Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Corman v. The National Collegiate Athletic Association

Commonwealth Court of Pennsylvania

September 4, 2013

Jake Corman, in his official capacity as Senator from the 34th Senatorial District of Pennsylvania and Chair of the Senate Committee on Appropriations; and Robert M. McCord, in his official capacity as Treasurer of the Commonwealth of Pennsylvania, Plaintiffs
The National Collegiate Athletic Association, Defendant

Argued: June 19, 2013




Defendant, the National Collegiate Athletic Association (NCAA) preliminarily objects to the Second Amended Complaint filed by Plaintiffs, Senator Jake Corman (Senator Corman) and Treasurer Robert McCord (Treasurer McCord) (collectively, Plaintiffs), in this Court's original jurisdiction seeking injunctive and declaratory relief against the NCAA. Senator Corman represents the 34th Senatorial District of Pennsylvania in the General Assembly, and is Chair of the Senate Appropriations Committee. Plaintiffs' Second Amended Complaint at ¶2. Treasurer McCord is Treasurer of the Commonwealth, a constitutionally-established elected office. Plaintiffs' Second Amended Complaint at ¶3. The NCAA is an unincorporated association headquartered in Indianapolis, Indiana, which has members throughout the United States (U.S.) and the Commonwealth. Plaintiffs' Second Amended Complaint at ¶5.

Pennsylvania State University (PSU) is a "state-related institution"[1]originally established as a "land grant" university under the federal Morrill Act of 1862[2] for purposes of teaching agriculture and mechanical arts. The General Assembly accepted the land grant pursuant to the act entitled "An Act Donating Lands to the Several States and Territories which may Provide Colleges for the Benefit of Agriculture and the Mechanic Arts" (1863 Act).[3]

On July 2, 2012, the Governor of Pennsylvania signed into law the act entitled "An Act to Accept Public Lands, by the United States, to the Several States, for the Endowment of Agricultural Colleges" (Act 10A) as a supplement to the 1863 Act.[4] Pursuant to Act 10A, the Pennsylvania General Assembly appropriated $214, 110, 000.00 to PSU for general financial support for the fiscal year July 1, 2012 through June 30, 2013. Plaintiffs' Second Amended Complaint at ¶44. Section 5 of Act 10A grants the General Assembly the right to "full, complete and accurate information as may be required" concerning PSU and its agents' expenditures. Plaintiffs' Second Amended Complaint, Ex. E at 3.

On July 12, 2012, Louis J. Freeh issued a report (Freeh Report) finding that PSU's former President, various staff members of PSU's athletic department and other senior PSU officials deliberately ignored multiple credible child sexual abuse allegations beginning in the 1990s against former PSU assistant football coach Gerald A. Sandusky. Plaintiffs' Second Amended Complaint at ¶¶6-9. On July 23, 2012, under threat of being excluded from participation in NCAA programs, PSU executed a Binding Consent Decree Imposed by the National Collegiate Athletic Association and Accepted by the Pennsylvania State University (Consent Decree) with the NCAA that required PSU, inter alia, to pay a $60 million fine in $12 million minimum annual installments beginning in 2012 over five years "into an endowment for programs preventing child sexual abuse and/or assisting the victims of child sexual abuse." Plaintiffs' Second Amended Complaint at ¶14 (quoting Ex. A at 5).

The NCAA established its Child Sexual Abuse Endowment Task Force (Task Force) for the purpose of developing standards for the expenditure of the fine. Plaintiffs' Second Amended Complaint at ¶18. At the end of 2012, the Task Force had not yet established its endowment, thus, the NCAA requested PSU to set aside the initial $12 million fine due in 2012. March 1, 2013 Declaration of Kathleen T. McNeely in Support of the Defendants' Application for Relief (McNeely Declaration), [5] Plaintiffs' Br., Ex. C at ¶5. PSU placed the $12 million into a money market account on December 20, 2012. Id.

