Kent State Univ. v. Ford
26 N.E.3d 868
Ohio Ct. App.2015Background
- Gene Ford signed successive employment contracts as Kent State men’s basketball head coach, both containing a liquidated-damages clause requiring the coach to pay base + supplemental salary multiplied by remaining years if he left early.
- Ford left Kent State four years before the contract term ended to accept a higher-paying job at Bradley University; Kent State hired a replacement coach shortly thereafter.
- Kent State sued Ford for breach of contract seeking $1.2 million under the liquidated-damages clause; claims against Bradley were later dismissed by notice of dismissal.
- At summary judgment the trial court found Ford breached and the liquidated-damages clause enforceable, and awarded $1.2 million pursuant to the parties’ stipulation.
- Ford appealed, arguing the clause was an unenforceable penalty, was disproportionate and arbitrary, and that Kent State failed to prove actual damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of liquidated-damages clause | Clause is a valid pre-estimate of damages tied to university’s investment and uncertainty of harms from losing a coach | Clause is an unenforceable penalty, arbitrary and disproportionate to foreseeable harm | Clause enforceable under Samson factors; damages uncertain and clause reflects parties’ intent |
| Necessity of proving actual damages when clause applies | Proof of actual damages not required where valid liquidated-damages clause exists | Recovery impermissible without proof of actual damages; at most replacement salary is recoverable | Actual damages proof not required for enforcement of a valid liquidated-damages clause |
| Whether clause was negotiated and conscionable | Clause was mutual, negotiable, and Ford knew and sought modifications before signing | Clause was boilerplate, not based on an estimate, and may operate as punishment | Court found negotiations, sophistication of parties, and legitimate compensatory purpose; not unconscionable |
| Relation of clause to foreseeable losses (proportionality) | Salary-based formula reasonably predicts hard-to-quantify losses (recruiting, ticket sales, fundraising, search costs) | Formula (salary × years left) bears no reasonable relation to actual losses and overstates damages | Court concluded relation reasonable given uncertainty and industry practice; clause not a penalty |
Key Cases Cited
- Samson Sales, Inc. v. Honeywell, Inc., 12 Ohio St.3d 27 (Ohio 1984) (sets three-part test for determining whether stipulated damages are liquidated or a penalty)
- Lake Ridge Academy v. Carney, 66 Ohio St.3d 376 (Ohio 1993) (courts must assess clause against parties’ knowledge at formation and estimate of actual damages)
- Vanderbilt Univ. v. DiNardo, 174 F.3d 751 (6th Cir. 1999) (upheld university coach liquidated-damages clause where losses from departure were uncertain and clause was reciprocal/negotiated)