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Keywords

contractbreach of contractdamagesappealtrialsummary judgmentliquidated damages
contractbreach of contractdamagesplealiquidated damages

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Kent State Univ. v. Ford, 26 N.E.3d 868, 314 Ed. Law Rep. 1067, 39 IER Cases 1183, 2015-Ohio-41

Facts

Kent State University filed a complaint against Gene A. Ford, the former head coach of its men's basketball team, for breach of contract after he terminated his employment four years before the contract's expiration to accept a position at Bradley University. The contract included a liquidated damages clause requiring Ford to pay his salary for the remaining years of the contract if he breached it. The trial court granted summary judgment in favor of Kent State, enforcing the liquidated damages clause and awarding $1.2 million in damages. Ford appealed the decision.

On April 26, 2011, Kent State filed a Complaint against Ford and Bradley University, asserting that Ford, the former head coach of the men's basketball team at Kent State, breached his contract by terminating his employment with Kent State four years before the contract's expiration and commencing employment with Bradley University.

Issue

Is the liquidated damages clause in Ford's employment contract enforceable despite the argument that it acts as a penalty and that actual damages were not proven?

Whether a contract with a liquidated damages clause is unenforceable when it requires a breaching university coach to pay his salary for each year remaining under the contract, when there is limited evidence of actual damages, and whether damages in such a case can include only the salary of a replacement coach.

Rule

Liquidated damages are permissible if they are consistent with the principle of compensation and are not punitive. Courts must evaluate whether the liquidated damages provision reflects a reasonable estimate of actual damages at the time the contract was formed, considering factors such as the uncertainty of damages and the parties' intent.

Liquidated damages are 'an agreed upon amount of money to be paid in lieu of actual damages in the event of a breach of contract.' Liquidated damages that are consistent with the principle of compensation are permitted. When a party challenges a liquidated damages provision of a contract, court must step back and examine it in light of what the parties knew at the time contract was formed and in light of estimate of actual damages caused by the breach.

Analysis

The court found that the liquidated damages clause was enforceable because the damages resulting from Ford's breach were difficult to ascertain. Testimonies indicated that the departure of a head coach could lead to decreased ticket sales, recruitment challenges, and other intangible losses. The court also noted that the clause was not unconscionable, as Ford had negotiated the contract and was aware of the liquidated damages provision. The damages were deemed reasonable and reflective of the parties' intent to ensure compensation for potential losses.

The application of Samson to the facts of this case supports a conclusion that the liquidated damages provision was properly enforced by the lower court. The parties agreed on an amount of damages, stated in clear terms in Ford's second employment contract. Regarding the first factor, the difficulty of ascertaining the damages resulting from Ford's breach, it is apparent that such damages were difficult, if not impossible, to determine.

Conclusion

The court affirmed the trial court's decision, holding that the liquidated damages clause was enforceable and that Kent State was entitled to the specified damages of $1.2 million.

For the foregoing reasons, the judgments of the Portage County Court of Common Pleas are affirmed.

Who won?

Kent State University prevailed in this case as the court upheld the enforceability of the liquidated damages clause in Ford's contract. The court reasoned that the clause was a reasonable estimate of potential damages that could arise from Ford's early termination of the contract. The evidence presented indicated that the departure of a head coach could lead to significant losses for the university, including impacts on ticket sales and recruitment. The court found that the damages were not arbitrary but rather a reflection of the investment Kent State made in Ford's employment.

Kent State University prevailed in this case as the court upheld the enforceability of the liquidated damages clause in Ford's contract.

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