Tai Kwan Cureton, et.al. v. NCAA ( 1999 )

Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit
12-22-1999
Tai Kwan Cureton, et.al. v. NCAA
Precedential or Non-Precedential:
Docket 99-1222
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Filed December 22, 1999
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 99-1222
TAI KWAN CURETON; LEATRICE SHAW,
each individually and on behalf of
all others similarly situated,
ALEXANDER WESBY; ANDREA GARDNER
v.
NATIONAL COLLEGIATE ATHLETIC ASSOCIATION,
Appellant
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civ. No. 97-00131)
District Judge: Honorable Ronald L. Buckwalter
Argued October 1, 1999
BEFORE: GREENBERG, MCKEE, and STAPLETON,
Circuit Judges
(Filed: December 22, 1999)
David P. Bruton (argued)
Michael W. McTigue Jr.
Drinker Biddle & Reath
18th & Cherry Streets
One Logan Square
Philadelphia, PA 19103
Elsa Kircher Cole
General Counsel
National Collegiate Athletic
Association
6201 College Boulevard
Overland Park, KS 66211
Attorneys for Appellant
Andre L. Dennis (argued)
Danielle Banks
Elizabeth R. Leong
Stradley, Ronon, Stevens & Young
2600 One Commerce Square
Philadelphia, PA 19103
Adele P. Kimmel
Trial Lawyers for Public Justice
1717 Massachusetts Avenue, NW
Suite 800
Washington, DC 20036
J. Richard Cohen
Southern Poverty Law Center
400 Washington Avenue
Montgomery, AL 36104
Attorneys for Appellees
2
Marcia D. Greenberger
Leslie T. Annexstein
Neena K. Chaudhry
National Women's Law Center
11 Dupont Circle, NW, Suite 800
Washington, DC 20036
Attorneys for Amici Curiae
American Association of University
Women, American Civil Liberties
Union, Center for Women Policy
Studies, Clearinghouse on Women's
Issues, The Connecticut Women's
Education and Legal Fund, Inc.,
Equal Rights Advocates, National
Association for Girls & Women in
Sport, The National Association of
Social Workers, National Education
Association, National Partnership
for Women & Families, Now Legal
Defense and Education Fund,
Women Employed, Women's Law
Project, The Women's Sports
Foundation, and The YWCA of
the USA
Edward N. Stoner II
Martha Hartle Munsch
Catherine S. Ryan
Reed Smith Shaw & McClay LLP
435 Sixth Avenue
Pittsburgh, PA 15219
Sheldon Elliot Steinbach
American Council on Education
One DuPont Circle
Suite 835
Washington, DC 20036
Attorneys for Amicus Curiae
American Council on Education
3
Paul A. Tufano
General Counsel
Gregory E. Dunlap
Deputy General Counsel
Anthony S. Potter
Assistant General Counsel
Commonwealth of Pennsylvania
Office of General Counsel
333 Market Street
Harrisburg, PA 17101
Attorneys for Amicus Curiae
Commonwealth of Pennsylvania
and Pennsylvania Department of
Education
John H. Findley
Pacific Legal Foundation
10360 Old Placerville Road,
Suite 100
Sacramento, CA 95827
Attorney for Amicus Curiae
Pacific Legal Foundation
Bill Lann Lee
Acting Assistant Attorney General
Dennis J. Dimsey
Marie K. McElderry
Attorneys
Department of Justice
P.O. Box 66078
Washington, DC 20035-6078
Attorneys for Amicus Curiae
United States of America
4
OPINION OF THE COURT
GREENBERG, Circuit Judge.
I. INTRODUCTION
This matter comes on before this court on appeal from an
order for summary judgment in this action challenging
certain academic requirements for participation in varsity
athletics promulgated by the National Collegiate Athletic
Association ("NCAA"). See Cureton v. NCAA, 37 F. Supp. 2d
687 (E.D. Pa. 1999). In particular, the plaintiffs challenge
the minimum Scholastic Aptitude Test ("SAT") score
requirement for freshman-year varsity intercollegiate
athletic participation. While the NCAA also has adopted
minimum grade point average ("GPA") requirements, the
plaintiffs do not challenge them directly on this appeal.1 We
set forth the background of the case at some length.
A. The Parties
Plaintiff Tai Kwan Cureton is an African-American who
graduated from Simon Gratz High School in Philadelphia in
June 1996 ranking 27th in a class of 305 students.
Cureton was a member of the track team and earned both
academic and athletic honors as a high school student.
Cureton exceeded the NCAA GPA requirements but did not
achieve the NCAA required SAT score. Cureton alleged that
several NCAA Division I schools recruited him before he
obtained his non-qualifying score on the SAT, but that after
he took the SAT a lesser number of Division I schools
recruited him and such institutions denied him admission
and/or athletic financial aid. Cureton, who alleged he lost
an opportunity to compete as a freshman in Division I
varsity intercollegiate athletics because of NCAA
regulations, enrolled in a Division III school.
_________________________________________________________________
1. The SAT is a nationally recognized standardized test. As an alternative
to the SAT, a student athlete may take the ACT, another nationally
recognized standardized test. The parties, however, have emphasized the
SAT in this action so we discuss only that test.
5
Plaintiff Leatrice Shaw is an African-American who also
graduated from Simon Gratz High School and was ranked
5th in a class of 305 students. Shaw was a member of the
track team and earned both academic and athletic honors
and was selected for membership in the National Honor
Society. Shaw exceeded the NCAA minimum GPA
requirement for freshman-year athletic participation, but
failed to achieve the minimum required score on the SAT.
The Division I school that Shaw entered did offer her
athletic financial aid, but she was unable to compete on the
track team during her freshman year because of the NCAA
regulations at issue here.
Plaintiffs Andrea Gardner and Alexander Wesby are
African-American student athletes who exceeded the NCAA
minimum GPA requirement for freshman year athletic
participation, but failed to achieve the minimum required
score on the standardized college admissions tests. Though
they originally were not parties, the district court allowed
them to intervene by order dated December 18, 1998,
pursuant to Fed. R. Civ. P. 24.
The defendant NCAA is an unincorporated voluntary
association of more than one thousand members, a
majority of which are public and private four-year colleges
and universities that conduct varsity intercollegiate athletic
programs in the United States. The NCAA member colleges
and universities are divided into Divisions. Division I
consists of more than three hundred members. The
Divisions adopt their own bylaws, although some NCAA
bylaws are applicable to all three Divisions. This action
concerns a bylaw adopted by Division I and the curtailment
of the plaintiffs' opportunity to participate in Division I
athletics.
The National Youth Sports Program (the "NYSP"), which
is not a defendant but nevertheless is implicated in this
case, is a youth enrichment program that provides summer
education and sports instruction on NCAA member and
non-member institution campuses. The Department of
Health and Human Services provides the NYSP with Federal
financial assistance. Before 1992, these funds were
advanced to the NCAA, but were not diverted for its use. In
1989, the NYSP Fund (the "Fund") was established as a
6
nonprofit corporation to administer the NYSP. Since 1992,
the department has granted the financial aid intended for
the NYSP directly to the Fund. The Fund is regarded as an
NCAA "affiliate."
Before 1971, college freshmen were not allowed to
compete in varsity sports. Since then, the NCAA has
adopted many rules defining freshman eligibility for varsity
intercollegiate athletic competition, but member institutions
continue to make individual admissions decisions. One of
these rules, Proposition 48, implemented in 1986, required
high school graduates to have a minimum 2.0 GPA in 11
academic core courses and a minimum score of 700 on the
SAT to be eligible for competition, practice, andfinancial
aid based upon athletic ability. Division I implemented the
requirement in response to the public's perception that
NCAA schools were exploiting student athletes for their
talents without concern for whether they graduated.
Division I felt compelled to act despite the fact that student
athletes were graduating at rates comparable to non-
athletes, and African-American student athletes were
graduating at higher rates than African-American students
who were not athletes. Since 1989, when the NCAA phased
in the eligibility requirements, the graduation rates of
student athletes, especially African-Americans, have
increased.
