PA vs. NCAA: Does the Commonwealth have Standing?

Recently, the Commonwealth of Pennsylvania brought suit against the NCAA, alleging that the NCAA violated antitrust laws in levying severe sanctions against Penn State’s football program.  Notably, the University is not a party to the suit.  We have seen a few of the media’s “legal experts,” such as Andrew Napolitano (here) and Lester Munson (here), argue that the Commonwealth has no legal standing.  They believe Penn State or its student athletes are the only ones with standing to sue.  So if these brilliant legal minds have spoken, there’s nothing to see here.  Or is there?  Well, upon reading the complaint and doing about ten minutes of legal research, it’s clear that there’s actually a solid basis for the Commonwealth to assert standing to sue.

By way of background, in 2011 Penn State’s president, vice-president, and athletic director were accused of failing to report a 2001 allegation sexual abuse of a minor by a retired assistant football coach.  All three have been criminally charged and are no longer actively employed with the school, but the trials are still pending.   There were no allegations that any student athletes were involved in this matter and the head football coach followed university procedures in passing the allegations to his superiors.  Nevertheless, in July, the NCAA bypassed its normal enforcement procedures and levied massive penalties against the football team, including drastic scholarship reductions, a four year bowl ban, and a $60 million fine.  Some have declared the sanctions to be worse than the “death penalty.” The NCAA did not cite a specific NCAA rule violation as basis for the punishment, but instead simply cited general ethics standards.

Penn State receives state funding but is not considered a “state school,” in spite of its name.  So how exactly does the Commonwealth have grounds to assert standing to challenge these sanctions levied against the Penn State?  It comes from a relatively obscure doctrine called Parens Patriae.  As noted in the first paragraph of the complaint, the Commonwealth of Pennsylvania brought this suit Parens Patriae seeking an injunction under Section 16 of the Clayton Act (15 U.S.C. § 26).  Under the doctrine of Parens Patriae, a state can bring a legal action to protect its citizens from harm. The Parens Patriae doctrine is indeed applicable in antitrust actions.  An American Law Reports article (23 A.L.R. Fed. 878) on Parens Patriae and Antitrust states:

…. a parens patriae action under § 16 of the Clayton Act (15 U.S.C.A. § 26), which provides for injunctive relief against antitrust violations, can be maintained by a state on the basis of injury to the state’s general economy.

This is what the District Court held in Com. of Pa. v. Russell Stover Candies, Inc., CIV. A. 93-1972, 1993 WL 145264 (E.D. Pa. May 6, 1993) (citing State of Ga. v. Penn R. Co., 324 U.S. 439 (U.S. 1945)).

The Commonwealth’s complaint lays out the case for how its economy was injured.  In short, the complaint alleges that the Penn State football program generates hundreds of millions of dollars for the economy in central Pennsylvania.  The complaint further alleges the sanctions levied by the NCAA, which are allegedly in violation of Section 1 of the Sherman Act, will cripple the viability of the football program and will in turn impact the state’s economy through lost travel, hotels, ticket sales, dining, et cetera.

It would seem that the Commonwealth has a pretty strong basis for standing.  It shouldn’t be hard for it to secure expert affidavits to show economic harm in order to get it past a motion to dismiss for lack of standing.  Heck, the NCAA’s President, Dr. Mark Emmert, has essentially admitted that the Penn State football program is a major economic engine whose demise will have far reaching impact.  As noted in the complaint, in discussing why the NCAA imposed sanctions rather than completely shutting down the football program, Dr. Emmert stated:

The collateral damage imposed in this case would have been on people who were essentially innocent bystanders … This case had nothing to do with the marching band or the mom-and-pop hotel in State College or the guy who sells hot dogs, all of whom would have been profoundly affected by a multiyear football ban.

Of course, the sanctions imposed by the NCAA will still have the same collateral economic effects as those discussed by Dr. Emmert, but on a smaller scale.

Notably, the Commonwealth did not request monetary damages.  Courts are generally more relaxed in allowing standing for states in antitrust cases requesting injunctive relief under § 16 of the Clayton Act rather than treble damages under § 4.   Under § 4, courts are reluctant to allow standing for a general state economic injury because such indirect damages are difficult to measure.

If the Commonwealth can survive a motion to dismiss for lack of standing, this case could be very interesting.  Then again, I doubt either party wants to see this make the inside of a courtroom.   I wouldn’t be surprised to see some sort of settlement for reduced sanctions if the Commonwealth can get past motions to dismiss.   Some have already speculated that settlement is the real end game.