Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Ky.: Antitrust claims against NCAA fail because bylaw was not commercial, (Sep 27, 2013)

By Tobias J. Gillett, J.D., LL.M.

An organizer of basketball tournaments failed to state a Sherman Act Section 1 claim over the National Collegiate Athletic Association’s application of one of its bylaws that led an athletic venue to deny the organizer permission to hold an event at the venue because the bylaw at issue was not commercial, the federal district court in Lexington, Kentucky has ruled (Bleid Sports, LLC v. National Collegiate Athletic Association, September 26, 2013, Caldwell, K.).

Bleid Sports, LLC was an organizer and promoter of high school and middle school basketball tournaments. Bleid alleged that it had scheduled a November 25, 2011 tournament at the University of Kentucky’s Rupp Arena, and had contacted the NCAA to ensure that the tournament would comply with NCAA bylaw 13.11.1.8, which read: “An institution … shall not host, sponsor or conduct a nonscholastic basketball practice or competition in which men’s basketball prospective student-athletes … participate on its campus or at an off-campus facility regularly used by the institution for practice and/or competition by any of the institution’s sports programs.” The NCAA allegedly assured both Bleid and a Rupp Arena representative that the event would comply with the bylaw.

However, on November 23, 2011, the NCAA denied the University of Kentucky’s request for a Legislative Relief Waiver to ensure compliance with the bylaw, causing Rupp Arena officials to refuse to hold the event. Although Bleid was able to relocate the event to a local high school, it alleged that it suffered lost sales and registration fees due to the move.

Bleid filed suit against the NCAA, alleging that the NCAA’s “unreasonable and arbitrary interpretation” of its bylaw had limited competition in violation of Section 1 of the Sherman Act, and asserting various state law claims. The NCAA moved to dismiss the complaint, and Bleid moved to amend.

Bleid failed to state a Section 1 claim because the NCAA’s rule was not commercial, according to the court. The court explained that an NCAA rule must be commercial to state a claim under the Sherman Act, and that the Sixth Circuit, in Bassett v. Kentucky Athletic Ass’n, 528 F.3d 426 (2008), 2008-1 Trade Cases ¶76,180, had held that “NCAA rules on recruiting student athletes, specifically those rules prohibiting improper inducements and academic fraud, are all explicitly non-commercial.”

Here, the court found the bylaw was “clearly a recruiting rule” on its face. The rule’s references to “prospective student-athletes” and “nonscholastic … competition[s]” both “obviously indicate[d] its recruiting nature,” in the court’s view. Moreover, Bleid acknowledged that the bylaw was “technically classified as a recruiting rule,” although it contended that the rule nonetheless had a “commercial effect.” The court noted that, in Bassett, the Sixth Circuit had reasoned that “if the rules themselves and the corresponding sanctions are not commercial … then the enforcement of those rules cannot be commercial.” Further, violations of the rule would permit a violator to expose prospective student-athletes to its competition venues, and would thus permit a recruiting advantage.

The court rejected Bleid’s argument that the rule was commercial because of “dicta” in the Sixth Circuit’s decision in Worldwide Basketball and Sports Tours, Inc. v. National Collegiate Athletic Association, 388 F.3d 955 (2004), 2004-2 Trade Cases ¶74,612. The court observed that the court in that decision had only assumed that the rule at issue had “some commercial impact” to allow it “to proceed to evaluate whether the district court’s dismissal was appropriate on other grounds.” Moreover, the plaintiffs in Worldwide Basketball had alleged that the NCAA had adopted the rule for purely commercial purposes, an assertion that Bleid did not make in the present case. Finally, the “dicta” in Worldwide Basketball was not a holding in that case, and to the extent it conflicted with the Sixth Circuit’s later decision in Bassett, Bassett controlled.

The court also denied Bleid’s motion to amend, concluding that the motion’s additional facts offered to clarify the scope of the geographic market would not alter the court’s decision regarding the antitrust claims. The court also concluded that the NCAA, as an unincorporated voluntary association, could not be sued under its own name under Kentucky law, and that the motion to amend’s attempted addition of NCAA member Murray State University (MSU) as a party to cure that defect would be futile, because MSU, as a public university, was immune to suit under the Eleventh Amendment.

The case is Civil Action No. 5:12-374-KKC.

Attorneys: Allison Brown Vermilion and Gregory Scott Berman (Wyatt, Tarrant & Combs, LLP) for Bleid Sports LLC. Charles H. Stopher and Edward H. Stopher (Boehl, Stopher & Graves) for National Collegiate Athletic Association.

Companies: Bleid Sports, LLC; National Collegiate Athletic Association

Cases: Antitrust KentuckyNews