Division I modified these rules in 1992 when it adopted
Proposition 16, which is at issue here. Proposition 16
increased the number of core courses to 13 and utilized an
index to determine eligibility based on a formula combining
the student's GPA and SAT scores. Using this index, the
minimum score for a student with a GPA of 2.0 is 1010 on
the SAT. Similarly, a student who scored an 820 on the
SAT would need at least a 2.5 GPA to meet the eligibility
requirements.2 As the district court pointed out, this
_________________________________________________________________
2. A student athlete not qualifying under Proposition 16 may become a
"partial qualifier" if he or she achieves a minimum SAT score between
720 and 810 along with a core GPA that produces a combined score
comparable to the combined score required for qualifiers. See Cureton,
37 F. Supp.2d at 691. A partial qualifier cannot compete in
intercollegiate athletics during his or her freshman year, but is eligible
to receive athletically related financial aid. See id. Shaw, Gardner, and
Wesby are partial qualifiers.
7
modification resulted "in a heavier weighting of the
standardized test" because the minimum GPA requirement
was two standard deviations from the mean, whereas the
minimum test score requirement was only one standard
deviation from the mean. Cureton, 37 F. Supp.2d at 691.
B. The Action
Cureton and Shaw filed the complaint in this case on
January 8, 1997. They alleged the minimum standardized
test score component of Proposition 16 had an unjustified
disparate impact on African-American student-athletes in
violation of regulations promulgated pursuant to Title VI of
the Civil Rights Act of 1964, 42 U.S.C. S 2000d et seq.,
which precludes exclusion from participation in, denial of
the benefits of, and discrimination under any program or
activity receiving Federal financial assistance on account of
race, color, or national origin. The NCAA moved to dismiss
the complaint, or alternatively for summary judgment, on
the following grounds: (1) there is no private right of action
for unintentional discrimination under Title VI or its
accompanying regulations; (2) the NCAA is not a"program
or activity" subject to Title VI; and (3) the NCAA does not
receive Federal funds necessary to subject it to Title VI. The
plaintiffs moved for partial summary judgment on the
grounds that, as a matter of law, the NCAA was a covered
program or activity subject to a Title VI action for
unintentional discrimination and was a recipient of Federal
financial assistance for purposes of Title VI.
On October 9, 1997, the district court issued an opinion
and order denying the NCAA's motion but granting in part
and denying in part the plaintiffs' motion for partial
summary judgment. See Cureton v. NCAA, No. 97-131,
1997 WL 634376 (E.D. Pa. Oct. 9, 1997). In that opinion,
the court determined that there was a private cause of
action under Title VI and its accompanying regulations to
remedy cases of disparate impact and that the NCAA was a
program or activity covered by Title VI. Id. at *2. The court,
however, held that it could not conclude on the record
before it that the NCAA was a recipient of Federal funds as
a result of its relationship with the NYSP. In view of our
recent opinion in Powell v. Ridge, 189 F.3d 387 (3d Cir.
1999), recognizing the existence of a private right of action
8
under Title VI, there no longer is an issue on this appeal
regarding that point.
Thereafter, following discovery, the plaintiffs and the
NCAA again filed cross-motions for summary judgment. By
an opinion and order dated March 8, 1999, the district
court denied the NCAA's motion but granted the plaintiffs'
motion. See Cureton, 37 F. Supp.2d at 715. The district
court held that Proposition 16's disparate impact on
African-Americans violates Title VI and the regulations
issued under it.
The court adopted two distinct theories to support its
finding that the NCAA is subject to the prohibitions of Title
VI. See id. at 696. First, the court found that the NCAA is
an "indirect recipient of federal financial assistance"
because it exercises effective control over a block grant
given by the United States Department of Health and
Human Services to the NYSP.3 See Id. at 694. Second, the
court held that Title VI covers the NCAA because member
schools, which indisputably receive federal funds, have
vested the NCAA with controlling authority over federally
funded athletic programs. See Id.
The court then turned to the plaintiffs' argument that the
SAT component of Proposition 16 violates Title VI because
of its alleged discriminatory disparate impact on African-
American student athletes.4 See id. at 696-712. It found
that the plaintiffs provided statistical evidence sufficient to
_________________________________________________________________
3. The complaint also alleges that the Fund receives money from the
Department of Education. Nevertheless, as far as we can ascertain, the
record does not contain any evidence to support this conclusion, and it
appears that the plaintiffs have prosecuted this case only by arguing
that the NCAA receives funds from the Department of Health and
Human Services. However, inasmuch as the regulations of each
department are parallel, we have cited to both sets of them.
4. A disparate impact case is based upon the idea that "some . . .
practices, adopted without a deliberately discriminatory motive, may in
operation be functionally equivalent to intentional discrimination."
Watson v. Fort Worth Bank and Trust, 487 U.S. 977, 987, 108 S. Ct.
2777, 2785 (1988). Many cases have applied this theory to educational
institutions and practices. See, e.g., New York Urban League, Inc. v.
State
of New York, 71 F.3d 1031, 1036 (2d Cir. 1995) (collecting cases).
9
show that the use of the SAT minimum standard "plainly
evince[d] that African-Americans are being selected by
Proposition 16 at a rate disproportionately lower than
whites sufficient to infer causation." Consequently, the
plaintiffs raised a prima facie case of disparate impact
discrimination. See id. at 699-701.
The district court rejected the NCAA's argument that
Proposition 16 benefits African-Americans because of the
alleged increase in graduation rates it has brought about.
The court stated that "the alleged beneficial impact
(increased graduation rates) redounds at the `back-end'
while the adverse impact occurs up-front." Id. at 700. In
this regard, it cited Connecticut v. Teal, 457 U.S. 440, 452-
56, 102 S. Ct. 2525, 2533-35 (1982), for the principle that
racial balance at the end of an employer's entire
promotional process does not preclude a plaintiff from
making a prima facie case of disparate impact
discrimination based on the impact of one component of
the process. Where the initial examination used by an
employer in the challenged hiring process had a disparate
impact, a "bottom-line" justification is not a defense to
employer liability. See id. Accordingly, the district court
concluded that the NCAA did not have a defense simply
because African-Americans enrolled in its member schools
after the adoption of Proposition 16 had an enhanced
chance of getting a degree.
Inasmuch as the plaintiffs demonstrated that African-
Americans are less likely to meet the standards required by
Proposition 16 than whites, the burden shifted to the NCAA
to show an educational necessity for the bylaw. The district
court approved the legitimacy of the NCAA's first proffered
goal of raising all student athletes' graduation rates,
Cureton, 37 F. Supp.2d at 703, yet found the NCAA's
second proffered goal -- closing the gap between white and
black student athletes' graduation rates -- not to have been
an actual goal of Proposition 16. Furthermore, the court
found that there was no legal "support for an educational
institution . . . to engage in such a goal." See id. at 704.
Next, the court determined that Proposition 16's use of the
SAT as a cutoff was not justified by the legitimate goal of
increasing student athletes' graduation rates. Id. at 706-12.
10
Moreover, the court found that the plaintiffs "have shown at
least three alternative practices resulting in less racial
disproportionality while still serving the NCAA's goal of
raising student athlete graduation rates -- not raising them
above a certain threshold number. That is all the proof that
plaintiffs need to demonstrate under Title VI." Id. at 714.
In view of its conclusions, the district court granted
summary judgment to the plaintiffs, and permanently
enjoined the NCAA from continued operation and
implementation of Proposition 16. See id. at 714-15.
Although regarding the matter as ripe for appeal, the court
retained jurisdiction. See id. at 715. By order dated March
16, 1999, the district court modified the March 8, 1999
opinion and order so that the NCAA was permanently
enjoined from denying student athletes freshmen-year
eligibility on the basis of the minimum standardized test
score cutoffs in Proposition 16, but nevertheless could use
minimum GPA cutoffs. See id. at 716.
Subsequently, the NCAA appealed and unsuccessfully
sought a stay in the district court. The NCAA then sought
a stay from this court, which we granted on March 30, 1999.5
II. JURISDICTION and STANDARD OF REVIEW
The district court had jurisdiction under 28 U.S.C.
S 1331. We have jurisdiction under 28 U.S.C.S 1292(a)(1)
as, notwithstanding the district court's entry of a
permanent injunction, it has not entered a final judgment.