On January 4, 2013, Senator Corman filed a complaint with this Court against the NCAA and Timothy P. White (White), in his official capacity as the Task Force Chair. Senator Corman also filed an application for preliminary injunction requesting that the NCAA and White be enjoined from disbursing any of PSU's initial $12 million payment. Based upon a Joint Stipulation wherein the NCAA stated that it did not immediately intend to disburse the fine, and agreed not to do so without 60 days' prior notice, this Court on January 16, 2013, ordered the preliminary injunction application stayed. The NCAA and White filed preliminary objections to Senator Corman's complaint.

On February 20, 2013, the Institution of Higher Education Monetary Penalty Endowment Act (Endowment Act)[6] was signed into law and became effective immediately. Section 3 of the Endowment Act requires that "[i]f an institution of higher education pays a monetary penalty [of $10 million or more] pursuant to an agreement entered into with a governing body, "[7] said penalty shall be paid into the Institution of Higher Education Monetary Endowment Trust Fund (Fund) maintained as a separate trust fund in the State Treasury. 24 P.S. § 7503(a), (b)(1). The Commonwealth's Treasurer is the sole custodian of all monies deposited into the Fund. 24 P.S. § 7503(b)(1). The Endowment Act further mandates that unless otherwise stated in the agreement, the Fund may only be used within the Commonwealth to benefit Commonwealth residents. 24 P.S. § 7503(b)(4).

Also on February 20, 2013, Senator Corman filed an amended complaint against the NCAA and White, wherein he renewed his application for preliminary injunctive relief to compel the NCAA to pay the first installment of the $60 million fine into the Fund. In response, the NCAA moved that this Court hold the preliminary injunction application in abeyance or enter a scheduling order that would permit the NCAA to file preliminary objections to the amended complaint because the NCAA did not yet have physical possession of the fine money. Senator Corman opposed the NCAA's motion. By March 13, 2013 order, this Court stayed the renewed application for a preliminary injunction and scheduled a status conference. The NCAA filed preliminary objections to the amended complaint.

On March 27, 2013, Senator Corman, joined by Treasurer McCord, filed a Second Amended Complaint against the NCAA seeking declaratory and injunctive relief on the basis that the PSU fine is subject to the Endowment Act and the NCAA must deposit it into the Fund. In Count I of the Second Amended Complaint, Plaintiffs aver that the NCAA violated the Endowment Act. [8]

The NCAA filed preliminary objections to the Second Amended Complaint. On June 19, 2013, the parties presented argument on the preliminary objections to this Court en banc. On June 20, 2013, Attorney General Kathleen G. Kane sent correspondence to Commonwealth Court President Judge Dan Pellegrini, stating in relevant part:

As you are likely aware, [the Office of Attorney General ("OAG")] is currently handling certain criminal prosecutions arising out of the Jerry Sandusky child sexual abuse scandal. To avoid any potential conflicts, immediately prior to my taking office, the OAG and the Governor's Office of General Counsel ("OGC") agreed – pursuant to the Commonwealth Attorneys Act[9] – that the OAG would continue to handle criminal matters relating to the Sandusky scandal and that the OGC would handle any civil matters relating to the Sandusky scandal. Accordingly, the OAG did not participate in Governor Corbett's antitrust action against the NCAA in federal court. For the same reason, the OAG declined to participate in the action brought by Senator Corman and Treasurer McCord against the NCAA in Commonwealth Court. The Treasurer, using his independent authority, has historically represented his office in matters which are the subject of litigation; the Treasurer is not obligated to request the representation of the OAG, nor is the OAG required, pursuant to the Commonwealth Attorney's [sic] Act, to provide representation on behalf of the Treasurer.

June 20, 2013 Attorney General letter (AG Letter). On June 21, 2013, this Court ordered the parties to address the standing of Treasurer McCord in light of the AG's Letter, to which they responded.[10]

The issues currently before this Court are: (1) whether Plaintiffs have standing to bring the instant action; (2) whether PSU is an indispensable party whose absence from this litigation deprives the Court of subject matter jurisdiction; (3) whether Count I of Plaintiffs' Second Amended Complaint states a claim upon which relief may be granted; and, (4) whether the Endowment Act and the proffered construction of Act 10A violate the U.S. and Pennsylvania Constitutions.

