McCormack v. National Collegiate Athletic Ass'n

• Decision Date: 01 June 1988
• Docket Number: No. 87-2802,87-2802
• Citation: 845 F.2d 1338
• Parties: , 1988-1 Trade Cases 68,048, 46 Ed. Law Rep. 562 David R. McCORMACK, et al., Plaintiffs-Appellants, v. NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1338

845 F.2d 1338

56 USLW 2734, 1988-1 Trade Cases 68,048,

46 Ed. Law Rep. 562

David R. McCORMACK, et al., Plaintiffs-Appellants, v. NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, Defendant-Appellee.

No. 87-2802.

United States Court of Appeals, Fifth Circuit.

June 1, 1988.

David R. McCormack, pro se.

Robert M. Roller, Austin, Tex., George H. Gangware, Kansas City, Mo., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before RUBIN and POLITZ, Circuit Judges, and DUHE ^*, District judge.

ALVIN B. RUBIN, Circuit Judge:

Finding that the football progam of Southern Methodist University had exceeded restrictions on compensation for student athletes, the National Collegiate Athletic Association suspended the program for the 1987 season and imposed other penalties. A group of SMU alumni, football players, and cheerleaders challenges that action, contending that the NCAA violated the antitrust and civil rights laws by promulgating and enforcing rules restricting the benefits that may be awarded student athletes. While we give the loyal students and alumni credit for making a college try, we affirm the judgment dismissing their complaint, for we hold that some of the plaintiffs lack standing and the others have failed to state a claim for which relief can be granted to them.

I.

The NCAA found that Southern Methodist University had violated its rules limiting compensation for football players to scholarships with limited financial benefits. It accordingly suspended the SMU football program for the entire 1987 season and imposed restrictions on it for the 1988 season. David R. McCormack, an attorney and SMU alumnus, then filed this class action suit on behalf of SMU "as an institution," its graduates and current students, several members of its football team, and several cheerleaders.

The complaint, as amended, charges antitrust violations in that (1) the restrictions on compensation to football players constitute illegal price-fixing in violation of the Sherman Act and (2) the suspension of SMU constitutes a group boycott by other NCAA members. The suspension, the complaint alleges, has destroyed the football players' careers and caused the cheerleaders "considerable emotional anguish and distress" by depriving them of the opportunity to conduct their cheerleading activities at games.

In addition, all of the plaintiffs assert that the NCAA has repeatedly imposed penalties on the college football program of SMU in unequal fashion and without due process of law, thereby damaging "the image of the University as an academic institution," endangering "[its] existence ... as an academic institution," and causing it to lose revenues from donors. The NCAA's actions, it is alleged, have deprived McCormack and others of "their right to associate together in support of the University by attendance at the football games of the University," while the football players have been "forced to discontinue their athlete-academic duties" at SMU and the cheerleaders have lost the opportunity to lead cheers at football games.

The plaintiffs seek (1) injunctive relief; (2) for the injuries suffered by the football players, treble money damages; (3) for the price-fixing violations, $20 million "in the name of the University and all graduates and students thereof," to be trebled after judgment; (4) for the group boycott, $50 million trebled to $150 million; and (5) for the civil rights violations, an additional $20 million payable to SMU.

McCormack's first complaint named only himself as representative of the class of alumni and students, and it asserted only the group boycott and civil rights claims. The NCAA moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim for which relief could be granted. McCormack then amended his complaint to add the football players and cheerleaders as plaintiffs and the price-fixing allegations as a theory of relief, without, however, altering his allegations in any other material way. The district court, without opinion, dismissed the complaint for failure to state a claim for which relief could be granted.

II.

Many of the claims the plaintiffs assert are SMU's, so we first determine whether they can represent the University's interests. The Constitution limits the jurisdiction of federal courts to cases and controversies. ¹ Even when a plaintiff meets constitutional requirements for standing to sue, he may still lack standing under prudential principles, one of which limits "access to the federal courts to those litigants best suited to assert a particular claim." ² A plaintiff generally must assert his own legal rights and interests, not those of third parties. ³

SMU is a legal entity, but it has not appeared in this action, and the plaintiffs do not contend that they are authorized to represent it. They attempt to analogize themselves to shareholders bringing a derivative suit, but, unlike shareholders, they own no interest in SMU. Moreover, they have not followed the federal and state rules governing derivative suits. ⁴ Each of these provisions requires the derivative plaintiff to allege "with particularity" his efforts to convince the corporation to sue or his reasons for not making such efforts, neither of which the plaintiffs have alleged.

