David Throws Two Punches at Goliath

A year ago last April, it was reported that Houston Baptist University (HBU), an NAIA school, made an application to rejoin the NCAA at the division one level, on a provisional basis. At that time, it was also reported that, because HBU was an NCAA division one school previously from 1973 to 1990, HBU would be required to wait only three years instead of the normal seven to become a full-fledged member of the NCAA. But according to HBU, after it became a provisional member last year, the NCAA notified HBU that the rule setting forth the provisional period for returning members was changed from three to seven years by an "editorial revision...(that) does not require a vote of Division 1 membership and is not a substantive change."

Last month, HBU threw its first punch by filing a lawsuit against the NCAA in state court alleging that the NCAA violated its own constitution when it informed HBU that it would have to wait the full seven years before becoming a full-fledged member. In its lawsuit, HBU asserts "such an amendment (to the constitution) would have to be voted on by the full membership and passed by a two-thirds vote" and that "the change was arbitrary, capricious, and in total disregard of its own rules and regulations."

Last week, HBU threw its second punch by filing an antitrust lawsuit against the NCAA in federal court alleging that the seven-year provisional period amounts to "an unreasonable restraint of trade" in violation of the Sherman Antitrust Act. HBU alleges that the seven-year wait has deprived it and other schools of the opportunities to compete in "highly successful and lucrative" postseason tournaments, specifically the NCAA men's basketball tournament, and that the NCAA has recently "established and sought to enforce policies that have had the intent and effect of restricting colleges from competing at all."

Whether David actually ends up defeating Goliath here remains to be seen. In the state lawsuit, one of the first issues that most likely needs to be resolved is whether HBU has standing to assert a violation of the NCAA constitution when it is not a member of the NCAA. There is a factual issue regarding when the rule was revised from three years to seven. According to the press release, an NCAA spokesman said that "information on the change was provided in writing to Houston Baptist before the school applied for membership." If the rule was revised before HBU filed its application, it might bolster a defense by the NCAA that HBU has no right to complain about the manner in which NCAA member schools conduct their business, even when it violates their own constitution and bylaws. But if the rule was revised after HBU filed its application, the standing issue becomes more problematic for the NCAA because then it can be argued that the NCAA has an obligation to all applicants to follow its rules and to not act unfairly nor arbitrarily, which would necessarily include following its rules pertaining to the procedures for amendments to the Constitution. HBU would then need to prove that the amendment to the rule regarding the provisional period for returning members was not made in accordance with the requisite procedures for amendments as set forth in its Constitution (another factual issue).

In the antitrust lawsuit, I don't think it's pertinent when the rule was revised by the NCAA. HBU is asserting that a seven year provisional period is an unreasonable restraint on HBU's ability to compete with other member schools in NCAA post-season basketball tournaments. A rule providing a provisional period before an applicant can become a full-fledged member of the NCAA constitutes a restraint on trade because the applicant is prohibited from competing in Division I athletics with all NCAA member schools. But the key question is what period of time constitutes a "reasonable" period of time, or to put it another way, whether seven years is an "unreasonable" period of time. The NCAA essentially needs to show a legitimate business reason for adopting a seven-year provisional period. Under a rule of reason analysis, the NCAA needs to demonstrate that the procompetitive effects of the rule outweigh its anticompetitive effects -- Of course, focusing on how the consumer is affected by this rule, which I have no idea how to assess. Let the jury try to figure out who the consumer is and how he, she or it is affected. You gotta love antitrust in sports....

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