Judge dismisses Gov. Corbett's antitrust suit against NCAA

By Jon Campisi | Jun 6, 2013

Pennsylvania Gov. Tom Corbett’s antitrust lawsuit against the National Collegiate Athletic Association has officially been killed.

Pennsylvania Gov. Tom Corbett’s antitrust lawsuit against the National Collegiate Athletic Association has officially been killed.

On June 6, U.S. District Judge Yvette Kane, the chief judge of the Middle District of Pennsylvania, granted a motion by the NCAA to dismiss the governor’s complaint against the agency that oversees collegiate sports over claims that the hefty sanctions that had been levied on Pennsylvania State University following last year’s Jerry Sandusky child sexual abuse scandal violated federal antitrust laws.

The sanctions, which included a $60 million fine, a four-year bowl ban, and the scrapping of a number of past wins by the Nittany Lions football team, had been agreed to by the university, which was not a party to the governor’s lawsuit.

Nevertheless, Corbett initiated litigation against the NCAA on behalf of state residents and businesses, alleging sanctions would have created a negative economic effect on the State College, Pa. region, which is home to Penn State, and sees much revenue generated around collegiate football.

The governor had argued that the penalties against Penn State violated antitrust laws, which have to do with anti-competitiveness.

Corbett had called the sanctions “unprecedented, overreaching and unlawful,” and claimed that only the NCAA would benefit from them.

In February, lawyers for the NCAA filed their motion to dismiss the litigation, arguing that it was more than a stretch to say the sanctions, which were agreed to by Penn State trustees, violated antitrust statutes.

In the motion, NCAA attorneys wrote that while the remedial measures agreed to by Penn State were “controversial,” they didn’t have “anything to do with antitrust laws.”

Kane, the judge, appeared to agree.

In her June 6 memorandum and order, the jurist determined that the defendant’s conduct didn’t violate the federal Sherman Act.

“… The factual allegations of conspiracy and state-wide economic fallout at play in this case place the complaint outside previous examples of NCAA enforcement actions related to amateurism and fair play held to be non-commercial,” the judge wrote.

Kane next turned toward the governor’s claims that the scholarship limits provided for in the sanctions and the penalties reducing Penn State football program’s ability to generate revenue for the university would violate federal antitrust laws.

The judge found the argument regarding the scholarship limits to be “unpersuasive,” citing the Seventh Circuit Court of Appeals opinion in the case of Agnew v. NCAA.

Contrary to a previous Third Circuit Appeals Court decision, the case of Smith v. NCAA, the Seventh Circuit’s opinion in Agnew held that the Sherman Act “applies generally” to a defendant’s actions.

“That is not the law in this Circuit, and thus the Court declines to find that the scholarship limits portion of the sanctions agreement is sufficient to render the entire agreement ‘commercial’ on the basis of Agnew,” Kane’s ruling states.

The jurist also was not persuaded by the plaintiff’s alternative argument, which was that the sanctions agreement is commercial because it could cause Penn State to experience revenue loss.

Kane wrote that the Third Circuit rejected this approach in Smith, “making it clear that any derivative effect of Defendant’s regulatory activity is irrelevant to the ‘commercial nature’ inquiry.”

The judge went on to write that Gov. Corbett represents Pennsylvania citizens under the legal doctrine of parens patriae, not Penn State University.

“Even were Plaintiff able to articulate financial injury to Penn State, cognizable under the Sherman Act, the Governor cannot lawfully advance this claim on Penn State’s behalf,” the memorandum states.

Further elaborating on the concept of parens patriae, and Corbett’s contention that he had standing to bring suit on behalf of Pennsylvania residents who would allegedly be negatively affected by the NCAA’s sanctions against Penn State, Kane wrote that while she agreed the plaintiff held standing, Corbett was still required to alleged that the harms threatening state citizens would result from reduced competition in the markets identified in the complaint, “not that citizens will suffer if Penn State and its football program alone is weakened as the result of the sanctions.

“On review of the complaint, the Court finds that Plaintiff has not cleared this hurdle,” the judge wrote. “At core, Plaintiff’s complaint alleges derivative injury to Pennsylvania citizens as the result of Penn State’s football program becoming less competitive, not to lessened competition in the relevant markets.”

In conclusion, Kane wrote that the complaint implicates “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. 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.”

In a statement released in the wake of the judge’s decision, Donald Remy, the NCAA’s chief legal officer, said the organization was “pleased with the court’s thorough analysis and thoughtful opinion dismissing Governor Corbett’s entire complaint.

“Our hope is that this decision not only will end this case but also serve as a beginning of the end of the divide among those who, like Penn State, want to move forward to put the horror of the Sandusky crimes behind the university and those who want to prolong the fight and with it the pain for all involved.”

Sandusky, the former defensive coordinator for the Nittany Lions, was found guilty last summer on 45 counts of child sex-abuse.

In the fall he was sentenced to between 30 and 60 years in state prison.

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