O'Brien v. Ohio State University
139 Ohio Misc. 2d 36, 859 N.E.2d 607, 2006 Ohio 4346 (2006)
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Rule of Law:
The after-acquired evidence doctrine cannot be used to bar an employee's recovery for wrongful termination if the employer was aware of the employee's misconduct prior to the termination. A liquidated damages clause is enforceable when damages are uncertain at the time of contracting, the contract is not unconscionable, and the amount is not disproportionate to potential actual damages.
Facts:
- Plaintiff, the men's head basketball coach for defendant Ohio State University, had an employment contract specifying liquidated damages if he was terminated 'other than for cause.'
- In 1998, Plaintiff made a loan to the family of a prospective recruit, an act which violated NCAA rules.
- Plaintiff did not disclose this loan when negotiating a new contract with Ohio State in 1999.
- In August 2003, Plaintiff informed Ohio State's athletic director, Andy Geiger, about a lawsuit containing allegations of improper benefits provided to another player, Slobodan Savovic.
- In the months leading up to the termination, Geiger and other university officials obtained deposition testimony related to the Savovic allegations and interviewed Plaintiff about them.
- On May 18, 2004, Ohio State self-reported the Savovic allegations to the NCAA, three weeks before terminating Plaintiff.
- On June 8, 2004, Ohio State terminated Plaintiff's employment, providing a written notice that cited only the 1998 loan as a material breach of contract justifying a 'for cause' termination.
Procedural Posture:
- Plaintiff (a former basketball coach) filed a breach of contract action against defendant (Ohio State University) in the Ohio Court of Claims.
- The court held a trial on the issue of liability.
- On February 15, 2006, the court issued a decision finding that Ohio State had breached its employment contract with the plaintiff by terminating him without sufficient cause.
- Following the liability decision, the parties filed cross-motions for summary judgment on the issue of damages.
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Issue:
Is an employee who was terminated without contractually sufficient cause entitled to recover liquidated damages as specified in his contract, even if the employer was aware of other employee misconduct before the termination?
Opinions:
Majority - Joseph T. Clauk, Judge
Yes, an employee terminated without cause is entitled to recover liquidated damages because an employer cannot rely on the after-acquired evidence doctrine for misconduct it was aware of prior to termination. The court held that the after-acquired evidence doctrine is inapplicable because it shields an employer only when it learns of employee wrongdoing after the termination. Here, undisputed evidence, including an affidavit from athletic director Andy Geiger, showed that Ohio State knew about the allegations concerning player Slobodan Savovic weeks and months before dismissing the plaintiff. Therefore, the university could not retroactively use that information as a justification to bar damages. The court also rejected the university's attempt to invoke a different termination clause related to NCAA sanctions, as that clause was not cited in the termination letter and its conditions—the imposition of sanctions—had not occurred at the time of firing. Finally, the court found the liquidated damages clause was an enforceable provision, not an unenforceable penalty, because it met Ohio's three-part test: damages for loss of collateral opportunities were uncertain at the time of contracting, the contract was negotiated between sophisticated parties and was not unconscionable, and the stipulated amount was not disproportionate to the coach's potential actual damages.
Analysis:
This decision clarifies a significant limitation on the after-acquired evidence doctrine, establishing that an employer cannot 'stockpile' knowledge of an employee's misconduct and later use it to defend against a wrongful termination claim. It underscores the importance for employers to specify all known grounds for a 'for cause' termination in the notice of dismissal as required by the contract. The ruling also reinforces judicial deference to liquidated damages clauses negotiated between sophisticated parties with equal bargaining power, even when the resulting payout is substantial. This precedent cautions employers that they will be held to the precise terms of their contracts and cannot retroactively construct justifications for their actions.
