The NCAA News - News and Features

The NCAA News -- October 12, 1998

Association-wide -- NCAA offers $44 million to settle in restricted-earnings case

The NCAA recently offered a cash settlement of $44 million to plaintiffs in the restricted-earnings coaches lawsuit, but the plaintiffs' attorneys turned down the offer.

While the Association believes that the $66.8 million judgment in the case was excessive, it has consistently stated its desire to provide fair compensation to coaches who were actually hurt by the legislation.

"Our offer of $44 million is more than fair," NCAA President Cedric W. Dempsey said. "It certainly exceeds actual damages and is nearly double the jury's figure." The jury in the damages phase of the trial awarded about $22.3 million in damages, which were trebled under antitrust law.

Dempsey said that the plaintiffs could have received the full $67 million judgment in a short time by allowing the Association to invest the $44 million in a tax-free annuity plan.

Dempsey noted the plaintiffs have no guarantee, unless they settle, that they will ever receive an award close to $67 million.

"In fact, that number could dramatically reduced through appeals," Dempsey said. "Our offer guaranteed a lump-sump payout that could be grown to whatever the plaintiffs want."

James L. Isch, NCAA vice-president for finance and information services, said that $30 million would have come from existing Association resources, with the rest being borrowed.

In a related matter, the U.S. Supreme Court announced that it will not hear the NCAA's appeal on the antitrust finding in the case. A U.S. district court ruled in 1995 that the NCAA's creation of a "restricted-earnings" coaching position violated the Sherman Antitrust Act. The Association appealed that decision to the Tenth Circuit Court of Appeals and subsequently to the Supreme Court.

However, another appeal in that case is pending. The Association has filed post-trial motions identifying major errors in the conduct of the damages phase of the trial. The damage phase resulted in the $22.3 million award to the plaintiffs that was trebled under antitrust laws.

While the Supreme Court declined to hear the NCAA's appeal on the restricted-earnings case, it announced that it will hear a case involving the Association on what constitutes the receipt of federal funds.

The court agreed to hear the Association's appeal of Renee M. Smith v. NCAA, which is based on the denial of an eligibility waiver for a postgraduate student. The federal law that Smith alleges should apply to the NCAA is Title IX.

Smith, a volleyball player, competed in the 1991-92 and 1992-93 seasons at St. Bonaventure University. She did not compete in 1993-94 and graduated at midterm of that year.

She subsequently enrolled in postgraduate programs at the University of Pittsburgh and Hofstra University. She sought a waiver from what is now NCAA Bylaw 14.1.7, which provides that a postgraduate student-athlete may continue to compete at the institution from which he or she gained an undergraduate degree, provided that the student-athlete is otherwise eligible.

The waiver was denied, and in 1996, Smith sued the Association on the grounds of antitrust and sex discrimination in violation of Title IX. She claimed that the NCAA provided the waivers in question more frequently for men than for women.

Although the NCAA in fact grants more post-baccalaureate bylaw waivers to women than to men, the NCAA challenged the right of Smith to bring suit under Title IX because the court had no jurisdiction to hear the claim. It also contested the applicability of the antitrust law to this kind of rule.

A U.S. district court ruled in 1997 that neither the Sherman Antitrust Act nor Title IX applied in the case. In the case of Title IX, the court ruled that the law did not apply to the NCAA because the plaintiff had not proved that the Association received federal funds.

Smith attempted to amend her complaint to the district court to say that the NCAA receives federal funds because it receives dues from member institutions that receive federal funds. The district court refused to allow the complaint to be amended

Smith appealed to the U.S. Court of Appeals for the Third Circuit, which ruled that the Sherman Antitrust Act does not apply to the case. However, it ruled that Title IX does apply if it can be proved that the Association receives dues from members who receive federal funds.The Association appealed that ruling to the Supreme Court, which agreed to review the Title IX portion of the case. It let stand the appeals court ruling that antitrust did not apply in this case.

Cole said that the Supreme Court over the summer receives about 1,700 appeals -- known as writs of certiorari -- but typically agrees to hear only about 20 of them.