Hagens Berman Sobol Shapiro: NCAA Sued for Conspiracy and Anti-competitive Practices Related to Athletic Scholarships

Oct 25, 2010, 14:17 ET from Hagens Berman Sobol Shapiro

SEATTLE, Oct. 25 /PRNewswire/ -- The National Collegiate Athletic Association is the target of a proposed national class-action lawsuit filed today claiming the authority governing most aspects of collegiate sports has conspired with colleges and universities to impose artificial limits on sports scholarships, actions the suit claims violate federal antitrust laws.

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Filed in the U.S. District Court for the Northern District of California by a current student-athlete who lost his scholarship after a series of injuries and a coaching change, the lawsuit alleges the NCAA and its member institutions forbid member schools from offering multi-year scholarships and illegally limit the number of scholarships in large part to maintain the profitability of the institutions' sports programs, a violation of the Sherman Act's antitrust laws.

The NCAA, whose member institutions number nearly every major college or university in the country, sets limits on the number of scholarships those institutions can grant, and prohibits schools from granting multi-year scholarships. The suit claims these limitations drive up the cost of a four-year education for student-athletes.

According to the suit, if colleges were forced to compete for student-athletes in an open market without limits to scholarships, the number of scholarships would increase, and schools would be forced to treat the student-athletes more fairly by offering multi-year scholarships.

"The NCAA will tell you these limits are necessary to maintain a level playing field in college sports," said Steve Berman, managing partner of Seattle-based class-action and complex litigation firm Hagens Berman Sobol Shapiro LLP. "However, we believe the monopoly is designed to safeguard the school sports programs' profitability, which spawns multi-million dollar coaching contracts and rich revenue streams for the schools."

The prohibition on multi-year scholarships leaves student-athletes who lose their scholarships through injury or coaching fiat with three difficult options: paying tuition, room and board out of pocket, finding another college or university that will give them a scholarship, or abandon their education, the lawsuit states.

"Absent the unlawful agreement between the NCAA and its member schools, student-athletes would not be forced to make a Hobson's choice," Berman added.

"The restrictions against multi-year scholarships relegate today's student-athletes to modern-day gladiators, but all they're really winning is the chance to fight again for a spot on the team next year," Berman said.

The lead plaintiff in the suit, former Rice University football player Joseph Agnew, faced just such a dilemma. Heavily recruited by several top-tier Division I schools, Agnew accepted a full scholarship to Rice and played football starting in 2006 as a freshman. During his sophomore year, the coach who recruited Agnew left Rice to coach at another Division I school, and Agnew saw his playing time significantly reduced under the new coaching regime, according to the lawsuit.

During his sophomore season, Agnew was sidelined with shoulder and ankle injuries sustained on the football field. He was also treated for severe migraine headaches. Prior to his junior year, he was cut from Rice's football team and his scholarship was canceled. Though he appealed the university's decision and won a scholarship for his junior year, Agnew did not receive any tuition money for his senior year, forcing him to pay for his schooling out of his own pocket, the lawsuit states.

Berman noted, "Given Mr. Agnew's athletic talent, in a truly competitive scholarship environment, he would have been courted by many different schools all vying to offer him a four-year scholarship."

The lawsuit seeks to represent anyone who, while enrolled at an NCAA member institution, received an athletics-based scholarship for at least one year and had their scholarship reduced or not renewed, forcing them to pay tuition at a college, university or other institution of higher learning. If you have information you believe is important to the case, please contact Hagens Berman at 206-623-7292 or by e-mail at ncaa_antitrust@hbsslaw.com.

The lawsuit accuses the NCAA and its member institutions of violating sections of federal antitrust laws. Plaintiffs' attorneys have asked the court to certify the case as a class action and declare the NCAA's limiting of the number of available scholarships and prohibition of multi-year scholarships unlawful.

Attorneys also ask the court to enjoin the NCAA from limiting the number of available scholarships and from prohibiting multi-year scholarships, and to award damages and attorneys' fees to the class.

"The only way to instill a sense of fair play in college sports is to force the NCAA and its member schools to offer more scholarships and end the prohibition on multi-year scholarships so student-athletes aren't left financially devastated or unable to complete their educations should something go awry," said co-counsel Stuart Paynter of the Paynter Law Firm PLLC in Washington, D.C.

The NCAA includes 1,055 active member schools. These schools are divided into three divisions. Division I – the elite level of college sports – includes 335 schools with extensive athletic programs. Divisions II and III include schools with relatively less extensive athletic programs, the suit states.

Annual revenues for the NCAA's 2007-2008 fiscal year were $614 million. The organization's financial operations are also highly profitable. The direct expenses for operating the actual games amounted to just $59 million, making it possible for NCAA executives to treat themselves to perks normally associated with Fortune 500 companies. The organization's Indiana headquarters cost an estimated $50 million, and the NCAA plans a $35 million expansion, according to the suit.

About Hagens Berman

Seattle-based Hagens Berman Sobol Shapiro LLP represents whistleblowers, investors and consumers in complex litigation. The firm has offices in Boston, Chicago, Colorado Springs, Los Angeles, Phoenix, San Francisco and Washington, D.C. Founded in 1993, HBSS continues to successfully fight for investor rights in large, complex litigation. More about the law firm and its successes can be found at www.hbsslaw.com. Visit the firm's class-action law blog at www.classactionlawtoday.com.

Contact: Mark Firmani, Firmani + Associates Inc., 206.443.9357 or mark@firmani.com.

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