The NCAA News - News and Features

February 2, 1998

Federal appeals court upholds restricted-earnings decision

Trial on damages set for April 1 in U.S. district court

A federal appeals court has upheld a U.S. district court judge's ruling that the NCAA violated antitrust law with its restricted-earnings coach legislation.

The U.S. Court of Appeals for the 10th Circuit in Denver upheld Judge Kathryn H. Vratil's May 24, 1995, summary judgment against the Association and a January 1996 permanent injunction barring the NCAA from imposing compensation limitations on coaches.

The ruling and permanent injunction resulted from a suit filed by five Division I men's basketball restricted-earnings coaches. The coaches challenged NCAA legislation that limited their annual compensation to $12,000 in income and $4,000 for the summer.

The appeals court's action clears the way for a hearing of the coaches' claims of damages in the case. The trial on damages is set for April 1 in Vratil's Kansas City, Kansas, courtroom.

Two separate but related suits also are pending. One is a class-action suit filed by a men's lacrosse coach representing restricted-earnings coaches in other sports and the other is a suit filed by several baseball coaches.

The Association filed its appeal in January 1996. It challenged Vratil's ruling that the coaches successfully demonstrated that the legislation was anticompetitive and that the NCAA failed to demonstrate legitimate justification for the restrictions.

But the three circuit court judges who heard the appeal ruled that limiting compensation has "obvious anticompetitive effects" and, therefore, the judge was justified in requiring that the NCAA prove its legislation has "procompetitive justifications."

The appeals court found that none of the Association's three justifications -- providing younger, less experienced coaches with an opportunity for entry positions; reducing costs; and maintaining competitive equity among Division I schools -- were persuasive. As a result, it said, the judge's May 1995 summary judgment was appropriate.

The appeals court also upheld the January 1996 permanent injunction, which was requested by the coaches in response to restricted-earnings coach legislation proposed by the membership for the 1996 Convention. The membership proposals were withdrawn before consideration, but Vratil issued the injunction to prevent the Association from "re-enacting" the compensation limits.

In related decisions, the appeals court reversed sanctions against the NCAA and its attorneys, and also partially overturned fines assessed against the Association when it sought in April 1996 to post a bond for interim attorneys fees pending its appeal in the case, rather than pay the fees directly to the coaches' attorneys as ordered by Vratil.

The circuit court judges overturned the sanctions against the NCAA and four attorneys, who were publicly censured and ordered to pay legal fees resulting from the coaches' inability in preparing for the damages trial to obtain financial information from the Association's member institutions, plus a 25 percent penalty.

The appeals court ruled that Vratil did not adequately notify the NCAA and the attorneys that criminal contempt sanctions might be imposed in the matter.

The Association did not appeal a related order that it pay all expenses and attorney fees incurred by the coaches in depositions of Division I member institutions, plus a 25 percent surcharge.

In another decision, the judges upheld an order by Vratil following the summary judgment in the basketball coaches' suit that the NCAA pay $380,000 in interim attorneys' fees plus expenses to the coaches' attorneys.

However, the judges overturned daily fines imposed against the NCAA between April 29, 1996, the deadline set by Vratil for paying the fees to the coaches' attorneys, and May 3, 1996, when Vratil heard but rejected the NCAA's requests for a stay of the fee order and to set bond in place of the fees.

The appeals court ruled that the $5,000-per-day fines assessed before May 3 constituted a criminal contempt citation and that Vratil did not properly inform the NCAA that it was subject to criminal sanctions.

The judges upheld a fine of $5,000 per day assessed between May 3 and May 7, 1996, when the circuit court set bond in the matter.

The appeals court said those fines were civil sanctions that the NCAA could have avoided by complying with Vratil's order to pay the fees.