We exercise plenary review on this appeal from the district
court's orders on the motions for summary judgment. See
Seibert v. Nusbaum, Stein, Goldstein, Bronstein & Compeau,
167 F.3d 166, 170 (3d Cir. 1999). Of course, on this appeal
we can remand the matter for entry of a summary
judgment in favor of the NCAA if we conclude that on the
_________________________________________________________________
5. Plaintiffs filed a cross-appeal on April 8, 1999, which we dismissed by
order dated June 11, 1999, as plaintiffs could raise the issues
mentioned in the cross-appeal as alternative grounds to affirm. See Rite-
Aid of Pa., Inc. v. Houstoun, 171 F.3d 842, 853 (3d Cir. 1999). On July
1, 1999, the district court granted the plaintiffs' motion for class
certification. See Cureton, 1999 WL 447313 (E.D. Pa. July 1, 1999). In
view of our result, we will not make further reference to the
certification.
11
undisputed facts it is entitled to a summary judgment as a
matter of law. See Nazay v. Miller, 949 F.2d 1323, 1328 (3d
Cir. 1991).
III. DISCUSSION
Plaintiffs brought this action pursuant to section 601 of
Title VI, which provides:
No person in the United States shall, on the grounds of
race, color, or national origin, be excluded from
participation in, or be denied the benefits of, or be
subjected to discrimination under any program or
activity receiving Federal financial assistance.
42 U.S.C. S 2000d. The Supreme Court has determined that
section 601 prohibits discrimination in or exclusion from
Federally financially assisted programs or activities only on
the basis of intentional discrimination. See Alexander v.
Choate, 469 U.S. 287, 292-93, 105 S. Ct. 712, 716 (1985);
Guardians Ass'n v. Civil Service Comm'n, 463 U.S. 582, 103
S. Ct. 3221 (1983); Powell, 189 F.3d at 392. But the
plaintiffs do not allege intentional discrimination.
Accordingly, they rely on regulations implementing section
601, which the Departments of Health and Human Services
and Education adopted pursuant to section 602 of Title VI
which provides, in relevant part:
Each Federal department and agency which is
empowered to extend Federal financial assistance to
any program or activity, by way of grant, loan, or
contract . . ., is authorized and directed to effectuate
the provisions of [Section 601] of this title with respect
to such program or activity by issuing rules,
regulations or orders of general applicability. . . .
42 U.S.C. S 2000d-1. These regulations extend section 601
to racial, color and national origin discrimination
predicated on recipients administering programs and
activities with a disparate impact.
But section 601 and the regulations have their
limitations, for they are enforceable only against the
recipients of Federal financial assistance. See 42 U.S.C.
S 2000d. The NCAA asserts that it is not a direct recipient
12
of Federal financial assistance and that its relationship with
third parties does not support the extension of Title VI
coverage to the NCAA as an indirect recipient of such
assistance.
The district court recited four different theories that the
plaintiffs proffered to support the extension of Title VI
coverage to the NCAA:
(1) that the NCAA directly receives federalfinancial
assistance through the Fund (which indisputably is a
recipient of federal funds) because the Fund is nothing
more than the NCAA's alter ego; (2) that the NCAA
indirectly receives federal financial assistance through
the Fund due to the NCAA's complete control over the
Fund; (3) that member schools who receive federal
funds have created and comprise the NCAA and that
the NCAA governs its members with respect to athletics
rules; and (4) that recipients of federal financial
assistance have ceded controlling authority over a
federally funded program to the NCAA, who then
becomes subject to Title VI regardless of whether it is
itself a recipient.
Cureton, 37 F. Supp.2d at 694 (emphasis added).
The district court rejected the first theory, as it concluded
that there was insufficient evidence to establish that the
NYSP was the alter ego of the NCAA.
The court did conclude, however, that the NCAA was an
indirect recipient of Federal financial assistance because
"although the Fund is the named recipient of the block
grant, it is merely a conduit through which the NCAA
makes all of the decisions about the Fund and the use of
the federal funds." Id. The NCAA, on the other hand,
asserts that there is no evidence to support a finding that
the NCAA itself controls the Federal monies disbursed by
the Fund.
The court alternatively determined that the NCAA was
subject to Title VI coverage because of its relationship to its
member institutions. The court stated:
Whether characterized as a `delegation' or an
`assignment' of `controlling authority,' `regulation,' or
13
`supervision,' Plaintiffs have established on this record
that the member colleges and universities have granted
to the NCAA the authority to promulgate rules affecting
intercollegiate athletics that the members are obliged to
abide and enforce. Under these facts, the NCAA comes
sufficiently within the scope of Title VI irrespective of
its receipt of federal funds.
Cureton, 37 F. Supp.2d at 696.
The district court was aware of National Collegiate
Athletic Ass'n v. Smith, 119 S. Ct. 924 (1999), which
determined that the mere fact that the NCAA received funds
from members that received Federal financial assistance did
not subject the NCAA to coverage under Title IX of the
Education Amendments of 1972. See Cureton, 37 F.
Supp.2d at 693. While the district court regarded that case
as "applicable" under Title VI, it noted that the Supreme
Court left open the possibility that the NCAA could be
subject to Title IX coverage on the basis of some other
theory. See id. (citing NCAA v. Smith , 119 S.Ct. at 929).
Thus, the district court concluded that the NCAA was
subject to Title VI.
We do not find it necessary to determine whether, by
reason of the NCAA's relationship with the NYSP or the
Fund, we should regard the NCAA as receiving Federal
financial assistance. Rather, we will assume without
deciding that these relationships are sufficient to establish
that Federal financial assistance to the Fund is assistance
to the NCAA itself. But section 601, as originally written,
did not preclude recipients of Federal financial assistance
from discriminating with respect to a program not receiving
such assistance. Thus, the language of Title VI is program
specific as it relates to "participation in," "[denial of] the
benefits of " or "discrimination under" "any program or
activity receiving Federal financial assistance." See Grove
City College v. Bell, 465 U.S. 555, 570-71, 104 S. Ct. 1211,
1220 (1984) (Title IX); Board of Pub. Instruction v. Finch,
414 F.2d 1068 (5th Cir. 1969) (Title VI).
It thus follows that when Congress enacted Title VI, a
department's authority to promulgate regulations under
section 602 to effectuate the provisions of section 601 was
14
subject to the program specific limitations of section 601.
See North Haven Bd. of Educ. v. Bell, 456 U.S. 512, 538,
102 S. Ct. 1912, 1926 (1982); see also Grove City, 465 U.S.
at 570-71, 102 S.Ct. at 1220. Consequently, when the
departments adopted the regulations under Title VI, see 45
C.F.R. S 80.3 and 34 C.F.R. S 100.3, the regulations,
though expanding on section 601 by precluding the use of
"criteria or methods of administration which have the effect
of subjecting individuals to discrimination," only related to
programs or activities receiving Federal financial assistance.
See 45 C.F.R. S 80.3(b)(2); 34 C.F.R.S 100.3(b)(2). Thus, the
regulations, like the statute, are program specific.
Moreover, the regulations themselves demonstrate that
they are program specific. Under the regulations, an
application for Federal financial assistance to carry out a
program must include assurances of nondiscrimination
which may go beyond the program to be Federally assisted.
Thus, 45 C.F.R. S 80.4(d)(2) and 34 C.F.R.S 100.4(d)(2)
provide that "[t]he assurance required with respect to an
institution of higher education . . . or any other institution
. . . shall be applicable to the entire institution unless the
applicant establishes . . . that the institution's practices in
designated parts or programs of the institution will in no
way affect its practices in the program of the institution for
which Federal financial assistance is sought." Clearly, these
provisions cannot possibly accommodate a reading of the
regulations so that as a matter of course their
discriminatory impact aspects are applied beyond the
specific program receiving Federal assistance. We are
constrained to reach this conclusion, as it is obvious that
a recipient of Federal financial assistance need not give an
assurance of nondiscrimination with respect to programs in
no way affecting the Federally assisted program.
It is, of course, true that in response to the Supreme
Court's program specific interpretation of Title IX in Grove
City, Congress passed the Civil Rights Restoration Act of
1987 and thereby modified Title VI so that it encompasses
programs or activities of a recipient of Federalfinancial
assistance on an institution-wide basis. See 42 U.S.C.
S 2000d-4a (Title VI); 20 U.S.C. S 1687 (Title IX); see also
NCAA v. Smith, 119 S.Ct. at 928 & n.4 (After passage of
15
Civil Rights Restoration Act, "if any part of the NCAA
received federal assistance, all NCAA operations would be
subject to Title IX."). Nevertheless, the Departments of
Health and Human Services and Education have not
modified 34 C.F.R. S 100.13 and 45 C.F.R.S 80.13 following
enactment of the Restoration Act. Consequently, the
regulations, which, unlike Title VI include disparate impact
provisions, by their terms remain program specific. It
therefore inexorably follows that, to the extent this action is
predicated on the NCAA's receiving Federal financial
assistance by reason of grants to the Fund, it must fail as
the Fund's programs and activities are not in issue in this
case.
