Paper Proposes Arbitration to Resolve College Athlete Eligibility Disputes

Mar 27, 2014

Paper Proposes Arbitration to Resolve College Athlete Eligibility Disputes
 
By Rick Karcher, Sport Law Professor
 
After the Philadelphia Phillies failed to sign their fifth round draft pick in the 2013 draft, Oregon State pitcher Ben Wetzler, the Phillies informed the NCAA that they believed Wetzler had violated the “no agent” rule. Last February the NCAA suspended Wetzler for 11 games and stated in its press release: “According to the facts of the case, which were agreed upon by the school and the NCAA, Wetzler sought help from an agent who attended meetings where Wetzler negotiated contract terms with the team.”
 
The italicized portion of the statement in the NCAA’s press release reveals an area of concern applicable to any athlete suspected of violating NCAA rules pertaining to the impartiality and neutrality of the exclusive dispute resolution process utilized by the NCAA and its member institutions to resolve eligibility disputes, coined as the “Student-Athlete Reinstatement Process.” In a recently-published article in the Journal of College and University Law titled, Judicial Review of NCAA Eligibility Decisions: Evaluation of the Restitution Rule and a Call for Arbitration, I, along with my co-authors Professor Steve Ross and S. Baker Kensinger, Esq., address the impartiality and neutrality concerns associated with the NCAA’s rules and process for handling eligibility disputes and propose an alternative system of independent arbitration.
 
The Restitution Rule Operates as a “Waiver of Recourse” Clause
 
College athletes have standing to legally challenge eligibility decisions as third-party beneficiaries to the NCAA bylaws. However, NCAA Bylaw 19.7 (the “Restitution Rule”) constitutes a huge impediment to any college athlete receiving fair and impartial judicial review of NCAA eligibility decisions. The Restitution Rule provides:
 
If a student-athlete who is ineligible under the terms of the constitution, bylaws or other legislation of the Association is permitted to participate in intercollegiate competition contrary to such NCAA legislation but in accordance with the terms of a court restraining order or injunction operative against the institution attended by such student-athlete or against the Association, or both, and said injunction is voluntarily vacated, stayed or reversed or it is finally determined by the courts that injunctive relief is not or was not justified, the Board of Directors may take any one or more of the following actions against such institution in the interest of restitution and fairness to competing institutions: (Revised: 11/1/07 effective 8/1/08) [List of nine categories of punishments is omitted].
 
We see three fundamental problems with the Restitution Rule. First, it distorts and inappropriately interferes with a judge’s exercise of discretion by adding a concern that harsh retributive sanctions will be imposed upon the hometown university by the NCAA if a court order is issued that overturns a ruling of ineligibility and the athlete thereafter participates in competition. In other words, the Restitution Rule itself is ex post but it operates ex ante. Second, out of fear for potential sanctions to be imposed by the NCAA, the Restitution Rule encourages institutions, and gives them an incentive, to disobey binding court orders. Finally, the rule frustrates the process of fair and independent review of decisions made by a dominant standard-setting organization, thereby depriving athletes of meaningful judicial review. Despite its review-precluding effect, the Restitution Rule has been upheld by courts citing theories of deference to private associations and the freedom of contract. However, the court in Oliver v. NCAA, which is widely-recognized for invalidating the “no agent” rule, stated that the Restitution Rule “is governed by no fixed standard except that which is self-serving for the defendant” and struck it down on the grounds that it is arbitrary and a violation of the covenant of good faith and fair dealing implicit in the NCAA’s contract with athletes as third-party beneficiaries.
 
Based upon our three stated concerns, in our view the Restitution Rule effectively constitutes a waiver of recourse clause. If the Restitution Rule is viewed as such, it most likely violates public policy. A waiver of recourse clause rarely appears in an association’s constitution or charter in the absence of an agreement to arbitrate or wherein some private contractual recourse remedy is expressly provided. In other words, a party to a contract only agrees to waive recourse to the courts if the other party (or parties) agrees to a fair and independent dispute resolution process. Moreover, a court will find such a clause invalid as against public policy under circumstances where the waiver of rights is not voluntary, knowing or intelligent, or was not freely negotiated by the parties occupying equal bargaining positions. Courts are also more willing to strike it down where a dominant association has monopolistic control of an area affecting an individual’s livelihood.
 
