Michigan State Settles With the Victims of Larry Nassar's Abuse. How Might the NCAA Respond?

Michigan State has agreed to a $500-million settlement with the victims of Larry Nassar's abuse—a decision that was likely more for public relations than it was for the law. Now, the ball is in the NCAA's court. Will it penalize Michigan State?

Michigan State University has settled lawsuits brought by 332 victims of serial child molester Larry Nassar, the former Michigan State professor who has been tried, convicted and sentenced in both federal and state courts for sexually assaulting numerous young women. Nassar, 54, has been sentenced to between 140 and 360 years in prison and will spend the rest of his life behind bars.

Nassar committed many of his crimes while employed as a physician in Michigan State’s Sports Medicine Clinic from 1997 to 2016. Nassar grotesquely engaged in ungloved vaginal and anal penetration under the guise of dispensing medical care. As reported by David Jesse and Gina Kaufman of the Detroit Free Press, Michigan State has agreed to pay $425 million now and hold $75 million in reserve on account of the possibility that other victims will bring claims. It is the largest settlement ever paid by a university in the United States.

The $500-million settlement does not necessarily end the Nassar controversy for Michigan State, particularly since the NCAA could punish the school’s athletic program. In addition, victims of Nassar can continue to pursue legal claims against other defendants and potentially receive monetary sums from them. This is especially true of USA Gymnastics, for whom Nassar served as national medical director from 1996 to 2014.

Michigan State’s decision to settle follows the university aggressively waging a legal defense

Michigan State did not immediately settle the litigation, which has been on the docket since January 2017. At that time, former gymnast Rachael Denhollander and 17 other former gymnasts filed a complaint in the U.S. District Court for the Western District of Michigan against Michigan State, the university’s board of trustees, USA Gymnastics, the Twistars Gymnastics Club and Nassar. In the months that followed, hundreds of other gymnasts and husbands of gymnasts joined Denhollander in filing claims. These claims were eventually consolidated into one lawsuit.

Michigan State was accused of being institutionally liable for Nassar’s crimes. The basic legal argument was that Michigan State owed a legal duty to supervise Nassar, who was a school employee entrusted with practicing medicine on school property, and the university failed to meet that duty. To that end, school officials allegedly failed to undertake reasonable steps, such as seriously investigating complaints of abuse and carefully scrutinizing Nassar’s behavior. These failures allegedly constituted negligence and violations of federal civil rights protections, including those detailed in Title IX of the Education Amendments of 1972—a federal law that requires reporting of sexual assaults. Michigan State was thus accused of enabling Nassar to inflict harm; had the university acted differently, the plaintiffs contend, many of Nassar’s victims would have been spared.

Until the settlement was reached, Michigan State had aggressively challenged the accusations. The school went so far as to retain former U.S. Attorney Patrick Fitzgerald, a high-profile attorney at Skadden Arps law firm. Fitzgerald became well-known in legal and political circles in the mid 2000s for his work in the prosecution of Scooter Libby, who had served as chief of staff to Vice President Dick Cheney. Fitzgerald was initially retained by Michigan State to conduct an investigation into the school. His role later morphed into top outside defense counsel. The school’s hiring of Fitzgerald suggested a defensive posture, and it seemed Michigan State’s legal strategy was to challenge and combat allegations of misconduct, not to settle claims of wrongdoing.

In court filings, Fitzgerald directly countered the victims’ legal theories. For instance, he reasoned that the victims had failed to notify any “appropriate” Michigan State officials about the abuse and thus the school was never on notice. “Plaintiffs allege that one adult patient reported to MSU in 2014 that Nassar sexually assaulted her at a medical appointment through physical contact that did not involve penetration,” Fitzgerald wrote. “None of the Plaintiffs allege, however, that they reported their abuse such that an appropriate official had actual notice of the abuse.”

This depiction of events contradicted the retellings of facts by not only the plaintiffs, but also media: A Detroit Newsinvestigation revealed that former university president Lou Anna Simon and at least 13 other people associated with Michigan State had knowledge of complaints against Nassar prior to September 2016. During that month, Denhollander became the first victim to publicly accuse Nassar.

