Panel Affirms Antitrust Ruling, Handing NCAA Another Victory

Aug 15, 2008

The 6th U.S. Circuit Court of Appeals has affirmed a lower court’s ruling that the complaint of a former assistant football coach at the University of Kentucky, who alleged that the NCAA violated antitrust laws by allegedly restricting his future employment, lacked “the critical commercial activity component required to permit application of the Sherman Act.”
The panel also denied the coach’s appeal on a second lower court ruling, this one involving a fraud claim against the University of Kentucky Athletic Association (UKAA).
Claude L. Bassett had been an assistant football coach for the University of Kentucky when he resigned after being accused of NCAA rules infractions. Bassett sued the NCAA, the Southeastern Conference, and the UKAA, alleging conspiracy to violate antitrust laws, fraud, civil conspiracy and tortious interference with contract.
The district court granted the NCAA’s, the UKAA’s and the SEC’s motions to dismiss the antitrust and civil conspiracy claims and granted the NCAA’s and the SEC’s motions to dismiss the plaintiff’s fraud claims. Later, the district court granted summary judgment for the NCAA and the UKAA on the plaintiff’s remaining claims.
Bassett appealed the district court’s granting of NCAA’s motion to dismiss the antitrust claim and the district courts granting of summary judgment on the UKAA’s fraud and a breach of contract claims, spawning the present opinion.
In its ruling, the panel revisited the circumstances that led to the lawsuit.
Bassett was hired in 1997 by then UK head football coach, Hal Mumme as recruiting coordinator and assistant coach. Bassett’s employment contract was with the UKAA, which serves as the athletic department for the UK. On November 19, 2000, Larry Ivy, the UK’s athletic director, called Bassett and Mumme to a meeting, wherein Ivy confronted Bassett about alleged rules violations. In the course of the meeting, Ivy asked Bassett to resign in light of the allegations of impropriety. In exchange for Bassett’s resignation, Ivy assured Bassett no further actions would be taken against him.
As a result of the November 19, 2000 meeting Bassett resigned. The following day, the UK disclosed that Bassett, along with several other assistants, had been fired. The UK conducted an internal investigation of its football program to determine if any NCAA rules violations occurred. The investigation proceeded with assistance from the SEC Commissioner and lasted through February 2001. On February 28, 2001, the UK turned over the results of its internal investigation to NCAA. As a result, NCAA issued official inquiry letters to Bassett, regarding alleged infractions, who responded in writing through his counsel. Bassett declined to appear at the hearing before NCAA, to address allegations which included improper recruiting inducements provided to prospective student athletes and high school coaches and academic fraud in aiding enrolled student athletes by preparing their papers or having student assistants type papers for enrolled student athletes. Shortly thereafter, NCAA imposed sanctions against the UK for violations of NCAA rules. In addition to the sanctions against the UK, the NCAA issued a show cause order requiring Bassett and any NCAA member institution seeking to hire him in an athletically related position, from January 21, 2002 through January 30, 2010, to appear before NCAA Division I Committee on Infractions to “consider whether the member institution should be subject to the show cause procedures of Bylaw, which could limit the coach’s athletically related duties at the new institution for a designated period.”
In his claim against the NCAA, Bassett alleged that the NCAA, the UKAA and the SEC conspired to prevent Appellant from coaching at any NCAA member school in violation of the Sherman Antitrust Act, 15 U.S.C. § 1-2 (2000) and the Clayton Act, 15 U.S.C. § 15 (2000), as the conspiracy amounts to a group boycott.
The district court determined Bassett’s antitrust allegation failed to state a claim because NCAA’s actions were not commercial in nature and therefore, did not violate the Sherman Act.
“We agree with the district court’s analysis,” wrote the panel. “In order to state a claim under the Sherman Act there must be a commercial activity implicated. As we held in Worldwide Basketball & Sport Tours, Inc. v. NCAA, 388 F.3d 955, 958 (6th Cir. 2004), the appropriate inquiry is ‘whether the rule itself is commercial, not whether the entity promulgating the rule is commercial.’ Worldwide at 959.
“Although the question before us is whether the enforcement activities of NCAA violate the Sherman Act and not a particular rule, the analysis must focus on the enforcement action itself and not NCAA as a commercial entity. … Bassett’s complaint contains considerable information on the size and scope of college football and the revenues generated by it. The Complaint is wholly devoid of any allegation on the commercial nature of NCAA’s enforcement of the rules it determined Bassett had violated. Bassett’s Complaint contends NCAA’s enforcement process violated its own due process requirements and, as a result, constitutes a Sherman Act violation. We find Bassett’s complaint lacks the critical commercial activity component required to permit application of the Sherman Act.
“Similar to the eligibility rules in Smith, the NCAA’s rules on recruiting student athletes, specifically those rules prohibiting improper inducements and academic fraud, are all explicitly non-commercial. In fact, those rules are anti-commercial and designed to promote and ensure competitiveness amongst NCAA member schools. Violation of the applicable NCAA rules gives the violator a decided competitive advantage in recruiting and retaining highly prized student athletes. It also violates the spirit of amateur athletics by providing remuneration to athletes in exchange for their commitments to play for the violator’s football program. Finally, violators of these rules harm the student-athlete academically when coaches and assistants complete coursework on behalf of the student-athlete.
“If the rules themselves and the corresponding sanctions are not commercial, as the reasoning in Smith supports, then the enforcement of those rules cannot be commercial. As long as the enforcement of non-commercial rules is reasonably and rationally related to the rules themselves, we find enforcement is a non-commercial activity. Although Bassett seeks to compartmentalize the enforcement in his analysis, we must examine the activity of NCAA, and that examination encompasses both the rule and its enforcement. To do otherwise would result in an incomplete analysis contrary to Worldwide Basketball. Such an examination demonstrates the enforcement of non-commercial rules is not a commercial activity, therefore, we find the allegations in Bassett’s Complaint fail to state a claim under the Sherman Act and we affirm the dismissal by the district court of Bassett’s antitrust claim.”
Bassett’s complaint alleges the UKAA and the SEC employees lied to him, “encouraging him to take actions depriving him of the due process guaranteed him under both his employment contract with the UKAA and NCAA rules,” according to the panel. “That lie was the statement by Ivy to Bassett that if he resigned, no further investigation or prosecution would occur. Because the UKAA employees reported Bassett’s alleged violations to the UKAA and NCAA, Bassett’s injury, i.e. the show cause order, occurred.
On summary judgment, the district court held that the “plaintiff has not presented ‘probative evidence’ that his reliance on Ivy’s promise that his own violations would not be investigated was reasonable under the circumstances.”
The panel agreed, finding that the district court “properly presented and relied on relevant Kentucky law. It is undisputed Bassett knew of the UK’s duty to report infractions. Bassett resigned when confronted with a non-NCAA violation for depositing a UK designated check into his personal bank account, a charge he admitted to at deposition. As stated above, the district court found ample evidence Bassett knew violations must be reported.”
The panel added that Bassett’s injuries “were due to his own admitted misconduct and not because of the UKAA’s alleged fraud. But for Bassett’s own conduct, he might still be coaching at the UK today.”
Claude L. Bassett v. NCAA and University Of Kentucky Athletic Association; 6th Cir.; No. 06-5795; 6/9/08


Articles in Current Issue