In 2004, Ohio State University officials announced that they were firing then-coach Jim O'Brien because of NCAA violations that allegedly breached O'Brien's contract with Ohio State. [1] O'Brien was the head coach for the men's basketball team, and was fired for loaning out $6,000 to a foreign player who the University was trying to recruit. [2] He then sued the University for a breach of their employment agreement. On February 15, 2006, Judge Joseph T. Clark of the Ohio Court of Claims ruled that O'Brien was unlawfully fired, despite the fact that he had indeed broken NCAA rules. [3] O'Brien had violated the terms of his contract, but the violations were not serious enough to warrant his firing. [4] This article evaluates the court's decision, and its implications on future contractual relationships between coaches and universities.
The University relied on specific contractual language to support its decision to fire O'Brien. Under the agreement, O'Brien would be in breach of his duties if he failed to comply with NCAA rules or if he had reasonable cause to believe that an NCAA violation had occured and he failed to report such violation(s). [5] O'Brien had failed to report the loan to the recruit for almost five years. [6] Under NCAA Bylaw 13.2.1, an institution or staff member is not allowed to give financial aid or any benefits to a recruit. [7]
Under the employment agreement, the University could fire O'Brien at any time for cause, for any material breach of his duties. The Court of Claims stated that "in deciding whether plaintiff's employment was terminated for cause, the court need only consider whether plaintiff's breach was material." [8] Under common law, a material breach occurs when there is a failure to perform an obligation which essentially defeats the entire purpose of the contract. [9] The Restatement Second of Contracts provides that materiality depends on a number of circumstances, and that the standard is "necessarily imprecise and flexible." [10] One of the factors considered by the court was the harm O'Brien's actions caused to the reputation of the University. [11] The court held that based on the evidence, this single incident, standing alone, did not cause serious harm to the University's reputation. [12] It would be interesting to see if this would be true were it not for the fact that Ohio State University had a number of NCAA infractions and controversies at the time.
The court ultimately found that O'Brien's breach was not material, and that compared to O'Brien's violations, the termination of his employment was excessive. [13] Based on this ruling, it is almost a certainty that future contracts will be much more precise in terms of defining what would consitute an adequate reason for terminating a coach's employment. In this case, it was obvious that O'Brien had violated a fundamental NCAA rule, but abiding by those rules was just a small portion of his duties under the contract. Thus, one infraction, given the circumstances under which that infraction was made, was not material enough to warrant O'Brien's termination.
But, despite the effect that this will have on future contracts, it should still be noted that this case may have simply been the exception to the rule. Thus, although it would be wise for parties to such future agreements to take care in adequately detailing the terms of employment, the analysis of materiality is one which is very fact intensive, and outcomes will depend on circumstances. Perhaps it takes such an exceptional case, where materiality is not found despite a significant departure from the terms of the agreement, for parties to realize that their agreements should be much more precise. Of course, this may result in other problems: How specific should the contract be? How costly would such specificity be? In other words, perhaps the reliance on common law, and the "materiality" standard actually lower the costs of forming such agreements. Thus, in determining whether to form detailed contracts, or whether to form broadly outlined causes for dismissal, parties should take into account these costs, and determine the level of risk they are willing to take, and the amount of money they are willing to initially spend, in the formation and performance of these contracts. It will be interesting to see what develops, as Ohio State University appears to have plans to appeal the decision.
Sources:
1. Doug Lederman, Court Win For A Rule Breaker, INSIDE HIGHER EDUCATION, Feb. 16, 2006,http://www.insidehighered.com/news/2006/02/16/obrien.
2. Id.
3. Id.
4. Id.
5. O'Brien v. Ohio State University, No. 2004-10230, slip op. at 11 (Ohio St. Feb. 15, 2006),ftp://data1.cco.state.oh.us/2004/C2004-10230-djl-20060215001020530-1.pdf.
6. Id. at 14.
7. Id. at 15.
8. Id. at 24.
9. Id. at 24.
10. Id. at 25.
11. Id. at 28.
12. Id. at 30.
13. Id. at 37.
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