Deppe v. Nat'l Collegiate Athletic Ass'n, 17-1711

• Citation: 893 F.3d 498
• Decision Date: 25 June 2018
• Docket Number: No. 17-1711,17-1711
• Parties: Peter DEPPE, on behalf of himself and all others similarly situated, Plaintiff–Appellant, v. NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, Defendant–Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

893 F.3d 498

Peter DEPPE, on behalf of himself and all others similarly situated, Plaintiff–Appellant,

v.NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, Defendant–Appellee.

No. 17-1711

United States Court of Appeals, Seventh Circuit.

Argued September 13, 2017

Decided June 25, 2018

Elizabeth Anne Fegan, Attorney, Hagens Berman Sobol Shapiro, LLP, Chicago, IL, for Plaintiff–Appellant.

Gregory L. Curtner, Attorney, Riley Safer Holmes & Cancila LLP, Ann Arbor, MI, Kathy L. Osborn, Attorney, Daniel Pulliam, Attorney, Faegre Baker Daniels LLP, Indianapolis, IN, for Defendant–Appellee.

Before Bauer, Rovner, and Sykes, Circuit Judges.

Sykes, Circuit Judge.

This case raises an antitrust challenge to the NCAA’s¹ "year in residence" rule, which requires student-athletes who transfer to a Division I college to wait one full academic year before they can play for their new school. A Division I football player filed a class-action lawsuit alleging that the rule is an unlawful restraint of trade in violation of § 1 of the Sherman Act. The district court dismissed the suit on the pleadings.

We affirm. The year-in-residence requirement is an eligibility rule clearly meant to preserve the amateur character of college athletics and is therefore presumptively procompetitive under NCAA v. Board of Regents of University of Oklahoma , 468 U.S. 85, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984), and Agnew v. NCAA , 683 F.3d 328 (7th Cir. 2012).

I. Background

The case comes to us from a dismissal on the pleadings, see FED. R. CIV. P. 12(b)(6), so we take the following factual account from the complaint, accepting the allegations as true. Peter Deppe was a star punter in high school, and several schools recruited him to play college football. He chose Northern Illinois University ("NIU"), a Division I school, and enrolled in June 2014 as a preferred walk-on. In other words, NIU invited him to join the football team but did not offer him an athletic scholarship. Deppe decided to "red shirt" his first year; this meant that he practiced with the team during the 2014 season but did not compete, and the clock did not run on his four years of NCAA athletic eligibility.

Shortly after Deppe enrolled, an NIU football coach told him that he would start receiving an athletic scholarship in January 2015. That coach soon left NIU, however, and the head football coach later informed Deppe that he would not receive the scholarship after all. Sometime in 2015 NIU signed another punter, reducing Deppe’s chances of getting playing time or receiving an athletic scholarship, so in the fall of 2015 he started shopping around for a new football program.

The University of Iowa, another Division I school, was interested. Coaches at Iowa told Deppe they wanted him to join the team if he would be eligible to compete during the 2016–2017 season. Deppe’s parents asked the NCAA about their son’s eligibility to play. The NCAA responded that under its year-in-residence rule, Deppe would be ineligible to compete for one year following his transfer.

The year-in-residence bylaw appears in the eligibility section of the NCAA Division I Manual . It provides:

14.5.5.1 General Rule. A transfer student from a four-year institution shall not be eligible for intercollegiate competition at a member institution until the student has fulfilled a residence requirement of one full academic year (two full semesters or three full quarters) at the certifying institution.

NCAA Division I Manual , 183, http://www.ncaapublications.com/productdownloads/D118.pdf.

The NCAA permits a one-time transfer with immediate athletic eligibility in certain limited circumstances. The so-called one-time transfer exception is available to a Division I football player only if he transfers from a school in the Football Bowl Subdivision to a school in the Football Championship Subdivision with two or more seasons of athletic eligibility remaining, or if he transfers from a Football Championship school that offers athletic scholarships to a Football Championship school that does not. Id. , 184–85, § 14.5.5.2.10. The exception was unavailable to Deppe because he intended to transfer from one Football Bowl school to another.

In addition, a player who transfers due to difficult personal or family circumstances or other extenuating circumstances may apply for a waiver of the NCAA’s requirement that a student-athlete’s four years of playing time be completed in five calendar years. Id. , 79, § 12.8.1; id. , 81, § 12.8.1.7; id. , 88–89, § 12.8.6. The NCAA informed Deppe that if he wanted to try to obtain a waiver, the school to which he planned to transfer would have to initiate the process on his behalf. In November 2015 the University of Iowa granted Deppe academic admission. But a few days later, Iowa football staff notified him that the team had decided to pursue another punter who had immediate eligibility and the school would not initiate the waiver process for him.

