Why the NCAA’s Transfer Regulations Can be Defeated in the Ninth Circuit

Go West, Young Man: Why the NCAA’s Transfer Regulations Can be Defeated in the Ninth Circuit

By: Cameron Miller

Introduction

The NCAA’s transfer regulations—a complex, convoluted web of school, conference, and NCAA-wide policies—are rivaled in their restrictiveness perhaps only by its amateurism rules. The core component of the transfer rules is a “residency requirement” that forces transferring athletes to sit out a year of competition and lose that year of competition, reducing the athlete’s eligibility to compete in NCAA competition from four years to three.[1] The deterrent effect of the residency requirement is two-fold: It discourages athletes from transferring, in part because of the loss of playing opportunity, but also by discouraging other schools from expending a limited pool of scholarships on a player who cannot help his/her team win in the short-term. To be sure, many schools expend scholarships on players who are ineligible to compete immediately[2], but there are countless athletes to whom schools would have tendered a scholarship—but did not— because of the residency requirement.[3] [4]

Although the transfer rules have been relaxed in the last few years[5] and may be liberalized again in the near future[6], the fact remains that many NCAA athletes cannot leave their current school and play immediately elsewhere. There are provisions allowing for immediate eligibility for the transferring athlete, but this one-time waiver of the residency requirement is only available to athletes outside the sports of baseball, football, basketball, and ice hockey.[7] In other words, schools’ most lucrative athletes are heavily disincentivized from taking their talents elsewhere, while “non-revenue” sport athletes can transfer more freely.

Many legal challenges have been lodged against the NCAA’s transfer rules over their long history, with the most recent attacks made on antitrust grounds. This note reviews this litigation, explains why it failed, and argues that a change of venue could make all the difference for players seeking to undo the NCAA’s restrictions on their freedom of movement.

Previous Efforts to Curb Transfer Restrictions

The first concerted challenges to NCAA and conference transfer rules emerged during the 1980s. In the 1983 case Weiss v. E. Coll. Athletic Conference, a former Arizona State tennis player unsuccessfully sought to enjoin the NCAA from imposing the residency requirement after he transferred to the University of Pennsylvania. The argument there was that the residency rule was unlawful under the antitrust laws and the United States Constitution’s Equal Protection and Due Process clauses.[8] That same year, a Louisiana state court in English v. NCAA also denied a bid for a similar injunction, noting that schools and players adhered to the NCAA’s transfer restrictions “apparently convinced that constraints on their freedom to move about from college to college are a fair price to pay for protection against the evils which would emerge from untrammeled recruiting practices and uncontrolled pirating of players among the colleges.”[9] English concluded that the transfer rules did not implicate antitrust concerns, and, even if they did, were “reasonable rule[s] designed to prevent the evils of recruiting.”[10]

1985 saw a Constitutional challenge to the transfer rules from a Cornell football player dismissed on the grounds that the NCAA was not a state actor[11]—a principle the Supreme Court would enshrine a few years later.[12] The same finding on the state actor/Constitutional issue was reached in Graham v. NCAA.[13]

This line of cases largely resolved the Constitutional questions concerning the NCAA’s transfer regulations: The protections embodied in the Equal Protection and Due Process clauses were inapplicable to transfer matters because the NCAA was not a state actor, and only state actors must adhere to Constitutional strictures. Less certain, however, was the validity of the transfer rules under the antitrust laws. Thirty years later, those questions remain unsettled.

Agnew and The Slog Through The Seventh Circuit

Since 2010, three key suits—Pugh, Deppe, and Vassar—have taken aim at the NCAA’s transfer regulations, seeking to undo the residency requirement on antitrust grounds.[14] Each case was litigated in federal courts in the Seventh Circuit Court of Appeals, which includes within its boundaries the NCAA’s home office in Indianapolis.[15] Ultimately, all three failed—but not on the merits. The ill affecting the trio was the Seventh Circuit’s 2012 decision in Agnew v. NCAA, which, though not reviewing the Association’s transfer rules, effectively insulated much of the NCAA’s rulebook from rigorous antitrust review.[16]