Evaluating the Student-Athlete Reinstatement Process as the Exclusive Dispute Resolution Mechanism
 
If courts were to construe the Restitution Rule as a waiver of recourse clause, it would necessitate an assessment of the dispute resolution mechanism utilized by the NCAA and its member institutions to supplant meaningful judicial review of eligibility disputes. Indeed, the Federal Arbitration Act (FAA) was adopted and designed to require and ensure independent impartial review and courts will invalidate an agreed upon dispute resolution mechanism on grounds of unconscionability or if it is deemed to be against public policy. Courts routinely invalidate provisions if the process has been unilaterally imposed without negotiation (i.e., procedural unconscionability) and if the process allows one of the parties to select the arbitrator or arbitrators (i.e., substantive unconscionability).
 
The dispute resolution process utilized by the NCAA for resolving eligibility disputes is the Student-Athlete Reinstatement Process. Its provisions require a member institution to certify eligibility of their athletes and to immediately withhold an athlete from competition if the institution determines that the athlete is ineligible. Because sanctions for playing an ineligible athlete are so significant, the institution has an incentive to make such a finding if there is any serious doubt about the athlete’s eligibility. After the institution determines that an athlete is ineligible, if the institution “concludes that the circumstances warrant restoration” it may appeal its determination to the Reinstatement Committee for restoration of eligibility. Lastly, the Reinstatement Committee can restore eligibility only if, after reviewing the eligibility dispute, it decides that the “circumstances clearly warrant restoration.” The committee’s determination “shall be final, binding and conclusive and shall not be subject to further review by any other authority,” thereby making the Student-Athlete Reinstatement Process an exclusive dispute resolution process.
 
The NCAA and its member institutions maintain that athletes agree to these rules and procedures as a condition to participation. Thus, this agreement would be subject to the FAA’s requirement that the process utilized to resolve disputes provide for independent impartial review. In our opinion, the process fails in that regard for three primary reasons. First, the athlete is not afforded a right of appeal; the member institution has the right but only if it concludes the circumstances warrant restoration. Second, the standard of review applied by the Reinstatement Committee — when the circumstances clearly warrant restoration — is akin to a “clearly erroneous” standard. Such standard of review is not only highly unusual for a reviewing panel charged with fact finding, but it is nearly impossible to overcome because the panel must decide that the institution’s findings of fact and determination were clearly in error. Typically, a reviewing panel applies a de novo standard of review. Third, all five members of the Reinstatement Committee serve a three-year term and are appointed by the NCAA, raising concerns of institutional bias.
 
A Proposal for Arbitration
 
NCAA eligibility decisions are similar to the time-sensitive eligibility decisions of governing bodies involving Olympic athletes. The United States Olympic Committee grants the National Governing Body (NGB) for each sport the exclusive authority to resolve athlete eligibility issues. If the athlete claims the NGB denied her the opportunity to participate, the Ted Stevens Olympic and Amateur Sports Act gives athletes a statutory right to submit the eligibility dispute to the American Arbitration Association (AAA) and the arbitration awards can be enforced under the FAA.
 
We propose that the Student-Athlete Reinstatement Process be replaced with a legitimate arbitration process modeled after the AAA Commercial Arbitration Rules and Mediation Procedures, which would afford athletes a neutral and impartial dispute resolution process. This process would ensure that the NCAA, the member institution, and the athlete are given the chance to have meaningful input in the selection of an expert, independent (outside) arbitrator to resolve their eligibility dispute, thereby eliminating the unconscionable process currently utilized whereby one of the parties (the NCAA) selects the arbitrators. It would also protect the NCAA’s legitimate interest in having a quick, final, and independent review and determination of eligibility disputes, and the Restitution Rule would no longer be necessary to insulate the NCAA’s eligibility rules from binding court orders issued against member institutions. One could even envision the development of a “closed list” of expert outside arbitrators similar to that utilized by the Court of Arbitration for Sport, which has evolved into the world leader in sports arbitration.


 

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