LAWSUIT BY FORMER N.C. STATE COACH COULD ROCK THE NCAA

Reprinted from the Sports Litigation Alert newsletter

The one-count complaint filed by a former men’s basketball coach against North Carolina State University in the U.S. District Court in North Carolina in August is remarkably short on details. The former coach, Mark Gottfried, alleges that the university breached its contract with him when it stopped making monthly buyout payments to him in 2018. The complaint, Gottfried V. N.C. State, is sparse on factual allegations, even failing to set forth how much money N.C. State still owes Gottfried.[9]

But this seemingly innocuous civil litigation has the potential to be extremely contentious and hugely embarrassing to both parties and to college basketball. Gottfried, after all, was the first coach directly linked to a federal investigation into improper payments made to high school recruits.

The marriage between the parties was consummated in 2011 after N.C. State dispensed with head coach Sidney Lowe, a key player on the Wolfpack’s 1984 national title team who never led his alma mater to the NCAA tournament in five seasons.

N.C. State fell in love with Gottfried, who was a key assistant to Jim Harrick on UCLA’s 1995 championship team and had enjoyed successful head coaching runs at Murray State and Alabama. The marriage had a long honeymoon − four consecutive seasons of at least 22 wins and two trips to the Sweet Sixteen — but it soured in two subsequent losing seasons. N.C. State showed Gottfried the door in 2017 after six years.

The Wolfpack finished 22-14 in 2014-2015, garnering a no. 8 seed in the NCAA tournament where they upset no. 1 seed Villanova before falling to Louisville, a no. 4 seed. Gottfried’s fortunes soured the following season, with the Wolfpack finishing 16-17. Beset by player transfers, the team struggled again in 2016-2017. Athletic Director Debbie Yow summoned Gottfried to her office in February 2017 and the university promptly announced that Gottfried would be leaving after the season with three years left on his contract.

A few weeks later, the parties allegedly entered into a Termination Agreement that required Gottfried to continue to coach through the end of the season and to actively seek another coaching job. (He is currently the head coach at Cal State Northridge.) N.C. State allegedly agreed to make monthly buyout payments until April 2020. The university paid several installments before allegedly halting payments in August 2018. Gottfried’s complaint states the following:

22. On May 24, 2018, over 14 months after entering into the Termination Agreement with Gottfried, and having accepted the benefit of Gottfried’s performance during that time, N.C. State sent Gottfried a purported “Notice of Intent to Discharge for Cause.” The Notice stated that Coach Gottfried had “induced the university to enter into payment arrangements” that were memorialized in the Termination Agreement. The Notice outlined the process for administrative review of the proposed action.

23. N.C. State’s allegations of “inducement” were false. The Termination Agreement was conceived, drafted, reviewed, and approved by N.C. State and its attorneys. Gottfried timely commenced the administrative review process.

The complaint and the circumstances behind the Termination Agreement raise a multitude of questions. First, why did the parties enter into the Termination Agreement in 2017 even though Gottfried’s employment contract already addressed this issue? The university’s reported explanation that it wanted to assure that Gottfried finished the regular season seems hollow.

Second, what did the university mean when it asserted that Gottfried (wrongly) induced it to enter into the Termination Agreement in 2017? And finally, on what legal and factual basis did N.C. State claim in 2018 that Gottfried was discharged “for cause?”

The answers may lie within the FBI and NCAA investigations into corruption in college basketball. It has been alleged that basketball coaches at several major programs used their relationships with athletic apparel companies to make illicit payments to high school recruits.

As of January, the NCAA had delivered Notices of Allegations directly tied to the FBI investigation to at least five schools: N.C. StateKansasOklahoma State, USC and Texas Christian. Other schools reportedly under investigation include Auburn, Louisville, LSU, Arizona and Alabama.[10]

The allegations against N.C. State concern a cash payment of $40,000 to five-star high school baller Dennis Smith, Jr. (Smith, a guard with the New York Knicks, played one season at N.C. State and then declared himself eligible for the NBA draft.) The payment was reportedly made by T.J. Gassnola, who started an AAU program for Adidas in Massachusetts in 2002 and operated it until he was caught up in the FBI’s probe. Gassnola cooperated with the investigation after the FBI announced the arrest of four college basketball assistant coaches and three Adidas-connected individuals for fraud in September 2017.

Gassnola testified in one of the federal college basketball corruption trials that he flew to Raleigh, N.C., in November 2015 and gave the money to Gottfried’s assistant coach, Orlando Early, who was supposed to pass it to Shawn Farmer, a trainer for Smith and intermediary between the family and N.C. State. NCAA Enforcement obtained phone records for the involved parties and noted consistent communication around the time of the transaction between Gassnola and Early. On November 2, 2015, the day Gassnola said he delivered the money to Early’s house, Gassnola had a six-minute phone conversation with Gottfried.[11]

In March 2019, Gottfried became the first head coach to be implicated in the FBI’s investigation. According to a disclosure from federal prosecutors, the attorney for Early said his client stated that Gottfried on two occasions gave him envelopes − containing what Early believed was cash − to deliver to Smith’s trainer to ensure he signed with the Wolfpack.

Smith’s trainer, Shawn Farmer, was supposed to deliver the envelopes to Dennis Smith Sr., the father of the recruit.

These developments raise the possibility that Gottfried represented to the university during termination negotiations that he was not involved in any activities that might run afoul of NCAA rules. It also begs the question of whether N.C. State sensed in 2018 that it might be a target of the FBI and NCAA investigations that might have some merit and, therefore, asserted after-the-fact that it had cause for Gottfried’s termination.

