SBJ/20090727/Opinion

Lack of signed contract leads Gillespie, UK to court

University of Kentucky men’s basketball coach John Calipari recently agreed to an eight-year, $31 million-plus deal, making him the country’s highest-paid college basketball coach. As the money involved in college athletics increases, so does the importance of college coaches’ employment agreements. 

On May 27, former UK coach Billy Gillespie sued the university in federal court in Texas, asserting, among other claims, that under Texas law UK fired him “without cause” and owes him $6 million as set forth in an April 6, 2007, memorandum of understanding between Gillespie and the university. The next day, UK filed a lawsuit in a Kentucky court arguing that under Kentucky law the university does not owe Gillespie any money because the memorandum is not an “enforceable contract.”

It is impossible to predict the precise outcome of the Gillespie-UK dispute. However, the initial legal filings offer insights for both coaches and university athletic administrators about memorandums in the coach-school employment context.

Coach-school employment memorandums of understanding should rarely be necessary. Too often, a school and coach use a memorandum due to fear that any delay associated with finalizing a contract will lead to a change of heart by one of the parties. Additionally, pundits and fans often bemoan the supposedly dire implications of each day without a new coach. These fears are almost always greatly exaggerated.

If a school and a coach truly want to work together, a detailed employment contract can be finalized in a few days. Consider that when both Gillespie and UK wanted to make a deal, they started direct negotiations, agreed on more than a dozen major contract terms, and announced Gillespie’s hiring in two days. The process of drafting the contract enables the parties to address concerns that could worsen if not promptly tackled and to lay a foundation for future coach-school teamwork that is essential to a program’s success.  Additionally, within NCAA bylaws and existing employment obligations, the coach can use the relatively quiet pre-announcement period in order to prepare the most effective transition to his/her new position.

If, as they should, the parties plan to have lawyers review a contract, the lawyers should be consulted as early as possible. After the parties sign a memorandum and announce the hiring, the coach and athletic director deal with the post-announcement frenzy and then focus on their daily responsibilities. To the extent that finalizing the contract is delegated to others, the process seldom continues the momentum that existed before the hiring announcement. Disagreements that could have been easily negotiated when the coach and the school were motivated to reach agreement before publicly committing to each other often become sticking points and bog down the drafting process.

The inability of Gillespie’s representatives and UK’s representatives to define “termination for cause” despite exchanging at least six proposed contracts over nearly two years demonstrates a fatal mistake. Had UK and Gillespie pushed to define termination for cause before announcing Gillespie’s hiring, one of two results would likely have occurred. Either they would have quickly agreed, or, after a day or two of negotiations, they would have recognized an unsolvable dispute about a critical issue, at which time they could have re-evaluated whether to move forward together. In either case, Gillespie and UK would have better understood their relationship before publicly committing to each other, which required Gillespie to leave Texas A&M and required UK to deliver millions of dollars and the stewardship of its flagship athletics program to Gillespie.

Gillespie and UK now offer different theories about their memorandum’s validity. Gillespie quotes UK’s general counsel to argue that the memorandum is a “legally binding, written contract between the parties,” but the university cites Kentucky case law to argue that the memorandum is only “an agreement to negotiate” with no current effect because the parties never finalized a contract. These competing arguments illustrate why a coach-school memorandum of understanding should addresses the contract drafting process itself, which the Gillespie-UK memorandum did not do. Without the document becoming overly detailed and difficult to draft, subjects that a coach-school memorandum can address include a contract completion deadline; the use of default language if the parties fail to agree on their own terminology; and which, if any, memorandum provisions will bind the parties in the absence of a final contract.   

The Gillespie-UK dispute also demonstrates the potential value of including some reasonably basic conflict resolution provisions in a coach-school memorandum. For example, a clause stipulating the settlement of memorandum disputes through arbitration could result in a more private, convenient, inexpensive, and timely process than the path taken by Gillespie and UK. Similarly, well-crafted forum selection and choice of law clauses could limit the legal uncertainty and expense inherent in the dueling lawsuits and competing legal theories of the Gillespie-UK case.

Regardless of how the Gillespie-UK dispute ends, it shows that signing a memorandum of understanding and announcing a coach’s hiring while planning to subsequently draft a detailed contract neither assures the effective completion of the hiring process, promotes a good coach-school fit, nor necessarily enhances program stability.

Coaches and schools should carefully consider the use of memorandums. If the parties decide to use a memorandum rather than pursue the pre-announcement completion of a detailed contract, then they should seek to reasonably include some provisions designed to reduce the risk of a situation like the Gillespie-UK dispute.

Matt Wilson (mjwilson@stetson.edu) is an assistant professor and program director of the sport management program at Stetson University. Stu Brown (stuartbrown@bellsouth.net) is an attorney and a former college coach who counsels schools and coaches about rules compliance and employment issues.

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