A federal judge has dismissed the antitrust lawsuit filed by Governor Tom Corbett and the state of Pennsylvania against the NCAA challenging the heavy sanctions the college sports governing body imposed on Penn State’s football program in the wake of the Jerry Sandusky sex-abuse scandal.
U.S. District Chief Judge Yvette Kane of the Middle District of Pennsylvania said the lawsuit, which argued, among other things, that the National Collegiate Athletic Association sought to bolster its own reputation by levying unprecedented penalties on the program, did not rise to the level of "commercial activity" under the federal Sherman Antitrust Act. Had the lawsuit established commercial activity, Kane said Corbett still would not have met the standard for antitrust — the crux of her decision in Commonwealth v. National Collegiate Athletic Association.
Perhaps legal framework other than antitrust would have been more successful, Kane said, in ruling on the NCAA’s motion to dismiss and delivering a first-round knockout to the widely publicized litigation. While she ruled Corbett did not have "antitrust standing," the judge concluded the governor did establish his right to sue on behalf of Pennsylvania citizens under the doctrine of parens patriae.
"The governor’s complaint implicates the extraordinary power of a non-governmental entity to dictate the course of an iconic public institution, and raises serious questions about the indirect economic impact of NCAA sanctions on innocent parties," Kane said. "These are important questions deserving of public debate, but they are not antitrust questions."
"In another forum, the complaint’s appeal to equity and common sense may win the day, but in the antitrust world these arguments fail to advance the ball," Kane added, an allusion to the sport of football, which resides at the center of the Sandusky scandal. Earlier in the opinion, Kane said the NCAA’s legal arguments in favor of dismissing the case rendered the governor’s legal standing to advance the case tantamount to a "Hail Mary pass."
Sandusky, the former defensive coordinator for Penn State and convicted serial child molester, is serving a minimum of 30 years in state prison after a jury convicted him on 45 of 48 counts of child sex abuse.
Corbett and the state’s complaint claimed the NCAA, through its "consent decree" with Penn State, forced the university to agree to its sanctions in July of last year, a move that allowed the university to avoid the so-called "death penalty" — a complete ban from a school’s participation in a given sport for a given time. Those sanctions included a $60 million fine, a four-year ban on postseason play, the vacating of seasons’ worth of victories for the university’s storied football program and a dropoff in scholarships.
Corbett and the state were seeking an injunction that would have prevented the NCAA from imposing those penalties. It also asked for the court to rule the sanctions a violation of the Sherman Act, for the state’s court costs, and for other relief the court may see fit.
Kane said the lawsuit, which was filed in early January and did not name Penn State as a party, failed on account of its inability to allege "commercial activity" and, thus, trigger the Sherman Act. Despite that, Kane went on to explain why the claims still lacked merit under Sherman Act scrutiny, the first reason being that Corbett and the commonwealth failed to show a "concerted action" on the part of the NCAA. Even if the plaintiffs had shown a concerted action, Kane went on in the 28-page opinion, they would not clear the second "unreasonable restraint of trade" hurdle found in the act.
Kane noted the courts evaluate the reasonableness of any restraint on trade under three standards, depending on the nature of alleged restraint: rule of reason, quick look or per se illegality.
The court decided to apply the rule-of-reason standard, the strictest of the three, under which the plaintiff bears the initial burden of showing the alleged restraint of trade produced an adverse, anti-competitive effect within the relevant geographic market.
Corbett offered three markets he claimed sustained harm in the form of "anti-competitive effects" following the NCAA’s sanctions to the university: the national market for post-secondary education; the national market for Division I football players or, in other words, large universities with premier football programs; and the national market for the sale of college football apparel and memorabilia.
Kane addressed only the first two markets, noting Corbett declined to brief the third, ruling that the lawsuit failed with respect to both markets under the rule of reason.
"First, even assuming that Penn State will face difficulty in competing for Division I football players as a result of the sanctions, the antitrust laws are not implicated," Kane said. "The fact that Penn State will offer fewer scholarships over a period of four years does not plausibly support its allegation that the reduction of scholarships at Penn State will result in a marketwide anti-competitive effect, such that the ‘nation’s top scholastic football players’ would be unable to obtain a scholarship in the nationwide market for Division I football players."
The lawsuit also failed to "plausibly" allege an anti-competitive effect in the national marketplace for post-secondary education, Kane added.
Kane said Corbett and the state plaintiffs’ inability to establish an antitrust injury made it unnecessary to examine antitrust standing in the first place.
The court did hold that Corbett has general standing to bring a suit on behalf of Pennsylvania citizens under the doctrine of parens patriae.
Pennsylvania General Counsel James D. Schultz said in a statement: "The governor had standing to bring this lawsuit, which Judge Kane acknowledged was justified given ‘injury to the state’s economy or the health and welfare of its citizens. And second, the extraordinary power — and potential damage — caused by the NCAA, which Judge Kane noted ‘raises serious questions about the indirect economic impact of NCAA sanctions on innocent parties.’"
Added Corbett: "I am disappointed with the court’s decision and believe that the sanctions have harmed the citizens, students, athletes, alumni and taxpayers of Pennsylvania. Countless individuals and small businesses throughout the state will continue to suffer because of the NCAA’s actions," Corbett said. "I feel strongly that the claims we raised in this lawsuit were compelling and these issues deserved a complete and thorough review by the court."
"I will continue to analyze the ruling with my legal team and review our options," Corbett added.
Reached for comment, one of the NCAA’s attorneys said Kane’s decision was in accordance with case law developed in federal antitrust suits against the NCAA.
"This was a welcome victory for the NCAA under the antitrust laws," said Ann Arbor, Mich.-based attorney Gregory L. Curtner of Schiff Hardin. "From our point of view … this opinion falls squarely in the general overview of cases that say that the NCAA needs to be given adequate breathing room to do what it does for its members based on the authority given to it by its members to help it manage intercollegiate athletics."
Those cases include Smith v. NCAA, in which the U.S. Court of Appeals for the Third Circuit concluded the Sherman Act does not apply to the NCAA’s enforcement of eligibility requirements. Kane used this decision for the proposition that the court would not apply the Sherman Act to an NCAA regulation seeking to ensure fair competition. Other courts have extended this reasoning beyond eligibility in ruling in favor of the NCAA.
Commenting on the current matter, Curtner added: "You’ve got to allege more than the governor did in his lawsuit to have something stand against the NCAA beyond the pleading stage."
Kane’s June 6 opinion did not close the door on litigation involving the NCAA stemming from the Sandusky scandal. For one, Corbett and the state could choose to appeal the ruling to the Third Circuit.
Also, the surviving family of former Penn State head football coach Joe Paterno, several Penn State board members, staffers and former football players recently filed a lawsuit in the Centre County Court of Common Pleas challenging the NCAA’s sanctions on different grounds, claiming they blackened Paterno and the other plaintiffs’ reputations and reflected a breach of contract.
Attorneys representing those plaintiffs did not return calls made by The Legal, but one was quoted on PennLive.com as saying he was not concerned about his clients’ chances of success following Kane’s ruling, pointing to legal distinctions between the cases.
Meanwhile, pending before Kane is a separate lawsuit the NCAA filed in February against Corbett and the treasurer and auditor general of Pennsylvania over legislation aiming to keep the NCAA’s $60 million fine against Penn State in the state of Pennsylvania.
State Senator Jake Corman, R-Centre, who sponsored that law, had previously sued the NCAA in the Commonwealth Court of Pennsylvania, asking the court to block the NCAA from using any of the fine money outside of Pennsylvania.