Rock v. Nat'l Collegiate Athletic Ass'n

JOHN ROCK, Plaintiff,

v.NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, Defendant.

1:12-cv-1019-JMS-DKL

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

Dated: August 16, 2013

ORDER DENYING MOTION TO DISMISS

As Schoolhouse Rock teaches, three is a magic number. Bob Dorough, "Three Is a Magic Number," Schoolhouse Rock, ep. 1 (1973); see also Blind Melon, "Three is a Magic Number" (Atlantic Records 1996). Presently pending before the Court is Defendant National Collegiate Athletic Association's ("NCAA") Motion to Dismiss, [dkt. 47], arguing that Plaintiff John Rock's Second Amended Complaint, [dkt. 46], is insufficient as a matter of law. This is the third time that this Court has ruled on the sufficiency of a plaintiff's complaint challenging two NCAA bylaws at issue—the prohibition on multi-year scholarships and the cap on the number of allowable scholarships. This is the first time, however, that the Court concludes that the complaint at issue pleads the rough contours of a relevant market that is plausible on its face and in which anticompetitive effects of the challenged regulations could be felt. This ruling should not be read too broadly. The burdens at the subsequent stages of litigation are significantly higher than they are in opposing a motion to dismiss, and Mr. Rock may struggle to identify admissible evidence to support some of the allegations that the Court was required to accept as true for purposes of ruling on the NCAA's motion. Nevertheless, because Mr. Rock has alleged sufficient factual allegations to support an antitrust claim that is plausible on its face, the Court denies the NCAA's motion to dismiss.

I.STANDARD OF REVIEW

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) asks whether the complaint "contain[s] sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). For the purposes of that rule, the Court will ignore conclusory legal allegations. Iqbal, 556 U.S. at 678 ("Although for the purposes of a motion to dismiss we must take all of the factual allegations in the complaint as true, we are not bound to accept as true a legal conclusion couched as a factual allegation."). The Court will, however, give the complaint the benefit of reasonable inferences from all non-conclusory allegations. See id.

II.BACKGROUND

Mr. Rock's Second Amended Complaint is styled as a class action and asserts certain "class allegations" in addition to the allegations specific to him, [dkt. 46 at 21-24], but he has not filed a motion to certify a class. Because Mr. Rock is the only party with "legally protected interests in the litigation[,]" Agnew v. National Collegiate Athletic Ass'n, 683 F.3d 328, 333 n.2 (7th Cir. 2012), the Court will focus on the allegations specific to him.

A. Reasonable Inferences from Non-Conclusory Allegations

The Court draws the following reasonable inferences from the non-conclusory allegations in Mr. Rock's Second Amended Complaint.

The NCAA includes 1,102 active member schools. [Dkt. 46 at 5 ¶ 10.] These schools are organized into three divisions, aptly named Divisions I, II, and III. [Id.] Division I football is further divided into two subdivisions—the Football Bowl Subdivision ("FBS"), which wasformerly known as Division 1-A, and the Football Championship Subdivision ("FCS"), which was formerly known as Division 1-AA. [Id. at 7 ¶ 17.]

Mr. Rock challenges two NCAA bylaws in his Second Amended Complaint. First, he challenges the bylaw that prohibited¹ awarding athletics-based financial aid in excess of one academic year. [Id. at 13 ¶ 54 (quoting Bylaw 15.3.3.1 ("One-Year Period: If a student's athletics ability is considered in any degree in awarding financial aid, such aid shall neither be awarded for a period in excess of one academic year nor for a period less than one academic year.")).] Second, Mr. Rock challenges the NCAA bylaws that cap the total amount of athletics-based scholarships that member institutions can grant to student-athletes in football. [Id. at 16 ¶¶ 61-62.] The NCAA rules currently permit FBS teams to award 85 full scholarships and permit FCS teams to award 63 full scholarships. [Id. at ¶ 18.] Division II football programs can award 36 full scholarships, and Division III programs are prohibited from awarding athletics based financial aid. [Id. at ¶¶ 22, 24.] A typical NCAA football team has 100 players. [Id. at ¶ 22.]

Mr. Rock is a United States citizen domiciled in Ohio. [Dkt. 46 at 4 ¶ 7.] Mr. Rock played football in high school, switching between the positions of running back, wide receiver, and quarterback. [Id. at 17 ¶ 68.] He was recruited by several colleges to play football, including both FBS and FCS schools. [Id. at 17-18 ¶ 69.] However, only four FCS schools, including Gardner-Webb University ("Gardner-Webb") in North Carolina, extended official football scholarship offers to Mr. Rock for 2008. [Id. at ¶¶ 69, 72.] Mr. Rock also received partial scholarshipoffers from Division II and National Association of Intercollegiate Athletics ("NAIA") schools but did not seriously consider them. [Id. at 10 ¶ 40.]