In reaching our result, we also point out the following.
Neither Congress nor the Departments of Health and
Human Services or Education has considered, at least in a
formal proceeding of which we are aware, what the
consequences would be if the disparate impact regulations
were expanded beyond their current program specific
limitations. It might well be that such expanded regulations
could subject all aspects of an institution of higher
education's activities to scrutiny for disparate
discriminatory impact beyond anything Congress could
have intended. Furthermore, the regulations have not been
amended pursuant to the notice and comment provisions of
the Administrative Procedure Act. Surely, such an
expansion should not be made without the opportunity for
comment by interested parties. See 5 U.S.C.S 553; see also
NLRB v. Wyman-Gordon Co., 394 U.S. 759, 764, 89 S. Ct.
1426, 1429 (1969).
We realize, of course, that arguably the Civil Rights
Restoration Act implicitly expanded the scope of"program"
within 45 C.F.R. S 80.13 and 34 C.F.R. S 100.13 so that it
is not limited to a specific activity; after all, without such
expansion there would be no regulations dealing with
disparate treatment by reason of race, color, or national
origin beyond the program actually receiving Federal
financial assistance. We, however, will not address that
possibility here beyond pointing it out, as this case does
not involve any allegation of disparate treatment.
Consequently, we have no reason to consider whether the
16
regulations under section 602 could be applied in disparate
treatment cases on an institution-wide basis.
We note that the dissent points out that the Fund may be
the alter ego of the NCAA. See Maj. Op. at 13. It seems
quite clear in view of our conclusions with respect to the
limited scope of the regulations, with which the dissent
agrees, that it is immaterial whether the Fund is the
NCAA's alter ego inasmuch as the discriminatory impact
aspects of the regulations only can be applied to the
specific program receiving Federal assistance and the
Fund's programs are not in issue here. See Grove City, 465
U.S. at 571-72, 104 S.Ct. at 1220-21 (holding that Title IX
only applied to college's financial aid program, for which
federal funds were earmarked, and not to the entire
institution). Moreover, as we have pointed out the plaintiffs
have not alleged that this is a discriminatory treatment
case. Accordingly, even if the NCAA directly received the
Federal financial assistance paid to the Fund our result
would be the same.
The foregoing conclusions bring us to the question of
whether the NCAA is a recipient of Federal funds by reason
of what the plaintiffs call its "controlling authority" over
programs or activities receiving Federal financial assistance.
The case law suggests that the critical inquiry in
determining whether an entity is an indirect recipient of
Federal assistance is whether that entity is the intended
recipient of Federal funds, intention being from Congress's
point of view. See id. at 563-65 & n.13, 104 S.Ct. at 1216-
17 & n.13. The Supreme Court, however, already has found
no indication that member schools paid their dues to the
NCAA with Federal assistance funds "earmarked" for that
purpose. NCAA v. Smith, 119 S.Ct. at 929. Thus, the
controlling authority argument can be sustained, if at all,
only on some basis beyond the NCAA's mere receipt of
dues. See id. at 929-30. Of course, in considering this
"controlling authority" argument, we emphasize that under
the applicable regulations only "recipients" of Federal
financial assistance are subject to the disparate impact
regulations, not merely organizations which have some
relationship with entities receiving such assistance or
organizations which benefit from such assistance. See
17
United States Dep't of Transp. v. Paralyzed Veterans of Am.,
477 U.S. 597, 605-07, 106 S. Ct. 2705, 2710-12 (1986).
In Horner v. Kentucky High School Athletic Ass'n , 43 F.3d
265, 272 (6th Cir. 1994), the court held that the Kentucky
State Board for Elementary and Secondary Education and
the Kentucky High School Athletic Association, its agent to
manage interscholastic sports, were subject to Title IX. But
in that case, the Board controlled and managed on behalf
of the Kentucky Department of Education over $396 million
in Federal funds. Furthermore, the Association was its
agent authorized by statute to manage interscholastic
athletics.6 On the other hand, more recently the court in
Smith v. Metropolitan School District, 128 F.3d 1014, 1019-
21 (7th Cir. 1997), held that individuals in a supervisory
capacity are not liable in an action under Title IX because
they are not recipients of Federal funds notwithstanding
the circumstance that they may have some control over the
funds.7 Of course, Title IX cases are instructive in this Title
VI action as the statutes are essentially similar. See NCAA
v. Smith, 119 S.Ct. at 928 n.3; see also Paralyzed Veterans,
477 U.S. at 600 n.4, 106 S.Ct. at 2708 n.4.
While not a Title VI or Title IX case, we find the Supreme
Court's decision in NCAA v. Tarkanian, 488 U.S. 179, 109
S. Ct. 454 (1988), instructive, as that case makes clear that
the NCAA does not "control" its members. Tarkanian was a
tenured coach, whom the University of Nevada at Las Vegas
(UNLV) reluctantly had suspended under threat of NCAA
sanctions. He then brought an action under 42 U.S.C.
S 1983 claiming that the NCAA was a state actor, because
_________________________________________________________________
6. Actually, Horner was an appeal from an order for summary judgment,
so the court based its holding on the plaintiffs' opposition to the
defendants' motion. It remained for the plaintiffs to prove their case on
the remand.
7. In Davis v. Monroe County Board of Education, 119 S. Ct. 1661 (1999),
a Title IX sexual harassment case against a school board and individual
officials, the district court dismissed the action against all the
defendants. While the case reached the Supreme Court, the Court did
not comment on the case against the individuals, as the plaintiffs
appealed the dismissal of the Title IX claims only against the school
board to the court of appeals. Id. at 1668; see Davis v. Monroe County
Bd. of Educ., 74 F.3d 1186, 1188 n.1 (11th Cir. 1996).
18
the "UNLV delegated its own functions to the NCAA,
clothing the [NCAA] with authority both to adopt rules
governing UNLV's athletic programs and to enforce those
rules on behalf of UNLV." Id. at 192, 109 S.Ct. at 462. The
Court held that the NCAA was not a state actor. While the
Court recognized that the NCAA's rules and
recommendations clearly influenced the UNLV, it concluded
that the UNLV, not the NCAA, took the final action
suspending Tarkanian. See id. at 192, 109 S.Ct. at 462.
The Court reasoned that the UNLV "delegated no power
to the NCAA to take specific action against any university
employee. The commitment by UNLV to adhere to NCAA
enforcement procedures was enforceable only by sanctions
that the NCAA might impose on UNLV itself." Id. at 195-96,
109 S.Ct. at 464. The Court explained that the UNLV had
the option to retain Tarkanian and risk sanctions, perhaps
even expulsion, or to withdraw voluntarily from the NCAA.
See id. at 197-98, 109 S.Ct. at 465. The Court questioned
Tarkanian's assertion that "the power of the NCAA is so
great that the UNLV had no practical alternative to
compliance with its demands." Id. at 198-99, 109 S.Ct. at
465. It stated that "[t]he university's desire to remain a
powerhouse among the Nation's college basketball teams is
understandable, and nonmembership in the NCAA
obviously would thwart that goal. But that UNLV's options
were unpalatable does not mean that they were
nonexistent." Id. at 198 n.19, 109 S.Ct. at 465 n.19.
Similarly, the ultimate decision as to which freshmen an
institution will permit to participate in varsity
intercollegiate athletics and which applicants will be
awarded athletic scholarships belongs to the member
schools. The fact that the institutions make these decisions
cognizant of NCAA sanctions does not mean that the NCAA
controls them, because they have the option, albeit
unpalatable, of risking sanctions or voluntarily withdrawing
from the NCAA. In this regard, we point out that this case
differs from Horner as there the Athletic Association was
exercising public authority with respect to its functions. We
emphasize that the NCAA members have not ceded
controlling authority to the NCAA by giving it the power to
enforce its eligibility rules directly against students.
