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Integrating Fields in Sport Law: Using the O'Brien v Ohio State University Case To Teach Principles of Contract Law, NCAA Compliance, and International.

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Presentation on theme: "Integrating Fields in Sport Law: Using the O'Brien v Ohio State University Case To Teach Principles of Contract Law, NCAA Compliance, and International."— Presentation transcript:

1 Integrating Fields in Sport Law: Using the O'Brien v Ohio State University Case To Teach Principles of Contract Law, NCAA Compliance, and International Arbitration Sport and Recreation Law Association 2008 21st Annual Conference Myrtle Beach, South Carolina Dr. Anastasios Kaburakis – Southern Illinois University Edwardsville Linda Sharp, J.D. – University of Northern Colorado Dr. Holly Sheilley – University of Louisville Emily Dahlberg, M.S. (08) – Southern Illinois University Edwardsville

2 Scope Contract Law Administrative Law – NCAA Compliance
International Law – Alternative Dispute Resolution (ADR)

3 College Coaching Contracts: Termination Clauses

4 Termination Clauses Termination without Cause
Breach of contract by party terminating contract No legitimate justification for doing so Liquidated damages or “buy-out” may be specified in contract Recent dispute between WVU & Rich Rodriguez

5 Termination Clauses Termination for Just Cause
Employee has breached contract by engaging in conduct that violates standards of job performance set by employer Fails to meet requirements of job Criminal behavior (morals clauses) Conduct unfavorable to employer Violations of NCAA, conference or university rules

6 Termination for Just Cause
Negotiation of these clauses is critical Employer wants to broaden provisions while employee wants to narrow O’Brien v. Ohio State University exemplifies this type of dispute Sharp, Claussen & Moorman Sport Law: A Managerial Approach, pp

7 O’Brien v. Ohio State University
Facts O’Brien hired as BK coach at OSU in 1997 In May, 1998 Alex Radojevic, BK player from Serbia came for unofficial visit Fall, 1998 O’Brien learned Radojevic had played pro BK in Europe O’Brien continued to recruit Radojevic and in Nov 1998 Radojevic signed NLI

8 O’Brien (cont) In December 1998 O’Brien gave the Radojevic family $6000 O’Brien said that this “loan” did not violate NCAA rules since Radojevic not eligible to be college player In Feb 1999 O’Brien told OSU AD that Radojevic could regain amateur status Radojevic never enrolled at OSU

9 O’Brien (cont) March 1999 OSU gets to Final Four
O’Brien gets new employment K effective September 1999 In Sept 1999 O’Brien signs NCAA Certificate of Compliance that he has reported any knowledge of NCAA violations for academic year

10 O’Brien (cont) O’Brien does not disclose “loan” to AD until April 2004
O’Brien terminated for cause in June 2004 OSU alleged that plaintiff violated Section 4.1(d) that required him to “know, recognize, and comply” with all rules of NCAA and to “immediately report to AD” if he had “reasonable cause to believe that any person had violated such laws, policies or regulations” OSU argued that failure to report loan to Radojevic violated this section and was a material breach of contract and university could terminate under Section 5.1(a) Section 5.1(a) stated that OSU can terminate a contract if a material breach occurred

11 The Relevant Section Section 5.1:
Termination for Cause - Ohio State may terminate this agreement at any time for cause, which, for the purposes of this agreement, shall be limited to the occurrence of one or more of the following: (a) a material breach of this agreement by Coach, which Coach fails to remedy to OSU's reasonable satisfaction, within a reasonable time period, not to exceed thirty (30) days, after receipt of a written notice from Ohio State specifying the act(s), conduct or omission(s) constituting such breach; (b) a violation by Coach * * * of applicable law, policy, rule or regulation of the NCAA or the Big Ten Conference which leads to a "major" infraction investigation by the NCAA or the Big Ten Conference and which results in a finding by the NCAA or the Big Ten Conference of lack of institutional control over the men's basketball program or which results in Ohio State being sanctioned by the NCAA or the Big Ten Conference * * * ; (c) any criminal conduct by Coach that constitutes moral turpitude or other improper conduct that, in Ohio State’s reasonable judgment, reflects adversely on Ohio State or its athletic programs.