This Court's review of preliminary objections is limited to the pleadings. Pennsylvania State Lodge, Fraternal Order of Police v. Dep't of Conservation & Natural Res., 909 A.2d 413 (Pa. Cmwlth. 2006), aff'd, 592 Pa. 304, 924 A.2d 1203 (2007).

[This Court is] required to accept as true the well-pled averments set forth in the … complaint, and all inferences reasonably deducible therefrom. Moreover, the [C]ourt need not accept as true conclusions of law, unwarranted inferences from facts, argumentative allegations, or expressions of opinion. In order to sustain preliminary objections, it must appear with certainty that the law will not permit recovery, and, where any doubt exists as to whether the preliminary objections should be sustained, the doubt must be resolved in favor of overruling the preliminary objections.

Id. at 415-16 (citations omitted).

I. Standing

The NCAA first contends that Plaintiffs are prohibited from pursuing this action. Specifically, the NCAA argues that under Section 204(c) of the Commonwealth Attorneys Act, 71 P.S. § 732-204(c), statutory authority to sue to collect debts and accounts owed to the Commonwealth is vested solely in the Pennsylvania Attorney General. Further, Treasurer McCord's official responsibilities as "custodian" under the Endowment Act begin when money is deposited into the Fund, and since no monies have been paid into the Fund, Treasurer McCord has no standing. Finally, the NCAA asserts that Senator Corman does not have standing because he claims standing as a legislator, but alleges no genuine impairment of his legislative powers.

Section 204(c) of the Commonwealth Attorneys Act states:

The Attorney General shall represent the Commonwealth and all Commonwealth agencies and upon request, the Departments of Auditor General and State Treasury and the Public Utility Commission in any action brought by or against the Commonwealth or its agencies, and may intervene in any other action, including those involving charitable bequests and trusts or the constitutionality of any statute. . . . The Attorney General shall collect, by suit or otherwise, all debts, taxes and accounts due the Commonwealth which shall be referred to and placed with the Attorney General for collection by any Commonwealth agency . . . . The Attorney General may, upon determining that it is more efficient or otherwise is in the best interest of the Commonwealth, authorize the General Counsel or the counsel for an independent agency to initiate, conduct or defend any particular litigation or category of litigation in his stead. . . .

71 P.S. § 732-204(c) (emphasis added).

The language of Section 204(c) of the Commonwealth Attorneys Act clearly states that the Attorney General is to represent the Commonwealth and Commonwealth agencies in actions "brought by or against the Commonwealth, " and specifically excludes from that directive, inter alia, the State Treasury. That section further mandates that "Commonwealth agencies" refer "debts . . . due the Commonwealth" to the Attorney General for the Attorney General to collect. 71 P.S. § 732-204(c).

Section 102 of the Commonwealth Attorneys Act defines a Commonwealth agency as "[a]ny executive agency or independent agency." 71 P.S. § 732-102. "Executive agency" and "independent agency" are defined as follows:

"Executive Agency." The Governor and the departments, boards, commissions, authorities and other officers and agencies of the Commonwealth government, but the term does not include any court or other officer or agency of the unified judicial system, the General Assembly and its officers and agencies, or any independent agency.
"Independent Agency." The Department of the Attorney General, the Pennsylvania Fish Commission, the Pennsylvania Game Commission, the Historical and Museum Commission, the State Civil Service Commission, the Pennsylvania Turnpike Commission, the Milk Marketing Board, the Pennsylvania Liquor Control Board, the Pennsylvania Human Relations Commission, the Pennsylvania Labor Relations Board, the State Tax Equalization Board, Pennsylvania Higher Education Assistance Agency, the Pennsylvania Crime Commission, and the State Ethics Commission. Except for the provisions of section 204(b) and (f), and for actions pursuant to 42 Pa.C.S. § 5110 (relating to limited waiver of sovereign immunity), for the purposes of this act the department of the Auditor General, including the Board of Claims, State Treasury and the Public Utility Commission shall not be considered either executive agencies or independent agencies.

