause? Most subsequent employers (in the real world) will not pay liquidated damages to a former employer, but there is a trend for Division I athletic departments to pay even if it is a settlement. Maybe liquidated damages serve no real purpose anymore with regard to college coaches leaving and university counsel should be more creative.

Anonymous Anonymous -- 6/21/2011 7:58 AM  

I agree that liquidated damages provisions in these coaching contracts provide little deterrence with regards to preventing the coach from leaving for another school, given that the damages are frequently paid by the university hiring the coach. Therefore, if a university is including a liquidated damages provision in hopes of deterring other schools from signing its coach, then the strategy is unlikely to succeed (unless perhaps the contract includes an exorbitantly large liquidated damages amount, which would itself raise potential unconscionability issues, assuming the coach would even agree to it in the first place).

However, that doesn't necessarily mean that the liquidated damages provision provides no benefit to a university. Rather, the payment of the liquidated damages provides the school with a source of revenue to use to help finance their subsequent search for a new coach, and in some cases may even allow a university to pay its next coach a higher salary, thus presumably enabling the school to land a better candidate than it otherwise would otherwise have been able to hire.

So I think it comes down to why the university is including the liquidated damages provision in the first place. In the case of Kent State, an athletics department official was quoted in a story regarding the Ford suit as saying that the school felt including a liquidated damages provision in Ford's contract was only fair, given that the university would have been on the hook for the entire length of the contract had it elected to prematurely fire Ford. So in Kent State's case, it appears that the provision was included more for symmetry purposes, and to provide revenue should the coach take another job, rather than to necessarily deter other schools from signing its coach. In that case, assuming Kent State ultimately collects its liquidated damages, the provision would appear to have served its purpose.

Blogger Nathaniel Grow -- 6/21/2011 12:56 PM  

I don't disagree with anything you have said, and certainly "why" this clause was included in his contract is mere speculation unless you interview the drafter. These days, the role of many liquidated damages clauses in D-1 have evolved far away from the deterrent days of the DiNardo case. Maybe it is time to refine what "damages" means in the phrase, "liquidated damages." If the primary purpose was to generate revenue, why don't we call it a "liquidated revenue" clause? Let's just tell it like it is.

Anonymous Anonymous -- 6/21/2011 1:18 PM  

Thats not good news for basketball fan and i really dont support university act.

Anonymous immigration lawyers -- 6/21/2011 3:58 PM  

Liquidated damages clauses can certainly be a deterrent, especially when they reach upwards of $1M. However, each instance is case specific. You could be a BCS school, and if you just paid $3M in damages after firing a coach, throwing another million on to that just to simply hire a mid-major guy who's not a “can’t miss prospect” could be too much to consider. From my dealings with the Missouri Valley Conference, I can say that I don’t think Bradley, or any other MVC school for that matter, would have gone for a guy if they thought they would need to pay $1.2M just for him to step on campus.

I’m actually surprised to see a buyout like this at Kent State. I would never let a client sign something like that at that level. When it comes down to it, the Division I-A institution and the individual coach are nowhere close in terms of their financial presence. The Division I-A institution is a long-term business, whose duration is theoretically endless, and is supported by donations from thousands of boosters, tuition and fees from thousands of students and many times by funds from the state. The individual coach is just one person with no guarantee that his/her services will be wanted anywhere in five years. A 1:1 buyout ratio, though legally not prohibited, is patently unfair to the coaches. The two sides are not on equal footing.

In this case, though, Ford has no one to blame but himself (or his reps). A clause like that could have been easily negotiated down as it is so glaringly one-sided that no school would have demanded that it stay as is (if for nothing else than to preserve the good will between the sides that comes from a new hire).

Blogger Myles Solomon -- 6/22/2011 8:51 AM  

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