The third time was the charm for student athletes bringing antitrust claims against the NCAA.
“As Schoolhouse Rock teaches, three is a magic number,” U.S. District Judge Jane Magnus-Stinson in Indianapolis wrote in rejecting the National Collegiate Athletic Association’s attempt to dismiss antitrust claims brought on behalf of student athletes. The proposed class action claims that the NCAA’s rules limiting athletic scholarships create an illegal horizontal restraint under the U.S. Sherman Antitrust Act.
Magnus-Stinson had dismissed the case on March 1, but concluded on Friday that an amended complaint had successfully defined a relevant market as required under the act. U.S. Magistrate Judge Denise LaRue set an initial pretrial conference for August 29.
“This is the third time that this Court has ruled on the sufficiency of a plaintiff’s complaint challenging two NCAA bylaws at issue—the prohibition on multi-year scholarships and the cap on the number of allowable scholarships,” she wrote. “This is the first time, however, that the Court concludes that the complaint at issue pleads the rough contours of a relevant market that is plausible on its face and in which anticompetitive effects of the challenged regulations could be felt.”
Stacey Osburn, a spokeswoman for the NCAA, which is based in Indianapolis, did not respond to a request for comment.
Plaintiffs lawyer Elizabeth Fegan, a partner in the Chicago office of Seattle’s Hagens Berman Sobol Shapiro, said she drew upon a ruling by the U.S. Court of Appeals for the Seventh Circuit dismissing an earlier complaint as a guide.
“We felt the Seventh Circuit gave us clear instructions on how to define the relevant market,” she said. “Even though it affirmed the district court, it recognized that clearly there was a commercial transaction involved in the purchase by the NCAA of student athlete services and student athletes providing those services in exchange for an education.”
The Seventh Circuit on June 18, 2012, affirmed Magnus-Stinson’s dismissal of a separate case brought by Hagens Berman called Agnew v. National Collegiate Athletic Association after finding that the plaintiffs had failed to plead a relevant market. That case asserted antitrust violations based on the now-discontinued NCAA rule that limits scholarships to one year and another rule restricting the number and amount of scholarships that a school can give to student athletes.
The new suit, filed a month after the Seventh Circuit’s ruling, challenged the same two NCAA rules at issue in Agnew, plus an additional ban on scholarships to Division III schools.
The suit was filed by John Rock, who in 2008 accepted a scholarship to play football at Gardner-Webb University in Boiling Springs, N.C., a Division I school. He chose the school based on a pledge from the head coach that his scholarship would be renewed annually as long as he kept his grades up and remained eligible for NCAA competition.
But three years later, the school hired a new coach who told Rock his scholarship had been revoked. Rock ended up paying thousands of dollars in tuition and room and board to graduate with a political science degree last year, the suit says.
Berman later amended the complaint to include two additional plaintiffs with similar claims who played for Division III schools.
In dismissing the case the first time around, Magnus-Stinson said that one of the plaintiffs lacked standing. She also concluded that the plaintiffs, by pleading claims based on “the nationwide market for the labor of student athletes” needed to work harder at a “proper identification of a relevant market.”
A May 24 amended complaint, relying on the Seventh Circuit’s ruling, dropped the Division III claims, and the second plaintiff, leaving only Rock, and limited the relevant market to student athletes in Division I football.
“In Agnew, the Seventh Circuit recognized that the relevant market is clearly at play and focused on football players in particular,” Fegan said.
NCAA attorney Gregory Curtner, a partner in the Ann Arbor, Mich., office of Schiff Hardin, had argued that Rock, who played for a school in Division 1-AA, or Football Championship Subdivision, could not assert claims involving its Division 1-A, now called Football Bowl Subdivision. He also challenged the relevant market being alleged.
Magnus-Stinson disagreed, concluding that “Mr. Rock has pled the rough contours of a relevant market that is plausible on its face.” But she noted that the plaintiffs could struggle as they go forward in the case.
“The Court emphasizes that these conclusions are not an endorsement that Mr. Rock’s market as pled will withstand the higher burdens of proof that accompany summary judgment or trial, where his factual allegations will not be accepted as true without supporting evidence,” she wrote. “Whether Mr. Rock can gather enough evidence to prove that the relevant market he pleads is correct is a question for another day.”
Amanda Bronstad is a reporter for The National Law Journal, a Legal affiliate based in New York.