The NCAA News - News and Features

June 1, 1998

Restricted-earnings appeal addressed by Smith

Chief executive officers at member institutions have received a letter from Samuel H. Smith, chair of the NCAA Executive Committee, that addresses the appeals process and possible payment options in the $67 million judgment against the Association involving the restricted-earnings coaches legislation.

In the May 22 letter, Smith said the Association will make its appeal to U.S. Court of Appeals for the Tenth Circuit within 30 to 45 days and that it likely will be at least March 1999 before a decision is announced by the Tenth Circuit.

Smith also noted that the Executive Committee has authorized a petition for a writ of certiorari to the U.S. Supreme Court on the issue of whether the restricted-earnings coaches rule violated federal antitrust laws. "We will not know whether the court will hear the case until at least October," Smith wrote. "If it does agree to hear the case, a decision would likely be announced before June 1999."

Smith also addressed how the damages could be paid and how the membership could be affected.

"The Association has purchased a surety bond that complies with requirements of the court to hold payment of the verdict in abeyance during the appeal process," Smith wrote. "Still, there are important questions to consider. The Association is exploring borrowing options to lessen the immediate impact on the membership. Whether payment is financed over one, two or three years, however, is a significant question.

"A more important concern to many in the membership is how the damage award might be allocated to individual institutions. Staff members attending conference and regional meetings have heard many suggestions. These suggestions range from allocating the cost of the damages across the board to allocating the costs based on the number of restricted-earnings coaches who participated in the lawsuit. Other suggestions include using the existing Division I distribution formula, allocation based on the number of sports offered, allocation based on those colleges and universities that voted for the restricted-earnings rule, a moratorium on championship and program expansion, or reduction of existing Association-wide services.

"While these suggestions may appear to be relatively simple to implement and are appealing to one segment of the membership or another, there are concerns with each," Smith wrote.

Smith said that the Executive Committee has directed the staff to investigate and gather information on some of the options.

However, he said that given the magnitude of the verdict and the potential impact on institutional, conference and national office budgets, it is important to expand the discussion on how the ultimate damage award might be paid if the NCAA's appeals are unsuccessful.

To that end, he wrote, the Executive Committee will appoint a special committee to undertake a study of the various options; solicit input from the Division I Management Council, conferences and member institutions; evaluate feedback; and make recommendations.

"We have sufficient time to consider the options and determine a prudent course of action," Smith wrote to the CEOs. "Your participation is valuable in this effort. Within the next few weeks, we will appoint the special committee and announce how input will be received and processed."

Appeal Rationale

The following is a list of the major points for appeal of the jury verdict in the restricted-earnings coaches case. These are arguments that have been made in the post-trial motions filed in U.S. District Court for the District of Kansas. This information was included with a May 22 letter to NCAA chief executive officers from Samuel H. Smith, chair of the NCAA Executive Committee:

1. The district court erred in certifying the damages portion of this case as a class action. Class treatment may have been appropriate for the purpose of determining liability (i.e., whether there was price fixing), but not to determine fact of injury and amount of damages. The testimony from the coaches at trial proved individualized issues predominated over common issues. Each coach had a unique work situation that needed to be analyzed individually to determine if that coach was injured by the rule, and, if so, by how much. Also, many salaries were below or above the cap, creating individual questions as to whether the rule had any impact at all on the individual coach's compensation. In addition, as there was evidence of circumvention of the rule, each coach should have been looked at individually. The judge did not allow such an instruction to the jury.

2. A critical element of the plaintiffs' cause of action was not proved -- that the plaintiffs as a class were injured directly as a result of the antitrust violation. The only proof submitted was their expert's testimony that the rule "nicked everybody" and that coaches who did not earn as much as his damage formula predicted were injured. This is not sufficient proof of class-wide injury.

