California Judge Rules NCAA’s Show-Cause Order Violates State Law

California Judge Rules NCAA’s Show-Cause Order Violates State Law

(Editor’s note: The following was published in Sports Litigation Alert and the Journal of NCAA Compliance. It was written by Ellen J. Staurowsky, Ed.D., Senior Contributor & Professor, Drexel University; Brian Menaker, Ph.D., Assistant Professor, Texas A & M — Kingsville; and Jeffrey Levine, J.D., Assistant Clinical Professor, Drexel University. It is being shared here by Hackney Publications.)

More than seven years ago, former University of Southern California (USC) football coach, Todd McNair, brought a state court action against the National Collegiate Athletic Association (NCAA or Association) on numerous counts, one of which challenged the NCAA’s coach disciplinary rule known as a “show-cause” order. In October of 2018, California Superior Court Judge Frederick Shaller issued a finding in support of McNair, determining that the NCAA’s “show-cause” rule violated state law by creating an unlawful restraint that impaired McNair’s ability to successfully seek a job in a lawful profession (i.e., college coaching). As Judge Shaller pointed out, “McNair’s ability to practice his profession as a college football coach has been restricted, if not preempted, not only in Los Angeles, but in every state in the country” (as quoted in Clifton, 2018, para. 3).

Brief Overview of McNair v. National Collegiate Athletic Association

Todd McNair’s journey in football started out in his hometown of Pennsauken, NJ where he became a high school standout, moving on to play his college career at Temple University (Eure, 2018; Staff, 2009). To follow was a six-year career in the National Football League (NFL) playing for Kansas City (1989-1993), Houston Oilers (1994-1995), and returning to Kansas City for his final season in 1996 (Eure, 2018; Staff, 2009). He joined the coaching ranks after retiring from the NFL, starting out as a high school assistant coach in Camden NJ. Within five years, he was hired by the Cleveland Browns but would eventually be tapped by then USC head football coach Pete Carroll to join the Trojan staff in 2004 (Staff, 2009).  McNair rose in the ranks at USC, adding to his running back coaching responsibilities by also being put in charge of special teams. A recruiter of considerable reputation, he was ranked as the third best college football recruiting coach in the country in 2006 (CBS College Sports Staff, 2006).  During his six-year tenure at USC, the football team appeared in the Rose Bowl four times and made single appearances in the Orange and Emerald bowls.

Among the players McNair coached at USC was then acclaimed running back, Reggie Bush, who was awarded the Heisman Trophy in 2005. Bush and his family would eventually become the center of an NCAA investigation into Bush’s relationship with player agents, Lloyd Lake and Michael Michaels, who gave Bush and his family more than $290,000 in gifts in violation of NCAA rules barring such exchanges (NCAA Committee on Infractions, 2010; Wharton, 2007). McNair was eventually implicated in the Bush matter by Lake who claimed that the two had spoken about Lake’s future representation of Bush in 2006. When NCAA investigators followed up with McNair, they cited the wrong year, asking him if such a conversation had occurred in 2005. McNair, in turn, denied having spoken with Lake while further denying knowledge of impermissible benefits that Bush had received.  The NCAA Committee on Infractions (2010) eventually concluded that McNair had provided false and misleading information to enforcement staff, thus violating NCAA ethical conduct rules. McNair was penalized by the NCAA with a one-year recruiting ban and a one-year show-cause order (NCAA Committee on Infractions, 2010) and his contract with USC was not renewed prior to the 2010 season (Kaufman, 2018).

After an appeal of the NCAA’s decision was to no avail (NCAA Division I Infractions Committee, 2011), McNair sought relief for damage to his professional reputation and ability to earn a living in Los Angeles Superior Court for libel, slander, breach of contract, negligence and other issues (Lev & Staff Writers, 2011). After a prolonged and protracted procedural process marked by numerous delays and appeals, McNair’s defamation claim proceeded to trial in April of 2018 with a jury deciding in favor of the NCAA (McCann, 2018). However, the court severed McNair’s action challenging the NCAA’s show-cause penalty to be decided later. Both parties agreed that this remaining issue would be briefed and the court would decide the issue without another hearing based on a the previously-submitted evidence.

