Greg Schiano's Memorandum of Understanding With Tennessee Could Burn Vols

Tennesssee's decision to back out of a deal with Greg Schiano over fanbase uproar related to the Jerry Sandusky scandal could have legal consequences for the university.

As detailed by SI’s Bruce Feldman, the University of Tennessee on Sunday backed out of a deal to hire Ohio State defensive coordinator Greg Schiano as its next head football coach. The two sides reportedly signed a “memorandum of understanding” or MOU. As explained below, an MOU for a college coach is a formal record of the understanding between the coach and the school as to the key terms and conditions under which the university would employ the coach. Could Schiano sue the university for breach of contract, fraud or other claims? If all of the necessary parties signed an MOU, the answer would be yes.

Tennessee’s tumultuous courtship of Schiano

Tennessee’s football program is in disarray after a season in which the team finished 4–8 and winless in SEC play. Earlier this month, the school fired head coach Butch Jones. The firing was not a surprise, but that the school would target Schiano—best known as head coach of the Tampa Bay Buccaneers and Rutgers before his time in Columbus—to replace Jones was surprising.

Schiano has a controversial reputation, in part due to his time as Penn State’s defensive backs coach in the early ’90s under former defensive coordinator Jerry Sandusky, who is currently serving a lengthy prison sentence for sexually abusing young boys. In a 2015 deposition for a civil suit between the school and its insurance company concerning the payouts to Sandusky’s victims, another former Penn State assistant coach, Mike McQueary, testified he had heard through another coach that Schiano had recounted witnessing Sandusky molest a boy. In interviews with media, Schiano has denied the allegation, and he was never charged or otherwise implicated by any other party in the lengthy litigation of the Sandusky scandal. It is unknown if Schiano has had an opportunity to make a similar denial while under oath.

As Feldman details, university officials felt backlash from alumni, fans and others after news reports about Schiano becoming the next Vols’ head coach circulated early on Sunday. While the main criticism of Schiano stemmed from the implication he knew in some way about Sandusky molesting children and took no action, others cited football reasons, including his largely unpopular tenure with the Buccaneers, as a key source of their displeasure.

Late Sunday, Tennessee broke off talks with Schiano. It appears the school will now move on to other candidates.

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Making sense of the MOU as a legally enforceable contract

As a starting point, it is worth noting the obvious disclaimer: while journalists have reported that Schiano and Tennessee signed an MOU, there has been no official statement by either Schiano or Tennessee to that effect. If no such agreement had been signed, Schiano’s potential claims would be far weaker.

Here’s another disclaimer: even if an MOU has been signed, it is not yet a public document.

With those disclaimers out of the way, the language of an MOU signed by Schiano and Tennessee would be crucial in understanding each side’s rights. Other MOUs signed by Tennessee may provide clues. One such MOU is available online. In 2015, Tennessee signed an MOU with Rick Barnes to become the school’s men’s head basketball coach. Barnes would later sign a six-year, $15 million contract. There are several key terms in the Barnes’ MOU:

1) The MOU is described as a “binding and legally enforceable agreement” once fully executed (signed).

Significance: Note first that the MOU must be signed by all relevant parties in order to become binding. In the case of Barnes’s MOU, four persons had to sign it: Barnes; vice chancellor and athletic director Dave Hart; chancellor Jimmy Cheek; and treasurer and CFO Butch Peccolo. If Schiano’s MOU contained similar requirements, it would not be enforceable unless signed by all of the listed persons.

Second, Barnes’s MOU is portrayed as an interim and incomplete contract—but nonetheless a binding contract. It is “interim” in that it would be replaced by an employment contract and is “incomplete” in that it only highlights key terms as opposed to detailing every term (as would the eventual employment contract).

This particular language in Barnes's MOU reflects why universities use MOUs. An MOU in part reflects that the coach and the university’s timing are on very different schedules. A coach wants to start immediately given the implications for recruiting and assembling a staff. Waiting for the paperwork to clear could put the coach and the program at a disadvantage.

A university—particularly a public university—normally can’t move that quickly. The university’s human resources department usually requires that a background check be conducted on a pending hire before that hire becomes official. Such a check can take weeks. In addition, there may be Affirmative Action policies that relate to close evaluation of the finalists and semi-finalists who were considered for the position. Further, the university’s board of trustees or the statewide university system board typically must vote to approve a hiring. Even though such votes are almost always pro forma, they are often not instantaneous. Given these hiring requirements, an MOU can facilitate the transition and allow the coach to take on some of his or her job functions.

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2) Tennessee can terminate the MOU or employment agreement without cause upon written notice to the coach. In such an event, the university must pay the coach $1 million per contract year for each remaining year of the contract. The university can offset what it owes the coach if the coach obtains comparable employment.

Significance: In referring to “without cause,” this language means a firing for reasons that have nothing to do with the coach’s misconduct. If a coach is fired for his or team playing poorly, the firing would be without cause.

A few other points:

First, Tennessee must provide written notice in order to fire without cause. While this seems like an unimportant point, if the termination of the MOU came during a phone call, the termination would not be effective until and unless it was followed with a letter, email or text. We don’t know how Tennessee officials communicated with Schiano or his representatives about his employment status.

Second, Barnes’s MOU is treated the same as Barnes’s employment contract for purposes of a firing without cause. If this were also true with Schiano, he could be owed a considerable amount of money through liquidated damages. In Barnes’s contract, he would receive $1 million per year remaining on his contract if he is fired.

Third, the Barnes MOU provides an offset, meaning that if he is fired, he wouldn’t receive the full liquidated damages amount if he took on “comparable employment.” The MOU defines such employment to include coaching and broadcasting positions.

3) Tennessee can terminate the MOU or employment agreement with cause “as determined in the reasonable and good faith judgment of the University.” A “for cause” firing can result from “acts or omissions in violation of NCAA legislation at prior institutions. Any “for cause” firing must “afford Coach a post-termination opportunity to contest the termination.”

Significance: A “for cause” firing is one where the employer doesn’t have to pay the employee the remainder of the contract. It arises when the employee has acted wrongfully in terms of the law or ethics.

Assuming that Schiano’s reported MOU with Tennessee uses similar language as the language used by the school with Barnes, it seems unlikely that Tennessee could terminate its reported MOU with Schiano “for cause.” While language for “acts or omissions” in violation of NCAA rules at past institutions could theoretically be construed to cover Schiano’s time at Penn State, such a construction would seem like a stretch.

For starters, Schiano disputes the allegation that he knew about Sandusky molesting children. Also, the NCAA has never punished him for it. Tennessee was also presumably aware of the allegation before it began negotiating with Schiano. It would seem unethical for Tennessee to bring up it as a reason to cut ties with Schiano after the school (reportedly) signed him to an MOU.

Of course, there may be more to the story than what is known at this time. Perhaps Tennessee could cite damaging information about Schiano that is not presently known to the public and that would warrant a firing with cause. But in the absence of that kind of info, any termination of Schiano would presumably be without cause.

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Legal and reputational considerations for Schiano

It is very possible, if not likely, that Schiano and Tennessee avert a lawsuit over the awkward end of their brief courtship. Attorneys for both sides could work out a settlement that is considered mutually acceptable. Even if Schiano is angry about how Tennessee treated him, he may not want to expend the necessary time and energy to wage a lawsuit against the school. Instead, he probably wants to return his professional focus to serving as Ohio State’s defensive coordinator—especially with the Buckeyes playing Wisconsin this Saturday in the Big Ten championship game.

Schiano also knows that bringing a lawsuit against Tennessee could negatively impact how schools consider him for future head coaching jobs. Schools may be leery of negotiating with Schiano if such negotiations fail and lead to a potential lawsuit.

But if Schiano and Tennessee can’t work out an agreement and if Schiano wants to explore a potential legal case, he and his attorneys would likely focus on a claim for breach of contract. He would argue that his MOU became legally binding once signed by both sides. He would demand liquidated damages as stipulated in the MOU. The damages could be considerable—many millions of dollars, perhaps—depending on the language in the MOU. Schiano would argue his firing is without cause since university officials, sensitive to fan reaction, appear to have gotten cold feet at the altar. As discussed above, he would note that his circumstances do not warrant a “for cause” firing.

Schiano could consider other claims in hopes of obtaining higher value damages. For instance, he could argue that the university has unlawfully interfered with his potential contractual relations with other schools for head coaching positions. To that end, Schiano could insist that by backing out at the last second and reportedly for reasons related to Schiano’s possible ties to the Penn State scandal, the university has irreparably damaged Schiano’s brand and reputation. He could maintain that Tennessee has implicitly endorsed McQueary’s accusation against Schiano even though Schiano categorically rejects it.

Schiano might also argue that Tennessee committed fraud in the inducement by leading him on to believe that he would be hired. He could assert that school gave him specific assurances that the Penn State scandal would not be disqualifying and yet dropped him under pressure for that very reason. Schiano would enhance such a claim if he could show he relied on guarantees by Tennessee and declined to pursue other coaching opportunities based on them.

Schiano and his representatives will also be on the look out for public statements made by Tennessee officials about the failed hiring. If such statements arguably constitute defamation, Schiano could add it as a claim. As a public figure, however, Schiano would need to prove “actual malice”—meaning Tennessee knowingly said something false and damaging about him—in order to prevail in a defamation claim.

Tennessee, of course, would be armed with legal defenses. For one, the school is a public university and in certain instances can rely on “sovereign immunity.” It is a legal principle that insulates public universities and other public entities (including the government) from being sued. Tennessee would also argue that it has a duty to respond to alumni who weighed in on reports of Schiano’s hiring. Likewise, as a state university, the school arguably has a duty to be responsible to the ethical expectations of Tennessee citizens concerning those employed by state schools. Further, the school can emphasize it can hire whomever the school chooses and that freedom allows the school to cut ties with a coach as the school sees fit. The school also knows that if Schiano sued, the case would likely be tried in a Tennessee court—a favorable forum for the school—and that Schiano might have to answer questions about Sandusky while under oath.

SI.com will keep you posted on any developments.

Michael McCann is SI’s legal analyst. He is also an attorney and the Associate Dean for Academic Affairs at the University of New Hampshire School of Law, and co-author with Ed O'Bannon of the forthcoming book Court Justice: The Inside Story of My Battle Against the NCAA.