University of Tennessee in Legal Hot Water Over Botched Hiring of Greg Schiano

Some of you may have heard of the legal entanglement surrounding the University of Tennessee’s botched hiring of controversial coach Greg Schiano. Today we are happy to share the legal analysis of FordHarrison attorney Joshua Sudbury.

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The Tennessee coaching search has produced high drama over the past two weeks. For Vol fans like myself, it has felt at times like absolute torture and at other times like just a little bit of torture. “Vol-nation” was in better spirits after the hiring of Phillip Fulmer as Athletic Director was announced, and many are pleased with the selection of master-recruiter and talented Alabama Defensive Coordinator Jeremy Pruitt as the next head coach of the Vols. Details surfaced early Thursday that Pruitt’s new contract is for 6-years at roughly $4 million per year.

Despite this stability, however, the University of Tennessee is far from out of the woods. That is because the administration is staring down the barrel of two potentially costly legal battles over separate memorandums of understanding (MOUs) with would-have-been head coach Greg Schiano and outgoing Athletic Director John Currie. As a legal blogger and avid college football fan, I have never been more excited to bring you legal analysis.

Schiano’s MOU

As you might recall, the Schiano hire at Tennessee was torpedoed after fans and boosters responded in an overwhelmingly negative way via social media and some alleged behind-the-scenes protests. It was later reported that Schiano may seek compensation for Tennessee backing out of an MOU that was allegedly signed by then-athletic director Currie. For starters, the biggest problem in giving any decided legal opinion is that we don’t have a copy of the MOU. In the absence of the actual Schiano MOU, most have looked to the MOU for current UT head basketball coach Rick Barnes for guidance about what might be in Schiano’s agreement. The Barnes MOU contains basic contract language, i.e., offer, acceptance, description of duties, compensation, and termination provisions. It is essentially a legally binding agreement and not an agreement to agree, even though it does contemplate the parties would sign a more detailed agreement later. The MOU contains standard for-cause/no-cause termination provisions outlining the parties’ duties in the event of a separation. The Schiano MOU is likely structured similarly.

While initial reports stated that Currie signed the document, reports have since surfaced that UT Chancellor Beverly Davenport did not sign the MOU, leaving some question about its enforceability. The question remains whether Currie’s purported signature on the MOU makes the document legally binding when UT’s top brass didn’t sign the agreement. The Barnes MOU states it would constitute a legally binding agreement “when fully executed.” I added the emphasis to “fully” because of the report that Currie’s is the only Tennessee signature purportedly on the agreement. By contrast, the Barnes agreement required the signatures of the athletic director, the chancellor, and the treasurer and CFO. That is consistent with Article IV, Section 8, of the UT Bylaws, which provide in pertinent part “all contracts . . . and other instruments of legal obligation shall be executed by the President or another University Officer after any required legal and fiscal review.” The position of athletic director—which Currie held—isn’t identified as a “University Officer” capable of executing such agreements. Thus, blank signature blocks for the university officers on Schiano’s MOU would tend to support the argument that although “executed,” the agreement wasn’t “fully” executed and therefore isn’t enforceable.

Schiano, however, may argue Currie had sufficient or at least apparent authority to bind the university so that Schiano could legitimately rely on Currie’s signature alone in believing the deal was done. Additional evidence about the university’s previous practice in such circumstances, such as other documents similar to the Barnes MOU, would be necessary to give a more definitive take on Schiano’s chances of success. But you can bet he and his agent are likely to push the issue, given that big money is at stake. A “no cause” termination would bring the MOU’s buyout clause into play. The Barnes MOU provided for a buyout worth $1 million per contract year remaining in the event of a no-cause termination. That was seemingly based on Barnes’ $2.5 million annual salary. Schiano’s MOU was likely worth much more, which would most likely result in a similarly higher buyout. Given the circumstances under which the deal crumbled, it is difficult to see how UT could argue it had cause to terminate the agreement. All facts pertinent to cause, including Schiano’s coaching history and The Washington Post article linking him to the Jerry Sandusky case at Penn State, were all well-known before negotiations began.

If Schiano presses the issue, UT will have to weigh its options in deciding whether to fight or try to negotiate a mutual resolution. That, too, could prove costly. A recent example can be found just down the road in Gainesville, Florida, in the form of (UT’s SEC East rival) the University of Florida’s termination of former head coach Jim McElwain. That termination, which was “for cause,” has reportedly resulted in a settlement paying McElwain roughly $4 million of his $12.9 million buyout. Since Schiano and McElwain reportedly share the same agent, the success of settlement negotiations in other termination cases may embolden Schiano to at least kick the tires with UT to see what he can get.

Currie’s Employment Status

The fallout from the Schiano debacle is far from over. Just this past Friday, Currie was “suspended with pay” by Chancellor Davenport. Despite “suspending” and not “terminating” Currie, Davenport hired former UT head coach and Hall-of-Famer Phillip Fulmer to assume the AD duties full-time, effective immediately. The hiring of Currie’s replacement while he is still on staff likely means UT administrators and counsel are conducting an internal investigation to determine whether they can fire him for cause—a decision that may alleviate the burden of having to pay Currie’s own buyout, which reportedly stands at $5.5 million. Whether the university can establish he acted outside of his authority with regard to the botched hiring of Schiano and his MOU or whether Currie’s desperate “Hail Mary” attempts to hire Mike “the Pirate” Leach to succeed Butch Jones was the final nail in his coffin remains to be seen.

Remember, while all of this potential cash exchange plays out on your Twitter feed, Tennessee has essentially agreed to honor former coach Butch Jones’ $8.25 million buyout. Oh, to have been a football coach where “success” is measured by a committee and under-performance guarantees you money! Whatever, man, just Swing Your Sword.

Joshua J. Sudbury, an attorney in the Nashville office of FordHarrison LLP, frequently defends employers in federal and state court against claims of discrimination and harassment, retaliatory discharge, and alleged wage/hour violations. This column first appeared in the FordHarrison blog EntertainHR.