Agnew concerned the validity of the NCAA’s rules capping the number of scholarships each athletic team is permitted to award and the now-repealed prohibition on awarding multi-year scholarships. The importance of the case lies in the manner in which the Seventh Circuit panel interpreted the Supreme Court’s seminal 1984 decision in NCAA v. Board of Regents of the University of Oklahoma.[17] Board of Regents reviewed the legality of the NCAA’s centralized television/media distribution plan, which capped the number of contests that could be televised in any given week and prevented schools from negotiating with broadcasters on the price of telecasts; the Court struck down the television plan as anti-competitive.[18] But in now-famous dicta, the Board of Regents majority wrote: “It is reasonable to assume that most of the regulatory controls of the NCAA are justifiable means of fostering competition among amateur athletic teams and therefore procompetitive because they enhance public interest in intercollegiate athletics.”[19] The Agnew panel took this language to mean that the Supreme Court had “blessed” certain NCAA rules as a “presumptively procompetitve” and therefore not subject to close antitrust scrutiny.[20] Agnew then concluded, apparently consistent with the Supreme Court’s dicta in Board of Regents, that NCAA eligibility rules “fall comfortably within the presumption of procompetitiveness…”[21] This ruling—that any NCAA regulation styled or characterized as an “eligibility” rule was effectively shielded from antitrust scrutiny—spelled doom for the subsequent challenges to the transfer rules.

Pugh v. NCAA was the first in the line of three antitrust cases filed in the Seventh Circuit aiming to invalidate the residency requirement. Judge Tanya Walton Pratt dismissed Pugh’s putative class action, holding that because the residency requirement was “directly related to eligibility,” it was, under Agnew, “presumptively procompetitive and no further analysis under the Sherman Act is required.”[22] The residency requirement was an eligibility rule, Judge Pratt reasoned, because it is found in a chapter entitled “Academic Eligibility” in the NCAA manual and the text of the residency rule contains the word “eligible.”[23] Judge Pratt was also assigned the next suit challenging the transfer restrictions—Deppe v. NCAA—and rendered the same dismissal she did in Pugh. Deppe appealed, and in June 2018 the Seventh Circuit affirmed the dismissal, concluding that the residency requirement is “clearly meant to preserve the amateur character of college athletics and is therefore presumptively procompetitve[.]”[24] Vassar v. NCAA, filed in November 2016, raised claims similar to those in Pugh and Deppe, but was preempted by the Seventh Circuit’s ruling in Deppe and was voluntarily dismissed in August 2018.

These defeats make clear that the federal judicial districts in the Seventh Circuit are not optimal venues for litigating challenges against the NCAA’s transfer rules. As they have done increasingly in recent years, those wishing to challenge the NCAA’s regulations should look west.

The Case for the Ninth Circuit

On the whole, the Ninth Circuit—which covers much of the western half of the United States—is known as ideologically liberal and plaintiff-friendly.[25] That skew certainly weighs in favor of players seeking to undo the NCAA’s transfer regulations. But the advantages of the Ninth Circuit run deeper than that: the panel that decided O’Bannon v. NCAA, which did not concern the transfer regulations, explicitly repudiated Agnew’s reading of Board of Regents, calling into question whether district courts in the Circuit could apply Agnew­-like deference to NCAA regulations.[26]

Writing for the O’Bannon majority, Judge Jay Bybee issued a stinging rebuke of Agnew. In O’Bannon, the NCAA asserted that Board of Regents held the NCAA’s amateurism rules “valid as a matter of law,” and cited Agnew in support.[27] But the O’Bannon majority refused to adopt Agnew, finding its language concerning the interpretation of Board of Regents not only dicta, but grounded on the “dubious proposition that in Board of Regents, the Supreme Court ‘blessed’ NCAA rules that were not before it, and did so to a sufficient degree to virtually exempt those rules from antitrust scrutiny.”[28] Simply put, the O’Bannon majority was unconvinced that the Board of Regents Court harbored the intent to give the blanket protection to NCAA bylaws imputed by Agnew.

