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The Commonwealth Court has called for a hearing on the validity of the $60 million fine that Penn State University agreed to pay to the NCAA under a consent decree.

The necessary hearing, the court said in its majority opinion, requires that the university be joined as a party in the litigation. Penn State had not become directly engaged in the case, which was begun by elected officials against the National Collegiate Athletic Association, which governs intercollegiate sports.

In a split decision issued Wednesday, an en banc panel of the court found that recent filings in Corman v. NCAA raised issues of fact over whether the consent decree between Penn State and the NCAA was made in good faith. The penalty was related to the Jerry Sandusky child sexual-abuse scandal.

In addition to including Penn State as a party, the court upheld the constitutionality of the Institution of Higher Education Monetary Penalty Endowment Act, which requires that fines of $10 million or more paid by institutions of higher education pursuant to an agreement with a governing body be deposited into a state Treasury trust fund.

“Based upon the parties’ pleadings and given the many discrepancies between the consent decree and the NCAA constitution and bylaws, there exists genuine factual disputes,” Judge Anne E. Covey said in the majority opinion. “These allegations and denials thereto present factual issues directly relating to … the NCAA’s constitution and bylaws concerning its authority to impose the monetary penalty, whether the NCAA acted in accordance with its constitution and bylaws, the validity of the consent decree and whether the NCAA acted in good faith. Because the NCAA’s answer and new matter expanded the scope of plaintiff’s second amended complaint, no objection having been made, Penn State must be joined as a party.”

Judge Robert Simpson concurred with Covey’s opinion in the result only, and President Judge Dan Pellegrini issued a dissent.

Pellegrini said that, although he was concerned about how the consent decree was entered into, issues regarding the validity of the agreement were not before the court, since the plaintiffs’ motion before the court only asked the judges to consider whether the Endowment Act was valid, whether the NCAA violated the act, and whether the money should be paid to the Treasury immediately.

“None of the parties to this case have disputed that the contract—the consent decree—is valid,” Pellegrini said. “Essentially, the majority spontaneously came up with that new cause of action, inferred from paragraphs in various defenses pled by the NCAA, that the consent decree is invalid and none of the sanctions could be enforced.”

According to court documents, state Sen. Jake Corman, R-Centre, and Treasurer Rob McCord jointly filed a second amended complaint against the NCAA in the Commonwealth Court in March 2013, arguing that Penn State’s $60 million fine should be deposited into the state’s Institution of Higher Education Monetary Penalty Endowment Trust Fund, which was established in February when Gov. Tom Corbett signed the Endowment Act into law. The fund is maintained in the state Treasury.

In September, the Commonwealth Court found that Corman and McCord had standing to sue the NCAA over the fines, and that the recently-enacted Endowment Act was not unconstitutional. The court, however, also found that Penn State was not an indispensable party that should be joined in the suit.

In her opinion, Covey noted Pellegrini’s concerns, but said that the recent filings from the NCAA put the issues about the validity of the consent decree before the court.

Covey specifically noted that the NCAA’s answer and new matter said that Penn State received considerations as a party to the consent decree, that the NCAA observed the principles of its constitution and bylaws, that it was justified to enter into the decree and that it acted in good faith.

“These allegations and denials present factual disputes relating to the NCAA’s authority to impose the sanctions and the validity of the consent decree,” Covey said. “The consent decree expressly recognizes the NCAA’s questionable involvement in and its dubious authority pertaining to a criminal action against a non-university official which involved children who were non-university student athletes.”

Covey additionally noted that the NCAA’s bylaws indicate that it will give an institution’s staff and student-athletes fair procedures when it comes to allegations of alleged failure to comply.

“High school athletes who had no involvement in the criminal acts were prevented from obtaining a free college education. Student-athletes, trainers, coaches and support personnel who were taught and trained to be and do their best were stopped from competing,” Covey said. “This court will not make a legal determination which has such far-reaching implications without conducting a hearing on the factual issues.”

In a statement to the press, McCord said he was pleased with the decision.

“My office is ready to help ensure that this penalty money benefits Pennsylvania-based child abuse programs,” McCord said. “Significantly, like many Pennsylvanians, the court appears to be concerned that the NCAA may have overstepped its own authority when it imposed upon Penn State the consent decree. I share this concern.”

“We are very pleased with the decision, and we’re reviewing it thoroughly to figure out our next steps,” said Matthew Haverstick of Conrad O’Brien, who was counsel for Corman.

A message seeking comment from the NCAA was not returned.

A spokeswoman for Penn State University declined to comment on pending litigation.

Max Mitchell can be contacted at 215-557-2354 or mmitchell@alm.com. Follow him on Twitter @MMitchellTLI. •

(Copies of the 40-page opinion in Corman v. NCAA, PICS No. 14-0525, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •