No Signed Contract, No Deal: Legal Fallout for Josh McDaniels and the Colts

McDaniels reminded us that nothing is legally binding until pen is put to paper on a contract. But can the Colts take any legal action against the Patriots' offensive coordinator?

In law, normally there’s no deal until there’s a deal.

Don’t tell that to the Indianapolis Colts.

On Tuesday night, ESPN’s Adam Schefter broke the stunning news: New England Patriots offensive coordinator Josh McDaniels had unexpectedly withdrawn from an agreement in principle to become the Colts’ next head coach. In a subsequent statement, the Colts expressed that McDaniels had notified the team of his withdrawal only after “agreeing to contract terms.” While McDaniels may have agreed to key contractual terms, it does not appear that he signed an actual employment contract.

It is unclear why the 41-year-old McDaniels, who served as head coach of the Denver Broncos in 2009, would back out at the last second. It’s possible that Patriots owner Robert Kraft offered McDaniels a massive raise so that he’ll be paid similar to NFL head coaches. It’s also possible that McDaniels received assurances from Patriots management that he is the certain “heir apparent” to Patriots head coach Bill Belichick, who will turn 66 in April. Considering that other teams might now be disinclined to pursue McDaniels in light of him leaving the Colts at the altar, it would be logical to assume that he has assurances from the Patriots about the team’s head coaching position (though the Patriots would need to be mindful of the Rooney Rule). Alternatively, McDaniels may have found reason to worry about Andrew Luck’s health. Or maybe he simply decided he didn’t want to be a head coach next year.

Whatever the reason(s), McDaniels and the Colts are not a match.

The news is shocking given that the Colts went so far as announcing, through the team’s Colts.com website, that they had agreed to terms with McDaniels and were set for a press conference with McDaniels in Indianapolis on Wednesday. Andrew Walker of Colts.com also authored a story titled “Getting To Know: Josh McDaniels.” In the story, McDaniels is described as gaining “a golden opportunity to put it all together” with the Colts. In sum, the Colts gave every indication that McDaniels was already in the fold.

Yet neither McDaniels nor his agent, Bob Lamont, made a public statement about any agreement to join the Colts. Their silence, especially when juxtaposed to the enthusiasm and expressiveness of the Colts, seems noteworthy in hindsight.

For Patriots fans grappling with the team’s loss in Super Bowl LII, the news of McDaniels staying—and turning down the Colts—is cause for celebration. With Tom Brady as the quarterback, McDaniels’s offenses have consistently been one of the best. And among the 32 NFL teams that McDaniels could have spurned at the last second, the Colts (along with the New York Jets) are likely at the top of wish list for Patriots fans. The Colts attracted the disdain of Patriots fans by playing an instrumental role in the Deflategate controversy. Emails from then-Colts general manager Ryan Grigson to NFL officials about Grigson’s air pressure suspicions contributed to the NFL’s controversial decision to investigate. Patriots fans may see McDaniels embarrassing the Colts as payback for Deflategate.

The Josh McDaniels U-Turn: Coach Abandons Colts After Patriots Convince Him to Stay

A verbal commitment by McDaniels to the Colts is not enough: no binding contract

The Colts say that McDaniels agreed to terms to become the team’s head coach. It’s unclear if McDaniels would agree with that characterization. McDaniels might depict the arrangement as less certain and more aspirational. To that end, he could argue that he and his agent were still negotiating details with the Colts when he had a last minute change of heart. As mentioned above, it’s noteworthy that while the Colts acted as if McDaniels was already the next head coach, neither McDaniels nor anyone on his behalf had made public statements about him taking the Colts’ job.

It’s thus possible that while the Colts thought a deal was done, McDaniels did not.

Even assuming that two sides had reached a so-called “meeting of the minds” on the essentials of a contract, it probably would still not be enough for a legally enforceable contract.

