Friday, August 27, 2010

Another Potential Legal Dispute Over a Breached College Football Scheduling Ageement

The SportsLawTalk blog has identified a potential legal dispute brewing between Indiana University and Central Michigan University regarding a breached college football scheduling agreement. Several years ago, IU and CMU entered into an agreement calling for their football teams to play three games against one another, with the first and third games to be held at IU, while the middle game was scheduled to be played this fall at CMU. CMU won the first game in Bloomington 37-34 in 2008.

IU subsequently backed out of its scheduled road game at CMU, while maintaining its desire to host CMU for the final game under the agreement. CMU objected, arguing that by cancelling the middle game, IU had breached the entire contract, effectively cancelling all remaining games. The parties now dispute the amount of liquidated damages owed under the contract.

Specifically, the contract's liquidated damage provision provides: "If either party breaches this contract, the party causing the breach shall pay to the other party a liquidated sum of $150,000 for games #1 and #2, and $200,000 for game #3, which shall represent liquidated damages to the, non-breaching damaged party" (courtesy of Central Michigan Life). Under IU's interpretation of the provision, it is only required to pay CMU $150,000 for cancelling the second game, while CMU owes it $200,000 for cancelling the third game. Not surprisingly, CMU disagrees with that interpretation, and argues that IU owes it $350,000 for its breach of the contract resulting in the cancellation of the final two games under the agreement.

This is the second time in the last two years that a contractual dispute over a breached football scheduling agreement has become public, following the 2008 litigation between the University of Louisville and Duke University (discussed here and here). As I argue in a forthcoming law review article, these disputes are likely to continue to arise in the future. Specifically, many scheduling agreements signed back in the early 2000s (like the IU-CMU agreement) provide for relatively small liquidated damages amounts. Meanwhile, following the advent of the 12-game schedule in Football Bowl Subdivision college football, the price that major programs are willing to pay to host a single non-conference home game has skyrocketed, now regularly eclipsing $1 million per game. As a result, many schools find themselves in a situation where it is most economically efficient to simply pay the liquidated damages amount provided for in the older contract, in order to enter a much more valuable contract negotiated in today's market. However, because these scheduling agreements are not always clearly written, and do not always anticipate certain eventualities, disputes such as the one between IU and CMU are all but inevitable. Therefore, this is unlikely to be the last legal skirmish between two college football programs over a breached scheduling agreement.