Gene Ford signed a five-year contract with Kent State University in Ohio to work as the head

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Gene Ford signed a five-year contract with Kent State University in Ohio to work as the head coach for the men’s basketball team. The contract provided that if Ford quit before the end of the term, he would pay liquidated damages to the school. The amount was to equal his salary ($300,000) multiplied by the number of years remaining on the contract. Laing Kennedy, Kent State’s athletic director, told Ford that the contract would be renegotiated within a few years. Four years before the contract expired, however, Ford left Kent State and began to coach for Bradley University at an annual salary of $700,000. Kent State filed a suit in an Ohio state court against Ford, alleging breach of contract. The court enforced the liquidated damages clause and awarded the university $1.2 million. Ford appealed, arguing that the liquidated damages clause in his employment contract was an unenforceable penalty.

In the Language of the Court

Diane V. CRENDELL, J. [Judge]

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* * * The parties agreed on an amount of damages, stated in clear terms in Ford’s * * * employment contract. * * * It is apparent that such damages were difficult, if not impossible, to determine. * * * The departure of a university’s head basketball coach may result in a decrease in ticket sales, impact the ability to successfully recruit players and community support for the team, and require a search for both a new coach and additional coaching staff. Many of these damages cannot be easily measured or proven. This is especially true given the nature of how such factors may change over the course of different coaches’ tenures with a sports program or team. [Emphasis added.]

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* * * Kennedy’s statements to Ford that the contract would be renegotiated within a few years made it clear that Kent State desired Ford to have long-term employment, which was necessary to establish the stability in the program that would benefit recruitment, retention of assistant coaching staff, and community participation and involvement. The breach of the contract impacted all of these areas.

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Regarding the alleged unreasonableness of the damages, * * * based on the record, we find that the damages were reasonable. * * * Finding a coach of a similar skill and experience level as Ford, which was gained based partially on the investment of Kent State in his development, would have an increased cost. This is evident from the fact that Ford was able to more than double his yearly salary when hired by Bradley University. The salary Ford earned at Bradley shows the loss of market value in coaching experienced by Kent State, $400,000 per year, for four years. Although this may not have been known at the time the contract was executed, it could have been anticipated, and was presumably why Kent State wanted to renegotiate the contract * * * . There was also an asserted decrease in ticket sales, costs associated with the trips for the coaching search, and additional potential sums that may be expended.

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As discussed extensively above, there was justification for seeking liquidated damages to compensate for Kent States losses, and, thus, there was a valid compensatory purpose for including the clause. * * * Given all of the circumstances and facts in this case, and the consideration of the factors above, we cannot find that the liquidated damages clause was a penalty. [Emphasis added.]

Decision and Remedy A state intermediate appellate court affirmed the lower court’s award. At the time Ford’s contract was entered into, ascertaining the damages resulting from a breach was “difficult, if not impossible.” The court found, “based on the record,... that the damages were reasonable.” Thus, the clause was not a penalty—it had “a valid compensatory purpose.”

• Cultural How does a college basketball team’s record of wins and losses, and its ranking in its conference, support the court’s decision in this case?