How Penn State Could Have Fought The NCAA And Won

The NCAA dropped those "unprecedented" punishments on Penn State on Monday, and they're mighty. There's the usual—scholarship cuts, probation, bowl bans, vacated wins, a fine—but amplified to heretofore unseen levels.

Penn State's president, Rodney Erickson, cut a deal with the NCAA because he preferred even a $60 million fine to the death penalty. It's understandable. Penn State wants uninterrupted years of revenue from TV and Beaver Stadium attendance, even if the product is mediocre for a decade or more.

Erickson's decision vexed some trustees. They were annoyed that he didn't consult them before agreeing to the punishments, so they met Wednesday night to smooth things over, and concluded that Erickson had had no choice but to accept the punishment.

The trustees appear to have been wrong. Two sports antitrust lawyers—Jeffrey Kessler, the Winston & Strawn partner who represented the NFL and NBA players' unions in their recent lockout negotiations, and Matt Mitten, director of the National Sports Law Institute—told me Penn State would have had a good case to beat most of the sanctions if it had sued the NCAA. Rodney Erickson could have told Mark Emmert, "Thanks but no thanks, we'll keep playing," and he could have won.

The NCAA's legal authority to punish its members is somewhat murky. In NCAA v. Board of Regents of Univ. of Oklahoma (1984), the U.S. Supreme Court ruled that the NCAA was subject to antitrust law. That ruling reversed more than 30 years of college football TV policy. Conferences—not the association—could now sell television rights. The NCAA had derived much of its early authority (and funding) from a 1952 dispute in which two schools, Notre Dame and Pennsylvania, briefly fought an association-wide fiat that only the NCAA-approved "Game of the Week" could be televised.

Market research showed that too much television would hurt attendance, so a large majority of NCAA members sided with the proposal. But Penn and Notre Dame wanted to keep their home games on TV. The NCAA threatened both schools with a contamination notice, which meant that opponents who played both schools would face punishment, too. Eventually they relented, and the NCAA took charge of selling all colleges' TV rights, skimming off the top.

That changed in 1984, when the court ruled that college football was big business and that the NCAA couldn't restrict it. Power shifted heavily in the conferences' favor, since the NCAA had no more football to sell.

But a 1988 decision, NCAA v. Tarkanian, affirmed the NCAA's power to punish schools without regard for due-process standards. Even though the association included state universities—governmental organs—as its members, and even though it held a great deal of authority over those members, the court ruled that the NCAA was not a state actor itself.

Since then, we've been left with two different standards for NCAA punishment: The organization can intervene in matters concerning individuals—eligibility and the like—but mostly cannot in big financial matters.

Penn State's punishment is a mix of the two, which is why Kessler says PSU's case isn't perfect. The school violated the NCAA's equivalent of MLB's "best interests of baseball" clause, John Infante of the Bylaw Blog told me. But NCAA president Mark Emmert had to seek special authorization from the organization's directors to negotiate with Penn State. The agreement is only definitely legal thanks to Penn State's total acquiescence.

So let's imagine a counterfactual in which Penn State says no to Emmert's offer. What happens? The 2012 football season probably goes off as planned. The NCAA either commissions an investigation of its own or uses the Freeh report to drag the school before the infractions committee, and Penn State faces hearings at the end of the year. The punishment comes swiftly in early 2013, with the death penalty—for as many as four years—on the table. Penn State likely faces even greater cuts in scholarships, a larger fine, and more postseason sanctions.

Mitten says Penn State could then sue the NCAA on antitrust grounds with a good chance to win. Case law has given the NCAA broad authority to restrain economic competition when it comes to furthering the causes of amateurism, competitive balance, and the education of student-athletes. But Penn State's transgressions, wretched though they were, didn't jeopardize competition or scholarship.

So Penn State's lawyers could make the case that the NCAA's sanctions constitute an unfair restraint on economic competition. Bowl bans, scholarship cuts, and a $60 million fine mean broad economic trouble for the school, not just for its football team. Penn State could argue that a wounded Nittany Lions would hurt the university's ability to recruit students and faculty. The vacated wins would stay vacated, Mitten says, but everything else would probably fall in court. The NCAA's usual authority would survive, but its expanded authority would be no more.

There's another conceivable situation in which the incentives would line up in such a way that someone might consider giving the NCAA's teetering authority one big, fatal shove. Penn State (and the Big Ten, more on which later) stands to lose a lot of money from its relegation to college sports' lower tier, to say nothing of the NCAA fine. What if Penn State went with the nuclear option, and the Nittany Lions decided to absent themselves entirely from the NCAA's blessing and try to schedule football games against other NCAA teams anyway?

Infante points out some obvious obstacles. For one, the NCAA forbids its members from sponsoring non-NCAA varsity teams in sports the NCAA sanctions. Penn State would either have to relinquish its NCAA membership for all its sports or reorganize Nittany Lions football as a club team. Athletic departments don't run club teams, so the team would have to hire its own management. What's more, the rogue Nittany Lions would have trouble getting a game. Playing Penn State would count against the other team's schedule—as one of its 12 games—while providing no benefits as far as conference records and playoffs would go. The matchup would effectively be high-level scrimmages.

At that point, Penn State could sue the NCAA on the grounds that the association would be taking part in a commercial boycott. This is one scenario Kessler had in mind, but it wouldn't be a terribly strong case. Here's a stronger one: Penn State walks out of the NCAA and the whole Big Ten follows. Suddenly, the NCAA would be the one facing a death sentence.

It's a little less crazy than it sounds. The NCAA's sanctions against Penn State mean trouble for the conference. Penn State has the third-biggest athletics budget in the Big Ten. Paterno's team played in bowl games every year from 2006 to 2012. That provided direct revenue for the conference, and it also creates indirect revenue: The Big Ten can charge ESPN more (and charge cable/satellite providers more for the Big Ten Network) when Penn State fans want to watch their team. ESPN's contract with the Big Ten is up before the 2017 season, at which stage one-time football power Penn State likely will be a sort of Northwestern of the Alleghenies. A more anarchy-minded Big Ten employee might well wonder: Could the conference just make more money by breaking free of NCAA oversight? (It's hard to say: The NCAA-owned March Madness provides all member schools a robust revenue stream, and the tournament might not survive if one or more conferences defected.)

But Penn State and the Big Ten are not going to fight the NCAA, even though it might make sense on principle. There's something wrong with a shadowy private body fining a public school $60 million, which will deplete some of its non-athletics resources. But it's hard to take a stand on principle when you're being punished for facilitating serial child molestation.