NCAA’s power at heart of Corbett’s lawsuit over Penn State
Pennsylvania Governor Tom Corbett is taking the National Collegiate Athletic Association to federal court in a case that could have far-reaching effects beyond the Penn State child-abuse scandal.
Initially, there were reports that the state would challenge the NCAA directly on federal antitrust grounds, and while that may happen at some point, officials only said on Wednesday they were seeking injunctive relief from harsh NCAA sanctions on Penn State’s football program.
The Corbett lawsuit pits a powerful state government against the NCAA in a battle of legal heavyweights, and it questions the ability of the NCAA to sanction its members.
It will be filed in the U.S. District Court for the Middle District of Pennsylvania. Penn State isn’t involved in the legal action.
On Wednesday, Corbett and General Counsel Jim Schultz claimed the NCAA, as a trade group, didn’t follow its own rules, resulting in “collateral damage” to businesses and people in Pennsylvania associated with Penn State football. (The Commonwealth of Pennsylvania supports the university annually with more than $200 million in public funds.)
The use of the description “trade group” is important, because it could put the NCAA within the guidelines of federal antitrust laws.
Additionally, Corbett said that the NCAA was operating outside of its own bylaws and that it was unfairly targeting students, athletes, and businesses in Pennsylvania.
Under federal and state laws, nonprofits like the NCAA are bound to operate within their bylaws, or face questions about their own nonprofit tax status.
In a statement, the NCAA said the lawsuit was unfounded.
“We are disappointed by the Governor’s action today. Not only does this forthcoming lawsuit appear to be without merit, it is an affront to all of the victims in this tragedy – lives that were destroyed by the criminal actions of Jerry Sandusky. While the innocence that was stolen can never be restored, Penn State has accepted the consequences for its role and the role of its employees and is moving forward. Today’s announcement by the Governor is a setback to the University’s efforts,” said Donald M. Remy, NCAA executive vice president and general counsel.
In a press release, Corbett stressed that NCAA leaders worked outside of the group’s rules.
“However, the NCAA leadership can’t make up its own rules,’’ Corbett said. In this case, “a handful of top NCAA officials simply inserted themselves into an issue they had no authority to police and one that was clearly being handled by the justice system.’’
As the state’s attorney general, Corbett started the investigation into abuse claims against Jerry Sandusky, a former top assistant football coach at Penn State. Sandusky was convicted and sentenced in the case after Corbett became governor.
Last week, Corbett publicly questioned the severity of the NCAA sanctions on Penn State’s football program.
“The NCAA, as an athletic trade association, overstepped its authority by forcing Penn State to endure harsh, unjustified and unprecedented punishment,” he said.
The NCAA faces several potential long-term issues as the Corbett lawsuit makes its way to court.
First, the NCAA operates as a national, nonprofit organization. According to its official web site, the NCAA took in $845 million in 2011, with most of the money coming from television revenue. It also doesn’t allow schools to compensate student-athletes beyond scholarship offers.
As a nonprofit, the NCAA doesn’t pay taxes, and it returns most revenue to member universities to use for financial aid, scholarships, and other causes. So any indirect challenge to its nonprofit status is important.
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But the NCAA’s power goes far beyond its ability to raise money for schools. The NCAA can ban schools from lucrative athletic competitions.
In the case of Penn State, university officials agreed to the strict sanctions after they were reportedly threatened with an NCAA football death penalty. Penn State’s football program brings in about $60 million annually and makes about $44 million after expenses.
So the Corbett case could set a precedent for limiting the NCAA’s power to punish its members, especially for acts that don’t directly relate to sports competitions.
The NCAA did lose a highly publicized case about its powers over television rights in 1984, when the U.S. Supreme Court ruled in favor of two major universities that sued the NCAA over television rights.
In NCAA v. Board of Regents of the University of Oklahoma, the Supreme Court decided that the NCAA violated the Sherman and Clayton Anti-Trust acts when it restricted national TV appearances by the University of Oklahoma and the University of Georgia.
Justice John Paul Stevens wrote the majority opinion and said the NCAA restrained free trade against the wishes of the Sherman Act.
There is one current high-profile lawsuit against the NCAA that is in litigation on an unrelated matter. A group of former collegiate athletes, including basketball player Ed O’Bannon, is suing the NCAA because their names and likenesses were used in popular video games without compensation.
That case isn’t scheduled for trial until 2014, but it has already seen some bitter legal battles.
In a September 2012 article on SI.com, law professor Michael McCann said the O’Bannon case could lead to student-athletes getting paid after they leave school for television revenue, licensing fees and merchandizing fees.
“The prospect of O’Bannon v. NCAA radically reshaping college sports is real. If O’Bannon ultimately prevails, ‘student-athletes’ and ‘amateurism’ would take on new meanings in the context of D-I sports,” McCann said.
Scott Bomboy is the the editor-in-chief of the National Constitution Center.