The Purpose of the NCAA’s Show-Cause Penalty

According to the NCAA, efforts to hold coaches accountable for rules compliance is a shared responsibility between the Association (that represents the interests of the membership) and the institution as a member. Consequently, coach discipline is left to the discretion of member institutions, however, the NCAA determines if the level and intensity of discipline satisfies an institution’s obligations to the Association[1] (NCAA Academic & Membership Affairs Staff, 2018).

The severest penalty reserved for coaches involved in major rules violations is the show-cause penalty. The penalty is designed in such a way that it is transportable, meaning that a job change to another institution does not remove the penalty and the shared obligations under the penalty for the institution. In effect, a coach cannot simply escape responsibility for non-compliance by changing jobs. Thus, a coach who may have lost a job at one institution because of NCAA rules violations carries restrictions imposed for misconduct to their next institution until the restriction has run its course or been lifted. Both the coach and the institution employing the coach are required to provide six-month updates to the NCAA for the term of the order.

The prospects of coaches under show-cause orders to retain their current jobs or to be hired by other programs are diminished for several reasons. First, athletic programs expect employees to be fully engaged in the work they do. The adjustments needed to accommodate a coach who is restricted in terms of their work threatens the stability of the program and the security of the remainder of the coaching staff. Consequently, coach non-renewal or outright firing depending on contract provisions is a logical outcome. Second, the coach’s current institution or prospective employers may be wary of bringing on a coach with a show-cause order because of the additional scrutiny that both parties will be obligated to engage in. For most athletic department officials, they wish to be clear of compliance scrutiny and are far less likely to affirmatively put themselves in circumstances where their commitment to rules compliance is actively questioned because of hiring decisions. The result is an intended hurdle for coaches who have received show-cause orders to retain and obtain employment in college coaching.

Judge Shaller’s Analysis

In granting McNair declaratory relief from the restrictions of the NCAA show-cause order, Judge Shaller found that the order violated Section 16600 of California’s Business and Professional Code which states “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void” (Todd McNair vs. National Collegiate Athletic Association, 2018; referred to hereafter as McNair v. NCAA, 2018, p. 1, para. 2).  Referencing the intention of the NCAA’s show-cause order to restrict McNair’s ability to get a job in college coaching, Shaller noted “[e] vidence at trial proves to a preponderance standard that the penalty had the effect of restricting McNair’s ability to become employed at another NCAA member institution during the one-year penalty period and was a substantial factor in McNair’s continuing unemployment at an NCAA member school after the end of the one-year show-cause penalty up until the time of trial” (McNair v. NCAA, 2018, p. 2, para. 1).

The NCAA argued that McNair’s request for declaratory relief was inappropriate for three reasons: that the claim itself did not present an actual controversy warranting judicial relief under CCP Section 1060; that declaratory relief in this case was not proper or necessary; and that Section 1660 was not applicable to this case.

In responding to each of those questions, beginning first with the NCAA’s ripeness claim, Judge Shaller found there was sufficient support to reach a conclusion favorable to McNair. While the show-cause order imposed on McNair by the NCAA had ended in 2012, Shaller concluded that “[t] he past impact and continuing effect of the penalties on McNair is not hypothetical or speculative or confined to the past” (McNair v. NCAA, 2018, p. 4, para. 2) and that the matter needed to be decided in order to achieve complete justice given that jurisdiction had been established.

Regarding the issue of whether declaratory relief was proper and necessary, Shaller wrote that the state of California considers, as a matter of public policy dating back to 1872, “the right of persons to engage in business or occupation of their choosing” (McNair v. NCAA, 2018, p. 5, para. 2) countering common law that allowed for reasonable restrictions on employment. Further, as a matter of first impression, resolving the question of the viability of the NCAA’s rule served “to allow NCAA and member schools to conform their conduct to the law and prevent future litigation” (McNair v. NCAA, 2018, p. 5, para. 3).