Fitzgerald also raised legal defenses. For example, he asserted that Michigan State was immune from the claims on grounds that the school is a public university and is thus protected under “sovereign immunity.” This legal doctrine instructs that various branches of government, including public universities, can generally not be sued without providing consent. Fitzgerald also argued that most of the victims suing Michigan State lacked standing to assert Title IX claims. This was allegedly because “they were never MSU students or they were not MSU students at the time of Nassar’s misconduct.”

Some commentators criticized Fitzgerald and Michigan State’s decision to hire him. Fitzgerald’s investigation, critics opined, arguably “whitewashed” the facts and insensitively failed to admit the truth about what really happened. That said, Fitzgerald has certain professional responsibilities as an attorney. His primary goal is to wage the most effective legal arguments on behalf of his client and to shield his client from liability. An attorney’s focus is on issues of law, not on popular opinion.  

The decision to settle was likely more about public relations than it was about law

The defenses articulated by Fitzgerald were not at all frivolous, particularly the sovereign immunity defense—it is a defense that often succeeds for public universities when facing lawsuits. Further, Fitzgerald would have been a skilled advocate to raise those defenses. His law firm, Skadden Arps, is also one of the best in the business. In other words, if the lawsuit had gone to trial, Michigan State might have won, in which case Nassar’s victims would have received nothing from the school.

Even if Michigan State went to trial and lost, it’s not certain that the school would have been ordered to pay damages in excess of $500 million. The record-setting settlement figure works out to, on average, $1.28 million per claimant ($425 million divided by 332). It’s unclear if each claimant will receive the same amount of money and attorneys fees could absorb as much as 33% of the settlement. To place this dollar figure in perspective, Penn State settled its claims to victims of Jerry Sandusky by reportedly paying $93 million to 33 victims ($2.8 million on average), though that amount was later increased to $109 million in order to address additional claims. Also consider that Bishop Accountabilityfinds that the average settlement and jury award in Catholic Church sexual abuse cases is $268,444 per claimant while the U.S. Department of Justice estimates that victims of medical malpractice are awarded, on average, between $400,000 and $631,000. As a further comparative, when an adult dies in a wrongful death, one study in North Carolina finds the average jury award is about $3 million and the average settlement is about $800,000.

While Nasser’s crimes were horrific, it’s not immediately clear that Michigan State faced a high risk of being ordered to pay Nasser’s victims more than what the school agreed to pay in the settlement. This is particularly the case since Nassar’s victims are poised to recover from USA Gymnastics and other institutional defendants, most likely through settlements. Keep in mind, damages must be based on defensible calculations. They are normally determined by extent of medical expenses, including mental health and counseling, as well as pain and suffering, lost wages and capacity to obtain meaningful employment. Juries have discretion in awarding damages. Through punitive damages, juries can punish or “send a message” to a defendant and similarly situated parties. On the other hand, federal judges can reduce jury awards by granting “remittitur,” a court mechanism that allows a judge to lower a damages award if the judge determines it is unreasonably high.

So why would Michigan State settle at a high dollar figure? There are several likely reasons.

First, Michigan State wanted to avoid the uncertainty of a trial. The school no doubt watched the victims’ moving, jaw-dropping statements at the January sentencing hearing for Nassar in the courtroom of Michigan Circuit Court Judge Rosemarie Aquilina. The same victims would have testified in a trial with Michigan State as the defendant, and jurors would have heard their words and seen their pain. Michigan State may have concluded that the risk of a jury awarding massive damages was too great.

Second, Michigan State placed a premium on gaining closure. The school’s reputation has been badly tarnished by its association to Nassar, and a trial pitting the university against Nassar’s victims would have only reinforced the Michigan State-Nassar connection. It probably would have been a public relations disaster. The sooner the university can own up to its institutional failings, the sooner the public—as well as the university’s applicant pool and alumni and donor groups—will judge the school in a more favorable light.

Third, the university can now fully implement steps to address the shortcomings that contributed to Nassar’s crimes without concern that those steps might signal an admission of guilt. While so-called “subsequent remedial measures” are normally inadmissible in a trial, defendants and their attorneys often worry about the optics of undertaking actions that imply the defendant previously erred.

Fourth, Michigan State has new leadership in president John Engler. He wants to distance his administration from the scandals that occurred during the administrations of his predecessors. The longer the litigation continued, the more likely damaging evidence and testimony about what the school knew about Nassar would have surfaced. Engler’s administration would become more and more attached to the controversy.