19
We also point out that applying the disparate impact
regulations to the NCAA is inconsistent with the
contractual character of section 601. The Supreme Court
explained in Paralyzed Veterans that the antidiscrimination
provisions in section 504 of the Rehabilitation Act of 1973,
29 U.S.C. S 794, which has language tracking Title VI, have
a contractual basis. Accordingly, the Court said that
"Congress limited the scope of S 504 to those who actually
`receive' federal financial assistance because it sought to
impose S 504 coverage as a form of contractual cost of the
recipient's agreement to accept federal funds." 477 U.S. at
605, 106 S.Ct. at 2711. Thus, "[b]y limiting coverage to
recipients, Congress imposes the obligations ofS 504 upon
those who are in a position to accept or reject those
obligations as a part of the decision whether or not to
`receive' federal funds." Id. at 606, 106 S.Ct. at 2711.
Title VI is a similar statute. See 45 C.F.R.S 80.4; 34
C.F.R. S 100.4. But there is no contractual privity between
the Departments of Health and Human Services and
Education and the NCAA with respect to Federal financial
assistance to the NCAA members. Therefore, the NCAA is
not in a position to accept or reject the Federal funds paid
to those institutions. We do not suggest that an absence of
privity means that in no circumstances may a controlling
authority argument be viable; we note that those who truly
assume control of federally-funded programs are in a
position to accept or reject that control as part of a decision
whether or not to receive federal funds indirectly.
Nonetheless the absence of privity clearly signals that a
court should be circumspect in imposing Title VI
obligations on an entity which is not a direct recipient of
Federal financial assistance. Such caution is consistent
with the Spending Clause foundation for Title VI. See Davis
v. Monroe County Bd. of Educ., 119 S. Ct. 1661, 1669-70
(1999).
We recognize that the dissent suggests that the NCAA
constitution requires NCAA members to cede authority over
their athletic programs to the NCAA, but the NCAA
constitution expressly provides for the retention of
institutional control over individual athletic programs.
While the constitution requires conformity with the NCAA's
20
rules and regulations, the ultimate decisions whether to
conform are made by individual members. Therefore, the
constitution is completely consistent with our result.
Furthermore, we cannot understand how the fact that the
NCAA promulgates rules and regulations with respect to
intercollegiate athletics somehow means that the NCAA has
controlling authority over its members' programs or
activities receiving Federal financial assistance. After all,
the institutions decide what applicants to admit, what
employees to hire, and what facilities to acquire.
IV. CONCLUSION
In view of the foregoing determinations, it is unnecessary
for us to reach the other issues raised on this appeal.
Moreover, inasmuch as the parties agree that there are no
disputes of material fact with respect to the question of
whether the NCAA is subject to Title VI (and we are aware
of none), and we have concluded that the NCAA is entitled
to a judgment as a matter of law, there is no reason why
this litigation should continue. Consequently, we will
reverse the order of the district court of March 8, 1999, and
will remand the case to the district court to enter summary
judgment for the NCAA.
21
McKEE, Circuit Judge, concurring in part and dissenting in
part.
I agree with the majority's analysis insofar as my
colleagues conclude that the District Court's grant of
summary judgment can not be sustained under the
applicable regulations of the Departments of Health and
Human Services and the Department of Education. As I
discuss below, the language of the regulations those
agencies adopted pursuant to SS 601 and 602 of Title VI are
program-specific. Accordingly, it appears that the relief for
the discriminatory impact that the District Court found
under Proposition 16 must be limited to the National Youth
Sports Program (the "Fund"). However, I believe that the
NCAA may well be subject to Title VI under the plaintiff 's
theory that the NCAA is a controlling entity of its member
institutions, or the alternative alter ego theory advanced by
the plaintiffs. Thus, I can not agree with the majority's
analysis insofar as it holds that the NCAA is entitled to
summary judgment. Rather, I believe that we should
remand for a trial to resolve the issue of whether the NCAA
is a controlling entity under Title VI or the Fund is merely
its alter ego. However, before explaining my position, a brief
parenthetical is necessary.
Title VI extends protection based upon race, color or
national origin. Accordingly, this dispute is framed by
issues of race. Nevertheless, the issues here are of such
gravity, and the social context in which they arise are of
such magnitude, that I think it is important that an aspect
of this controversy not be lost even though it is irrelevant
to our legal analysis. Buried deep within this record is a
statement that is of such consequence that it ought not to
be ignored. Yet, that statement has been lost in the
intensity of the debates underlying this legal dispute. The
NCAA's Rule Change Memorandum contains the following
statement:
Low-income student-athletes also have been impacted
to a greater degree than other student-athletes by
Proposition 16 standards. For example, in 1997, 18
percent of all student-athletes with a self-reported
family income below $30,000 failed to qualify, whereas
22
only 2.5 percent of student-athletes with a family
income greater than $80,000 failed to qualify.
JA at 756a. Proposition 16 therefore has a disparate impact
on poor student-athletes regardless of race. Thus, the
dynamics of the disparate impact here are the dynamics of
socio-economic status. These are issues of class; not race.
Student athletes are more likely to be adversely affected by
Proposition 16 whether they are Black or White if they are
poor. Concomitantly, student athletes are more likely to be
advantaged by Proposition 16 if they have attended schools
with abundant resources and are from families that know
about, and have the resources to avail themselves of, the
proliferation of privately sponsored courses that prepare
high school students for the SAT exam. See Los Angeles
Times, More Latinos Take SAT Exams But Scores Lagging,
Sept 2, 1998, at A1 ("Suburban and affluent students . . .
enjoy another advantage--greater access to commercial test
preparation courses that can add 120 points or more to a
student's SAT score."). The economic stratification that
exists in our society often means that issues of class are
either translated into issues of race, or the two are so
intertwined as to be inseparable.
Because we function as a court of law, and not as a
legislature, the significance of the NCAA's Memorandum
can play no role in our adjudication of this appeal.
However, the explosiveness of the issues lying coiled just
below the surface of this dispute require that the broader
implications of this debate be kept in proper perspective.1
I. The Applicable Regulations.
I begin my legal analysis with the regulations that have
been promulgated under Title VI. 34 C.F.R. S 100.3
promulgated by the Office of Civil Rights of the Department
of Education provides in relevant part that:
(b)(2) A recipient [of funds under Title VI], in
determining the types of services, financial aid, or
_________________________________________________________________
1. This observation is not intended to detract from, or add to, the
discussion of the cultural bias that many believe also influences SAT
scores.
23
other benefits, . . . or the class of individuals to whom,
or the situations in which, such services, . . . will be
provided under any such program, or the class of
individuals to be afforded an opportunity to participate
in any such program, may not, directly or through
contractual or other arrangements, utilize criteria or
methods of administration which have the effect of
subjecting individuals to discrimination because of
their race, color, or national origin, or have the effect of
defeating or substantially impairing accomplishment of
the objectives of the program as respect individuals of
a particular race, color, or national origin.
34 C.F.R. S 1003(b)(2). The cited Authority for that
regulation is "Sec. 601, 602, 604, Civil Rights Act of 1964;
78 Stat. 252, 253, 42 U.S.C. 2000d, 2000d-1m 2000d-3."
The Department of Health and Human Services
promulgated an identical regulation at 45 C.F.R.
S 80.3(b)(2), and the identical provisions of The Civil Rights
Act of 1964 are cited as authority for that regulation. As the
majority notes, the scope of these regulations is limited by
34 C.F.R. S 100.4(d)(2) and 45 C.F.R. S 80.4(d)(2)
respectively. That limitation provides that the respective
prohibition of discrimination "shall be applicable to the
entire institution unless the applicant establishes . . . that
the institution's practices in designated parts or programs
of the institution will in no way affect its practices in the
program of the institution for which Federal financial
assistance is sought." See Maj. Op. at 15.2
As the majority explains, this limitation is a direct result
of the original interpretation of Title VI. See Grove City v.
Bell, 465 U.S. 555 (1984). Maj. Op. at 15-16. However,
Congress subsequently enacted the Civil Rights Restoration
Act, 42 U.S.C. S 2000-4, and thereby broadened the reach
of Title VI beyond the offending program in response to
Grove City. However, neither HHS nor the Department of
Education amended the applicable regulations to make
them coextensive with the expanded scope of the Civil
_________________________________________________________________
2. Here, there is nothing to demonstrate that practices of the Fund (the
direct recipient of Title VI funds) affect the broader practices of the
NCAA.
