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Can Large Buyouts Keep College Coaches from Jumping Ship?

By Rick Karcher, Michael McCann, Geoffrey Rapp, Greg Skidmore, and Howard Wasserman

How many millions does it take to keep a college coach from leaving? A $1.... A $2.... A $3.... (crunch) -- A $3. I don't know what made me think of that owl in the Tootsie Pop commercial, but that's how much new Indiana University basketball coach Tom Crean must pay IU if he leaves within the first three years. Conversely, if IU fires Crean without cause, IU's liability to him is capped at $3M. So it ends up being a two-way street. In yesterday's edition of The Indianapolis Star, Terry Hutchens and Mark Alesia provide all the details of Crean's new eight year, $18.24 million contract as well as IU's reasons for demanding such a large buyout obligation.

While it used to be that liquidated damages obligations on the part of the coach for leaving early were rarely seen in college coaches contracts, these provisions are now fairly common. And much larger buyout amounts appear to be a rapidly growing trend. For example, Rich Rodriquez had a $4M buyout with WVU, and reportedly now has the same buyout in his new contract with Michigan. Xavier basketball coach Sean Miller has a $2M buyout. Auburn football coach Tommy Tuberville's five year contract has a buyout starting at $7M if he leaves during the first year of the contract term, which then gets reduced a million each year thereafter. Former Kentucky basketball coach Tubby Smith had no buyout obligation in his contract with Kentucky when he recently left for Minnesota, but his new contract with Minnesota contains a $3M buyout in year one, $2M in year two, $1M in year three, and $500K in year four. Some coaches contracts contain liquidated damages provisions that are the same on both sides; meaning that the breaching party owes the non-breaching party an amount equal to the coach's annual salary owing through the remainder of the contract term, which could be extremely costly depending upon the amount of the coach's annual salary and the number of years left on the term of the contract.

According to IU athletics director Rick Greenspan: "I've done about a 180 on this. I used to not believe in buyouts. But I believe there are now deterrents that are important to have.'' Greenspan also knows that nowadays it's going to take more than a $500k - $1M buyout to deter a coach from leaving, because IU is paying Tom Crean's $650K buyout that Crean owes Marquette for breaking his contract there. Eventually, these much larger buyout obligations will help contain the "coaches carousel" in collegiate athletics. Les Miles has a $1.25M buyout obligation in his contract if he bolts for Michigan, and only he knows how much of a deterrent it served when he decided to stay at LSU. At some point, the economics are such that leaving early can become virtually impossible for the individual coach to afford, and it doesn't make good business sense for the new school to pay the coach's buyout obligation on his behalf either.

Full post as published by Sports Law Blog on April 06, 2008 (boomark / email).