United States District Court, M.D. Pennsylvania
COMMONWEALTH OF PENNSYLVANIA, THOMAS W. CORBETT, JR., GOVERNOR, Plaintiff
NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, Defendant
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
For Commonwealth of Pennsylvania, Thomas W. Corbett, Jr., Governor, Plaintiff: James D. Schultz, LEAD ATTORNEY, Governor's Office of General Counsel, Harrisburg, PA; Jarad W. Handelman, LEAD ATTORNEY, Office of General Counsel, Office of General Counsel; Melissa H. Maxman, Ronald F. Wick, LEAD ATTORNEYS, Cozen O'Connor, Washington, DC.
For National Collegiate Athletic Association, Defendant: Everett C. Johnson, James Scott Ballenger, Roman Martinez, LEAD ATTORNEYS, Latham & Watkins LLP, Washington, DC; Gregory L. Curtner, Kimberly K Kefalas, LEAD ATTORNEYS, Schiff Hardin LLP, Ann Arbor, MI; Thomas W. Scott, Killian & Gephart, LLP, Harrisburg, PA.
Yvette Kane, Chief United States District Judge.
Before the Court is the motion of Defendant National Collegiate Athletic Association (NCAA) to dismiss Plaintiff Commonwealth of Pennsylvania's complaint. (Doc. No. 9.) The motion has been fully briefed and is now ripe for disposition. The Court heard oral argument on Defendant's motion on May 20, 2013. For the reasons that follow, the Court will grant Defendant's motion.
This case finds its origins in sanctions imposed against the football program at the Pennsylvania State University (Penn State) by the governing body of college sports, the NCAA. Penn State agreed to the sanctions at issue here and waived any legal challenge to the sanctions or the manner in which they were adopted. The Governor of the Commonwealth of Pennsylvania brings this antitrust action on behalf of the natural citizens of Pennsylvania, challenging the sanctions under Section 1 of the Sherman Act as an unlawful agreement to restrain trade and seeks an order enjoining enforcement of the sanctions. Penn State is not a party to this action and takes no position in this litigation.
A. Sandusky sexual abuse scandal
The challenged sanctions were imposed following a widely publicized child sex abuse scandal that implicated Penn State officials. On November 4, 2011, after an extensive grand jury investigation into horrific allegations that former Penn State assistant football coach Gerald A. Sandusky sexually abused children for over a decade, Sandusky was criminally charged. (Doc. No. 1 ¶ 37.) That same day, charges were brought against senior Penn State officials alleged to have covered up the Sandusky accusations in an effort to protect the university's football program; these officials included Penn State Athletic Director Timony M. Curley and Penn State Senior Vice-President of Finance and Business Gary C. Schultz. (Id.) Shortly thereafter, Defendant NCAA issued a letter to Penn State President Rodney Erickson demanding that the university produce information related to the grand jury indictment to assist the NCAA in its review of Penn State's response to the sexual abuse scandal. (Id. ¶ 46.) Following the initiation of these criminal charges, the law firm of Freeh, Sporkin &
Sullivan LLP was charged with investigating and reporting the failure of Penn State personnel to respond to and report to authorities the sexual abuse of children (Freeh Report). (Id. ¶ 41.)
On June 22, 2012, after a three-week trial, a jury in the Court of Common Pleas of Centre County found Sandusky guilty of 45 counts of the criminal charges against him.  (Id. ¶ 39.) Approximately one month later, Freeh, Sporkin & Sullivan LLP issued its findings. The Freeh Report confirmed that senior Penn State officials had collaborated to conceal accusations that Sandusky sexually abused children, and that Penn State leadership had exhibited a " total and consistent disregard . . . for the safety of Sandusky's victims" and worked together to conceal Sandusky's crimes for fear of bad publicity and out of sympathy for Sandusky. (Id. ¶ 42.) The Freeh Report described Penn State's culture as including an " excessive focus on athletics" and cited the failure of former President Spanier, former head football coach Joe Paterno, and former Athletic Director Tim Curley to protect children as not only " reveal[ing] numerous individual failings," but also " reveal[ing] weaknesses of the University's culture, governance, administration, compliance policies and procedures for protecting children." (Doc. No. 11-2 at 128.) The university accepted full responsibility for the failure of its administration to protect the victims abused by Sandusky, and began the process of implementing many of the recommendations contained in the Freeh Report. (Id. ¶ 43.)