Fifth, Michigan State has the financial wherewithal to pay a sizable judgment without compromising its other contractual obligations or core academic mission. While there are legal restrictions on the use of endowments to pay litigation settlements, Michigan State’s endowment is estimated to be worth between $2.7 and $3.0 billion. The school’s annual operating budget is also $1.36 billion. Kim Kozlowski of The Detroit Newsreports that the school may cut the budget by 2.5% to help pay for the settlement—a sizable cut to be sure, but not an extreme one for a university facing short-term financial issues. Michigan State’s insurance companies, which Matt Mencarini and Justin A. Hinkley of the Lansing State Journalreport were involved in the settlement talks, are also expected to contribute.

Sixth, as explained more fully below, Michigan State is mindful that a longer litigation against Nassar’s victims would have increased the probability that damaging emails and other records surface. Various investigators and regulatory bodies could then use those records for their own purposes. The NCAA, for example, could rely on any such disclosures in its assessment of whether to punish the school. The same dynamic would be true for concurrent investigations by the Michigan Attorney General, the Michigan Legislature, the U.S. Congress and the U.S. Department of Education.

Will the NCAA punish Michigan State?

In January, NCAA executive vice president Oliver Luck sent a letter of inquiry to Michigan State athletic director Mark Hollis in regards to MSU’s handling of Nassar-related complaints and accusations, making it very clear the NCAA is interested in the degree to which the university wrongly treated female student-athletes. The letter referred to Article 2.2 of the NCAA constitution and bylaw 20.9.1.6. Both provisions require member universities to protect the wellbeing, health and safety of student-athletes. Both will be critical in the NCAA’s assessment.

In March, attorney Mike Glazier, an attorney representing Michigan State, filed a response to NCAA’s investigation. The letter denied that Michigan Stated had engaged in any wrongdoing worthy of triggering NCAA violations. Glazier reasoned that university officials didn’t know Nassar had sexually assaulted young women. “[A]fter a thorough and analytic examination of NCAA legislation and an application of the known facts associated with the Nassar matter to NCAA legislation,” the letter noted, “the University finds no NCAA rules violations."

The NCAA could commence a formal investigation into Michigan State by sending a notice of allegations. The notice would argue that Michigan State failed to adhere to NCAA rules and failed to exhibit institutional control. Any such investigation and enforcement process could take years to play out—something Ole Miss knows all about as it continues to face a multi-year enforcement process with the NCAA. Although an investigation into Michigan State would focus on athletes who were connected to Nassar, other damaging information about Michigan State athletics could surface—including in regards to a federal lawsuit brought last month by a former student who claims that three basketball players raped her in 2015.

Eventually, the NCAA could find fault and punish Michigan State. Possible penalties would include a fine, imposition of a post-season ban and forfeiture of athletic scholarships. A more severe and uncommon penalty would be to shut down Michigan State gymnastics or shut down the entire Spartans athletic department for a period of time. Such a penalty would be the so-called “death penalty.” The most recent imposition of the death penalty for a Division I college occurred in 1987, when Southern Methodist University received it due to extensive recruiting violations.

Some have compared the Michigan State controversy to the one faced by Penn State on account of Sandusky. Both involved a monster who sexually assaulted young persons. Both featured university administrators who either knew or should have known what was occurring.

However, one could argue that Nassar was even “worse.” Hundreds of victims have come forward to accuse Nassar whereas the number of Sandusky victims who have come forward is in the dozens. Likewise, Nassar had a stronger legal relationship to his school. He was a high-ranking employee of Michigan State when he committed his sexual assaults. Sandusky, in contrast, had already retired from coaching to become “professor emeritus”, which is typically a courtesy or unpaid appointment, during most of the time he was found to have committed sexual assaults. These points could lead the NCAA to conclude that Michigan State warrants a more severe penalty than the one received by Penn State, which initially faced $60 million fine, five-years probation, a four-year postseason ban and vacating of wins.

But nothing is ever simple with the NCAA. As analyzed by SI in January, the NCAA was notified in 2010 about sexual misconduct involving Michigan State student athletes. Records suggest the NCAA did not investigate. Had it done so, the NCAA may have either caught Nassar or at least made it more difficult for him to engage in sexual misconduct. If the NCAA now punishes Michigan State over Nassar, the school may respond that the NCAA has a conflict of interest.

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