Dave Hickman is an idiot

I hate to call people out. Actually, that is a lie. I love it and Dave Hickman you may be a poor sports writer, but you are a terrible lawyer. Hickman wastes two pages in today's Charleston Gazette verbally fellating John Beilein and the correctness of the buyout. That's fine, you loved Beilein and wanted to have his baby, but science won't let that happen yet even though Arnold got preggers in that one movie. Unfortunately, Hickman then tries to explain the purpose of the buyout.

Now, before anyone decides that the settlement between West Virginia and Beilein should be taken as a signal to try to barter down that tuition you owe, or the check you’re about to write for season tickets, it’s apples and oranges. This isn’t money owed to West Virginia for services rendered, but rather a punitive award.

Well I'm not a contract lawyer, but my first year in law school contracts taught me that there is almost never a punitive award in contracts. The goal in contract law is to put the non-breaching party in the position they would have been had there not been a breach. Liquidated damages must be proven both to have been reasonable in light of the anticipated or actual loss and difficult to prove at the time of the drafting of the contract to be enforceable. Should a liquidated damages clause look penal (not the organ but a punishment) then it is unenforceable. Whether the clause in Beilein's contract could be construed as punishment is reviewed by OS here and here.

WVU clearly settled for one reason alone. The liquidated damages clause was vague and high enough it could be construed as punishment. If so, a judge would not lower the clause, but throw it out giving WVU actual damages which are the cost to bring in Huggybear. So going to court would have been $2.5 million or basically $0, plus the expenses of court. WVU looked at the situation and said $1.5 million is still a lot, so lets take it. Whether it was right or wrong is as the Dude would say, "like your opinion man." Personally, I would have taken it to court because the precedent is set that WVU will back off during later negotiations, but then again I don't have to answer to the state had WVU lost. $1.5 million may not purchase a new scoreboard, but it would at least be able to buy some new sound effects during introductions. I'm sending Dave a link for his response. And Dave if you do drop by you also screwed this up recently, too. Dummy.

*Note from Option Spread: To let you guys know, all three of the contributors to this site are admitted to the practice of law in various states. Its not a brag, its to let you know that we're not just coming up with this crap off the top of our heads or from research on the googles or the ebays. We actually know what we're talking about and we have the student loan debt to prove it.

Further, the information contained in this article and other posts on this site, if legal in nature, is merely provided as information and is not to be construed as legal advice. If you have a legal matter similar to Beilein's or otherwise, please contact a local attorney immediately as the factual nuances in each case differ and are often times essential to the correct analysis of your situation. Since very few of our readers know our actual names and/or identities, this post, and others like it, are also not solicitations or advertisements for legal services. Sorry for the legalese, the ethics rules require this stuff.

Settle down now

The Dominion-Post is reporting that John Beilein and West Virginia University have agreed to settle the buyout of his contract for $1.5 million over 5 years. In addition, the payments may be going to the Mountaineer Athletic Club or the WVU Foundation. The reasoning would be that I guess Beilein could attempt to use a payment to either as a tax write-off.

In other Michigan/WVU news it appears as though upcoming UM senior safety Ryan Mundy is attempting to transfer to WVU. In a little used NCAA rule, one that has been rescinded, a player that graduated could transfer and not sit out a year if the school he transferred to had a graduate program unavailable at the former school. Mundy is attempting to get in under a grandfather clause and would have one year of eligibility remaining. Florida cornerback Ryan Smith used the rule last year to follow Urban Myer from Utah and in basketball UNLV player Kevin Kruger used the loophole to leave ASU and play for his daddy.

One little additional thing on Beilein's Buyout

As we've previously discussed, no one is readily paying over the $2.5 million allegedly owed by Beilein to WVU pursuant to his employment contract. We proffered earlier that Beilein and his team of crack attorneys may be banking on the fact that the buyout clause is potentially unenforceable due to its amount in proportion to his salary and lack of language declaring otherwise.

The guys over at mgoblog raised another possibility - er, a plan B for Beilein. Even if the clause if found enforceable, Beilein should be able to get the amount reduced if he pays it all right now based upon current value accounting. Without getting too technical, CVA is premised upon inflation, i.e. $500k in 2012 is actually worth less than $500k in 2007, so any payment today of a sum guaranteed in the future should be appropriately reduced.

