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Analyzing Kelvin Sampson's Settlement: A Good Business Decision for IU

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

Last week on the blog, I discussed Kelvin Sampson's contract situation in the wake of Indiana's receipt of a Notice of Allegations two weeks ago from the NCAA's enforcement staff. Yesterday's $750,000 settlement between IU and Sampson, of which $550,000 is coming from an anonymous donor, is a really good business decision for IU.

First, there is the risk of losing a wrongful termination lawsuit. According to Mark Alesia of the Indianapolis Star: "IU spokesman Larry MacIntyre said the risk of losing a wrongful-termination lawsuit was the biggest reason for offering Sampson a buyout instead of firing him. MacIntyre said the school thought it could have been liable for $2 million to $3 million in a lawsuit." MacIntyre further commented, "The university is basically avoiding that for $200,000." As I mentioned in the comments to my previous post, and I also said it to Alesia, the for cause termination language in Sampson's contract with IU is much more favorable to IU than it was for OSU in Jim O'Brien's contract. That being said, just as OSU did not prevail in O'Brien's wrongful termination suit, there is always a risk that IU would not prevail either; not to mention the time, the inconvenience, the attorneys fees and the bad PR associated with ongoing litigation -- even if IU were to prevail!

There's also another risk element that may have been eliminated by a settlement. IU has until May 8 to respond to the NCAA's allegations. The case is expected to be heard on June 14 by the NCAA Committee on Infractions, and a decision regarding possible penalties against IU's basketball program would come four to eight weeks later. IU could also appeal that decision to the Infractions Appeals Committee. Sampson is most likely going to be a witness in the case. A wrongful termination lawsuit could be very contentious and ugly, and IU doesn't want an adversarial witness at the NCAA hearing who has an axe to grind. Also, the NCAA would have access to all the pleadings and testimony from a lawsuit, which might not be in IU's best interest. I'm not suggesting that IU administration and/or compliance staff were involved in any wrongdoing, but in a lawsuit you just never know what might be alleged or what information could be revealed through discovery.

Full post as published by Sports Law Blog on February 23, 2008 (boomark / email).