Deppe sued the NCAA on behalf of himself and a proposed class alleging that two of the Association’s bylaws violate § 1 of the Sherman Act: the year-in-residence requirement, and a rule capping the number of athletic scholarships a school can grant each year. He dropped his challenge to the scholarship cap; only the year-in-residence rule remains at issue. Deppe argued that the bylaw is an unlawful restraint of trade and that student-athletes would receive more generous athletic scholarships if they could transfer more freely.

The NCAA moved to dismiss the complaint under Rule 12(b)(6), arguing that the year-in-residence bylaw is an eligibility rule and thus is presumptively procompetitive under Board of Regents and Agnew and need not be tested for anticompetitive effect under a full rule-of-reason analysis. The district judge agreed and dismissed the case.

II. Discussion

We review the judge’s dismissal order de novo. Tagami v. City of Chicago , 875 F.3d 375, 377 (7th Cir. 2017). Section 1 of the Sherman Act declares illegal "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce." 15 U.S.C. § 1. To prevail in a suit alleging a violation of § 1, the plaintiff must prove three elements: "(1) a contract, combination, or conspiracy; (2) a resultant unreasonable restraint of trade in [a] relevant market; and (3) an accompanying injury." Agnew , 683 F.3d at 335 (quoting Denny’s Marina, Inc. v. Renfro Prods., Inc. , 8 F.3d 1217, 1220 (7th Cir. 1993) ). This case centers on the second element—specifically, whether the NCAA’s year-in-residence bylaw is an unreasonable restraint of trade.

The Supreme Court considered the antitrust implications of NCAA regulations in Board of Regents . The case raised a Sherman Act challenge to the Association’s restrictions on televising college football games. 468 U.S. at 91–92, 104 S.Ct. 2948. The details are not important here; for our purposes, it’s enough to note that the Court found the restrictions unlawful under § 1 of the Act. Id. at 120, 104 S.Ct. 2948. Along the way to that holding, the Court had this to say about antitrust challenges to the NCAA’s bylaws more generally:

It is reasonable to assume that most of the regulatory controls of the NCAA are justifiable means of fostering competition among amateur athletic teams and therefore procompetitive because they enhance public interest in intercollegiate athletics. The specific restraints on football telecasts that are challenged in this case do not, however, fit into the same mold as do rules defining the conditions of the contest, the eligibility of participants, or the manner in which members of a joint enterprise shall share the responsibilities and the benefits of the total venture.

Id. at 117, 104 S.Ct. 2948. The Court closed its decision by observing that "[t]he NCAA plays a crucial role in the maintenance of a revered tradition of amateurism in college sports" and "needs ample latitude" to play that role, and that "the preservation of the student-athlete in higher education adds richness and diversity to intercollegiate athletics and is entirely consistent with the goals of the Sherman Act." Id. at 120, 104 S.Ct. 2948.

In Agnew we read this language from Board of Regents to mean that although the Sherman Act applies to the NCAA, "most [of the Association’s] regulations will be a ‘justifiable means of fostering competition among amateur athletic teams[ ]’ and are therefore procompetitive." 683 F.3d at 341 (quoting Bd. of Regents , 468 U.S. at 117, 104 S.Ct. 2948 ). We also understood these passages as "a license to find certain NCAA bylaws that ‘fit into the same mold’ as those discussed in Board of Regents to be procompetitive ... at the motion-to-dismiss stage" without the need for analysis under the rule-of-reason framework. Id. (internal citation omitted) (quoting Bd. of Regents , 468 U.S. at 117, 110 n.39, 104 S.Ct. 2948 ). Accordingly, we held that "the first—and possibly only—question to be answered when NCAA bylaws are challenged is whether the NCAA regulations at issue are of the type that have been blessed by the Supreme Court, making them presumptively procompetitive." Id.

Agnew involved a challenge to the NCAA’s scholarship cap and its prohibition of multiyear scholarships. Id. at 332. Extrapolating from Board of Regents , we distilled the following legal standard for determining whether a § 1 challenge in this context may go forward or should be dismissed on the pleadings: an NCAA bylaw is presumptively procompetitive when it is "clearly meant to help maintain the ‘revered tradition of amateurism in college sports’ or the ‘preservation of the student-athlete in higher education.’ " Id. at 342–43 (quoting Bd. of Regents , 468 U.S. at 120, 104 S.Ct. 2948 ). On the other hand, "if a regulation is not, on its face, helping to ‘preserve a tradition that might otherwise die,’ " no such presumption is warranted. Id. at 343 (quoting Bd. of Regents , 468 U.S. at 120, 104 S.Ct. 2948 ).

Importantly here, we also explained that ...