O’Bannon then rejected the Agnew­-like analysis that delineates “eligibility” rules from all others and declares the former presumptively procompetitve. Just as it did in Agnew, Pugh, Deppe, and Vassar, the NCAA contended that the amateurism rules at issue in O’Bannon were tied to athlete eligibility, and therefore effectively immune from antitrust scrutiny.[29] That line of reasoning found no receptive audience with Judge Bybee, who wrote that simply because an NCAA regulation can be stylized as an “eligibility” requirement “does not mean the rule is not a restraint of trade.”[30] Without expressly mentioning Agnew, Judge Bybee criticized its core holding by pointing out how, if the NCAA were allowed to hide behind the “eligibility” rule façade—as Agnew and its progeny permitted—it could effectively foreclose any antitrust scrutiny of its regulations by self-describing them as eligibility-related.[31] “The antitrust laws,” Judge Bybee wrote, “are not to be avoided by such ‘clever manipulation of words.’”[32]

So what does O’Bannon’s rejection of Agnew—two cases that did not concern the NCAA’s transfer rules—mean for litigation seeking to invalidate those very rules? The upshot is that the NCAA’s “eligibility” rule crutch is likely of little use in the Ninth Circuit, meaning that plaintiffs challenging the transfer regulations on antitrust grounds can at least survive a motion to dismiss. Showing anticompetitive harm and prevailing in a Rule of Reason analysis is beyond the scope of this piece, but there are arguments to be made that the residency requirement’s reduction of an athlete’s playing eligibility is an unlawful group boycott.[33] Additionally, the Seventh Circuit’s fear-mongering in Deppe about the possibility of increased transfers divorcing the twin pillars of college sports—academic and athletic—can be allayed through more reasonable limits on transferring.[34] In other words, even if the NCAA could convince a court that safeguarding academic achievement/progress is a procompetitve justification for the residency requirement[35], there are numerous less restrictive alternatives that stop well short of the current residency rule. Furthermore, player-plaintiffs in the Ninth Circuit can rely on the ruling in O’Bannon and the forthcoming ruling in the Alston/Jenkins matter to dispel the various procompetitve justifications the NCAA would assert in support of the transfer rules.[36] In short, there are multiple advantages of bringing a challenge to the NCAA’s transfer rules in the Ninth Circuit, the core of which is the Circuit’s evident repudiation of Agnew’s expansive reading of Board of Regents.

Conclusion

Rules restricting the playing eligibility of athletes transferring between schools have been enshrined in the NCAA’s regulatory framework since its founding over a century ago.[37] Not even the amateurism rules have enjoyed the continuity the residency requirement has. In all fairness, the NCAA has eased the restrictions, for instance, by permitting athletes who have graduated to transfer and play immediately.[38] More recent changes have included preventing coaches/schools from “blocking” athletes from receiving athletic financial aid at certain schools, streamlining the “permission to contact” process with the creation of a transfer portal[39], and allowing any athlete from any sport to avoid the residency requirement on a showing of “documented mitigating circumstances that are outside the [athlete’s] control and directly impact the health, safety and well-being of the [athlete].”[40] Yet, the residency requirement remains a significant barrier for the athletes most negatively affected by it—those in the revenue-generating sports. And then there are the transfer rules promulgated by the conferences, which are beyond the scope of this piece but add another layer of barriers. Schools themselves maintain their own transfer policies, and National Letter of Intent signees who seek a transfer are also subject to restrictions.[41]

The best venue to confront this complex web of rules that limit athletes’ freedom of movement is decidedly not in the Seventh Circuit—the NCAA’s home court. Player-plaintiffs have a far better chance of success in the Ninth Circuit, where the review of the NCAA’s rules is more exacting and the deference to Board of Regents less all consuming. College athletes have already won a significant verdict in the Northern District of California (O’Bannon) and are poised to do so again in Alston/Jenkins. The same strategy should be adopted for undoing the residency requirement. Out west, the validity of the NCAA’s rules “must be proved, not presumed.”[42]

[1] “Transfer Terms,” NCAA.org, http://www.ncaa.org/student-athletes/current/transfer-terms (last accessed Dec. 19, 2018) (“If you play at a Division I school, you have five-calendar years in which to play four seasons of competition. Your five-year clock starts when you enroll as a full-time student at any college. Thereafter, your clock continues, even if you spend an academic year in residence as a result of transferring; decide to red shirt, if you do not attend school or even if you go part-time during your college career”).