3. The jury instructions contained numerous errors that were material to the deliberations of the jury. The most serious were:

(a) Eliminating the requirement that the jury find fact of injury. As stated above, for an antitrust plaintiff to recover damages, he or she must show the antitrust violation directly caused damages to him or her. The judge refused to issue such an instruction and instead told the jury that because there had been an antitrust violation, that was sufficient to show fact of injury, too. The judge also eliminated the crucial requirement that each class member prove injury to him or herself, holding instead that it is enough to prove that "injury to the class is widespread." The result was that the jury was told that all it had to do was estimate the amount of damages for the class as a whole.

(b) Reading to the jury selectively edited, unfavorable portions of the Tenth Circuit opinion regarding liability. This was irrelevant to the issue before the jury and had the effect of tarring the NCAA as a conspirator and law-breaker. The judge repeatedly used highly charged words like "cartel," "conspiracy," "violation," "anti-competitive effect" and "continuing conspiracy." The judge also stated that cost cutting was the primary purpose of the rule and that such a purpose was illegal. The effect of all this was to invite the jury to punish the NCAA.

(c) Essentially instructing the jury that Division I coaching was a separate and distinct market, and if prices were fixed in that market, that the jury could infer that the coaches were injured, despite the lack of any evidence on what was the relevant market. The instruction was very prejudicial because it undermined the NCAA's argument that other jobs were available for these coaches.

(d) Refusing to instruct the jury that limits on graduate assistant coaches compensation in an earlier rule had not been held to be illegal. Throughout the trial prejudicial statements were made by plaintiffs to prior rules that restricted coaches' pay.

(e) Inconsistent and confusing instructions that had the effect of telling the jurors that they could not even consider the NCAA's coach-by-coach analysis for determining fact of injury and amount of damages.

4. The plaintiffs' expert's methodology was neither scientific nor reliable and therefore he should have been disqualified. He included millions of dollars for coaches who were not injured by the rule -- e.g., they were below the cap before, during and after the rule. He extrapolated when actual data were available, he used averages to inflate damages, and he ignored money coaches received to offset any shortfall.

5. The judge made numerous errors in admitting and/or excluding evidence. In the aggregate, the harm should warrant a reversal of the verdict and a new trial. A few examples are:

(a) The law only allows recovery for damage to "business or property," which in this case meant lost salary, not for pain and suffering. However, over NCAA objections, the judge allowed the coaches to tell stories about how the rule ruined their lives. These appeals for sympathy undoubtedly had a powerful impact on the jury.

(b) The judge told the jury the purpose of the rule was cost containment but largely prevented the NCAA from proving the real purpose of the rule was more than that. This was significant because it bolstered the plaintiffs' argument that if the purpose was cost containment, the rule must have hurt the class.

(c) The judge allowed in volumes of hearsay over NCAA objections about what athletics directors, head coaches and conference members said to the coaches about the rule and what schools were going to do once the rule was rescinded. She did so on the grounds that these were admissions by the defendant NCAA by ruling these people were all speaking as authorized agents of the NCAA. These statements were used to show a continuing conspiracy after May 1995 to prove an additional two years of damages.

(d) The judge refused in large part to allow the NCAA to present evidence of how the rule was circumvented, so that it appeared that was the exception rather than a more common practice.

(e) The judge excluded the NCAA's expert's notebook examining the 200 coaches he testified were the only ones that could have been hurt by the rule. The judge did this because it displayed the information in a different format than it appeared on a computer disc given the plaintiffs. The judge said the notebook "would make it too easy for the jury to examine damages on a coach-by-coach basis." No rule of evidence authorizes exclusion of evidence for such a reason.

6. The personal bias of the judge affected the fairness of the trial. Twice she, in effect, called the NCAA's attorneys liars in front of the jury. Each time the NCAA requested a mistrial, which was denied. Several times when the NCAA made a valid objection to the plaintiffs' evidence, she threatened to strike the NCAA's evidence that contradicted theirs unless the NCAA dropped the point. Her demeanor, on the whole, was prejudicial, as she was often attentive and interested to the plaintiffs' presentation and inattentive and performing other tasks when NCAA counsel presented.

The NCAA preserved on the record all of the above-described points. The NCAA made appropriate objections, repeatedly filed written offers of proof, and made appropriate motions, orally and in writing at the trial.