Poor Contract Drafting Costs Universities

There currently is an unspoken legal battle between athletic directors and well-paid coaches, some of whom often wield more power on their campuses than their athletic directors. Poorly-defined for cause termination language can cost universities millions in settlements and legal fees. For example, in 2015 the University of Hawaii reached a settlement with former men’s basketball head coach Gib Arnold. Arnold was accused of providing players with impermissible benefits, altering incoming international student visas, and “not properly promot[ing] an atmosphere of compliance.” Hawaii spent $1,098,000 to fire Arnold, including $200,000 for Arnold’s attorney. Legislators criticized Hawaii for having “paid more than we [the University] should have; paid money that the university doesn’t have.” After Hawaii reached a settlement with Arnold, an NCAA investigation found that Arnold committed multiple NCAA Level II violations, a well-established basis for terminating a coach without pay.

Upon termination, many cash-strapped athletic departments neglect opportunities to save millions of dollars by overpaying coaches. Hawaii could have saved $1.1 million by waiting for the results of the NCAA investigation. In a time of tuition increases, declining state funds for public universities, and economic stratification in college athletics, meticulous termination language in coach contracts can save universities and taxpayers millions of dollars while providing coaches with well-defined expectations.

High Financial Stakes

The highest paid public employee in 40 states is a college basketball or football coach. The highest paid federal government employee is Naval Academy head football coach Ken Niumatalolo, who earns a $1.6 million salary (new Defense Secretary James Mattis makes approximately $200,000). Some football strength and conditioning personnel in the Southeastern Conference (SEC) are paid $600,000. Three Michigan assistant football coaches earn at least $1 million annually under five-year guaranteed contracts. These assistants are eligible for retention and signing bonuses worth as much as $450,000. The salaries of coaches seemingly reach new heights every off-season.

Coaches are paid millions to leave a program. The University of Minnesota will pay $9.5 million to fired coach Tracy Claeys and his 13 assistant coaches and support staff. The University of Connecticut, and arguably Connecticut taxpayers, recently paid perennially losing football coach Bob Diaco $3.4 million to walk away from the program.

Between 2004 and 2014, the annual severance amount paid by the 48 public universities in the “Power Five” conferences increased by 120% from $12.9 million to $28.5 million (inflation adjusted). At least seven college football coaches would be owed more than $20 million guaranteed if they were fired. Florida State University head football coach Jimbo Fisher’s buyout is $33 million. Of the 53 publicly available contracts for Power Five coaches, 33 include buyouts of at least $8 million.

This week, now former University of Oregon co-offensive coordinator David Reaves was terminated after he was arrested for driving under the influence. Reaves’ contract allows Oregon to terminate his contract for cause for “any material violation of local, state or federal law.” This is poor lawyering. Drunk driving may be a material violation of local and state law, but reasonable attorneys could disagree and engage in costly litigation. Reaves has only been charged, and has not been convicted or plead guilty. Merely being charged with a crime does not constitute a material violation of the law. Consider Oregon’s legal exposure in the event that Reaves is found not guilty. To protect coaches from potentially losing hundreds of thousands or millions of dollars, these provisions should be negotiated to require conviction for violation of the law.

Former Wichita State University (WSU) women’s basketball coach, Jody Adams-Birch, was terminated this month due to complaints about mistreatment of players. WSU argues it can terminate Adams-Birch for cause. Adams-Birch is demanding a guaranteed buyout of at least $500,000. Adams-Birch’s contract states that WSU may terminate without pay for good cause as determined by WSU to be in the best interests of the program and the university.

WSU and Adams-Birch, like most other athletic departments, will inevitably settle out of court after threatening litigation in the press due to ambiguous termination language. In lieu of paying Adams-Birch $500,000, WSU should have included a well-drafted for cause termination provision in the coach’s contract.

Proposed Solutions

As there is no universal definition of “cause,” it must be clearly stated in employment agreements. Athletic departments want “cause” to be defined as broadly as possible to give the employer the most protection. Coaches desire narrow definitions of cause. Some potential solutions are as follows:

• Uniform Standards: The NCAA, athletic conferences, or coaches’ associations could provide a uniform legal standard that governs coach contracts. These standards could either be included in contracts or incorporated by reference.
• Uniform Adjudication: Similar to the Court of Arbitration for Sport, coach contracts in the U.S. could be adjudicated before a permanent arbitration body that uses law applied equally to every sports contract.
• Clawbacks on Settlements: Settlement agreements with fired coaches could include clawback provisions such that the settlement must be repaid by the coach if the NCAA finds rule violations occurred in the coach’s program.

Conclusion

Unless and until termination language is properly defined, athletic departments and universities will continue to pay tens of millions of dollars for coaches to leave their programs and coaches will continue to be exposed to athletic departments that exploit vague termination language to not pay guaranteed severance. After all, a coaching compensation deal is only as good as its exit provisions.

Aaron Swerdlow  represents sports, corporate, and emerging technology entities. Prior to joining Gerard Fox Law, he served as the general counsel of a prominent sports agency representing NBA and NCAA coaches and executives. He is an honors graduate of Georgetown University Law Center and the University of Wisconsin-Madison.