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National Collegiate Athletic Association v. Corbett

United States District Court, M.D. Pennsylvania

June 12, 2014

NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, Plaintiff
v.
THOMAS W. CORBETT, JR., in his capacity as Governor of the Commonwealth of Pennsylvania, et al., Defendants

Page 558

For National Collegiate Athletic Association, Plaintiff: Everett C. Johnson, James Scott Ballenger, LEAD ATTORNEYS, Latham & Watkins LLP, Washington, DC; Thomas W. Scott, LEAD ATTORNEY, Killian & Gephart, LLP, Harrisburg, PA.

For Thomas W. Corbett, Jr., in his capacity as Governor of the Commonwealth of Pennsylvania, Mark R. Zimmer, in his capacity as Chairman of the Pennsylvania Commission on Crime and Delinquency, Defendants: Linda Cadden Barrett, Office of General Counsel, Harrisburg, PA.

For Rob Mccord, in his capacity as Treasurer of the Commonwealth of Pennsylvania, Defendant: Christopher B. Craig, LEAD ATTORNEY, Commonwealth of PA Department of Treasury, Harrisburg, PA; Craig S. Schwartz, Commonwealth of Pennsylvania, Treasury Department, Harrisburg, PA.

For Eugene Depasquale, in his capacity as Auditor General of the Commonwealth of Pennsylvania, Defendant: Victoria S. Madden, PA Department of the Auditor General, Harrisburg, PA.

For Jake Corman, Intervenor Defendant: Joshua John Voss, Conrad O'Brien PC, Harrisburg, PA; Mark E. Seiberling, Conrad O'Brien Gellman & Rohn, P.C., Philadelphia, PA; Matthew H. Haverstick, Conrad O'Brien, Philadelphia, PA.

Page 559

MEMORANDUM

Kane, Judge.

Before the Court are Defendants Governor Thomas Corbett and Chairman of the Pennsylvania Commission on Crime and Delinquency Mark R. Zimmer (Doc. No. 17), Treasurer Rob McCord (Doc. No. 18), and Auditor General Eugene DePasquale's (Doc. No. 19) motions to dismiss or stay Plaintiff National Collegiate Athletic Association's complaint. The motions have been fully briefed and are ripe for disposition. For the reasons that follow, the Court will deny Defendants' motions to dismiss or stay the case.

I. BACKGROUND

Plaintiff, the National Collegiate Athletic Association (" NCAA" ), brings this constitutional challenge to a 2013 enactment of the Pennsylvania General Assembly, alleging that the statute violates the United States Constitution. The facts alleged in support of Plaintiff's complaint are all too familiar. Plaintiff is a voluntary association of higher education institutions that regulates intercollegiate athletic competition and enforces uniform rules for the administration of intercollegiate athletics. (Doc. No. 1 ¶ 10.) As a member institution, Pennsylvania State University (" Penn State" ) is subject to the NCAA's constitution

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and bylaws. (Id. ¶ ¶ 21, 23, 28.) On November 4, 2011, after a grand jury investigation into allegations that former Penn State assistant football coach Gerald A. Sandusky sexually abused children for over a decade, Sandusky was criminally charged. (Id. ¶ 29; Doc. No. 23 at 7.) That same day, charges were brought against senior Penn State officials for failing to report the allegations of abuse and for committing perjury before the grand jury; these officials included Penn State Athletic Director Timothy M. Curley and Penn State Senior Vice-President of Finance and Business Gary C. Schultz. (Doc. No. 1 ¶ 32.)

Shortly after the criminal charges were filed against various Penn State officials, Plaintiff began evaluating whether Penn State's conduct had violated any NCAA rules. (Id. ¶ 37.) Following Plaintiff's investigation, Penn State entered into a consent decree with Plaintiff on July 23, 2012. (Id. ¶ 38.) As part of the consent decree, Penn State agreed to pay a $60 million fine over five years into an endowment for programs devoted to preventing child sexual abuse or to assisting the victims of such abuse. (Id. ¶ 42; Doc. No. 14-1 at 6.) On or about September 18, 2012, Plaintiff appointed a task force to oversee the creation of the endowment funded by the $60 million fine. (Doc. No. 1 ¶ 45.) Members of the task force include the Dean of the College of Health and Human Development at Penn State, the Vice Dean for Clinical Affairs at the Penn State College of Medicine, and individuals from national non-profit organizations, the federal government, and the NCAA. (Id.) The task force established that " [a]ll funds from the fine will follow the endowment guidelines established by the Child Sexual Abuse Endowment Task Force and flow to programs designed to prevent child sexual abuse or assist the victims of child sexual abuse nationwide." (Id. ¶ 47.) To date, Penn State has paid $12 million into an account scheduled to be transferred into the endowment. (Id. ¶ 48; Doc. No. 14-2.)

B. Defendant Governor Corbett's antitrust action

On January 2, 2013, Governor Corbett, on behalf of the Commonwealth, filed an antitrust action against the NCAA in this Court, alleging that NCAA President Dr. Mark Emmert, 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. On June 6, 2013, this Court granted the NCAA's motion to dismiss Governor Corbett's complaint, finding that the Governor's complaint failed to sufficiently allege: (1) commercial activity subject to the Sherman Act; (2) that the NCAA's imposition of the sanctions against Penn State constituted a violation of Section 1 of the Sherman Act; and (3) that the Commonwealth suffered an antitrust injury. See Pennsylvania v. Nat'l Collegiate Athletic Ass'n, 948 F.Supp.2d 416 (M.D. Pa. 2013).

