George v. Nat'l Collegiate Athletic Ass'n

• Citation: 945 N.E.2d 150
• Decision Date: 21 April 2011
• Docket Number: No. 94S00–1010–CQ–544.,94S00–1010–CQ–544.
• Parties: Tom GEORGE, Chris Vitron, Lori Chapko, and Edward Snead, on Behalf of Themselves and All Others Similarly Situated, Appellants (Plaintiffs below),v.NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, Appellee (Defendant below).
• Court: Supreme Court of Indiana

945 N.E.2d 150

Tom GEORGE, Chris Vitron, Lori Chapko, and Edward Snead, on Behalf of Themselves and All Others Similarly Situated, Appellants (Plaintiffs below),

v.NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, Appellee (Defendant below).

No. 94S00–1010–CQ–544.

Supreme Court of Indiana.

April 21, 2011.

Certified Question from the United States Court of Appeals for the Seventh Circuit, No. 09–3667; The Honorable Richard D. Cudahy, Circuit Judge, The Honorable Michael S. Kanne, Circuit Judge, The Honorable John W. Darrah, District Judge.^*William N. Riley, Joseph N. Williams, Brad A. Catlin, Indianapolis, IN, Leonard W. Aragon, Robert B. Carey, Phoenix, AZ, Attorneys for Appellants.George T. Patton, Jr., Peyton L. Berg, Indianapolis, IN, Douglas N. Masters, Chicago, IL, Michael Mallow, Benjamin King, Los Angeles, CA, Attorneys for Appellee.

SULLIVAN, Justice.

The NCAA randomly allocated championship sporting event tickets to applicants who had offered to purchase tickets by submitting the face value of the tickets along with a nonrefundable handling fee. The face-value amount (but not the handling fee) was refunded to applicants whose offers were not accepted. The NCAA's ticket-allocation process was not an illegal lottery under Indiana law because no prize was awarded to those applicants who received the opportunity to purchase tickets.

Background

The National Collegiate Athletic Association (“NCAA”) is an organization through which the nation's colleges and universities govern their athletic programs. Many NCAA competitions have gained widespread popularity, particularly the women's and men's NCAA Division I basketball tournaments and the NCAA Division I men's ice-hockey championship tournament. Due to both the popularity of such events and the limited seating in sports venues, demand for tickets often exceeds supply.

To distribute tickets to these events, the NCAA developed the following ticket-distribution system. The NCAA sets the face value of the tickets to its events many months before the event. Would-be ticket purchasers submit to the NCAA an application offering to purchase tickets for a particular event. Each applicant may submit only one application, but, for at least some events, an applicant can submit multiple offers on a single application, though only one offer can be accepted. When submitting an application, the applicant must submit the face value of the tickets along with a nonrefundable handling or service fee¹ for each offer. When demand exceeds supply, the NCAA uses a random-selection program to accept offers from the pool of offers. Applicants whose offers are accepted receive event tickets via overnight delivery. Applicants whose offers are rejected receive refunds of the ticket price, though it may take several weeks or months. No applicant receives a refund of the handling fee.

This ticket-allocation plan was used for the 2009 NCAA Men's Final Four, the championship round of the men's basketball tournament. The NCAA set the face value of the tickets at $150 each, and tickets were sold in pairs. Fewer than 5,000 tickets were released for sale and several hundred thousand people submitted offers. Each applicant could submit up to 10 offers to purchase a pair of tickets, but if one offer was accepted, the remaining offers were rejected. A handling fee of $6 was charged for each offer.² If an applicant's offer was accepted, he or she would receive game tickets via overnight mail, and if that applicant had made more than one offer, he or she also received a refund of the total ticket price for the other (rejected) offers,³ though it would arrive several months later. Applicants whom had all their offers rejected also received refunds of the total ticket price offered. No one received a refund of the handling fees.

The plaintiffs in this case submitted offers to the NCAA to purchase tickets for the NCAA Division I men's basketball tournament, but their offers were not accepted. They submitted their applications knowing both that the handling fee was nonrefundable and that there was a possibility demand would exceed supply and that the random-selection process would be utilized. Dissatisfied with not being able to purchase tickets, the plaintiffs filed suit against the NCAA and Ticketmaster in federal court for the Central District of California. Ticketmaster settled with the plaintiffs and venue was transferred to the Southern District of Indiana.

The plaintiffs alleged several claims, but the underlying basis for all of their claims is the allegation that the NCAA's ticket-distribution system constitutes an unlawful lottery under Indiana law. Judge Lawrence dismissed the complaint with prejudice for failure to state a claim, holding that even if the NCAA was operating an illegal lottery under Indiana law, the plaintiffs' claims were barred by the equitable doctrine of in pari delicto because the plaintiffs were aware of the essential features of the process when they applied for tickets. George v. Nat'l Collegiate Athletic Ass'n, No. 1:08–cv–1684–WTL–JMS, 2010 U.S. Dist. LEXIS 113997, 2009 WL 6965794 (S.D.Ind. Sept. 25, 2009).⁴ In other words, assuming the ticket-distribution process was an unlawful lottery, the plaintiffs could not seek help from the court because they knowingly participated in it.

