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Saturday, July 12, 2008
Final thoughts on WVU v. Rodriguez
So WVU v. Rodriguez ends (as most cases do) with the whimper of settlement. I want to mention three significant and potentially lasting lessons and questions from the case.
The importance of forum selection
WVU filed suit in December 2007 and the case settled in July 2008, meaning it was alive for just over six months. And a big chunk of that time was spent fighting over where the case was going to be litigated and among what parties. Rodriguez removed the case to federal court on the basis of diversity jurisdiction but, on WVU’s motion, the court remanded to state court because there was no federal jurisdiction.
The fight over federal jurisdiction was a great lesson in the minutae of diversity jurisdiction, which I wrote about at the time. These include the unique treatment of States as not being citizens; the intensely fact-bound nature of the inquiry into an individual’s citizenship, notably the question of how quickly a person can change his citizenship from one state to another and how courts should determine citizenship; the allocations of cases among different parts of the federal juriciary; and some limitations on unadorned concern for “local bias” as a basis for pushing cases into federal court. As I wrote then, it is hard to imagine a bigger example of local bias than the former football coach of the flagship public university having to litigate against the State itself in state court. But the diversity rules keep this case in state court. I will continue to use the materials from this case to teach removal and diversity.
There also is reason to believe that Rodriguez’s lawyers did not thoroughly research the facts or law prior to removing, always a big no-no. They did not have a good factual record to show that Rodriguez had successfully changed his citizenship from West Virginia to Michigan at the time the lawsuit was filed; he and his family clearly were mid-move at the time. His lawyers also seemed to have assumed WVU’s status as a citizen, rather than as an arm of the state. Ironically, these lawyers previously had represented WVU in litigation and had argued the university could not be sued in federal district court on diversity precisely because it was the state and not a citizen. In moving to remand, WVU also moved for sanctions against the lawyers based on this past representation, although the court denied that motion.
Is settlement a good thing?
More than thirty years ago, Owen Fiss criticized the modern judicial preference for settlement as a method of dispute resolution, arguing that it deprived courts of the opportunity to give meaning to public constitutional values by identifying, elaborating, and expounding on those values. And it deprived the public of the benefit of judicial exegesis on constitutional meaning and values, particularly as that guides future real-world conduct. Fiss focused on settlement in constitutional cases, but the point could be made for all litigation—settlement deprives courts of the chance to establish and elaborate on legal rules and principles and deprives future actors of the benefit of clearer legal rules.
One might make that complaint about the settlement in Rodriguez, a case that had been shaping up as a test case of sorts. How mobile are college football and basketball coaches under long-term contracts? How much leeway do schools have to use steep liquidated damages clauses as a way to at least slow coaches down or make other schools hesitant to hire them? How do schools raid coaches? Is a $ 4 million buyout provision so out of line with the actual damages WVU suffered as to be an unreasonable, and unenforceable, penalty? Did WVU improperly strong-arm Rodriguez into signing the contract with that buyout provision? Was there an under-the-table agreement not to enforce it? Did WVU abide by its contractual obligations to Rodriguez to sink substantial resources into things such as facilities and assistant coaches? When and how did Michigan pursue Rodriguez as its coach? We never found out.
Reading the tea leaves of the settlement
It generally is a bad idea to read anything into a settlement; parties settle for many reasons, usually upon balancing the strength of their case against the cost of litigation, as well as taking into account (as Rodriguez likely did) the value of “moving on.” But can this settlement give any guidance for future clashes between coaches and their former schools and attempts to enforce similar provisions? I find it interesting that WVU will receive the full $ 4 million; the settlement did not compromise on the amount. Back in January, Rodriguez made a $ 1.5 million settlement offer, which the University rejected. The ultimate compromise was over who pays (Rodriguez will pay $ 1.5 million, the University of Michigan $ 2.5 million) and the payment plan (Rodriguez makes three annual installments of $ 500K). This suggests that such a steep buyout clause, even one largely divorced from any real damage suffered by the school, will be enforceable. It suggests that there were no under-the-table agreements beyond what was in the contract and that Rodriguez did not, in fact, sign under duress. It seems to me that if WVU were worried at all about whether its conduct made the buyout less than fully enforceable, it would have given up something monetary.
I would expect that we will begin to see similar multi-million-dollar provisions become the norm in coaching contracts. I also would expect to see payment of all or part of the buyout as a negotiating point with schools looking to hire coaches away from other schools. So, to the extent this was a test case on coaches’ mobility, we did not get a judicial determination on the issue, but we did get a settlement that offers some strong hints.
Cross-Posted at WVU v. Rodriguez: The Legal Perspective