C. State Senator Jake Corman's Commonwealth Court lawsuit and further proceedings in Commonwealth Court

On December 28, 2012, Senator Jake Corman, a State Senator from the 34th Senatorial District of Pennsylvania and the Chair of the Senate Committee on Appropriations, circulated a memorandum to other state senators entitled " NCAA Fine Endowment for Pennsylvania." (Doc. No. 1 ¶ 51; Doc. No. 14 at 3-4.) In the memorandum, Senator Corman stated that he planned to introduce legislation to direct funds from penalties placed on Commonwealth-supported institutions of higher education

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to Commonwealth causes and that " state policy should require the money be distributed for the benefit of the state and its residents." (Doc. No. 1 ¶ 52; Doc. No. 1-3 at 2.) Senator Corman further stated in the memorandum that the proposed legislation " seeks to impact the $60 million financial penalties placed upon the Penn State University." (Doc. No. 1 ¶ 52; Doc. No. 1-3 at 2.)

Prior to the enactment of the legislation envisioned in his memorandum, Senator Corman commenced an action against the NCAA in the Commonwealth Court of Pennsylvania on January 4, 2013, seeking declaratory and equitable relief to ensure that all of the funds paid into the endowment would be used for the benefit of the Commonwealth and its residents. (Doc. No. 14 at 1-2; Doc. No. 14-1.) In his complaint, Senator Corman alleged that the sanctions imposed in the consent decree violated the Pennsylvania Constitution and Pennsylvania law primarily because the NCAA, despite intending " to wrest such a large sum of Pennsylvania funds, . . . has refused to submit to any control by Pennsylvania elected officials." (Doc. No. 14-1.) Three days later, Senator Corman moved the Commonwealth Court to issue a preliminary injunction enjoining the NCAA from " disposing of, reducing, or otherwise dissipating outside of Pennsylvania" any of Penn State's first payment of $12 million. (Doc. No. 14-2.)

D. The Endowment Act and further proceedings in Commonwealth Court

Following Senator Corman's filing of his complaint and motion for a preliminary injunction in the Commonwealth Court, Governor Corbett signed into law the Institution of Higher Education Monetary Penalty Endowment Act on February 20, 2013. See 24 P.S. § 7503 The Act provides:

If an institution of higher education pays a monetary penalty pursuant to an agreement entered into with a governing body and:
(1) the monetary penalty is at least $10,000,000 in installments over a time period in excess of one year; and
(2) the agreement provides that the monetary penalty will be used for a specific purpose,
then the monetary penalty shall be deposited into an endowment that complies with the provisions of subsection (b).

24 P.S. § 7503(a); (Doc. No. 1 ¶ 54.) Section 7503(b) requires that the monetary penalty be deposited into a separate trust fund in the State Treasury and, unless otherwise explicitly provided in the agreement, the funds may only be used within the Commonwealth for the benefit of Commonwealth residents. Id. § 7503(b)(1), (4); (Doc. No. 1 ¶ ¶ 55, 57.) Furthermore, Section 7503(b)(3) directs the Commission on Crime and Delinquency to " expend the money of the endowment." Id. § 7503(b)(3); see also id. § 7502 (defining " commission" ); (Doc. No. 1 ¶ 56.) The Act is applicable " to all monetary penalties paid or payable under agreements between institutions of higher education and governing bodies regardless of the payment date." Id. § 7505; (Doc. No. 1 ¶ 58.)

On February 7, 2013, the NCAA filed preliminary objections to Senator Corman's complaint in the Commonwealth Court. (Doc. Nos. 14-4, 14-5.) In its preliminary objections, the NCAA asserted that Senator Corman lacked standing to bring the action in Commonwealth Court, that the Commonwealth Court lacked jurisdiction over the action because Penn State was not a party to the action, and that the relief sought by Senator Corman

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was unconstitutional in that his attempt to override the consent decree would violate the Commerce Clause of the United States Constitution, as well as the Contracts and Takings Clauses of the Constitutions of the United States and Pennsylvania. (Doc. No. 14-4.)

On February 20, 2013, the same date on which Governor Corbett signed the Endowment Act into law, Senator Corman filed an amended complaint in his pending Commonwealth Court action, alleging that the consent decree violated the Endowment Act. (Doc. Nos. 14-6, 14-7.) Senator Corman then renewed his motion for a preliminary injunction in the Commonwealth Court on February 26, 2013. (Doc. No. 14-12.) In that motion, he requested the Commonwealth Court compel the NCAA to comply with the Endowment Act and remit Penn State's first payment of $12 million into the State Treasury. (Doc. No. 14-13.)

The NCAA filed preliminary objections to the amended complaint on March 21, 2013, and, six days later, Senator Corman and Treasurer McCord filed a second amended complaint in the Commonwealth Court. (Doc. No. 23 at 9; Doc. No. 23-1.) The second amended complaint alleges that the consent decree violates the Pennsylvania Constitution and the Endowment Act. (Doc. No. 23-1.)

On September 4, 2013, the Commonwealth Court overruled the NCAA's preliminary objections. Corman v. Nat'l Collegiate Athletic Ass'n,74 A.3d 1149, 1171 (Pa.Cmwlth. Ct. 2013). The NCAA then filed an Answer and New Matter on September 24, 2013, asserting that because it is " special legislation," the Endowment Act violates the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. See Docket No. 1 MD 2013, at 16. The matter was fully briefed, and on April 17, 2014, the Commonwealth Court issued an opinion holding that the Endowment Act did not violate the Equal Protection Clause. (Doc. No. ...


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