On appeal, a panel of the United States Court of Appeals for the Seventh Circuit, in a 2–1 decision, reversed. George v. Nat'l Collegiate Athletic Ass'n ( George I), 613 F.3d 658 (7th Cir.2010). Over the dissent of Judge Cudahy, the majority held that the ticket-distribution process was a lottery under Indiana law; that the process did not fall within the statutory exception for bona fide business transactions; and that the in pari delicto defense was not available because the NCAA had a greater degree of fault than the plaintiffs. Id. at 661–64.

The same panel, however, granted the NCAA's petition for rehearing and vacated its prior decision. George v. Nat'l Collegiate Athletic Ass'n ( George II), 623 F.3d 1135 (7th Cir.2010) (per curiam). It noted both that the question whether this distribution process was a lottery under Indiana law “is a close one” and that its decision “could have far-reaching effects.” Id. at 1137. Pursuant to Indiana Appellate Rule 64, it certified the following three questions for our consideration:

1. Do the plaintiffs' allegations about the NCAA's method for allocating scarce tickets to championship tournaments describe a lottery that would be unlawful under Indiana law?

2. If the plaintiffs' allegations describe an unlawful lottery, would the NCAA's method for allocating tickets fall within the Ind.Code § 35–45–5–1(d) exception for “bona fide business transactions that are valid under the law of contracts”?

3. If the plaintiffs' allegations describe an unlawful lottery, do plaintiffs' allegations show that their claims are subject to an in pari delicto defense as described in Lesher [ v. Baltimore Football Club], 496 N.E.2d [785,] 790 n. 1 [ (Ind.Ct.App.1986) ], and Swain v. Bussell, 10 Ind. 438, 442 (1858)?

Id. at 1137–38.

We agreed to consider the questions by order dated October 29, 2010, Ind. Appellate Rule 64(B), and following the completion of supplemental briefing, held oral argument on December 22, 2010.

Discussion

The underlying basis of the plaintiffs' claims is the allegation that the NCAA ticket-distribution process constitutes an unlawful lottery under Indiana law. The first certified question asks whether the ticket-distribution process constitutes a lottery. If the first question is answered in the affirmative, we are asked to proceed to the second question and determine whether the NCAA's ticket process falls within the statutory exception for bona fide business transactions valid under the law of contracts. If it does not, we are asked to proceed to the third question and determine whether the plaintiffs' claims are barred by the equitable doctrine of in pari delicto, as set forth in Swain v. Bussell, 10 Ind. 438, 442 (1858), and subsequent cases.

I

To answer the first certified question, we consider the meaning and scope of Indiana Code section 35–45–5–3, which makes it a felony to conduct lotteries in Indiana.⁵ That statute provides, in relevant part, that “[a] person who knowingly or intentionally ... conducts lotteries or policy or numbers games or sells chances therein ... commits professional gambling, a Class D felony.” Ind.Code § 35–45–5–3(a)(4) (2008). Subsection (b) extends this proscription to activities over the Internet when they occur in Indiana or when the transaction directly involves a person located in Indiana. I.C. § 35–45–5–3(b)(4).

Because this is a penal statute, it is to be construed strictly. FCC v. Am. Broad. Co., Inc., 347 U.S. 284, 296, 74 S.Ct. 593, 98 L.Ed. 699 (1954); Brown v. State, 868 N.E.2d 464, 470 (Ind.2007) (citation omitted). Due process requires that a penal statute clearly define the prohibited conduct so that it provides adequate and fair notice as to what precisely is proscribed. Id. at 467; see also Healthscript, Inc. v. State, 770 N.E.2d 810, 815–16 (Ind.2002) (explaining the void-for-vagueness doctrine, the rule of lenity, and the fair-notice requirement). On the other hand, penal statutes should not be read so narrowly as to exclude cases they fairly cover. Sales v. State, 723 N.E.2d 416, 420 (Ind.2000) (citation omitted); Short v. State, 234 Ind. 17, 122 N.E.2d 82, 85 (1954) (citation omitted).

Our primary goal in construing statutes is to determine and give effect to the Legislature's intent. State v. Oddi–Smith, 878 N.E.2d 1245, 1248 (Ind.2008) (citation omitted). The intent of the Legislature is best gleaned from the statutory text itself. Id. (citation omitted). When interpreting a statutory provision, we examine the statute as a whole and avoid “excessive reliance upon a strict literal meaning or the selective reading of individual words.” Id. (citation omitted). Undefined words...