24
Rights Restoration Act. Consequently, regulations that were
initially designed to lengthen the reach of a statutory
prohibition against discrimination by extending it to
unintended discriminatory consequences ("disparate
impact") now appear to have a shorter reach than the
statutory prohibition the regulations were supposed to
expand.
My colleagues address the apparent tension between the
Civil Rights Restoration Act and the regulations as follows:
We realize, of course, that arguably the Civil Rights
Restoration Act implicitly expanded the scope of the
"program" within 45 C.F.R. 21 80.13 and 34 C.F.R.
S 100.13 so that it is not limited to a specific activity;
after all, without such expansion there would be no
regulations dealing with disparate treatment by reason
of race, color, or national origin beyond the program
actually receiving Federal financial assistance. We,
however, will not address that possibility here beyond
pointing it out, as this case does not involve any
allegation of disparate treatment. Consequently, we
have no reason to consider whether the regulations
under section 602 could be applied in disparate
treatment cases on an institution-wide basis.
Maj. Op. at 16-17 (emphasis in original).
It may be that this regulatory anomaly is more the result
of administrative inertia than studied decision making.
However, the agencies ought not to assume that their
regulations have been implicitly amended by the
subsequent legislation. If our analysis of the explicit
language of these regulations is not what the agencies
intend, I would hope that they take steps to promulgate
amendments to their regulations that will clearly reflect the
intended scope of the meaning of "program" as that term
relates to Title VI, and similar prohibitions of
discrimination.
Of course, this does not end the inquiry. As the majority
notes, we must still determine "whether the NCAA is a
recipient of Federal funds by reason of what the plaintiffs
call its `controlling authority' over programs or activities
receiving Federal financial assistance." Maj. Op. at 17. It is
25
at this point that I part company with my colleagues as I
believe that the NCAA may well be subject to Title VI
because it may be a controlling authority, or because the
Fund may be its alter ego. Although the Supreme Court
held in NCAA v. Smith, ___ U.S. ___, 119 S. Ct. 924, 926
(1999), that dues payments to the NCAA from its member
institutions, who are themselves recipients of Federal
financial assistance, are not sufficient to subject the NCAA
to Title IX, the Court refused to reject either of these two
alternative theories as a bases of recovery under Title IX.
Rather, the Court stated that it would not decide the
question of whether the NCAA "directly and indirectly
receives federal financial assistance" because of its
relationship to the Fund, and the question of whether
"when a recipient cedes controlling authority over a
federally funded program to another entity, the controlling
entity is covered by Title IX regardless [of] whether it is
itself a recipient" because neither question was decided by
the lower courts. Id. at 930. Thus, the Court left "resolution
of those grounds to the courts below on remand." Id. at
926. Those questions, albeit with regard to Title VI and not
Title IX, are squarely before us now, and I do not believe
that either proposition can be rejected as a matter of law.
II. The NCAA as a Controlling Authority.
As noted above, the NCAA is not subject to Title VI
merely because it receives dues from member institutions
who are themselves recipients of Federal assistance. Smith,
___ U. S. at ___, 119 S.Ct. at 926. The Federal funds going
to the NCAA member institutions are not earmarked for
NCAA dues, and therefore, although the NCAA is a
beneficiary of those funds it is not a "recipient." See United
States Dep't of Transp. v. Paralyzed Veterans of America,
477 U.S. 597, 605-07 (1986).
Thus, plaintiffs' "controlling authority argument can be
sustained, if at all, only on some basis beyond the NCAA's
mere receipt of dues." Maj. Op. at 17. For purposes of our
discussion, there are two entities over which the NCAA may
have controlling authority -- the NCAA's member
institutions, and the Fund. I will first explain why I believe
the plaintiffs have demonstrated that the NCAA may have
26
controlling authority over its members, and then discuss
the NCAA's relationship to the Fund.
A. The NCAA's Control of Member Institutions.
1. The NCAA Constitution
The constitution of the NCAA provides in part: "The
control and responsibility for the conduct of intercollegiate
athletics shall be exercised by the [member] institution
itself." NCAA Const., Art, 6, Rule 6.01.1. Atfirst blush, this
suggests that member institutions have not ceded
controlling authority over intercollegiate sports to the NCAA
because constituent colleges and universities retain
responsibility for, and control of, their intercollegiate
athletics.
However, the constitution also provides that one of the
purposes of the NCAA is: "To uphold the principle of
institutional control of, and responsibility for, all
intercollegiate sports in conformity with the constitution and
the bylaws of the Association." NCAA Const., Art. I, Rule
1.2(b) (emphasis added). The NCAA's constitution also
states: "It is the responsibility of each member institution to
control its intercollegiate athletics program in compliance
with the rules and regulations of the Association. NCAA
Const., Art. 2, Rule 2.1.1 (emphasis added). These two
rules appear to be in tension with Rule 6.01.1 and appear
to trump whatever authority member institutions might
otherwise have under the NCAA's constitution to retain
control over their intercollegiate athletic programs.
Consequently, I believe the plaintiffs here may be correct in
their contention that the NCAA's constitution requires
NCAA members to effectively cede authority over their
intercollegiate athletic programs to the NCAA. Moreover,
plaintiffs' position is clearly supported by the very
precedent that my colleagues rely upon in granting
summary judgment to the NCAA.
2. NCAA v. Tarkanian.
The majority relies heavily upon the Supreme Court's
decision in NCAA v. Tarkanian, 488 U.S. 179 (1988), to
27
support its conclusion that the NCAA is not a controlling
authority of the member institutions. However, Tarkanian
proves just the opposite. Tarkanian illustrates the extent of
absolute control the NCAA has over its member colleges
and universities for purposes of our analysis, and the case
establishes that the NCAA may well be a controlling
authority to the extent that it should be subject to Title VI.
Tarkanian involved a dispute between UNLV and its
basketball coach, Jerry Tarkanian. The Supreme Court
began its analysis of the issues in that case with "a
description of the relationship among the three parties --
Tarkanian, UNLV, and the NCAA." 488 U.S. at 182.
Tarkanian had been hired as UNLV's basketball coach in
1973. He "inherited a team with a mediocre 14-14 record."
Id. at 180. However, "[f]our years [after Tarkanian became
coach] the team won 29 out of 32 games and placed third
in the championship tournament sponsored by the National
Collegiate Athletic Association." Id. 4 In return, the
university compensated Tarkanian at a level that reflected
both his value to the university, and the university's
appreciation of his having transformed its basketball team
into a national powerhouse. He "was initially employed on
a year-to-year basis but became a tenured professor in
1977." Id. at 182. As a tenured professor Tarkanian would
have received an annual salary of $53,000. However, as
head basketball coach his compensation was
$125,000, plus 10% of the net proceeds received by
UNLV for participation in NCAA-authorized
championship games, plus fees from basketball camps
and clinics, product endorsements, and income
realized from writing a newspaper column, speaking on
_________________________________________________________________
4. The importance of the NCAA's Basketball tournament -- popularly
referred to as "March Madness" -- is evidenced by the fact that a major
television network recently paid $6 billion for the rights to broadcast
the
tournament for the next eleven years. See CBS Signs $6 Billion Deal With
NCAA, Wall St. J. Nov 19, 1999, at A3 ("To keep the tournament CBS
had to withstand strong competition from Walt Disney Co., which
wanted the tournament for its ABC and ESPN Networks and News
Corp.'s Fox network and its sports cable outlets. . . . with the internet
and new-media rights as part of the deal, some industry observers
wondered if CBS didn't get a bargain.") (emphasis added).
28
a radio program entitled `THE JERRY TARKANIAN SHOW,' and
appearing on a television program bearing the same
name. That compensation was entirely contingent on
[Tarkanian's] continued status as the Head Basketball
Coach at UNLV.
Id. at 182, n.1 (internal quotation marks omitted). Despite
Tarkanian's success, and the university's appreciation of it,
in September of 1977, the university informed Tarkanian
that he was going to be suspended.
No dissatisfaction with Tarkanian, once described as
the winningest active basketball coach, motivated his
suspension. Rather, the impetus was a report by the
NCAA detailing 38 violations of NCAA rules by UNLV
personnel, including 10 involving Tarkanian. The NCAA
had placed the university's basketball team on
probation for two years and ordered UNLV to show
cause why the NCAA should not impose further
penalties unless UNLV severed all ties during the
probation between its intercollegiate athletic program
and Tarkanian.