12 Ohio Court of Claims Decision 2006 Ohio 1104 (Feb. 15, 2006)
Judgment for O’Brien-OSU breached contract Judge found “fact” that O’Brien made loan for humanitarian reasons not for recruiting advantage Radojevic ineligible to play NCAA BK at time of loan (note that O’Brien still recruited Radojevic despite his play in pro BK) O’Brien did violate § 4.1 (d) but this was not a “material breach” under §5.1 (a)

13 Was O’Brien’s breach “material”?
Material breach defined as “a failure to do something that is so fundamental to a contract that the failure to perform that obligation defeats the essential purpose of the contract or makes it impossible for the other party to perform under the contract” Williston on Contracts, Chapter § 63:3

14 The Restatement criteria for material breach
Restatement of the Law 2d, Contracts, § 241. The Restatement test is prevailing law, and it was used by the Ohio Court of Claims in deciding this case: (a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to perform * * * will suffer forfeiture; (d) the likelihood that the party failing to perform * * * will cure his failure, taking account of all the circumstances including any reasonable assurances; (e) the extent to which the behavior of the party failing to perform * * * comports with standards of good faith and fair dealing.

15 Rationale for finding no “material breach”
The extent to which OSU was deprived of the benefit it expected from employment K was not as significant as OSU argued NCAA sanctions minor Damage to OSU reputation minor Breach of trust was reparable O’Brien’s forfeiture of salary & benefits substantial O’Brien made good faith effort to resolve dispute and OSU did not

16 Rationale (cont) NCAA compliance is important to OSU
BUT wording of § 5.1(b) contemplates that coach could retain employment during investigation and remain employed unless serious sanctions imposed

17 Damages Award Court of Claims awarded just over $2.25 million on August 2, 2006 Amount determined by reference to liquidated damages provisions in contract (Sections 5.2 & 5.3)

18 Ohio Court of Appeals Decision 2007 Ohio App. LEXIS 4316
Affirmed decision of trial court Under broader contract terms not favoring the employee to such a degree result would not be the same Contract must honor parties’ agreement absent unconscionability

19 Questions and Discussion Points
1. The judge in this case interpreted the facts in favor of O’Brien when he characterized the loan as for humanitarian reasons and not to gain an improper recruiting advantage. What facts might support a more sinister interpretation of the coach’s conduct? Discussion Point: O’Brien’s “story” was inconsistent. If he really felt that Radojevic was ineligible to play college basketball, why did he have Radojevic sign a NLI and come for an official visit? Then O’Brien changed his story again and told Geiger that he thought Radojevic’s eligibility could be restored.

20 Questions and Discussion Points
2. Discuss how Ohio State could have strengthened its grounds for termination for cause. Discussion Points: When Ohio State negotiated the employment agreement with O’Brien it could have drafted language that provided that any failure to immediately report any violation of NCAA or Big Ten rules is a material breach of the contract. In that way, it would not be up to a fact finder to decide, as here, that a single failure to report was not a material breach. OSU negotiated a termination clause very favorable to O’Brien and it paid the price here. A review of successor Thad Matta’s contract shows the degree to which a lengthy list of behaviors could all be grounds for termination Ohio State could also have waited to see if the Radojevic incident would be investigated by the NCAA as a major infraction. But in this case the NCAA did not investigate for another 11 months after O’Brien was terminated, so relying on this clause would have meant that Ohio State would not have been able to terminate O’Brien at the earlier date, when there was a need to do so based on public concern about the program.

21 Questions and Discussion Points
3. Discuss the implications of this decision relative to other colleges that may wish to terminate coaches “for cause.” Discussion Point: This ruling may deter schools from trying to use the “for cause” provisions in coaches’ contracts. Often schools have chosen to take the easy way out in these types of situations by terminating the contract without cause and paying a buy-out to a coach instead of risking litigation by the coach who has been terminated for cause. The interpretation of the facts here in favor of the coach is a deterrent to colleges that might be considering using the “for cause” provisions instead of buying out a coach who has acted in a less than honorable fashion.

22 O’Brien Contract v. Thad Matta Contract
Negotiation of the termination clauses is a critical undertaking O’Brien negotiated several limitations on termination for cause Matta’s contract has 15 specific grounds for termination Includes “commission of a crime whether prosecuted or not…” “Failure to manage Team in a manner that reflects the academic values of Ohio State…”

23 Thad Matta’s contract (cont)
“Commission of…any act…which in OSU’s reasonable judgment brings Coach into public disrepute, contempt, scandal or ridicule…” “Significant or repetitive or intentional violation (or if OSU has a reasonable basis for believing that a significant or repetitive or intentional violation has occurred) by Coach (or any other person under Coach’s supervision and direction, including student-athletes) or any law, rule, regulation, constitutional provision, bylaw or interpretation of Ohio State, the Big Ten Conference or the NCAA”