For one, employment contracts are often difficult and in some cases impossible to enforce in the absence of them being in writing. In the context of an NFL coach, an employment contract is a very detailed understanding of the responsibilities and duties of the job. Had McDaniels and the Colts finalized a written contract, it would have specified:

• Compensation (including McDaniels’s base salary, non-salary compensation and deferred compensation).

• Years of the contract and, possibly, the mechanics for which the years could be altered.

• Health care, insurance and fringe benefits.

• Performance bonuses, such as for winning a Super Bowl or the AFC Championship Game.

• Available reimbursement for moving and relocation costs.

• Use of a courtesy car and mileage reimbursement.

• The conditions in which the Colts could void McDaniels’s contract or be able to terminate it “with cause”—meaning not have to pay McDaniels on the remainder of the contract—on account of any misconduct.

• Prohibitions on McDaniels taking on other employment while working for the Colts.

• The circumstances in which McDaniels could perform consulting services and independent contractor work outside of his employment with the Colts.

• Duties on the part of McDaniels to mitigate the amount of money owed to him by the Colts should the Colts fire him without cause; for instance, if the Colts fired him in year 3, would McDaniels taking a job with a different NFL team in year 4 cause a salary offset? Would the offset not occur if the job were instead with a college team or a media company? The contract would specify these dynamics.

• The procedures for dispute resolution in the event McDaniels and the Colts , such choice of law clauses and use of mediation and arbitration.

Those are just a sampling of many important terms that would likely be found. While it’s theoretically possible that McDaniels and the Colts informally agreed on all of those terms, it’s far more likely that a signed written contract was needed to reveal the parties’ final expression of intent. This seems especially probable given McDaniels’s public silence on the Colts: while McDaniels may have seen an incomplete arrangement, the Colts may have seen a done deal. Unless both sides assented, there was no assent.

Along those lines, consider that whenever an NFL team hires a coach, it does so through a written contract. For the Colts to hire McDaniels without such a contract would seem at odds with NFL business practices.

In addition, Indiana, like other states, recognizes the “Statute of Frauds.” Among other things this legal doctrine dictates that in order to enforce a contract that cannot be performed be performed in one year, it must be in writing. McDaniels and the Colts presumably negotiated a multi-year agreement that could not have been performed within one year.

Josh McDaniels Walks Out on Indianapolis

Colts would be wise to not sue McDaniels and seek damages from him

While McDaniels does not appear to have become employed by the Colts, that doesn’t mean the Colts couldn’t sue McDaniels.

At least in theory, the Colts might insist that they detrimentally relied on McDaniels’ alleged assurances. Such a claim is sometimes raised in court as “detrimental reliance” and other times as “promissory estoppel.” The gist of it would be that the Colts took McDaniels’s word and then conducted business accordingly.

The Colts, for example, hired assistant coaches who would have joined McDaniels’s staff. Had McDaniels not relayed an intention to sign on as head coach, the team presumably would not have hired any of those assistant coaches.

The Colts also could have pursued other potential head coaches, including those who became head coaches while the Colts pursued McDaniels. Take Mike Vrabel, who was a finalist to become the Colts head coach. When the Colts made clear their preference was to hire McDaniels, Vrabel accepted an offer to become the Tennessee Titans’s head coach. If the Colts had known McDaniels would have bailed at the end, the team presumably would have tried to hire Vrabel instead. In that sense, McDaniels harmed the Colts.

So could the Colts sue McDaniels? Sure, but suing someone and winning a lawsuit are two very different things. To put it mildly, there would be a number of major hurdles for the Colts.

One hurdle is that everyone involved in this situation understands that the marketplace for NFL coaches is extremely competitive. Colts owner Jim Irsay has been around the NFL a long time. The 58-year-old billionaire was only 12 when his father, Robert Irsay, bought the Baltimore Colts. Jim Irsay knows that there are always risks in pursuing one coaching candidate instead of others. Non-preferred candidates will realize what’s happening and seek other opportunities. Meanwhile, the preferred candidate may have a change of heart at the very end. A court would probably be unsympathetic to the Colts if the team sued McDaniels.

