When In Doubt, Seek a Buyout: Indiana’s Solution to the Kelvin Sampson Dilemma

I.    Introduction

Parting ways with a college coach accused of violating National
Collegiate Athletic Association (NCAA) rules has become a delicate
process.  On February 8th, the NCAA notified Indiana University that
its men's basketball coach, Kelvin Sampson, had allegedly committed
five "major" NCAA rule violations.[1]  After more than a week of
speculation surrounding Sampson's future at Indiana, the school
negotiated a settlement to terminate its relationship with the
second-year coach.[2]  In exchange for a $750,000 buyout, Sampson
resigned and agreed not to pursue any legal action against the
university.[3]

On its face, the buyout seems generous for a coach who conceivably
could have been fired outright for cause.  Sampson, who was already
under NCAA sanction for prior infractions, had a clause in his contract
that allowed Indiana to terminate him for "significant or repetitive
violations."[4]  Nevertheless, Indiana was in a difficult position. 
Firing Sampson prior to NCAA hearings on the alleged violations would
have likely spurred a wrongful termination suit in which Sampson could
potentially recover the remaining $2.5 million on his contract.[5] 
Allowing the embattled coach to remain a Hoosier until the NCAA's final
determination in July would prolong the program's instability as the
NCAA tournament and recruiting season approach.[6]  Faced with this
dilemma, Indiana decided it was well worth the buyout to get Sampson
out the door immediately.

II.   The NCAA's Case Against Sampson

Indiana's decision to sever ties with Sampson in a quick manner
likely reflects the university's desire to restore its basketball
program's once-clean image after a string of embarrassing incidents
involving the coach.  Two months after he was hired in March 2006, the
NCAA imposed sanctions on Sampson for making 577 impermissible phone
calls to recruits while he coached at the University of Oklahoma.[7] 
In October 2007, a university investigation found that Sampson and his
staff made over 100 impermissible calls while still under recruiting
restrictions.[8]  Sampson himself took part in ten three-way calls
during the time when he had been expressly prohibited from
participating in calls made by his staff.[9]

The NCAA's subsequent investigation found further violations that it
deemed substantial.[10]  Its report stated that Sampson had
impermissible recruiting contact with attendees of a two-day sports
camp in Bloomington and that he made twenty-five phone calls that would
have exceeded NCAA limits even if no sanctions had been in place.[11] 
Most damaging, however, was the NCAA's assertion that Sampson
repeatedly gave false or misleading information to investigators and
that he "failed to deport himself . . . with the high standard of of
honesty."[12]  When questioned about the report, Sampson denied he ever
knowingly acted contrary to his sanctions or provided false information
to investigators.[13]

Sampson's history of impropriety justifies Indiana's desire to part
ways with the coach in a timely fashion.  The decision to offer Sampson
a buyout allows the basketball program a chance at a fresh start, even
as it awaits further proceedings relating to the investigation.  Under
the NCAA's version of due process, Indiana will have to file a written
response to the allegations by May 8, and hearings are likely to occur
in June.[14]  The NCAA is expected to make its final decision on
further action against Sampson and the university sometime in
July.[15]  Ultimately, Indiana concluded it could not keep Sampson
around that long.

III.   The O'Brien Precedent

The decision to negotiate a buyout rather than fire Sampson outright
was likely influenced by recent litigation involving Ohio State
University and its former men's basketball coach, Jim O'Brien.  Ohio
State fired O'Brien in 2003 shortly after he admitted to giving a
$6,000 loan to a potential recruit.[16]  O'Brien's contract specified
that he could be terminated for cause if he materially breached the
agreement or committed a "major" NCAA violation.[17]  The Ohio Court of
Appeals ruled in favor of O'Brien because he had substantially
performed his contract and was fired before the NCAA held hearings and
formally ruled that his conduct constituted a violation.[18]  Thus,
Ohio State was judged to have breached the contract for firing O'Brien
without cause.[19]  As a result, the court ordered Ohio State to pay
its ex-coach nearly $3 million in damages.[20]

Sampson's contract was similar to O'Brien's.  It contained a
termination provision for violations of university and NCAA rules, in
addition to instances of moral turpitude and conduct prejudicial to the
university.[21]  Indiana officials, conscious of the O'Brien ruling,
knew they could not fire Sampson without incurring liability until the
NCAA conducted its hearings over the summer.  The latter two
termination provisions are broad, however, and could arguably have been
invoked in an attempt to fire Sampson outright.  Faced with the
prospect of years of litigation and an uncertain outcome, Indiana chose
to offer Sampson the buyout.