24 Thad Matta’s contract (cont)
“A material breach of this agreement by Coach after receipt of a written notice from Ohio State specifying the act(s), conduct, or omission(s) constituting such breach which breach cannot be or has not been cured within thirty (30) days after the date that a written notice by Ohio State identifying such breach is sent”

25 Learning Objectives Appreciate complexity of termination for cause clauses Appreciate importance of negotiating these clauses Understand various interpretations of material breach Understand importance of adopting “worse case scenario” when drafting contracts

26 Resources Sharp, Moorman & Claussen Sport Law: A Managerial Approach
O’Brien v. Ohio State Univ., 2006 Ohio 1104 (Ct. Claims Feb. 15, 2006) O’Brien v. Ohio State Univ., 2007 Ohio App. LEXIS 4316 (Ct. App. Sept. 20, 2007) Greenberg, M.J.(2006). Termination of college coaching contracts…17 Marquette Sports Law Rev. 197.

27 NCAA Governance

28 Spectrum of Cases Where does Radojevic and Sedo fit on the spectrum?
Professional Salary, Professional Contract, Professional Competition Benefits from booster Providing false information Competing for institution while ineligible (transfers, progress toward degree, initial eligibility) – Five-Year Clock Extensions Academic Fraud (e.g., having academic tutor write paper) Benefits from sports agent Prize Money Entrance Exam (i.e., ACT, SAT) Fraud Financial Aid Contract w/ agent Ethical Conduct, Amateurism, Extra Benefits (Student-athlete acting independent of institution) General Eligibility, Financial Aid (Institution primarily responsible for violation) Where does Radojevic and Sedo fit on the spectrum? Spectrum of Impact Approach on Outcome of Cases. (The Analysis for EVERY case has changed; the spectrum considers outcome.)

29 NCAA Compliance Lessons
Amateurism Clearinghouse Reinstatement– Could Radojevic be reinstated after playing on a professional team? Extra Benefit – Coach O’Brien gave $6,000 to "Semi" Patrovic, family friend of Radojevic, so Radojevic could go home after father died… Does this constitute an extra benefit? “Semi” Patrovic was an agent. Had Radojevic made prior verbal or written agreements with him? Institutional Control – Did O’Brien have a duty to report this earlier?

30 Student Athlete Reinstatement
Student-athlete reinstatement is a department within the NCAA's membership services program. The student-athlete reinstatement staff processes violations and waivers that directly affect the eligibility of a prospective student-athlete or an enrolled student-athlete. When an NCAA member school self-reports a violation, all eligibility issues are addressed first and as quickly as possible. Then, if the violation has institutional responsibility, it is forwarded to the NCAA's enforcement staff to be processed as a secondary or major infraction case.

31 Principles of SAR Student-athlete’s (SA) responsibility for the violation. Institution’s responsibility for the violation. Impact of condition on SA. Could violation reasonably been avoided? Other mitigation presented by the institution.

32 General SAR Philosophy
Put SA back in the position prior to violation. Assess SA’s responsibility for violation. Evaluated totality of circumstances to reach appropriate decision.

33 The Process

34 Old Student-Athlete Reinstatement Process
Initial Recruitment- evaluation, questionnaire, scholarship offer Institution reviews eligibility- bylaws & , ISA questionnaire, amateur status info, AGA staff input Ineligible SAR staff appeal and info collection, AGA staff contribution Eligible SAR staff review Eligible Ineligible Conditions (repayment, withheld from contests) SAR Committee Appeal 34

35 New Student-Athlete Reinstatement Process
Initial Recruitment Division I & II Register with NCAA eligibility center – online questionnaire & student release form No Certification Certified w/ conditions Certified Division III Institution submits reinstatement request to SAR staff Certification by institution Ineligible Eligible w/ conditions Eligible w/o conditions Appeal to SAR Committee 35

36 Decision and Appeal The NCAA student-athlete reinstatement staff issues initial decisions in all cases. Staff decisions may be appealed to the Student-Athlete Reinstatement Committee. The reinstatement committee has the authority to amend a decision or lessen a penalty imposed by the staff, but it does not have the authority to increase the penalty.