In addressing the NCAA’s position that Section 1660 was not applicable to McNair because he was not a party to the contract between the NCAA and its member institutions, Shaller cited what he characterized as the clear and unambiguous language of Section 1660, which does not limit its applicability to parties to a contract but instead refers expansively to anyone who is “restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void” (McNair v. NCAA, 2018, p. 6, para. 2). Applying the legislative intent of the statute, which was designed to foster open competition and employee mobility, Shaller concluded that the NCAA’s contractual restrictions offered “…even more reason to void the contractual Show-Cause Order enforcement provisions in the NCAA bylaws pursuant to the policy behind Section 16600 because the NCAA-member schools are pervasive and therefore the restrictive covenants provide a much greater restriction than a single non-complete agreement between employee and employer or business partners” (McNair v. NCAA, 2018, p. 7, para. 1).  In other words, there are NCAA members looking to pursue their business interests by hiring the best talent, and there are also other professionals currently under show-cause orders that restrain their right to pursue their lawful profession.

Likelihood of Appeals to Follow

Some anticipate that the NCAA is likely to seek a stay of Judge Shaller’s decision. Others have argued that the grounds for appeal will recognize the complex nest of relationships that exist within the college sport space between the NCAA, conferences, schools, and coaches. Knobbe, Yarnell, and Siracusa (2018) suggest that Shaller’s decision does not fully take those relationships into account nor recognize that coaches voluntarily agree to the terms of discipline when they agree to employment. A potential area of vulnerability in the decision may be its perceived failure to consider the impact it may have on the NCAA and its member institutions to fulfill the enforcement function without coach discipline being left up to state courts. At the same time, such a stance begs the question of whether NCAA rules should be used to strip away the rights of individuals who are U.S. citizens or citizens of individual states. Although a court traditionally defers to a private association’s self-governance, one recognized exception is in matters where the private association’s rules violates public policy (Charles O. Finley & Company Inc. v. Bowie Kuhn, 1978).

Implications

This decision may immediately impact NCAA member institutions in the state of California, especially if the decision is upheld on appeal. Based on Judge Shaller’s decision, show-cause penalties are effectively unenforceable for NCAA member institutions in California in all three divisions. Nine Division I conferences have full-time or affiliate members in the state of CA including the Mountain West, PAC-12, Pioneer Football League, MPSF, Big Sky, Big West, West Coast, and Western Athletic Conferences. Schools in those conferences might be on an uneven playing field with the others who reside outside of California since they could effectively hire sanctioned coaches under a now unenforceable bylaw in the state. Furthermore, California schools would be at odds with the NCAA due to their inability to enforce a significant piece of NCAA legislation. This presents a quagmire for compliance officials within NCAA member institutions.

If upheld in court, this decision could potentially have implications for conferences and coaches across all NCAA divisions. Considering the potential impact, it still leaves many unsettled questions about the future of show-cause penalties and potential legal actions challenging them. If the current interpretation of California state law withstands appeal, will coaches in other states subject to show-cause penalties challenge the rule in court, as well? Will this interpretation have any impact on NCAA rule-making in the future regarding disciplining coaches? What type of implications does this have on conferences with members in California and other states not subject to this ruling’s jurisdiction? Is this the beginning of the end for the show-cause penalty?