[2] Andy Katz, College basketball transfers: What you need to know about the transfer process, NCAA.com (Dec. 6, 2018), https://www.ncaa.com/news/basketball-men/article/2018-12-05/college-basketball-transfers-what-you-need-know-about (finding that less than 10 percent of the Division I basketball players who transferred to another Division I institution after the 2017-18 season requested a waiver to play immediately; the remainder are, ostensibly, sitting out the current 2018-19 season).

[3] See, e.g., Steve Berkowitz, Lawsuit challenges rule for transfers between NCAA Division I football schools, USA TODAY Sports (Mar. 8, 2016, 9:40 p.m.), https://www.usatoday.com/story/sports/ncaaf/2016/03/08/lawsuit-ncaa-division-football-transfer-rules-peter-deppe-iowa-hawkeyes-northern-illinois-huskies/81510022/ (discussing former collegiate punter’s claims that the residency requirement effectively killed his chances of transferring because other institutions did not want a player who could not compete immediately).

[4] The great irony of the transfer rules is, of course, that other college students involved in co- or extra-curricular activities—which the NCAA maintains are no different that “big-time” athletics—can move between schools without having their eligibility for club sports or the student newspaper or the mock trial team impacted whatsoever. And yet, the NCAA claims its rules, including the transfer regulations, pass muster under the antitrust laws because they ensure that athletes are integrated into their campus communities. In fact, the opposite is true: The transfer rules, like most other NCAA regulations, drive a wedge between athletes and non-athletes by subjecting one subset of students to different standards than the remainder of the student body.

[5] See, e.g., Tom VanHaaren, NCAA reform eases rule on athlete transfers, ESPN.com (June 13, 2018), http://www.espn.com/college-sports/story/_/id/23782893/ncaa-passes-reform-allows-athletes-transfer-permission (discussing NCAA’s rule change that prevents coaches/schools from “blocking” athletes from receiving athletic financial aid at certain schools, effectively precluding the transfer).

[6] See, e.g., Michelle Brulag Hosick, DI Council introduces transfer legislation, NCAA.org (Oct. 5, 2018, 10:19 a.m.), http://www.ncaa.org/about/resources/media-center/news/di-council-introduces-transfer-legislation (discussing introduced legislation would allow some athletes to transfer during the summer and be immediately eligible to play for a new school if there is a head coaching change before the first day of fall classes).

[7] See NCAA Bylaw 14.5.5.2.10(a) (One-Time Transfer Exception).

[8] Weiss v. E. Coll. Athletic Conference, 563 F. Supp. 192 (E.D. Pa. 1983).

[9] English v. Nat’l Collegiate Athletic Ass’n, 439 So. 2d 1218, 1223 (La. Ct. App. 1983).

[10] Id. at 1224.

[11] McHale v. Cornell Univ., 620 F. Supp. 67 (N.D.N.Y. 1985).

[12] Nat’l Collegiate Athletic Ass’n v. Tarkanian, 488 U.S. 179 (1988) (reversing Nevada Supreme Court decision that the NCAA was acting under color of state law and therefore a state actor when it, through the University of Nevada-Las Vegas (UNLV), sanctioned UNLV’s basketball coach for rule violations).

[13] Graham v. Nat’l Collegiate Athletic Ass’n, 804 F.2d 953 (6th Cir. 1986).

[14] Pugh v. Nat’l Collegiate Athletic Ass’n, No. 1:15- cv-01747-TWP-DKL, 2016 WL 5394408 (S.D. Ind. Sept. 27, 2016); Deppe v. Nat’l Collegiate Athletic Ass’n, 893 F.3d 498 (7th Cir. 2018); Vassar v. Nat’l Collegiate Athletic Ass’n, No. 1:16-cv-10590-ARW (N.D. Ill. Aug. 14, 2018).

[15] “About Federal Courts,” United States Courts, http://www.uscourts.gov/about-federal-courts/federal-courts-public/court-website-links (last visited Dec. 19, 2018).

[16] Agnew v. Nat’l Collegiate Athletic Ass’n, 683 F.3d 328 (7th Cir. 2012).