37 Amateurism Rules Certified by the Amateurism Certification Process
Contract with a professional team. Salary for participating in athletics. Prize money. Play with professionals. Tryout, practice or competition with a professional team. Draft. Benefits from an agent or prospective agent. Agreement to be represented by an agent. Tennis and swimming and diving rule. (Division I only). Matriculation after 20th birthday-tennis. (Division I only). Participation after 21st birthday. (Division I only). Organized competition rule. (Division II only).

38 Amateurism Certification Process
Creation of prescribed penalties to be imposed. Cases not on prescribed list or where mitigation is present will be forwarded to reinstatement staff. Reinstatement staff will provide condition as part of certification process. Decision can be appealed by an institution to the student-athlete reinstatement committee.

39 Amateurism Guidelines
Sign an agreement or contract that states the team is professional or the individual is a professional. Sign an agreement or contract that provides the individual with money above expenses (even if the money is never provided). Individual receives money above his or her expenses.

40 Amateurism Guidelines
Individual has profited from his or her sport. Individual consistently represents himself or herself as a professional athlete. Individual enters into a written or verbal agreement with an agent. Individual accepts significant monetary benefits from an agent.

41 Clear Decision Amateurism Clearinghouse Guidelines
Division I Student Athlete Reinstatement Guidelines

42 Case Example #1: Klaus graduated from high school in 2004 and served a mandatory 10 months in the German Armed Services. While serving in the German Armed Services, Klaus competed on a second division tennis Bundesliga club team. Klaus participated in 3 dates of competition. Klaus did not sign a contract or receive any money above expenses from the team; however, the first position player on his team did receive money above actual and necessary expenses from the team. Klaus did not accept any prize money for his participation on the tournaments and only accepted actual and necessary expenses from the team. Klaus plans to enroll at an NCAA Division I institution in the Fall of 2005.

43 Case Example #2: Steve graduated from high school in June While in high school, Steve competed in 8 contests for the Hamilton Thunder, a team that competes in the Canadian Professional Soccer League (CPSL). The Hamilton Thunder team declares itself to be a professional team. Steve received $450 in actual/necessary expenses from the team. Steve did not sign a contract with the team, nor did he have an agreement with an agent. Steve plans to enroll at an NCAA Division I institution in the Fall 2005.

44 Case Example #3: Brad, a men’s ice hockey student- athlete, graduated high school in May 2001. Brad competed for and received expenses from an amateur ice hockey team for the and seasons. During the season, Brad was called up and competed in 5 contests for a Major Junior A team. Brad accepted $125 for actual/necessary expenses from the Major Junior A team. Brad plans to enroll at an NCAA Division I institution in the Fall of 2005.

45 Case Example #4 Robin, a track and field student-athlete, accepted $5,000 in prize money following her participation in competition that was held in her hometown over the summer. Robin had less than $100 in actual and necessary expenses for the competition. During the remainder of the summer Robin traveled internationally, participating in various track and field competitions and paying all of her expenses. Although Robin did not win any other events or accept any prize money, her actual and necessary expenses for all of the other competitions totaled $6,000.

46 Case Example #5: Betsy, a golf student-athlete, competed in an event that occurred outside the institution’s playing and practice season, but during the academic year. Based on her place finish in the event, Betsy accepted a $500 gift certificate for the local pro shop. Gift certificates are permissible under USGA rules and are permitted under NCAA rules during the summer. Betsy paid all of her own expenses, including a $175 event entry fee.

47 National Club 47 ISFs Continental Federations NFs-NGBs
Regional Associations Senior Clubs Junior Clubs – Rec & School Programs National Club 47

48 ISFs CFs NFs - NGBs Regional Assoc. Senior Clubs
World Championships & Olympics CFs Continental (e.g. European) Championships NFs - NGBs National teams Regional Assoc. Regional select teams Senior Clubs Jr. Clubs, Rec, & School 48

49 ISFs CFs NFs & NGBs Regional Assoc. Senior Clubs
Champions League, Euroleague ISFs FIFA/UEFA, FIBA/FIBA Europe CFs Professional Leagues Associations (ULEB, G14) NFs & NGBs Professional Clubs Associations (EPL, ESAKE) Top (pro) competition (Super Leagues, A1, A2) Lower levels (amateur or pro-am; Divisions II, III, IV, V, etc.) + Promotion and relegation Regional Assoc. Promotion to First team Senior Clubs Junior Clubs (U12, U14, U16, U18) High School and College competitions Jr. Clubs, Rec, & School 49

50 In re: Toronto Raptors v. Buducnost The Radojevic saga continues
International ADR In re: Toronto Raptors v. Buducnost The Radojevic saga continues