From a legal standpoint, the court’s opinion in McNair v. NCAA (2018) is also significant. The court did not defer to the NCAA or acknowledge its role as protecting college football, unlike some previous opinions. For example, in National Collegiate Athletic Association v. Lasege (2001), the Kentucky Supreme Court held that the “NCAA unquestionably has an interest in enforcing its regulations and preserving the amateur nature of intercollegiate athletics” (p. 85). Further, in National Collegiate Athletic Association v. Jones (1999), the Supreme Court of Texas categorized the NCAA as “preserving the proper balance between athletics and scholarship in intercollegiate athletics…[and]…the NCAA promulgates rules and regulations to prevent any member institution from gaining an unfair competitive advantage in an athletic program” (p. 85). However, the court in McNair viewed the NCAA as merely a private association whose rules did not outweigh a state statute. The fact that the McNair court construed the relevant statute broadly may also play a role in future legal challenges to the show-cause order and other legal challenges to NCAA power, both as binding and persuasive authority.

Conclusion

While Judge Shaller’s decision has been regarded as a modest win for Todd McNair, should it survive on appeal, his efforts to challenge the show-cause order has the potential to prevent other coaches from being stigmatized by a rule that some have viewed as a scarlet letter (Dodd, 2018), designed to create a substantial warning to future employers that hiring coaches so marked carry the burden of added responsibility and scrutiny. The timing of the ruling offers fertile ground to speculate how intensely the NCAA will pursue additional legal action given that its Board of Directors adopted an increased penalty matrix in August of 2018 in response to recommendations made by its appointed Commission on College Basketball that included a provision that a show-cause order on a specific coach found to have engaged in behavior rising to the level of a major infraction could be issued for the span of a lifetime (National Collegiate Athletic Association, 2018).

References

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Dodd, D. (2018, October 10). California judge rules NCAA’s scarlet letter, the show-cause penalty, illegal in state. CBS Sports. Retrieved from https://www.cbssports.com/college-basketball/news/california-judge-rules-ncaas-scarlet-letter-the-show-cause-penalty-illegal-in-state/

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Lev, M., & Staff Writers.  (2011, June 6). Todd McNair sues NCAA for ‘ruining his career’. The Orange County Register. Retrieved from https://www.ocregister.com/2011/06/06/todd-mcnair-sues-ncaa-for-ruining-his-career/

McCann, M. (2018, May 21).  Ex-USC coach Todd McNair losing trial to NCAA shows why defamation lawsuits are tricky. SI.com. Retrieved from https://www.si.com/college-football/2018/05/21/todd-mcnair-usc-loses-ncaa-defamation-lawsuit

National Collegiate Athletic Association v. Jones, 1 S.W.3d 83 (Tex. 1999)

National Collegiate Athletic Association v. Lasege, 53 S.W.3d 77 (Ky. 2001)

National Collegiate Athletic Association (2018, August). Actions taken by the NCAA Division I Board of Directors related to the Commission on College Basketball Recommendations. Indianapolis , IN: National Collegiate Athletic Association. Retrieved from http://www.ncaa.org/sites/default/files/Aug2018DIBoD_BoardActionsRelatedCCBRecommendations_20180809.pdf

NCAA Academic and Membership Affairs Staff. (2018, July). NCAA Division I Manual 2018-2019. Indianapolis , IN: National Collegiate Athletic Association. Retrieved from http://www.ncaapublications.com/productdownloads/D119.pdf

Staff. (2009). Todd McNair:  Bio. USCtrojans.com. Retrieved from https://usctrojans.com/coaches.aspx?rc=374&path=football

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Wharton, D. (2007, October 31). Bush is one target of lawsuit. Los Angeles Times.  Retrieved from http://articles.latimes.com/2007/oct/31/sports/sp-bush31

Yarnell, M., Knobbe, T., & Siracusa, T. (2018, October 15). Can a CA court stop the NCAA? The Last Word on College Football. Retrieved from https://lastwordoncollegefootball.com/2018/10/15/can-a-ca-court-stop-the-ncaa/


[1] NCAA Bylaw 19.2 — Shared Responsibility; NCAA Bylaw 19.9.5.4 — Show Cause Orders; Bylaw 19.9.5.5 — Head Coach Restrictions; NCAA Bylaw 19.9.5.6 — Recruiting Restrictions