The Gardner-Webb head football coach, Steve Patton, "pledged to Mr. Rock that his scholarship would be renewed annually so long as he did well academically and remained eligible for NCAA competition." [Id. at 17-18 ¶ 69.] Additionally, Mr. Patton "verbally promised that his scholarship would still be honored in the event the current coaching staff departed for any reason." [Id. at 18 ¶ 69.] Ultimately, in 2008, Mr. Rock committed to attend Gardner-Webb and play football. [Id. at ¶ 71.]

By Mr. Rock's junior year at Gardner-Webb, he was a team captain and the starting quarterback. [Id. at 19 ¶ 74.] On January 26, 2011, Gardner-Webb named a new head football coach. [Id. at 20 at ¶ 78.] Mr. Rock was informed in writing in July 2011 that he would no longer receive his athletic scholarship. [Id. at ¶ 80.] Mr. Rock paid tuition and room and board out-of-pocket to graduate from Gardner-Webb in May 2012 with a degree in political science. [Id.]

Mr. Rock alleges that in a competitive market not subject to the NCAA's prohibition on multi-year scholarships and the cap on the total number of scholarships per team, he would have received additional or enhanced scholarship offers, including a multi-year scholarship. [Id. at 21 ¶¶ 81-83.] Mr. Rock alleges that the challenged bylaws have no effect on amateurism and cannot be justified by competitive balance concerns. [Id. at 13 ¶ 55, 16 ¶¶ 63, 64.]

B. Procedural History

Mr. Rock filed his initial complaint against the NCAA on July 25, 2012.² [Dkt. 1.] He filed a substantially similar Amended Complaint before the NCAA answered, [dkt. 20], and the NCAA moved to dismiss the Amended Complaint in response, [dkt. 21]. In that complaint, Mr. Rock alleged a relevant market consisting of "the nationwide market for the labor of student athletes," [dkt. 20 at 9 ¶ 27], regardless of NCAA division or sport. The Court granted the NCAA's motion to dismiss, in relevant part, after concluding that Mr. Rock had failed to allege a legally cognizable relevant market. [Dkt. 38 at 11-16.] The Court dismissed Mr. Rock's claims without prejudice, but cautioned him that if he wanted this case to proceed, he must move to amend his complaint and "spend the time and undertake the potentially complicated task of the proper identification of a relevant market." [Id. at 23.]

Mr. Rock subsequently moved to amend his complaint, [dkt. 39], which the NCAA opposed, [dkt. 42]. The Court granted Mr. Rock's motion and docketed the Second Amended Complaint as the operative complaint in this matter. [Dkts. 45; 46.]

In his Second Amended Complaint, Mr. Rock alleges that the NCAA and its member institutions have violated Section 1 of the Sherman Act by agreeing to restrict the number of scholarships on a team and prohibiting multi-year scholarships. [Id. at 25-26 (citing 15 U.S.C. § 1).] He proposes the following relevant market in support of his allegations:

The relevant market is the nationwide market for the labor of Division I football student athletes. In this labor market, student athletes compete for spots on Division I football athletic teams of NCAA member institutions, and NCAA memberinstitutions compete for the best Division I football collegiate student athletes by paying in-kind benefits, namely, Division I football scholarships, academic programs, access to training facilities, and instruction from premier coaches.

NCAA Division I football is further divided into two subdivisions, D1-A, now known as FBS (Football Championship Series), and D1-AA, now known as FCS (Football Championship Subdivision). These subdivisions constitute distinct submarkets within the broader labor market for Division I football student athletes.

[Dkt. 46 at 6 at ¶¶ 16-17 (paragraph numbers removed).] Mr. Rock contends that the NCAA bylaws he challenges "reduce the overall supply of football scholarships available to student-athletes thereby forcing them to accept far less compensation than they would have received for their labor." [Id. at 21 ¶ 82.]

The NCAA has again moved to dismiss Mr. Rock's claims. [Dkt. 47.] In its order granting the NCAA's previous motion to dismiss Mr. Rock's claims, the Court noted that Mr. Rock challenges the two NCAA bylaws that were at issue in Agnew v. National Collegiate Athletic Association, 2011 U.S. Dist. LEXIS 98744 (S.D. Ind. 2011), affirmed by Agnew v. National Collegiate Athletic Association, 683 F.3d 328 (7th Cir. 2012). Accordingly, the Court summarized what it believes to be the "key teachings" of the Seventh Circuit Court of Appeals' decision in Agnew. [Dkt. 38 at 5-8.] The Court will continue to apply Agnew in the manner previously interpreted.

III.DISCUSSION

The NCAA asks the Court to dismiss Mr. Rock's complaint for four reasons,...