51 Setting the stage Radojevic drafted 12th in the 1999 NBA draft by the Toronto Raptors Entered into contract with Buducnost in 1996 NBA-FIBA agreement in 1997 stipulating: Valid contracts will be honored by both sides Final and binding arbitration upon disputes If Radojevic was deemed still bound by Buducnost contract, NBA would have to wait

52 NBA-FIBA agreement “Player Contract = written agreement for a specified term and for a specified salary or other compensation.” Licensing system, Letters of Clearance, mutual requests re: contract status “Any disputes… shall be resolved finally and conclusively by an International Arbitrator” Best efforts deterring interference w/ contract

53 The arbitration London, England, 8/19/1999
International arbitrator: Iain Patrick Travers Toronto Raptors v. Buducnost Yugoslav Basketball Federation denied issuance of letter of clearance Side note: NATO bombings 3/24-6/10/1999 Was Radojevic subject to a valid contract? Was the contract effectively terminated? ex aequo et bono

54 Contract clauses For the following three years ( , , and ), the Player’s compensation shall be agreed upon after the first two seasons have elapsed The Player has the right to cancel this contract by unilateral statement of will, to the Club’s detriment, if the Club defaults on payment of any monetary sum due to the Player for a period longer than 90 days, or if the Club does not provide him with the conditions for training or necessary medical aid. Whether the contract between Radojevic and Buducnost was a valid and binding Player Contract as defined in the NBA-FIBA agreement, thus a written agreement which requires the performance of services as a basketball player for a specified term and for a specified salary or other compensation. Whether or not Buducnost was in breach of the obligations owed by it to Radojevic by failing to pay amounts required under the contract and, if it was in breach, whether Radojevic was entitled to, and did, treat that breach as a repudiatory breach of that contract. Whether or not Buducnost failed to provide the medical aid that it was obliged to provide to Radojevic under that contract and, if it did so fail, whether Radojevic was entitled to, and did, elect to treat that breach as a repudiatory breach of that contract (In re: Toronto Raptors v Buducnost, pp. 7-8, § 14).

55 The contractual matter
Claim: Not a valid binding contract, missing material salary stipulation for the last three years Response: Defer to Yugoslav Federation policy Min. & Max. salary fixed Teams invest in talent development, not salaries Lodging, meals, medical aid, and necessary support = Other compensation Arbitrator disagreed Specific terms for first two years No stipulation of resolution upon remaining salary dispute Salary is distinct from non-monetary obligations Governing law (any) did not provide for treatment of material omission “An amount to be agreed on an unspecified date” lacks certainty NO CONTRACT = FREE RADOJEVIC

56 The medical issue Secondary – Had it been the most significant, arbitrator would allow time for further evidence Knee injury while training in Greece (September 1996) Greek doctor misdiagnosed injury Surgery in Podgorica October 1996 Respondents pts: Health care standard way below US ($ discussion) Went above and beyond Good job Hippokrates!

57 Compensation Secondary breaches Fascinating clauses:
≥ 20MPG = DEM 15,000 (11 monthly installments) 7-19MPG = DEM 9,000 (11 monthly installments) If injured, receives DEM 15,000/11mos rate! Claim: Did not receive last installment and DEM 6,000 at the conclusion of the season Response: HE LEFT! Arb. decision: Indeed, he could have waited 90 days; thereafter he would be able to terminate the contract

58 What if this occurred today?
New FIBA ADR–FIBA Arbitral Tribunal (FAT) New contracts + FAT arbitration clause Court of Arbitration for Sport (CAS) Appeals (+waiver of Swiss Federal Tribunal appeal) Could CAS contribute to NBA-FIBA disputes? Now dispute would be first dealt via FAT FAT v NBA-FIBA arbitration agreement conflict NBA-FIBA agreement needs amendment (defer to FAT) What if… ULEB decides to break away… again?

59 Useful teaching points
Radojevic was honest “to the extent that, on occasion, he gave answers which might not have been entirely helpful to his cause” “…an individual must comply with a contract that he enters into” Under the scope of Arts. 81, 82, et seq. EC Treaty, and Sherman Antitrust Act § 1, critique minimum and maximum salary limits “…other compensation” & Salary determination upon injury –Omit & Be precise Contractual obligations determined by prevailing circumstances Termination – Specify timing and include buyout clause Governing law – Which is it?

60 Discussion Thoughts on “Integrating fields” teaching case studies
Thank you for your participation

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