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NCAA Scores With Motion To Dismiss

Posted  March 27, 2013

The National Collegiate Athletic Association bylaws escaped unscathed after the U.S. District Court for the Southern District of Indiana dismissed the amended complaint in Rock v. National Collegiate Athletic Association, a class action alleging NCAA limits on athletics-based financial aid violate antitrust laws.

Plaintiffs John Rock, Tim Steward, and Kody Collins each received scholarships for athletic and academic achievement to offset tuition while playing for NCAA teams.  The plaintiffs alleged that although their universities promised them financial aid, the schools eventually asked each student to choose between participation in his respective sport and receiving the scholarship in order to comply with NCAA rules.

According to the amended complaint, NCAA rules on athletic scholarships “artificially restrict” the nationwide market for labor of student athletes.  Until recently, NCAA rules did not allow students to receive athletics-based scholarships for more than one year.  The NCAA’s bylaws also limit the number of scholarships each school can award for each sport and bar Division III schools from awarding athletics-based financial aid at all.

Judge Jane Magnus-Stinson disagreed with the plaintiffs’ arguments.  Her decision relies largely on Agnew v. National Collegiate Athletic Association, a case in which two football players lost their athletic scholarships due to injury and accused the NCAA of anticompetitive behavior.

In Agnew the U.S. Court of Appeals for the Seventh Circuit held that a “cognizable” market must be affected by the anticompetitive behavior in order for transactions between student athletes and universities to comprise antitrust violations.

Judge Magnus-Stinson found the plaintiffs’ claims failed to define such a relevant market.  First, the market definition did not account for substitute associations, such as the National Association of Intercollegiate Athletics.  Second, the alleged market grouped all student athletes together without consideration for gender, differences among sports, or differences among divisions.

“Even at the motion to dismiss stage, the Court will not “don blinders” and “ignore commercial reality” when analyzing Plaintiffs’ market allegations,” the court wrote.

The court’s opinion also agreed with the NCAA in rejecting plaintiffs’ arguments that the inability of Division III schools to provide financial aid restricts competition.  According to the NCAA’s motion to dismiss, the ban on Division III athletic-based scholarships actually exists to allow more schools to participate.  According to the NCAA, the financial requirements accompanying athletics-based scholarships that had existed prior to the ban had made joining the NCAA difficult for smaller schools.

Rock, who played at a Division I school, will have 28 days to submit an amended complaint.

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