[17] Nat’l Collegiate Athletic Ass’n v. Board of Regents of the University of Oklahoma, 468 U.S. 85 (1984).

[18] Id. at 89-98.

[19] Id. at 117.

[20] Agnew, 683 F.3d at 341.

[21] Id. at 343.

[22] Pugh, 2016 WL 5394408 at *4.

[23] Id. at *3.

[24] Deppe, 893 F.3d at 499.

[25] See, e.g., “Political Scientist Weighs In On Trump’s Criticism Of 9th Circuit Court of Appeals,” NPR (Nov. 22, 2018, 4:28 p.m.), https://www.npr.org/2018/11/22/670313813/political-scientist-weighs-in-on-trumps-criticism-of-9th-circuit-court-of-appeal (Harvard political scientist discussing how “the 9th Circuit has been known as being a left-of-center court”).

[26] O’Bannon v. Nat’l Collegiate Athletic Ass’n, 802 F.3d 1049 (9th Cir. 2015).

[27] Id. at 1061.

[28] Id. at 1064.

[29] Id. at 1065.

[30] Id.

[31] Id.

[32] Id.

[33] Cf. Leonard W. Aragon and Cameron Miller, The National Letter of Intent’s Basic Penalty: Analyses and Legal Basis to End the Practice, Arizona State University S. And Ent. L. J., Vol. 7, Issue 1 at 72 (Fall 2017) http://asuselj.org/wp-content/uploads/2018/03/Aragon-Miller-NLOI-Final.pdf. In essence, the reduction in playing eligibility removes the athlete from the college athlete labor market a year early by barring athletes who, absent the residency requirement, would otherwise be eligible to compete.

[34] Deppe, 893 F.3d at 503 (“[u]ninhibited transfers with immediate eligibility to play would risk severing the athletic and academic aspects of college sports, threatening the character of intercollegiate athletics”).

[35] One of the stated justifications for the NCAA’s transfer regulations is that athletes “who transfer are less likely to earn a degree than those who remain at their original school.” See “Frequently Asked Questions About the NCAA,” NCAA.org, http://www.ncaa.org/about/frequently-asked-questions-about-ncaa (last visited Dec. 19, 2018). The NCAA could argue that the residency requirement deters transfers and therefore safeguards academic achievement, and also the residency rule removes distractions from an athlete’s initial year on a new campus, allowing them to focus on academics. But see Michelle Brutlag Hosick, DI Committee on Academics considers transfer rule changes, NCAA.org (April 5, 2018, 4:51 p.m.), http://www.ncaa.org/about/resources/media-center/news/di-committee-academics-considers-transfer-rule-changes (“[t]he academic data reviewed by the committee indicated that, on average, sitting out a year of competition following a transfer may not be academically necessary for student-athletes with a strong scholastic foundation”).

[36] See In re National Collegiate Athletic Association Grant-in-Aid Cap Antitrust Litigation, No. 4:14-md-02541-CW (N.D. Cal. Dec. 19. 2018). The NCAA has argued that its amateurism rules promote several procompetitive goals, including the integration of athletes’ academic and athletic endeavors; ensuring competitive balance; maintaining the core value of amateurism; and increasing output (scholarships, games, etc.). See Tatos, T. (2017). Deconstructing the NCAA’s Procompetitive Justifications to Demonstrate Antitrust Injury and Calculate Lost Compensation: The Evidence Against NCAA Amateurism. The Antitrust Bulletin, 62(1), 184-236. https://doi.org/10.1177/0003603X16688968.

[37] See Aragon and Miller at 27.

[38] See NCAA Division I Bylaw 14.6 et seq.

[39] Tristan Jung, How Does the NCAA Transfer Portal Work?, Sports Illustrated (Jan. 11, 2019), https://www.si.com/college-football/2019/ncaa-transfer-portal-rules-list.

[40] See supra Note 5; “Report of the NCAA Division I Council and Council Standing Committees,” April 16-18, 2018, at 4, http://www.ncaa.org/sites/default/files/April2018DICouncil_Report_20180427.pdf.

[41] See Aragon and Miller at 19-22.

[42] O’Bannon, 802 F.3d at 1064.