The contract language, "Coach will pay . . . $500,000 per year for the remainder of the Agreement's term" suggests that if this liquidated damage clause is enforceable in its entirety, Beilein would owe the University $500,000 once per year over the next 5 years instead of $2.5 million right now. Using the CPI calculator available from the US Bureau of Labor and Statistics, and assuming a rate of growth over the next 5 years similar to the past 5 years, Beilein's total buyout has a current value of $2.31 million.

Furthermore, cash in hand is always more valuable than cash owed. And let's not forget settlement value. The potential flaws in the liquidated damage clause raises the possibility of expensive litigation and creates the possibility of WVU getting squat, nada, zilch.

Add it all together, and assuming some sort of financial backing permitting Beilein to settle now, I'm predicting a settlement in the $1.7 million dollar range.

*The mgoblog guys also raised some issues about taxes (as did my boss), but I know about as much about taxes as I do about appropriate conduct in public.

Warning: Legal Analysis Ahead - Beilein's Buyout

A week or so ago, when it was finally official that Beilein was heading off to "greener" pastures in Michigan, the silver lining to that ominous rain cloud was his $2.5 million dollar "buyout" provision in his contract. Most fans felt we could use that money to improve various aspects of the athletic program or at least get some hookers for Hardesty's going away party. Well, not so much.

Apparently, no one is going to pay it unless court ordered. From, ugh, ESPN:

Beilein won't go on the record about his intentions in seeking legal counsel, but multiple sources have told ESPN.com that Beilein is trying to get the buyout reduced -- if not wiped out entirely. Pastilong said he wouldn't discuss anything more about the buyout, except that, "We expect the contract to be honored. A contract is a contract. [The buyout is for $2.5 million] and that's what the contract is for."

Well, not exactly.

The short story: This clause is potentially uneforceable (more on this below). If the judge finds that it IS enforceable, WVU gets $500,000/year ($2.5M). If the judge finds it unenforceable, then the liquidated damage clause is out, but Beilein is still on the hook for "damages", which, unfortunately here, seem to be minimal.

The long story: Beilein's buyout clause was not written particularly well. Beilein's buyout clause is technically what is called a liquidated damage clause. Liquidated damage clauses allow parties to specify in advance an estimated value of how badly a party would be damaged if the other party breached the contract. However, they're typically only enforceable if the contract provides that "the parties hereto hereby agree that in the event of a breach by either party that the nature of this Agreement would prevent an accurate measurement or estimation of the actual damages incurred by the nonbreaching party" and "that the parties hereto hereby agree that $xxx,xxx.xx is a fair and reasonable estimation of damages resulting for a breach and that the nonbreaching party shall be entitled to this amount in liquidated damages in the event of a breach." So, lets take a look, does Beilein's contact have this stuff:

Crap. Who drafted this thing? What? Some second year law student? Where's Cardi!? Regardless, the liquidated damage clause, i.e. buyout, is probably still enforceable. However, it faces two potential "uphill battles". First, a liquidated damage clause is only enforceable if actual damages are difficult to measure and the amount is found to be reasonable, i.e. $500,000 is a reasonable estimate of damages. That's why drafters typically include the "the parties agree that it will be hard to esitmate and that this is a reasonable amount" language. Unfortunately, that language is missing from Beilein's contract and so more open to review by a judge than if it had that language.

Second, there are other limitations on employment contracts. For instance, clauses that make it unreasonable or overly difficult for a former employee to pursue new employment can be striken from a contract if its found to be against the public policy encouraging the freedom of employment.

So, if this is actually litigated, WVU has to be concerned whether the "iffiness" of the liquidated damage clause and the prohibition against restricting future employment weighs so strongly against it that a judge rules it as unenforceable. While I find it unlikely, the potential exists for such a ruling. Consequently, WVU may have to decide whether to roll the dice and have the full amount enforced or settle for a smaller amount. And this, I imagine, is why Beilein is fighting it.

*This is not legal advice. This is only general legal information. Do not rely upon the information provided herein. This is also not a legal advertisement.

*More analysis in the comments. Please read on. Questions? Feel free to ask.

A second response

This time for the people that are attacking the basketball team. Here is an example of one of these groups (my responses will be in italics) from the Daily Athenaeum:

Huggins hire sends a bad message about WVU values

An open letter to West Virginia University director of athletics Ed Pastilong:

My wife and I are both alumni of WVU from 40 or so years ago.

Glad you were so precise. Apparently you weren't math majors.

