Corman v. Nat'l Collegiate Athletic Ass'n

• Decision Date: 04 September 2013
• Citation: 74 A.3d 1149
• Parties: Jake CORMAN, in his official capacity as Senator from the 34th Senatorial District of Pennsylvania and Chair of the Senate Committee on Appropriations; and Robert M. McCord, in his official capacity as Treasurer of the Commonwealth of Pennsylvania, Plaintiffs v. The NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, Defendant.
• Court: Pennsylvania Commonwealth Court

74 A.3d 1149

Jake CORMAN, in his official capacity as Senator from the 34th Senatorial District of Pennsylvania and Chair of the Senate Committee on Appropriations; and Robert M. McCord, in his official capacity as Treasurer of the Commonwealth of Pennsylvania, Plaintiffs

v.The NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, Defendant.

Commonwealth Court of Pennsylvania.

Argued June 19, 2013.

Decided Sept. 4, 2013.

Christopher B. Craig, Chief Counsel, Harrisburg, for Plaintiff Robert M. McCord.

Matthew H. Haverstick, Philadelphia, for Plaintiff Jake Corman.

Everette C. Johnson, Jr., Washington, DC, for Defendants.

BEFORE: PELLEGRINI, President Judge, McGINLEY, Judge, LEADBETTER, Judge, COHN JUBELIRER, Judge, SIMPSON, Judge, McCULLOUGH, Judge, and COVEY, Judge.

OPINION BY Judge COVEY.

Defendant, the National Collegiate Athletic Association (NCAA) preliminarily objects to the Second Amended Complaint filed by Plaintiffs, Senator Jake Corman (Senator Corman) and Treasurer Robert McCord (Treasurer McCord) (collectively, Plaintiffs), in this Court's original jurisdiction seeking injunctive and declaratory relief against the NCAA. Senator Corman represents the 34th Senatorial District of Pennsylvania in the General Assembly, and is Chair of the Senate Appropriations Committee. Plaintiffs' Second Amended Complaint at ¶ 2. Treasurer McCord is Treasurer of the Commonwealth, a constitutionally-established elected office. Plaintiffs' Second Amended Complaint at ¶ 3. The NCAA is an unincorporated association headquartered in Indianapolis, Indiana, which has members throughout the United States (U.S.) and the Commonwealth. Plaintiffs' Second Amended Complaint at ¶ 5.

Pennsylvania State University (PSU) is a “state-related institution” ¹ originally established as a “land grant” university under the federal Morrill Act of 1862 ² for purposes of teaching agriculture and mechanical arts. The General Assembly accepted the land grant pursuant to the act entitled “An Act Donating Lands to the Several States and Territories which may Provide Colleges for the Benefit of Agriculture and the Mechanic Arts” (1863 Act).³

On July 2, 2012, the Governor of Pennsylvania signed into law the act entitled “An Act to Accept Public Lands, by the United States, to the Several States, for the Endowment of Agricultural Colleges” (Act 10A) as a supplement to the 1863 Act.⁴ Pursuant to Act 10A, the Pennsylvania General Assembly appropriated $214,110,000.00 to PSU for general financial support for the fiscal year July 1, 2012 through June 30, 2013. Plaintiffs' Second Amended Complaint at ¶ 44. Section 5 of Act 10A grants the General Assembly the right to “full, complete and accurate information as may be required” concerning PSU and its agents' expenditures. Plaintiffs' Second Amended Complaint, Ex. E at 3.

On July 12, 2012, Louis J. Freeh issued a report (Freeh Report) finding that PSU's former President, various staff members of PSU's athletic department and other senior PSU officials deliberately ignored multiple credible child sexual abuse allegations beginning in the 1990s against former PSU assistant football coach Gerald A. Sandusky. Plaintiffs' SecondAmended Complaint at ¶¶ 6–9. On July 23, 2012, under threat of being excluded from participation in NCAA programs, PSU executed a Binding Consent Decree Imposed by the National Collegiate Athletic Association and Accepted by the Pennsylvania State University (Consent Decree) with the NCAA that required PSU, inter alia, to pay a $60 million fine in $12 million minimum annual installments beginning in 2012 over five years “into an endowment for programs preventing child sexual abuse and/or assisting the victims of child sexual abuse.” Plaintiffs' Second Amended Complaint at ¶ 14 (quoting Ex. A at 5).

The NCAA established its Child Sexual Abuse Endowment Task Force (Task Force) for the purpose of developing standards for the expenditure of the fine. Plaintiffs' Second Amended Complaint at ¶ 18. At the end of 2012, the Task Force had not yet established its endowment, thus, the NCAA requested PSU to set aside the initial $12 million fine due in 2012. March 1, 2013 Declaration of Kathleen T. McNeely in Support of the Defendants' Application for Relief (McNeely Declaration),⁵ Plaintiffs' Br., Ex. C at ¶ 5. PSU placed the $12 million into a money market account on December 20, 2012. Id.

On January 4, 2013, Senator Corman filed a complaint with this Court against the NCAA and Timothy P. White (White), in his official capacity as the Task Force Chair. Senator Corman also filed an application for preliminary injunction requesting that the NCAA and White be enjoined from disbursing any of PSU's initial $12 million payment. Based upon a Joint Stipulation wherein the NCAA stated that it did not immediately intend to disburse the fine, and agreed not to do so without 60 days' prior notice, this Court on January 16, 2013, ordered the preliminary injunction application stayed. The NCAA and White filed preliminary objections to Senator Corman's complaint.

On February 20, 2013, the Institution of Higher Education Monetary Penalty Endowment Act (Endowment Act) ⁶ was signed into law and became effective immediately. Section 3 of the Endowment Act requires that “[i]f an institution of higher education pays a monetary penalty [of $10 million or more] pursuant to an agreement entered into with a governing body,” ⁷ said penalty shall be paid into the Institution of Higher Education Monetary Endowment Trust Fund (Fund) maintained as a separate trust fund in the State Treasury. 24 P.S. § 7503(a), (b)(1). The Commonwealth's Treasurer is the sole custodian of all monies deposited into the Fund. 24 P.S. § 7503(b)(1). The Endowment Act further mandates that unless otherwise stated in the agreement, the Fund may only be used within the Commonwealth to benefit Commonwealth residents. 24 P.S. § 7503(b)(4).

Also on February 20, 2013, Senator Corman filed an amended complaint against the NCAA and White, wherein he renewed his application for preliminary injunctive relief to compel the NCAA to pay the first installment of the $60 million fine into the Fund. In response, the NCAA moved that this Court hold the preliminary injunction application in abeyance or enter a scheduling order that would permit the NCAA to file preliminary objections to the amended complaint because the NCAA did not yet have physical possession of the fine money. Senator Corman opposed the NCAA's motion. By March 13, 2013 order, this Court stayed the renewed application for a preliminary injunction and scheduled a status conference. The NCAA filed preliminary objections to the amended complaint.

On March 27, 2013, Senator Corman, joined by Treasurer McCord, filed a Second Amended Complaint against the NCAA seeking declaratory and injunctive relief on the basis that the PSU fine is subject to the Endowment Act and the NCAA must deposit it into the Fund. In Count I of the Second Amended Complaint, Plaintiffs aver that the NCAA violated the Endowment Act.⁸

The NCAA filed preliminary objections to the Second Amended Complaint. On June 19, 2013, the parties presented argument on the preliminary objections to this Court en banc. On June 20, 2013, Attorney General Kathleen G. Kane sent correspondence to Commonwealth Court President Judge Dan Pellegrini, stating in relevant part:

As you are likely aware, [the Office of Attorney General (“OAG”)] is currently handling certain criminal prosecutions arising out of the Jerry Sandusky child sexual abuse scandal. To avoid any potential conflicts, immediately prior to my taking office, the OAG and the Governor's Office of General Counsel (“OGC”) agreed—pursuant to the Commonwealth Attorneys Act ⁹—that the OAG would continue to handle criminal matters relating to the Sandusky scandal and that the OGC would handle any civil matters relating to the Sandusky scandal. Accordingly, the OAG did not participate in Governor Corbett's antitrust action against the NCAA in federal court. For the same reason, the OAG declined to participate in the action brought by Senator Corman and Treasurer McCord against the NCAA in Commonwealth Court. The Treasurer, using his independent authority, has historically represented his office in matters which are the subject of litigation; the Treasurer is not obligated to request the representation of the OAG, nor is the OAG required, pursuant to the Commonwealth Attorney's [sic] Act, to provide representation on behalf of the Treasurer.

June 20, 2013 Attorney General letter (AG Letter). On June 21, 2013, this Court ordered the parties to address the standing of Treasurer McCord in light of the AG's Letter, to which they responded.¹⁰

The issues currently before this Court are: (1) whether Plaintiffs have standing to bring the instant action; (2) whether PSU is an indispensable party whose absence from this litigation deprives the Court of subject matter jurisdiction; (3) whether Count I of Plaintiffs' Second Amended Complaint states a claim upon which relief may be granted; and, (4) whether the Endowment Act and the proffered construction of Act 10A violate the U.S. and Pennsylvania Constitutions.

This Court's review of preliminary objections is limited to the pleadings. Pennsylvania State Lodge, Fraternal Order of Police v. Dep't of Conservation & Natural Res., 909 A.2d 413 (Pa.Cmwlth.2006), aff'd,592 Pa. 304, 924 A.2d 1203 (2007).

[This Court is] required to accept as true the well-pled averments set forth in the ... complaint, and all inferences reasonably deducible therefrom. Moreover, the [C]ourt need not accept as true conclusions of law, unwarranted inferences from facts, argumentative allegations, or expressions of opinion. In order to sustain preliminary objections, it must appear with certainty that the law will not permit recovery, and, where any doubt exists as to whether the preliminary objections should be sustained, the doubt must be resolved in favor of overruling the...