Commonwealth Court Scrutinizes NCAA

What a couple of weeks it has been for the National Collegiate Athletic Association.  Still reeling from a Labor Relations Board determination that private college football players are employees of the college and may elect to organize and collectively bargain, on April 9, 2014 Pennsylvania Commonwealth Court resurrected scrutiny of the entire sanctions process used by the NCAA against Penn State University.

The case, Jake Corman et al. v. The National Collegiate Athletic Association (NCAA), came to Commonwealth Court on a motion for judgment on the pleadings and a request for declaratory judgment against the NCAA.  This litigation was an effort by the plaintiffs to enforce the Endowment Act, Act of February 20, 2013, P.L. 1, 24 P.S. Section 7501 et seq. (the “Act”), a state law which, among other things, would restrict funds of state related schools in settlements to fund charitable purposes in sums over $10,000.00, such that the funds must be spent in Pennsylvania.  This law was in conflict with the intent of the NCAA to use penalty funds being collected from PSU amounting to $60,000,000 over a period of years required through the NCAA for charitable organizations addressing child abuse but NCAA has refused to limit its distribution of funds to Pennsylvania charities.

The NCAA objected that the Act was unconstitutional as “special legislation”, challenging the standing of Plaintiffs and asserting that Penn State is an indispensable party.  The Court overruled NCAA objections on its preliminary objections, except for the issue of unconstitutional special legislation which was a new issue.

The Pennsylvania Constitution (Art. III, Section 32) prohibits “special legislation”, or laws for specified individuals or private purposes which do not apply equally to all members of a class.  The basic idea is that like persons in like circumstances should be treated similarly by the government.  But the legislature may reasonably classify persons and regulate them so long as those classifications are reasonable and not arbitrary.  Here the Act applied to institutions of higher education paying monetary penalties of at least $10,000,000 over a period of years pursuant to an agreement and where the agreement provides the penalty will be used for a specific purpose.  The Court rejected NCAA’s argument.

NCAA also objected that the Act impaired its fundamental right to freely contract but the Court noted that the Constitution does not create a fundamental right of contract but, rather, it protects liberty and due process.  Thus, the freedom of contract is qualified by protection of specific interests.

Judge Covey, writing for the Court, stated the $60,000,000 penalty was specifically set forth in the agreement as an amount based on the gross monies Penn State expected to collect from football as a business enterprise.

NCAA further objected that the Act and the classification therein was not rationally related to the Act’s goals.  NCAA failed to carry its burden to prove this.

The NCAA appears to indicate that PSU paying a $60,000,000 penalty will not burden the institution.  The Court, being more realistic than the NCAA, rejected this.  Obviously, no matter where the money comes from if not given to the NCAA, it could be used by PSU to education, provide scholarship, for athletics or other goals all of which are damaged by NCAA’s actions.

The Court found each of the classification criteria in the Act rationally related to the purpose of the Act.

But the real surprise in the Court opinion came in the Court’s review of Plaintiff’s motion after reviewing NCAA’s constitution, by laws and the settlement agreement.  The Court notes that the NCAA seems to have failed to apply the same procedures, rules or penalties.  For example, the NCAA says not giving the “death penalty”, that is suspension of athletic competition for a period of time, if the parties enter into the agreement is consideration but the NCAA rules state the death penalty is only appropriate for a repeat offender and NCAA agrees PSU has no prior violations.

NCAA, by it constitution and by laws mandates, “. . . fair procedures” and fairness to “. . . uninvolved student athletes, coaches, administrators. .  .”  Here, there is no one who was involved in any wrongdoing who is now a student athlete, coach or administrator now at Penn State.  It seems that the NCAA determined that, since there was a public uproar and terrible allegations, the innocent must be punished.

Dissenters questions whether the consent decree was actually before the Court but the majority found it was based on allegations and denials of NCAA.

The Court stated:

“. . .while acknowledging that no student athlete is responsible for these events. . .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 and student-athletes from other colleges and universities were also prevented from competing against them by prohibition against post-season play.”

The Court indicated that it would not make a decision about the agreement without a hearing, but I can’t think the opinion was well received by Mark Emmert, NCAA’s multi-million dollar President and the multi-billion dollar generating NCAA.  PSU was jointed as a party.

President Judge Pellegrini dissented, indicating that he did not find the agreement to be before the Court, “Even though it would give more pleasure to join with the majority because I share the concerns with the process by which the consent decree was entered. . .”