A lawsuit would also be at risk of being tossed from court on grounds that it is preempted by the NFL constitution. Article 8.3 of the constitution makes clear that commissioner Roger Goodell has “full, complete, and final jurisdiction and authority to arbitrate any dispute between or among players, coaches, and/or other employees of any member club or clubs of the League.” The Colts are contractually obligated to follow such language. McDaniels would likely assert that the Colts would first have to raise its grievance with Goodell before any court could hear the claim.

Even if the Colts could somehow devise a winning legal theory against McDaniels, the team would likely suffer significant reputational harm in bringing a case against him. Think about it: what credible coaching candidate would want to negotiate with a team that sues a preferred candidate who doesn’t accept the job? Whatever possible money the Colts might obtain from McDaniels would seemingly be outweighed by the potential ridicule that the team could attract in suing McDaniels.

Colts would likely struggle to show tampering or unlawful conduct by the Patriots

There is no indication that the Patriots engaged in wrongful behavior in trying to retain McDaniels. Kraft and Belichick had every right to negotiate with McDaniels until he would have become contractually bound to the Colts.

For instance, the Patriots could have sweetened McDaniels’s current terms of employment and even agreed to pay him more than what the Colts would have paid him. Kraft and Belichick could have also stressed possible downsides to McDaniels taking the Colts job, most notably the lingering questions about Luck’s health. Also, Kraft and Belichick may have gently reminded McDaniels of his “failure” as a head coach the first time around. To that end, they may have warned him that a second failure as an NFL head coach could doom his prospects for another chance. It’s also possible, as explained above, that Kraft promised McDaniels that he would become the Patriots head coach when Belichick retires or leaves.

None of those scenarios would be grounds for misconduct. They instead reflect healthy competition between an existing employer and a prospective employer over a coveted person.

Some have speculated that the Colts could argue that the Patriots engaged in tampering. There’s a big problem with such a theory: tampering occurs when one team interferes with another team by trying to convince that other team’s employee to join. In this instance, McDaniels had been a Patriots employee the whole time. The Patriots couldn’t tamper with the Colts when the person of interest was already under contract with the Patriots.

The Colts could instead consider filing a lawsuit against the Patriots. At least in theory, one claim might be “tortious interference”. Through it, the Colts would insist that the Patriots unlawfully damaged a prospective contractual relationship between the Colts and McDaniels.

A lawsuit along these lines seems far-fetched. For one, it would be subject to preemption. As mentioned above, the NFL constitution makes clear that disputes between teams must first go to the commissioner. Second, the Patriots attempted to retain McDaniels so that they would keep their talented offensive coordinator and ensure that he does not sign with an archrival. That’s not illegal conduct—that’s being competitive in a market economy.

The Patriots, in other words, appeared to exercise a legitimate right to try to keep McDaniels.

The assistant coaches are in a tough spot

In anticipation of McDaniels taking the job, the Colts hired Matt Eberflus as defensive coordinator, Dave DeGuglielmo as offensive line coach and Mike Phair as defensive line coach. Although Mike Garafolo of the NFL Network reports that the Colts will retain these three coaches, these three men will nonetheless have legitimate reason to worry about their Colts employment. Whoever the Colts ultimately hire as head coach won’t be the person who recruited them. Their new boss might be someone they don’t know and who has a very different philosophy about game planning and preparation. That new boss might eventually—and perhaps sooner than later—want or even demand from Colts management the ability to hire other persons to those assistant coach slots.

Still, it seems unlikely that the assistant coaches would pursue a detrimental reliance claim against McDaniels over their situation. The fact is, they are employed, albeit with less certainty and under different circumstances than they expected. It’s also possible that they could—like assistant coaches on any team—pursue jobs with other NFL teams. They also took a bit of risk in signing contracts with the Colts before McDaniels signed. A lawsuit would also trigger a time-consuming and energy-draining controversy that the assistant coaches are probably not interested in.

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.