B. The consent decree
Following the publication of the Freeh Report, Defendant NCAA initiated sanctions against Penn State. At the direction of NCAA President Dr. Mark Emmert, the NCAA's established disciplinary procedures were bypassed and the matter was directed to the NCAA's Executive Committee and the Division I Board of Directors. (Id. ¶ 48.) Dr. Emmert, along with the NCAA Executive Committee and Division I Board of Directors, informed Penn State that if it did not accept Defendant's proposed consent decree and sanctions, Defendant would impose the football " death penalty" on the school for a period of four years.  (Id. ¶ 50.) The proposed consent decree, which accepted as true the findings contained in the Freeh Report, justified the imposition of the proposed sanctions on the basis of Penn State's failure to value and uphold Defendant's principles of institutional integrity, responsible conduct, and individual integrity. (Id. ¶ 52.)
By its terms, the consent decree: (1) required that Penn State pay a $60 million dollar fine into an endowment for sexual abuse education and sexual abuse victims over a period of five years; (2) banned Penn State from football post-season play for a period of four years; (3) reduced the number of football scholarships that Penn State was authorized to offer from 85 to 65 total scholarships per year for a period of four years, and 25 to 15 initial scholarships per year for a period of four years; (4) placed Penn State on probation for four years, necessitating the appointment of an
on-campus integrity monitor; (5) vacated Penn State's football wins between 1998 and 2011; (6) waived the NCAA's bylaw restricting transfer of student athletes from Penn State to other colleges; and (7) required that Penn State permit football players to retain their athletic scholarships regardless of whether they continued to play football. (Id. ¶ 48.)
On July 23, 2012, Penn State President Rodney Erickson accepted the terms of the consent decree, and waived any claim to further process or appeal under NCAA rules and any judicial process related to the subject matter of the consent decree. (Id. ¶ 51.) Though widely debated elsewhere, the wisdom of President Erickson's decision is not a question for this Court, nor is the relative fairness of the sanctions selected by the NCAA to address the university's admitted failings in the Sandusky matter. The complaint limits this Court's review to the question of whether Plaintiff has articulated a violation of federal antitrust law.
C. The Governor's complaint
Before this Court for resolution is a discrete claim by Governor Tom Corbett on behalf of the Commonwealth of Pennsylvania that NCAA President Dr. Emmert, and the NCAA Executive Committee and Division I Board of Directors, participated in an unlawful antitrust conspiracy designed to destroy Penn State as an athletic competitor and cause a cascading economic fallout throughout Pennsylvania. The Governor's complaint is an impassioned indictment of the sanctions against Penn State. Citing the complete lack of authority by the NCAA President and its Executive Committee and Division I Board of Directors to involve themselves in disciplinary matters, and the unprecedented imposition of sanctions to address actions that did not directly affect student athletes or member competitiveness, the Governor condemns the NCAA's sanctions as " arbitrary and capricious," and personally motivated by a new NCAA President who was out to make a name for himself at Penn State's expense.
As the complaint observes, these allegations were the subject of lively debate in the court of public opinion. They are not the subject of the Governor's claim for relief, and are not before the Court for a review on their merits. The Court emphasizes that the Commonwealth's legal claim in this lawsuit is based only on its allegation that the NCAA is guilty of an antitrust violation. To establish its Section 1 antitrust claim under the Sherman Act, Plaintiff cannot allege just any harm, but must point to harm directed at commercial activity of the type the Sherman Act is designed to address. Further, Plaintiff must establish that Defendant's action affected the kind of antitrust activity over which this Court has jurisdiction.
D. The NCAA's response
The NCAA did not respond to the Governor's complaint with an answer, but instead moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), arguing that the Commonwealth can prove no set of facts that would entitle it to relief. In an all-out blitz, Defendant attacks every aspect of the complaint as bereft of the essential elements of an antitrust claim. First, Defendant objects on the grounds that the singular focus of the Sherman Act is to protect consumers from reduced competition caused by those who would artificially manipulate commercial markets. Justifying its imposition of sanctions as within its discretion to protect amateur athletics, Defendant argues that its actions do not merit review under the antitrust laws because it did not seek to
regulate commercial activity and Plaintiff does ...