The general rule against third-party standing will often not bar a claim if the plaintiff himself has suffered a cognizable injury and the third party for some reason cannot assert its own rights. ⁵ We find no indication, however, that SMU is disabled from pressing its rights. The plaintiffs, therefore, may not assert the claims of the University in a Sec. 1983 or an antitrust action. For these reasons, all claims asserted on behalf of SMU were properly dismissed.

III.

Not every person who complains of injury as a result of violation of the antitrust laws has standing to assert claims under the statutes. Only a person injured "in his business or property" may seek damages for violation of the antitrust laws, ⁶ and only a person who can show a significant threat of such injury from impending violations can obtain injunctive relief. ⁷ Even a plaintiff injured in his business or property must, in order to sue for damages, show "antitrust injury," that is, "injury of the type the antitrust laws were designed to prevent and that flows from that which makes defendants' acts unlawful." ⁸ Finally, even if the plaintiff meets these requirements, the court must consider whether he is a "proper plaintiff" to sue for damages, examining such factors as (1) whether the plaintiff's injuries or their causal link to the defendant are speculative, (2) whether other parties have been more directly harmed, and (3) whether allowing this plaintiff to sue would risk multiple lawsuits, duplicative recoveries, or complex damage apportionment. ⁹

Neither McCormack nor any of the cheerleaders satisfies these requirements. The cheerleaders assert only the loss of the opportunity to lead cheers, which clearly does not qualify as an injury to business or property. The only injuries McCormack alleges are the devaluation of his degree, the loss of the opportunity to see football games, and the damage to his contact and association with current and prospective student athletes derived from his membership in the Mustang Club, "an athletic fund-raising organization." Of these three, only the first is even arguably an injury to business or property. Although the Supreme Court has emphasized that "property" in this context "has a naturally broad and inclusive meaning," ¹⁰ we cannot conclude that the devaluation of McCormack's degree is an injury for which the antitrust laws were designed to afford a remedy. The alleged connection, moreover, between the NCAA's actions and the devaluation of his degree presents the sort of "speculative" and "abstract" causal chain that the Supreme Court has held insufficient to support antitrust standing. ¹¹

The claims of the football-player plaintiffs rest on a different basis. They contend that they have suffered an injury to their business, playing football: that they in effect sell their labor to SMU and that the NCAA rules restrict the amount that SMU or any other competing university can pay them, thus eliminating their opportunity to offer those services to the highest bidder. As we held in Tugboat, Inc. v. Mobile Towing Co., ¹² the selling of one's labor is a commercial interest.

Even so, employees generally are not "proper plaintiffs" to sue for injuries their employer suffers as the target of antitrust violations, because injuries to the employees are indirect. ¹³ Yet, the District of Columbia Circuit has noted, "[e]mployees in professional sports have surmounted the standing inquiry simply because their injuries have stemmed at least in part from restraints in the labor market itself." ¹⁴ We drew a similar distinction in Tugboat, holding that employees could not sue based solely on the damage they suffered as a result of their employers' economic injuries, but only if the alleged violations aimed at the employees themselves. ¹⁵ The eligibility rules aim at the football players, for their very purpose is to restrict student athletes' compensation.

The Supreme Court taught, however, in Associated General Contractors of Cal. v. Cal. State Council of Carpenters ¹⁶ that a plaintiff does not have standing to sue for damages simply because he is injured by an antitrust conspiracy aimed at him. The Court there relied on other factors--the remoteness of injury, the existence of parties more directly harmed, and the risk of duplicative or complicated suits--in concluding that construction unions were not "proper plaintiffs" to sue a group of contractors who, the unions alleged, had coerced landowners and other contractors to hire non-union subcontractors and thereby injured the unions. ¹⁷

The alleged violations in Associated General...