IV.     Conclusion

In a business context, Indiana's decision to offer Kelvin Sampson a
$750,000 buyout serves as a pragmatic, if expensive, solution to a
difficult situation.  The university was able to swiftly oust its
coach, while avoiding a potentially lengthy and costly legal battle. 
Additionally, the countervailing interests of due process in NCAA
proceedings and a university's ability to act rapidly for its own
interests have been sufficiently maintained.

Nevertheless, there remains a visceral unease when assessing the
fairness of the situation from Indiana's perspective.  It seems
counterintuitive that the university cannot immediately fire a man who
has repeatedly run afoul of NCAA rules while coaching at two major
institutions.  Less  than two years after being entrusted to lead one
of the nation's most stroried college basketball programs, Sampson has
resigned in a cloud of scandal after incurring university and NCAA
sanctions, with more potentially forthcoming. 

In the future, universities may seek to better protect themselves
from the situations faced by Indiana and Ohio State by negotiating
broader termination clauses in contracts.  The O'Brien court
stressed the fact that Ohio State, a sophisticated entity, freely
bargained away its "unfettered discretion" to terminate O'Brien by
agreeing to equate cause for termination with NCAA rule
violations.[22]  These attempts may be fruitless, however, as coaches
are high-profile figures who often hold a great deal of bargaining
power in the increasingly competitive world of college sports. 
Investigations are not uncommon in college athletics, and most coaches
will try to contractually insulate themselves from termination until
the NCAA has a made a formal determination that its rules have been
violated. 

Another alternative to the Indiana dilemma would be for the NCAA to
institute expedited proceedings in necessary circumstances.  Though the
five-month process in Indiana's case is not particularly long, the
school may have refrained from offering Sampson the buyout if the
NCAA's ultimate decision could have been made sooner.

It remains to be seen how schools, coaches, and the NCAA will adapt
to the issues raised by the Sampson  situation.  Just as the O'Brien decision
has had the effect of discouraging universities from immediately
terminating coaches accused of rule violations, it will be noteworthy
to see whether the Sampson buyout changes the dynamics of contract
negotiations and termination clauses.

Sources

1 Andy Katz, Indiana Gets List of Alleged Violations Related to Phone Calls, ESPN, Feb. 15, 2008, 2008, http://sports.espn.go.com/ncb/news/story?id=3243325 (last visited Feb. 23, 2008).

2 Skip Myslenski, Kelvin Sampson Accepts $750,000 Buyout to Step Down at Indiana, Chi. Tribune, Feb. 22, 2008, available at http://www.chicagotribune.com/sports/cs-080222-kelvin-sampson-indiana,1,1109826.story.

3 Id.

4 Id.

5 Associated Press, Sampson's Future Remains in Limbo at Indiana, ESPN, Feb. 22, 2008, http://sports.espn.go.com/ncb/news/story?id=3257218 (last visited Feb. 23, 2008).

6 Id.

7 Espn.com News Service, Indiana, Sampson Reach $750,000 Settlement to Part Ways, ESPN, Feb. 23, 2008, http://sports.espn.go.com/ncb/news/story?id=3258506 (last visited Feb. 24, 2008).

8 Id.

9 Id.

10 Espn.com News Service, NCAA Lists 5 Major Violations; IU AD 'Profoundly Disappointed,' ESPN, Feb. 15, 2008, http://sports.espn.go.com/ncb/news/story?id=3243793 (last visited Feb. 24, 2008).

11 Id.

12 Id.

13 Id.

14 See Associated Press, supra note 5.

15 Id.

16 Ed Matisik, Jim O'Brien v. Ohio State: The Battle Continues, Collegehoopsnet.com, Dec. 20, 2007, http://www.collegehoopsnet.com/new/story/jim_obrien_vs_ohio_state_battle_continues41490 (last visited Feb. 24, 2008).

17 O'Brien v Ohio State Univ., No. 06AP-946, 2007 WL 2729077, at *14 (Ohio Ct. App. Sept. 20, 2007).

18 Id.

19 Id.

20 Rusty Miller, High Court Declines to Hear Ohio State Appeal of Coach's Lawsuit, Yahoo Sports, Feb. 20, 2008, http://sports.yahoo.com/ncaab/news?slug=ap-ohiost-coachlawsuit&prov=ap&type=lgns (last visited Feb. 24, 2008).

21 See Espn.com News Service, supra note 10.

22 See O'Brien at *14.