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Keywords

contractbreach of contractdamagessummary judgmentwillliquidated damages
contractbreach of contractdamagessummary judgmentwillliquidated damages

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Vanderbilt University v. DiNardo, 174 F.3d 751, 134 Ed. Law Rep. 766, 14 IER Cases 1702, 1999 Fed.App. 0135P

Facts

Gerry DiNardo resigned as Vanderbilt University's head football coach to accept a position at Louisiana State University. Vanderbilt University subsequently filed a breach of contract action against DiNardo, seeking liquidated damages as stipulated in his employment contract. The contract included a provision that required DiNardo to pay the university an amount equal to the remaining years of his contract multiplied by his annual salary if he resigned before the contract's expiration. The district court granted summary judgment in favor of Vanderbilt, awarding $281,886.43 in damages.

Gerry DiNardo resigned as Vanderbilt's head football coach to become the head football coach for Louisiana State University. As a result, Vanderbilt University brought this breach of contract action. The district court entered summary judgment for Vanderbilt, awarding $281,886.43 pursuant to a damage provision in DiNardo's employment contract with Vanderbilt.

Issue

Whether the liquidated damages provision in DiNardo's employment contract was enforceable or constituted an unlawful penalty under Tennessee law.

Whether the liquidated damages provision in DiNardo's employment contract was enforceable or constituted an unlawful penalty under Tennessee law.

Rule

Under Tennessee law, a liquidated damages provision is enforceable if it is reasonable in relation to the anticipated damages for breach and not grossly disproportionate to the actual damages. A provision will be considered a penalty if it is designed to coerce performance by punishing default. The reasonableness of the provision is measured at the time the contract was entered into, not at the time of breach.

Under Tennessee law, a liquidated damages provision is enforceable if it is reasonable in relation to the anticipated damages for breach and not grossly disproportionate to the actual damages. A provision will be considered a penalty if it is designed to coerce performance by punishing default. The reasonableness of the provision is measured at the time the contract was entered into, not at the time of breach.

Analysis

The court found that the liquidated damages provision was reasonable given the nature of the damages that Vanderbilt could suffer from DiNardo's resignation. The contract explicitly stated that a long-term commitment was essential for the stability of the football program, indicating that the parties anticipated damages beyond just the cost of hiring a replacement coach. The court also noted that the damages were difficult to quantify, which justified the use of a liquidated damages formula based on DiNardo's salary.

The court found that the liquidated damages provision was reasonable given the nature of the damages that Vanderbilt could suffer from DiNardo's resignation. The contract explicitly stated that a long-term commitment was essential for the stability of the football program, indicating that the parties anticipated damages beyond just the cost of hiring a replacement coach. The court also noted that the damages were difficult to quantify, which justified the use of a liquidated damages formula based on DiNardo's salary.

Conclusion

The court affirmed the enforceability of the liquidated damages provision in DiNardo's contract, concluding that it was not an unlawful penalty under Tennessee law.

The court affirmed the enforceability of the liquidated damages provision in DiNardo's contract, concluding that it was not an unlawful penalty under Tennessee law.

Who won?

Vanderbilt University prevailed in the breach of contract action against DiNardo. The court ruled that the liquidated damages provision was enforceable and that Vanderbilt had not waived its right to these damages. The court's reasoning emphasized the importance of the long-term commitment in the contract and the anticipated damages that could arise from DiNardo's resignation, which justified the liquidated damages clause.

Vanderbilt University prevailed in the breach of contract action against DiNardo. The court ruled that the liquidated damages provision was enforceable and that Vanderbilt had not waived its right to these damages. The court's reasoning emphasized the importance of the long-term commitment in the contract and the anticipated damages that could arise from DiNardo's resignation, which justified the liquidated damages clause.

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