Contract Law: Meet Rich Rodriguez

Apologies to those who are just a few weeks removed from their contract law final. Feel free to stop reading now.

By now you probably know that West Virginia University’s Board of Governors is suing former football coach Rich Rodriguez (inset) in order to collect a $4 million buyout of his contract with the school. The lawsuit, filed in Monongalia County Circuit Court, says the university believes Rodriguez doesn’t intend to abide by the contract. It also states that the university fulfilled the contract’s terms and Rodriguez never gave it written notice, as required by the contract, that it had not followed the agreement. The buyout clause requires Rodriguez to pay $4 million to the school over a two-year period, with one-third of the total due 30 days after his employment’s termination, which was effective Dec. 19 when Rodriguez formally accepted the head job at Michigan after seven seasons in Morgantown (where he led West Virginia to four Big East championships and a 60-26 record).

Rodriguez’s agent, Mike Brown, has thus far declined to comment on the matter. But attorneys for Rodriguez are allegedly planning to argue in court that Rodriguez does not owe the school (or alternatively, that the $4 million sum ought to be reduced, a la the buyout of former Mountaineers basketball coach John Beilein, who ironically also bolted for Michigan) because he was fraudulently induced to sign a contract with false promises. And a key witness for Rodriguez will likely be Ken Kendrick, a longtime West Virginia athletics donor and close friend of Rodriguez who is also the managing general partner of Major League Baseball’s Arizona Diamondbacks. “They baited and switched him,” said Kendrick.

Rodriguez and the university agreed to a seven-year contract on Dec. 21, 2002, and it has been extended twice since then. The latest revision was agreed to on Dec. 8, 2006, when Rodriguez was considering an offer from Alabama. The revised contract was to run through the 2013 season. Kendrick claims, however, that a university signed document contained promises allegedly made to Rodriguez when he last signed with the school that were never in fact met. Said promises, asserts Kendrick, included allowing players to keep textbooks for resale, a practice that occurs at some other schools; waiving a $5 charge for high school coaches to attend Mountaineers games; having authority over distribution of sideline passes (Kendrick said Rodriguez “negotiated” one for his wife, Rita); having authority to allocate funds from the 1100 Club for coaches; a commitment to increase pay for his assistant coaches; additional money to pay graduate assistants; and hiring an additional recruiting assistant.

Kendrick pointed out that Beilein had his buyout reduced after last season, in part because WVU had failed to deliver on promises. But Stephen Goodwin, chairman of WVU’s Board of Governors, stood by the actions of athletic director Ed Pastilong and WVU president Mike Garrison, and furthermore downplayed the laundry list of items that Kendrick claimed Rodriguez passionately implored the university to address during his tenure. “There were some very minor issues that [Rodriguez] raised with the administration—and people were working on them,” argued Goodwin. Kendrick, however, disagrees. “Rich was boxed in by a university and athletic department that was arrogant, mean-spirited and intellectually bankrupt. This was 100 percent preventable, which is what makes it so sad. [Rich] was frustrated. Things weren’t getting done. He’d never say it because he’s a class act. So I’ll say it.”

Scrounge around the internet rumor mill however and you’ll find varying opinions about how “classy” Rodriguez really is. According to collegefootballtalk.com, for example:

“The irony of all of this is that, as we understand it, is that Rodriguez refused to finalize the term sheet that was negotiated last year at this time to keep him in West Virginia, because he tried prior to the 2007 season to finagle more stuff. And what isn’t being reported [by ESPN.com or other outlets] is the manner in which Rodriguez went about making his requests. There was, as we understand it, crying and screaming and incoherence from both Rodriguez and his wife.

The real culprit, in our opinion is Rodriguez’s agent, Mike Brown, who doesn’t get a percentage of his client’s happiness as a fee. Brown made it known last year that he thought it was time for Rodriguez to leave his alma mater, and we believe that Brown spent the next 12 months stirring up trouble.

The kicker was the aftermath of the unthinkable loss to Pitt. Based on various conversations with folks in the know, it appears that Rodriguez’s grief morphed into a finger-pointing campaign, which apparently set the stage for his agent to make the differences irreconcilable.

The tragedy here is that guys who presumably are smart (like Kendrick and other boosters) have allowed themselves to form their opinions without hearing the whole story. And if the university is guilty of anything here, it’s of having the class not to tell the world about the manner in which Rodriguez conducted himself over the past several months.”

Attorney Drew Capuder weighed in on the matter from a legal standpoint for MSNBC.com, as did attorney Tom Kirkendall
over at thewizardofodds.com,:

“This is really pretty straightforward stuff from a legal standpoint, although one has to overlay West Virginia state law on the contract issues. Whether Rodriguez has a valid fraudulent inducement claim largely depends on the terms of the contract. In most cases of a contract of this magnitude, it will contain a merger clause that will provide something to the following effect:

‘The parties confirm that, in entering into this contract, they have relied only on the representations and warranties included in this contract and that all prior representations made between the parties — whether oral or written — are null and void and of no force and effect. This contract is the sole agreement between the parties and cannot be modified except in writing approved by both parties.’

If such a provision is contained in the contract, Rodriguez’s fraudulent inducement claim would be dismissed on summary judgment in most jurisdictions.”

But this analysis may be overly simplistic. For example, what about Beilein’s case? Under that contract, Beilein’s “buyout clause” was in fact what is more specifically labeled a “liquidated damage clause,” whereby parties to a deal specify in advance an estimated value of how badly one party would be damaged if the other party breached the contract. In most jurisdictions, however, said clauses are only enforceable to the extent that the parties acknowledge that in the event of a breach, the nature of the agreement in question prevents an accurate measurement or estimation of the actual damages incurred by the nonbreaching party, and furthermore that the parties then proceed to make a reasonable estimation of the damages that would in fact result from the breach.

The clause in Beilein’s contract, however, lacked the proper requisite language, and furthermore tabbed liquidated damages at a seemingly capricious $500,000/annum for the contract’s duration. Not surprisingly, Beilein’s lawyer shot holes through the shoddy drafting and the court found partially in his favor. But what precedent does that hold for Rodriguez, since the language of his contract is presumably materially different? Most likely, very little.

Furthermore, Rodriguez’s attorney can argue that the mere presence of a merger clause per se is irrelevant. Rodriguez is claiming fraud, not breach. A merger clause prevents a party from claiming that the other party breached the agreement by failing to meet some unwritten obligations. However, Rodriguez could assert that he isn’t arguing that WVU failed to do what it promised, but rather that he would not have signed the deal in the first place had WVU not fraudulently claimed it would do what it promised. The subtle difference could render the merger clause legally insignificant in the court’s eyes.

If you’ve been put in a difficult situation by an oppressive business following a contractual agreement that you’re seeking to terminate, Iron Fist may be able to help you with your legal needs when it comes to negotiating acceptable terms or walking away legally.