Id. at 180-81 (emphasis added). NCAA rules did not allow
it to directly sanction Tarkanian for his role in the
purported rules violations. Accordingly, the NCAA had
"proposed a series of sanctions against UNLV including a 2-
year period of probation during which its basketball team
could not participate in postseason games or appear on
television." Id. at 186. However, the NCAA also required the
University "to show cause why additional penalties should
not be imposed against UNLV if it failed to discipline
Tarkanian by removing him completely from the
University's intercollegiate athletic program during the
probation period." Id. at 187.
In response, the president of the University directed the
vice president to conduct a hearing to determine what the
University should do. "Tarkanian and UNLV were
represented at the hearing; the NCAA was not." Id. at 186.
Following that hearing, the vice president of the University
"expressed doubt concerning the sufficiency of the evidence
supporting the [NCAA's] findings." Id . Nevertheless, "he
concluded that `given the terms of our adherence to the
29
NCAA we cannot substitute -- biased as we must be -- our
own judgment on the credibility of witnesses for that of the
infractions committee and the Council [of the NCAA]." Id. at
186-7 (emphasis added). He advised the University's
president that the NCAA's ultimatum that the University
sever all ties to its intercollegiate athletic program and
Tarkanian "or else," left the University with but three
alternatives. The University could
1. Reject the sanction requiring [disassociatio n] from
Coach Tarkanian from the athletic program and take
the risk of still heavier sanctions, e.g., possible extra
years of probation.
2. Recognize the University's delegation to the NC AA of
the power to act as ultimate arbiter of these matters,
thus reassigning Mr. Tarkanian from his present
position--though tenured and without adequate notice--
even while believing that the NCAA was wrong.
3. Pull out of the NCAA completely on the grounds that
[the University] will not execute what [it] hold[s] to be
their unjust judgments.
109 S.Ct. at 187 (emphasis added). Faced with an offer it
could not refuse, the University "accepted the second option
and notified Tarkanian that he was to be `completely
severed of any and all relations, formal or informal with the
University's Intercollegiate athletic program during the
period of the University's NCAA probation,' " Id., just as the
NCAA wished. Thereafter Tarkanian filed suit under 42
U.S.C. S 1983 against the UNLV arguing that its actions
had deprived him of property and liberty without due
process of law. He brought a second civil rights action
against the NCAA. The two suits were consolidated on
appeal to the Supreme Court. The Court concluded that
Tarkanian had no cause of action against the NCAA under
S 1983 because the alleged deprivations did not arise from
state action as required for liability under S 1983. The
Court stated:
it was UNLV, the state entity, that actually suspended
Tarkanian. Thus the question is not whether UNLV
participated to a critical extent in the NCAA's activities,
but whether UNLV's actions in compliance with the
30
NCAA rules and recommendations turned the NCAA's
conduct into state action.
Id. at 193. The Court held that it did not because "the
source of the legislation adopted by the NCAA is not Nevada
but the collective membership, speaking through an
organization that is independent of any particular state." Id.
The Court noted that the NCAA might still be a state actor
if "UNLV, by embracing the NCAA's rules, transformed them
into state rules and the NCAA into a state actor." Id.
However, the Court concluded that the nexus between
UNLV and the NCAA was not sufficient to cloak the NCAA
with the state authority vested in the University.
Contrary to being an agent of the state, the NCAA had
acted in opposition to, rather than in compliance with, the
wishes of the state agency. "During the several years that
the NCAA investigated the alleged violations, the NCAA and
UNLV acted more like adversaries than like partners . . .".
Id. at 196. Here, the majority concludes that "the Supreme
Court's decision in NCAA v Tarkanian, is instructive, as
that case makes clear that the NCAA does not `control' its
members." Maj. Op. at 8. However, Tarkanian proves the
reverse. The issue there was not whether the NCAA
controlled its members, but whether a state institution that
was a member of the NCAA controlled that organization to
the point of transforming the NCAA into a state actor. My
colleagues therefore look at Tarkanian through the wrong
end of the telescope. We are not focused upon a university's
control of the NCAA. Rather, we must focus upon the
NCAA's control of the colleges and universities that
comprise its membership. Tarkanian is compelling support
for the plaintiffs' argument that the NCAA does exercise
sufficient control over members' intercollegiate athletic
programs to subject it to Title VI. The fact that UNLV was
coerced into accepting the only viable option among the
three choices left it by the NCAA's ultimatum in that case
demonstrates just how much control the NCAA has over
member institutions' athletic programs. Although that
control may not be as great outside of Division I, the
control certainly seems pervasive insofar as those schools
that are subject to Proposition 16 are concerned.
31
Of course, I realize that the Court in Tarkanian
recognized that "UNLV could have retained its coach and
risked additional sanctions, perhaps even expulsion from
the NCAA, or it could have withdrawn voluntarily from the
Association," Id. It should come as no great surprise that it
did neither. That is consistent with the Court's conclusion
that the NCAA was not a state actor. However, it is also
consistent with, and I think illustrative of, the NCAA's near
total control of its members insofar as the amenities that
are tethered to Division I athletic dominance in a "money
sport" like college basketball. UNLV knew it had an
alternative to suspending Tarkanian. The University clearly
did not want to suspend him. The University thought that
doing so was unjust and unjustifiable. Yet, Tarkanian was
suspended just as the NCAA had commanded. The
Supreme Court expressed skepticism over whether those
circumstances established the NCAA's state authority, but
the Court clearly entertained the possibility that those
circumstances established the NCAA's control of UNLV's
athletic program.
Tarkanian argues that the power of the NCAA is so
great that the UNLV had no practical alternative to
compliance with its demands. We are not at all sure
this is true, but even if we assume that a private
monopolist can impose its will on a state agency by a
threatened refusal to deal with it, it does not follow
that such a private party is therefore acting under
color of state law.
In the final analysis the question is whether the
conduct allegedly causing the deprivation of a federal
right [can] be fairly attributable to the State. It would
be ironic indeed to conclude that the NCAA's imposition
of sanctions against UNLV -- sanctions that UNLV and
its counsel including the Attorney General of Nevada,
steadfastly opposed during protracted adversary
proceedings -- is fairly attributable to the State of
Nevada. It would be more appropriate to conclude that
UNLV has conducted its athletic program under color of
the policies adopted by the NCAA, rather than that
those policies were developed and enforced under color
of Nevada law.
32
Id. at 199. (emphasis added).
Therefore, I believe a fact finder could reasonably
conclude that the member institutions have ceded control
over their intercollegiate programs to the NCAA, and this
could subject the organization to Title VI. However, even if
the NCAA is not a controlling authority, I think a
reasonable inference could be drawn that the Fund is the
alter ego of the NCAA, and therefore the latter is actually a
recipient of Federal assistance under Title VI.
B. The NCAA's Control Over the Fund
It is undisputed that the NCAA created the Fund in an
attempt to insulate itself from being considered a recipient
of Federal assistance. Frank Marshall, the NCAA's Group
Executive Director for Finance and Business Services and
the Secretary/Treasurer of the Fund, testified at his
deposition as follows:
Over time the NCAA has wanted to insure that it is not
a recipient or a contractor of the federal government
and has tried to manage the NYSP program in
accordance with that. The NYSP Fund I believe was
created to be the grant recipient related to the NYSP
grant to help insure that distinction.
App. at 147a.
That motivation is not, by itself, a justification for viewing
the NCAA and the Fund as a single entity. However, I think
that a genuine question remains as to whether the Fund
has an existence separate and apart from the NCAA.
1. Arguments in favor of the Fund as alter ego
Plaintiffs argue the following to support their claim that
the Fund has no separate existence and is, therefore, the
alter ego of the NCAA:
- Pursuant to the Funds' byla ws, the Funds' Board of
Directors is composed solely of high-level NCAA employees
and the chair of the NCAA's NYSP Committee.
33
- All of the decisions regard ing the NYSP Fund's
operations and use of federal funds are made by the
NCAA's NYSP Committee.
- The NCAA's NYSP Committee h as final approval over
which colleges and universities may participate in the NYSP
as subgrantees and over which schools may continue to
participate in the program.
- The NCAA performs all of th e NYSP's administrative
services, pursuant to a contract, for annual consideration
of one dollar.
- The administrative services include handling the receipt
and the disbursement of the federal grant money through
a bank account that bears the name, "The National
Collegiate Athletic Association -- The National Youth Sports
Program."
