I'm not a lawyer, but I am trying to lay out what I think the argument is from Schiano's point of view.
A. Tennessee backed out of an agreement.
Why?
If it's the Penn State business, he will argue that there is defamation of his character which not only caused monetary damages and damage to his personal reputation, but that damage makes it more unlikely to gain future jobs which also hurts him financially.
He will argue that he was never charged with anything regarding PSU. One person (McQuery) mentioned him as having knowledge of an incident as hearsay only from a third party (Bradley). That third party denies Schiano having knowledge of the incident or saying what McQuery said he told him. Furthermore, not only was he not charged, he was never asked to testify or had any involvement in the legal proceedings of the people in that case who were prosecuted.
If it's for any other reason, they didn't have cause to back out of the agreement and he is owed compensation.
B. Even if we were to accept that McQuery's word is accurate and Bradley and Schiano are lying, it's not Schiano's fault Tennessee overlooked it and entered into an agreement with him.
Tennessee broke the agreement. Tennessee owes him money.
That's basically what I think his argument will be.
Now, since I am not a lawyer, I do not know if he has a case or not.