Did O’Brien materially breach the contract?

The Ohio State University (OSU), experiencing a drought in its men’s basketball program, brought in Coach Jim O’Brien to turn things around. The plan was successful. In only his second year, he guided the team to its best record ever. The team advanced to the Final Four, and O’Brien was named national coach of the year. OSU’s athletic director promptly offered the coach a new, multiyear contract worth about $800,000 per year.
Section 5.1 of the contract included termination provisions. The university could fire O’Brien for cause if
(a) There was a material breach of the contract by the coach or
(b) O’Brien’s conduct subjected the school to NCAA sanctions. OSU could also terminate O’Brien without cause, but in that case, it had to pay him the full salary owed.
O’Brien began recruiting a talented 21-year-old Serbian player named Alex Radojevic. While getting to know the young man, O’Brien discovered two things. First, it appeared that Radojevic had been paid to play briefly for a Yugoslavian team, meaning that he was ineligible to play college basketball. Second, it was clear that Radojevic’s family had suffered terribly during the strife in his homeland.
O’Brien concluded that Radojevic would never play for OSU or any major college. He also decided to loan Radojevic’s mother some money. Any such loan would violate an NCAA rule if done to recruit a player, but O’Brien believed the loan was legal since Radojevic could not play in the NCAA anyway. Several years later, the university learned of the loan and realized that O’Brien had never reported it. Hoping to avoid trouble with the NCAA, OSU imposed sanctions on itself. The university also fired the coach, claiming he had lied, destroyed the possibility of postseason play, and harmed the school’s reputation.

O’Brien sued, claiming he had not materially breached the contract. The trial court awarded the coach $2.5 million, and the university appealed.