71 P.S. § 732-102 (emphasis added). Given that Section 102 of the Commonwealth Attorneys Act explicitly excludes the State Treasury from the definitions of executive agency and independent agency, it is not a Commonwealth agency subject to the mandates of Section 204(c) of the Commonwealth Attorneys Act pertaining to Commonwealth agencies. Thus, Section 204(c) of the Commonwealth Attorneys Act does not prohibit Treasurer McCord from pursuing the instant action.

Moreover, the NCAA characterizes the $60 million fine as a "debt" to be collected by and due to the Commonwealth, however, Plaintiffs make no such assertion regarding the same.[11] Looking only to the pleadings before us and all reasonable inferences therefrom as we must, Plaintiffs do not allege that PSU or the NCAA owe the Commonwealth a "debt." Rather, the nature of Plaintiffs' action is that the first installment of the $60 million fine has been allocated and is payable but such payment over which the NCAA alleges authority to direct has not been made in accordance with the Endowment Act. In fact, the NCAA's pleadings and other documents submitted to this Court maintain that the NCAA is entitled to receive and control the $60 million fine. For example, the NCAA's Application for Relief in the Nature of a Request for Scheduling Order refers to the "constitutionality of a law that seizes money the NCAA will lawfully acquire through a private contract." NCAA App. for Relief at 4 (emphasis added). In addition, the NCAA asserts that it has a "contractual right to direct how those funds are spent." NCAA Mem. in Support of Preliminary Objections (NCAA Memo) at 39. Further, the Joint Stipulation to Stay Application for Preliminary Injunction states: "the [NCAA] has informed Plaintiff that for multiple reasons it has no intention to disburse or otherwise dissipate said funds in the immediate future; [a]nd . . . the [NCAA] has promised to notify Plaintiff 60 days prior to any intended disbursements of said funds[.]" Joint Stip. at 1. Finally, in the NCAA's June 14, 2013 letter to this Court's Chief Clerk, it refers to "legislation . . . requiring 100% of the fine that Penn State must pay to the NCAA under the Consent Decree to be paid instead to the Commonwealth." NCAA June 14, 2013 letter at 1 (emphasis added). Given that the Second Amended Complaint does not demonstrate on its face that the $60 million fine is a "debt" owed to the Commonwealth, and the various NCAA documents which reflect that the NCAA considers the fine a "debt" owed to itself, and not the Commonwealth, we conclude that Section 204(c) of the Commonwealth Attorneys Act is inapplicable to the instant matter.

The NCAA further argues that the Pennsylvania Supreme Court's decision in Casey v. Pennsylvania State University, 463 Pa. 606, 345 A.2d 695 (1975), controls the standing issue here. Specifically, the NCAA contends that the Casey Court held "the Attorney General and the Department of Justice alone are empowered to collect debts due the Commonwealth." Id. at 618, 345 A.2d at 701 (emphasis added). The issue in Casey, as expressed by the Supreme Court, was "whether the Auditor General has the legal authority to bring suit to collect monies allegedly owed to the Commonwealth." Id. at 609, 345 A.2d at 697. In Casey, the Commonwealth appropriated monies to PSU for continuing education programs. The monies appropriated were only to fund the necessary costs of the programs. The Auditor General alleged that PSU received money in excess of the programs' costs and was seeking repayment from PSU for monies allegedly due the Commonwealth. Resolution of the issue required an interpretation of the then recently-amended Administrative Code, [12] where the authority to sue and collect indebtedness owed to the Commonwealth was placed exclusively with the Attorney General and the Department of Justice. In addressing the issue, the Pennsylvania Supreme Court expressed that "[a]lthough, resolution of these ambiguities is not as clear to us as the Commonwealth Court, nonetheless we agree with the conclusion reached by that court . . . ." Id. at 614-15, 345 A.2d at 700. The Supreme Court stated:

The Commonwealth Court reasoned that the legislature's failure to amend [Section] 903(a) by making an express exception for the Auditor General, in the same manner that it repeatedly used to exclude the Auditor General from the provisions of the Administrative Code, set forth before, indicated a continuing legislative intent that all debts owed the Commonwealth be mandatorily referred to the Attorney General for collection.