We are not people who care passionately about sports, but over the past few years, we have come to follow the fortunes of the Mountaineer football and basketball teams closely.

Ah, you like us when we are good. Glad to see the bandwagon wasn't too full for you the last few years. And I can understand why you don't normally like sports. They are so barbaric what with winning and losing and all.

We have especially enjoyed the attractive brand of basketball that John Beilein introduced to his teams, with its emphasis on teamwork, smart shooting and disciplined play that went beyond individual athleticism and often led to victories over teams with superior individual players.

Yes, everyone liked how Beilein's teams played. But constantly having a team with less talent is NOT an admirable trait.

It was so different from, and more exciting than, the big-man-stuffs-the-ball style that prevails these days that it came to represent (along with Beilein's teaching skills) a set of values that distinguished the University.

I hate to watch dunks too. When Joe Alexander or Frank Young dunked this year I booed. I'd much rather watch a two hand set shot like back in the fifties. Oh, and some other qualities Beilein showed. Wanting to leave no matter what. Trying to go to NC State, Indiana, and then Michigan in a one-year span. Then claiming he couldn't win or recruit any higher at WVU because WVU wasn't as good as Michigan.

In your quest for a new coach, we had hoped you would keep these values in mind.

Which ones the coach that teaches teamwork, the coach that can't recruit, or the coach that hates Morgantown?

We are particularly disturbed to learn that you have hired Bob Huggins, a man who is unquestionably a good coach, but also a man who, according to news reports, has been arrested and convicted of drunken driving, and a man who was forced to resign from Cincinnati over issues that included players' arrests, suspensions and low graduation rates.

Huggins left Cinci after losing a power struggle with UC President Nancy Zimpher. The 2004 DUI just gave the president more ammunition to call for the firing. More worrisome than the past arrest is the heart attack suffered in 2002.

These are not the kind of values that should be shaping the lives of young men, nor are they the kind of values we wish to have associated with teams that represent our school.

The school you haven't followed until the last two or so years admittedly.

I'm afraid you'll have to count us as former Mountaineer basketball fans and potential donors.

After 40 or so years you are still "potential donors." You haven't given a red cent, but you feel the need to add your two cents? I bet you haven't been to a game either. So in the end WVU loses you what, not watching games on ESPN. I bet you still will sneak a peak.

Jerry and Suzanne Bowles

New York, N.Y.

Now in all seriousness Huggins would not have been my first choice as the coach. But I'm not the AD or the boosters with millions. And I can understand the reasons for the hire. First off Huggins is a big name and great coach. Cinci was not a major program when he took over, hadn't been since the Big O. He has been to a Final Four and 3 Elite Eights. He has made the postseason every year at UC or KSU. The man can flat out recruit and won't use the "we are in WV" cry as an excuse if he misses on someone. The biggest drawback would be the graduation rates. Huggins disputes the numbers and claims he has had teams with valadictorians, high rates, and GPAs, but the NCAA numbers don't count players that started school elsewhere.

So Huggy bear has given the detractors ammunition over his career. But is he any worse than Eddie Sutton before his hire at OSU? The overall reason that WVU made the move for Huggins, despite the fact that it could be problematic from a PR standpoint, is that he is from West Virginia. WVU had two choices. Look for a big name or find a small guy and raise him (ala Beilein). The small guy has a great chance of failure. Also if either he or the big guy succeed they could use WVU as a spring board elsewhere. WVU hit option 1 with the insurance that Huggins was a WVU guy. The alternative was hold your breath and hope the new guy is both good and loyal to WVU. Then start over.

One of the things that won me over about Huggins was his press conference. He WANTS to be here. He also knows he isn't well liked in most places and doesn't care. Winners don't care how the loser preceives them. WVU needs more of that. Huggins talked about the inferiority complex some in WV have. People from WV are one of the few PC options people can still openly mock (ask Imus). Maybe it bothers me more because I'm not from West Virginia originally. But, if we lose we're loser hillbillies and when we win we are still inbred hillbillies. Well I'd rather be called a hillbilly after my team just put their foot up someones ass anyday.

Beilein was a great coach and most wish he would have stayed here until he retired. But, he wanted out. We took a good girl and married her, then she started going out behind our back and left us for another guy. Now the hot girl we wanted back in high school came calling. Sure she had a reputation in high school, but she still is hot and she wants to settle down. Let's just hope she doesn't give us chlamydia.