The U.S. Seventh Circuit Court of Appeals issued an opinion last week affirming the dismissal of a challenge at the pleading stage to the legality of the NCAA’s “year-in-residence” rule in Deppe v. National Collegiate Athletic Association, No. 17-1711 (7th Cir. 2018).
The rule requires varsity athletes who transfer schools, absent certain exceptions, to sit-out for a full year before becoming eligible to compete at their new school. The 7th Circuit’s ruling should come as no surprise in light of their previous decision in Agnew.
In 2012, Agnew v. National Collegiate Athletic Association, 683 F.3d 328 (7th Cir. 2012), established the 7th Circuit’s interpretation of the applicability of anti-trust laws to the NCAA. The court gave the NCAA significant flexibility by stating that most of their rules would be seen as justifiable means of preserving amateur competition.
In doing so, the court opined that such rules are “procompetitive” and thus do not violate anti-trust laws of the Sherman Act (15 U.S.C. § 1).
To prevail on a claim under the Sherman Act, a plaintiff must prove three elements: (1) a contract, combination or conspiracy; (2) a resultant unreasonable restraint of trade in a relevant market; and (3) an accompanying injury.
The first and third elements were a given in Deppe, so the challenge turned on the second element. Before one can get beyond the pleading stage and argue that the three requisite elements are present, a plaintiff must overcome the presumption that a NCAA rule is procompetitive.
The 7th Circuit applies the test the court created in Agnew for allowing challenges to NCAA rules: If a regulation is not, on its face, helping to preserve the amateur spirit of competition inherent to the NCAA, the court will not presume that the rule is valid and thus the pleading can move forward. While Agnew involved a challenge to scholarship limitations, Deppe challenged a rule that is arguably even more connected to preserving amateurism.
Requiring athletes to sit-out for a year enables reasonable arguments on both sides of the issue. Proponents argue that it restrains large schools from over-poaching rising stars from small schools.
Conversely, opponents argue it prevents smaller schools from competing by trapping athletes at the big schools. The 7th Circuit was more sympathetic to the first argument, opining that the rule preserves the nature of intercollegiate athletics by stopping the “severing of athletic and academic aspects of college sports” that would result from uninhibited transferring.
In the view of the 7th Circuit, and the U.S. Supreme Court for that matter (see National Collegiate Athletic Association v. Board of Regents University of Oklahoma, 468 U.S. 85 (1984), the academic components of intercollegiate athletics are integral to the distinction between amateur and professional sports.
By arguing that the year-in-residence rule is the main barrier to more students transferring, the petitioner, Peter Deppe, basically parroted the NCAA. Constant transferring of athletes between teams is emblematic of professional sports where athletes have the sole responsibility of performing in competition.
Intercollegiate athletes have a decidedly different experience. The NCAA, through its member institution schools and conferences, impose several bylaws, as interpreted and enforced by NCAA staff. These bylaws are ostensibly, as described by NCAA staff and member institutions, designed to ensure that student-athletes experience the academic side of college just as much as the athletic side.
NCAA staff and member institutions posit that an integral part of amateur athletics is about balancing competition with other responsibilities. By arguing that the year-in-residence rule prevents many students from transferring, something that could interfere with this balance, the petitioner essentially conceded that the challenged regulation fell within the purported overall spirit of intercollegiate athletics.
The appellant’s other arguments did not gain much traction either.
First, the petitioner argued that the presence of exceptions to the rule show that the year-in-residence rule was unnecessary to the survival of college athletics. However, the 7th Circuit’s test does not ask whether or not college athletics would survive absent a rule, but rather, does the subject regulation, on its face, help maintain amateurism.
Instead, the court felt that the presence of exceptions simply shows that the NCAA understands that some students can escape the limitation without damaging amateurism.
Economic arguments raised by the appellant received ample criticism as well. The petitioner alleged that the rule is applied selectively for economic reasons, as is evidenced by the rareness of football and basketball (the highest grossing sports) players being granted the exception.
He also argued that the regulation lowers the administrative costs of transferring and recruiting. This argument once again ignored the “amateurism” test of the 7th Circuit since the petitioner failed to prove that the rule was facially about revenue-generation instead of preserving amateurism.
The NCAA gets a lot of deference from the 7th Circuit under this test. The presumption is that the NCAA crafts its rules for legitimate purposes, since its rules define what it means to be a collegiate athlete. To be sure, staking a claim against the NCAA through anti-trust laws is not impossible, as the successful petitioners in Board of Regents who challenged an arbitrary limitation of television coverage of football games showed.
The challenged rule in Board of Regents, however, had nothing to do with the competition and eligibility aspects that Deppe was concerned with. Instead, it dealt with promoting live attendance at football games. Promoting live attendance is not related to the distinction between amateur and professional sports, so the challengers were able to bring their claim forth and ultimately prevail.
The success of the challengers in Board of Regents was rooted in the connection of the NCAA rule to economic motives. While this would likely not have changed the outcome, a more effective articulation of economic motives could have helped the petitioner’s case in Deppe.
Nevertheless, this most recent NCAA decision proves that it is difficult to overcome the initial barrier of the court’s presumption that a rule is procompetitive, particularly in the 7th Circuit.