Id. at 614, 345 A.2d at 699 (emphasis added). However, five years after the Casey decision, the General Assembly enacted the Commonwealth Attorneys Act, which requires no speculation about the legislative intent of the Administrative Code, and makes the Casey decision inapposite to the case herein. Moreover, as discussed above, the Commonwealth Attorneys Act specifically excludes the Auditor General, the State Treasury and the Public Utility Commission from its definition of executive agencies or independent agencies. 71 P.S. § 732-101.

The NCAA also relies on this Court's decision in Knoll v. Butler, 675 A.2d 1308 (Pa. Cmwlth. 1996), aff'd, 548 Pa. 18, 693 A.2d 198 (1997), to support its position that the Treasurer lacks standing. The NCAA asserts that the Knoll Court sustained preliminary objections in the form of a demurrer on the basis that the Treasurer could not maintain her role as custodian of certain funds because the Treasurer was not yet in possession of the funds. The Knoll decision, although written after the Commonwealth Attorneys Act was enacted, did not involve that statute. Rather, the issue in that case was whether the Treasurer was entitled to possession of an escrow account where the conditions of the escrow had not yet been met. Specifically, as expressed by this Court, the issue was "whether the escrowed monies are funds in the possession of [the State Workers' Insurance Board] SWIB, and/or whether SWIB has legal title over them for purposes of Section 301 of [The Fiscal] Code[13] and Section 4 of the [Worker's Compensation] Act."[14] Id. at 1311. The Knoll Court held that until certain escrow conditions were satisfied, title to liquidated bank proceeds remained with the depositor, not SWIB, and thus was not subject to a custodial claim by the Treasurer. Id. The reasoning was the Treasurer could not become custodian of the funds until the conditions were met, and the money was released to SWIB. Here, Plaintiffs allege, and we must accept as true, that there are no conditions precedent prior to the monies being deposited into the Fund because PSU has already paid the 2012 installment. Plaintiffs' Second Amended Complaint at ¶61. Accordingly, we conclude that the Knoll case is inapposite.

Next, the NCAA asserts that because no monies have been deposited into the Fund, Treasurer McCord has not been harmed. The Endowment Act applies to "all monetary penalties paid or payable under agreements between institutions of higher education and governing bodies regardless of the payment date." 24 P.S. § 7505. This Court has held:

Something that is 'payable' has been defined as something '[c]apable of being paid; suitable to be paid; admitting or demanding payment; justly due; legally enforceable.' BLACK'S LAW DICTIONARY 1128 (6th ed. 1990). Furthermore, the definition of 'payable' goes on to indicate that 'payable' can refer to future obligations 'but, when used without qualification, [the] term normally means that the debt is payable at once . . . .' Id. [15]

Chrzan v. Workers' Comp. Appeal Bd. (Allied Corp.), 805 A.2d 42, 46 (Pa. Cmwlth. 2002) (emphasis and footnotes omitted).

Treasurer McCord maintains that he has standing as the statutorily-designated sole custodian of all funds deposited into the Fund created by the Endowment Act. Plaintiffs' Second Amended Complaint at ¶3. Section 3(b)(1) of the Endowment Act states: "The endowment shall be established as a separate trust fund in the State Treasury and the State Treasurer shall be custodian thereof." 24 P.S. § 7503(b)(1) (emphasis added). The General Assembly has designated that:

The State Treasurer may, if requested to do so, receive and act as custodian for any moneys or securities which may be contributed to or deposited with the Commonwealth, or any officer, department, board or commission of the Commonwealth, by the United States, or any agency thereof, or by any other person, persons, organization or corporation, for any designated special purpose.

Section 1 of the Act of December 27, 1933, Sp. Sess., P.L. 113, 72 P.S. § 3832 (emphasis added).

Given the State Treasurer's responsibility as custodian of the Fund, and the allegation that the money has been "paid" and is merely awaiting direction as to its proper location, and the remainder of the fine is "payable" thereby making it subject to the Treasurer's custodial claim, we hold that Treasurer McCord currently has the authority to implement his statutory obligations. See Pennsylvania Game Comm'n v. Dep't of ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.