The NCAA News - News and Features

May 11, 1998

NCAA appeal possible in $67 million judgment

The NCAA is strongly considering an appeal of a $67 million judgment that a jury has awarded to a group of restricted-earnings coaches.

Elsa Kircher Cole, NCAA general counsel, said she strongly believes that reversible errors were made during the course of the trial, which concluded when the jury's decision was announced May 4.

"We were not permitted to characterize or explain the rationale for the restricted-earnings legislation," Cole said, "nor were we able to ask the jury to look at each coach's situation to determine appropriate damages."

She said the NCAA was not permitted to explain to the jury that the rule was passed to provide opportunities for new coaches with a salary similar to that which would have been paid to a graduate assistant to perform the same function. Division I chose to create the new position rather than use a graduate-assistant position.

The NCAA's position has been that any coaches who were harmed by the rule should be compensated, but Cole said the judgment was excessive and she would recommend that it be appealed.

"We should not pay a judgment that in our view unjustly enriches plaintiffs who are not harmed by the restricted-earnings legislation," she said. "If we did this, student-athletes, our member institutions, colleges and universities and their athletics programs would be deprived of resources that they would otherwise receive from the Association."

The plaintiffs were asking for $30 million in damages. Although the NCAA claimed that only 59 coaches were affected by the legislation and that their damages totaled less than $1 million, the jury determined that damages equal $22.3 million, which are tripled under antitrust law.

Generally, a party is required to pay a damage in full within 10 days of a judgment. U.S. District Judge Kathryn Vratil entered a judgment May 4. To meet that obligation, should the Association decide to appeal, it will file a motion with the court to post a bond, which would be held in trust pending the outcome of the appeals process. In addition to an appeal on the damages, the NCAA is also discussing filing a petition for a writ of certiorari to the U.S. Supreme Court on the issue of whether the NCAA rule really violated the antitrust law.

Cole stressed that the decision on how to pay the judgment rests with the NCAA Executive Committee. The NCAA was not insured against this action, so any payments will need to come from Association resources.

Background

The restricted-earnings rule was adopted at the 1991 NCAA Convention as an offshoot of the "reform movement" in Division I athletics. At that Convention, Division I sponsored and passed extensive legislation designed to control spending. In its effort to limit the proliferation of personnel costs at Division I institutions while maintaining opportunity for young coaches to enter the profession, the Special Committee on Cost Reduction recommended the establishment of the "restricted-earnings position." It was designed to "encourage the development of new coaches while more effectively limiting compensation to such coaches."

Coaches were restricted not only on income, but also on certain duties, such as recruiting off-campus. In addition, restricted-earnings coaches in Division I basketball were permitted to stay in the position only for five years.

Early on, income was restricted only in the academic year. However, a number of institutions chose not to hire entry-level personnel but instead retained experienced coaches and supplemented their salaries through highly paid summer employment.

At the 1992 Convention, the Division I membership closed that avenue with legislation that limited summer income for restricted-earnings coaches to $4,000. Soon thereafter, the lawsuit was filed.

After Vratil ruled against the NCAA in 1995, the Association eliminated the earnings limit but maintained the other restrictions on the position. At its most recent meeting, the Division I Board of Directors eliminated all other restrictions, except that coaches in the position still may not recruit off-campus.

Although the case unquestionably involves a restraint on trade, antitrust law does allow for "reasonable" restraints. Indeed, courts have ruled previously that the NCAA has the right to regulate such areas as financial aid and size of coaching staffs in order to maintain competitive equity.

The jury awarded damages of $11.2 million for men's basketball coaches, $1.6 million for baseball coaches and $9.5 million for coaches of other sports. Under antitrust law, those amounts were automatically tripled and the Association held liable for the plaintiffs' legal fees.

Although the plaintiffs' attorneys claimed that the case could have been settled long ago at a much lower price, Cole said she was unaware of any such settlement offer.

"Experienced trial attorneys like those involved in this case put serious settlement offers in writing," Cole said. "In this case, the only settlement offers in writing that the NCAA received were $60 million to settle only the basketball suit back in 1996 and to settle all the cases for $46.75 million last November, and that came only after the court ordered the plaintiffs to come up with a settlement figure."