- Upon dissolution of the Fun d, all of the Funds' assets
are to be transferred to the NCAA.
- The Fund does not observe s tandard corporate
formalities. It has no offices, no employees and no
letterhead. It has never had a Board of Directors meeting
nor has the Fund performed anything other than
ministerial functions since its inception.
- In 1993, the NCAA prepared and submitted form
guidelines to HHS on the Fund's behalf, which identified
the NCAA and not the Fund as the grantee. The guidelines
specified that the NCAA was responsible for the program's
direction and control.
- Four years after the Fund b ecame the named grantee,
HHS issued a press release identifying the NCAA as
recipient of the annual grant to operate the NYSP.
- In 1994, The Department of Health and Human
Service's Office of Civil Rights investigated allegations that
the NCAA engaged in discrimination in violation of Title IX
based on HHS' determination that the NCAA was the
recipient of federal funds.
34
2. Arguments Against Viewing the Fund
as an Alter Ego.
The NCAA disagrees. It argues that it successfully created
the Fund as a separate entity, and that there was nothing
wrong with doing so. In support of its assertion that the
Fund is a separate entity the NCAA submits:
- All of the federal funds re ceived by the Fund are sub-
granted to third parties, and none have ever been diverted
to or for the benefit of the NCAA.
- Since its creation, the NYS P Fund has remained
separate and distinct from the NCAA and the Fund's
separate and distinct character is evidenced by the fact that
the Fund contracts with third parties for services,
maintains its own insurance5 and Federal Employee
Identification Number ("E.I.N."), and has been sued in its
own name. In addition, the Fund's fiscal year runs from
June 1 through May 31, while the NCAA's fiscal year runs
from September 1 through August 31.
- The Fund pays individuals t o perform evaluations of
the program.
- The NCAA only provides free administrative services to
the Fund pursuant to a written contract.
- Although the NYSP Committee was created by the
NCAA and although the NYSP Committee makes final
determinations with respect to the disposition of funds, the
NYSP Committee is not controlled by the NCAA. According
to the NCAA, the NYSP Committee has no NCAA employees.
Rather, it is composed of representatives from five
participating NYSP institutions and three ex-officio
members, including two representatives from the federal
government.
_________________________________________________________________
5. This assertion is not entirely true. Although the Fund has been the
named recipient of federal funds since 1992, the named insured on the
insurance policies has not always been the Fund. From June 1, 1992 to
June 1, 1994, the named insured was "National Collegiate Athletic
Association d/b/a National Youth Sports Program." It is only from June
1, 1994, that the named insured has been "National Youth Sports
Program Fund."
35
- In 1989, the Department of Education's Office of Civil
Rights declined to investigate an allegation that Proposition
48 discriminated against students with learning disabilities
in violation of S 504 of the Rehabilitation Act of 1973 based
on its determination that the NCAA was not a recipient of
federal funds.
3. More Than One Inference Can Be Drawn From
Undisputed Facts.
Of course, this matter is before us on appeal from the
District Court's grant of summary judgment. The parties
did agree at oral argument that there are no genuine issues
of disputed material fact. Nevertheless, unlike my
colleagues, I do not think that the purported absence of
disputed facts necessarily warrants a grant of summary
judgment because the undisputed facts allow for more than
one interpretation of the relationship of the Fund to the
NCAA. Thus, I believe that summary judgment to either
party is inappropriate. See Nathanson v. Medical College of
Pennsylvania, 926 F.2d 1368, 1380 (3d Cir. 1991)
("Summary judgment may not be granted . . . if there is a
disagreement over what inferences can be reasonably
drawn from the facts even if the facts are undisputed.").
The conflict between Rule 6.01.1, on the one hand, and
Rules 1.2(b) and 2.1.1, on the other hand viewed in context
with the realities of the importance of NCAA membership to
Division I schools places the issue of the NCAA's control of
member institutions into a posture that can only be
resolved by a trier of fact. Similarly, issues remain as to
whether the Fund is an alter ego of the NCAA. For example,
both parties here rely on the undisputed fact that the NCAA
provides administrative services to the Fund for a nominal
yearly fee as support for their completely opposite
conclusions. Similarly, it is undisputed that the Fund's
Board of Directors is composed of high-level NCAA
employees, that the NYSP Committee is a NCAA committee,
and that the NYSP Committee makes final determinations
with respect to the disposition of the HHS grant. However,
it is also undisputed that no NCAA employees are members
of the NYSP Committee. Rather, the NYSP Committee is
comprised of representatives from five participating NYSP
36
institutions and three ex-officio members, including two
representatives from the federal government. I believe that
more than one conclusion can reasonably be drawn from
the undisputed facts. Consequently, I believe that the
matter should be remanded for trial.
III. Limitations Imposed Under The Spending Clause
If the NCAA is found to be a controlling authority of its
members, the NCAA may still not be subject to Title VI. As
the majority correctly notes, Title VI is Spending Clause
legislation. Maj. Op. at 20. Title VI's character as a "typical
`contractual' spending power provision," Guardians Ass'n v.
Civil Service Comm'n, 463 U.S. 582, 599 (1985), raises a
crucial question that was not addressed by the District
Court. The majority claims that there is "no contractual
privity between the Departments of Health and Human
Services and Education and the NCAA with respect to
Federal financial assistance to NCAA members." Maj. Op. at
20. However, I do not think we can jump to that conclusion
without a proper privity analysis, and the District Court
never conducted one. Moreover, if a fact finder concludes
that the Fund is merely an alter ego of the NCAA, the
privity hurdle may be cleared.6 Similarly, if member
institutions have ceded control of their programs to the
NCAA, one could logically conclude that Congress intended
to include the NCAA (as the authority actually controlling
the programs receiving the Federal assistance) within the
_________________________________________________________________
6. Under the traditional application of the alter ego doctrine, corporate
form may be disregarded when the corporation is "the mere
instrumentality or business conduit of another corporation or person." 1
FLETCHER CYCLOPEDIA OF PRIVATE CORP. S 41.10(perm. ed. rev. vol. 1999).
"The effect of applying the alter ego doctrine . . . is that the
corporation
and the person who dominates it are treated as one person, so that any
act committed by one is attributed to both, and if either is bound, by
contract, judgment or otherwise, both are equally bound. . . ." Dudley v.
Smith, 504 F.2d 979, 982 (5th Cir. 1974) (citation omitted) (emphasis
added). Thus, I believe it is an open question as to whether the program-
specific limitation of the regulations can reach the NCAA if the Fund is
truly its alter ego and was established solely to provide interference for
an end run around Title VI. See Maj. Op. at 17.
37
contractual obligations required of a grantee under Title VI.7
I do not think that Congress intended to enter into
contractual obligations with colleges and universities in
return for giving Federal assistance, and then allow those
same institutions to keep the assistance while evading their
contractual obligations by turning control of their
intercollegiate athletics over to a purported insulated third
party.
I agree that Spending Clause jurisprudence dictates that
we should be "circumspect in imposing Title VI obligations
on an entity which is not a direct recipient of Federal
financial assistance." Maj. Op. at 20. However, that does
not preclude our requiring the District Court to undertake
a privity analysis after resolution of the competing
inferences arising from the undisputed facts to determine
whether the NCAA's own conduct or structure subjects it
the restrictions of Title VI. Moreover, if the Fund is merely
the alter ego of the NCAA the latter may be the recipient,
and we ought not treat the Fund as a separate entity.
Accordingly, I conclude that the only appropriate course
here is to reverse the District Court's grant of summary
judgment, and remand the matter for trial.
IV. CONCLUSION
For the foregoing reasons, I respectfully dissent from the
majority opinion and would, instead, remand for resolution
of the competing inferences that can arise from the
undisputed facts. Once the inferences are drawn, a proper
analysis of the NCAA's privity of contract under the
Spending Clause can proceed.
_________________________________________________________________
7. In Paralyzed Veterans of Am, when considering the application of the
Spending Clause to the limitations imposed upon recipients of Federal
assistance under S 504 of the Rehabilitation Act, the Supreme Court
stated: "[b]y limiting coverage to recipients, Congress imposes the
obligations of S 504 upon those who are in a position to accept or reject
those obligations as a part of the decision whether or not to `receive'
federal funds." Id. at 606.
38
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
39