But it doesn’t explain why the university was so motivated to keep Gottfried as head coach until the end of the 2016-2017 season that it renegotiated the termination terms of Gottfried’s contract.

The NCAA’s case against N.C. State will be resolved under the new Independent Accountability Resolution Process (IARP). The IARP calls for a hearing before an independent panel with outside advocates and investigators in the basic roles of defense (N.C. State) and prosecution (NCAA Enforcement). The IARP is an option for those institutions that prefer not to have the NCAA Committee on Infractions decide their case. However, one feature of the IARP is that the defendant waives any right to an appeal — a requirement that N.C. State could challenge in court.

The civil complaint filed on behalf of Gottfried says nothing of these underlying circumstances. For his part, Gottfried asserted in his Initial Response to NCAA Enforcement that he is “a compliance-oriented head coach” and that if Early made the alleged payments, he did so “directly against Gottfried’s direction.”[12]

Yet, Gottfried’s testimony at the NCAA hearing and in his civil action against N.C. State could prove very interesting. How often is it even remotely possible that a college coach might consider invoking the Fifth Amendment privilege?

[9]https://wwwcache.wralsportsfan.com/asset/colleges/ncsu/2020/09/01/19265992/dkt_1_Complaint-DMID1-5o1rwma24.pdf

[10] https://www.si.com/college/2020/01/31/ncaa-college-basketball-investigation-corruption

[11] https://www.si.com/college/2020/04/08/nc-state-ncaa-investigation-dennis-smith

[12] http://dig.abclocal.go.com/wtvd/docs/Gottfried response to NCAA 12.9.19.pdf

Do Athletes Tweet at their Own Risk?

Professional athletes traditionally shy away from political and social issues. One reason is the risk of losing lucrative endorsements. “Republicans buy sneakers, too,” Michael Jordan famously said in explaining his reluctance to become politically engaged. (He later claimed that he was joking.)

Another reason is fear of backlash: Rather than support Colin Kaepernick’s plea for social justice, the NFL in 2018 adopted a policy of requiring players to stand for the national anthem. (League commissioner Roger Goodell later conceded that the NFL had mishandled the controversy.)

But to what extent, if any, do professional athletes enjoy a right to free speech when they are on the job? Can teams or leagues discipline athletes for using their celebrity status to express their opinions on controversial issues while they are at the ballpark?

The reluctance of many athletes to protest appears to be diminishing in view of their increasing use of social media and as evidenced by the shutdown of NBA, WNBA, MLS, and MLB games in the summer as protest of the shooting of Jacob Blake.

The protest raised the question of whether professional athletes have a legal right to protest while they are on the job. The answer is unclear.

The First Amendment guarantees one’s right to freedom of speech. The Bill of Rights applies to state or governmental intrusion upon individual freedoms; it does not generally protect persons from private employers who may impose restrictions on individual freedoms at work.

A prime example of the limits of freedom of speech is the recent development at Goodyear. The automotive company prohibited political displays and other types of speech on the job, irking President Trump and some of its employees. But Goodyear is a private business and not a government agency, so it may limit employee speech.

Since professional sports teams are private entities, they too can limit speech by players and other employees while they are on the job. But there are exceptions to the general rule.

If a team’s operations are connected with or entwined with the government/state, the law may consider the team to be a so-called “state actor.” If a team is a state actor, then the employees enjoy First Amendment rights.

One example of a team becoming a state actor is when the team leases a public facility that has been created, improved or leased for the benefit of the team. For example, in Ludtke v. Kuhn, 461 F.Supp. 86 (S.D.N.Y. 1978), the court held that Yankee Stadium was a state actor and a ban on women reporters in the clubhouses of MLB teams constituted a violation of the First Amendment. Ludtke was a reporter for Sports Illustrated who covered the 1978 World Series between the Dodgers and the Yankees. She was barred from entering the team clubhouses after Commissioner Bowie Kuhn communicated MLB’s policy against allowing female reporters to enter the team’s dressing rooms to the Yankees and the City of New York.

Here are three of the key points the court emphasized in determining that the Yankees were a state actor:

  • “The City acquired title to Yankee Stadium and the land surrounding it by exercise of its power of eminent domain upon a factual showing, approved by the Supreme Court of the State of New York, Bronx County, that purchase of Yankee Stadium was required for a ‘public use.’”
  • The city and the team were interdependent in that “profit from its [New York’s] lease with the Yankees escalates when attendance at Yankee games increases.”
  • New York essentially “rationed” out a public resource for the benefit of one user, rather than make it available to anyone on a first-come, first-served basis.

Under this “entwinement” standard, a professional sports team is less likely to be a state actor if it performs in a privately-financed facility such as Dodger Stadium in Los Angeles or Oracle Park in San Francisco. But the New York Mets would likely be a state actor because of the massive public subsidies that have been used to offset the $850 million cost of Citi Field. The Mets, unlike the Dodgers and Giants, are substantially tied to the state.

Thus, if a sports franchise playing at its home venue is a state actor, then the First Amendment rights of athletes to engage in political speech are tempered only by a team’s compelling interest. In other words, an athlete could protest at a game unless the protest interferes with the playing of the game (because the team has a compelling interest in the smooth operation of the game).

In the case of Colin Kaepernick, the San Francisco 49ers quarterback who knelt during the national anthem to protest racial injustice, his home field was Levi’s Stadium in Santa Clara, California. That stadium was created and leased for the benefit of the 49ers to a far greater extent than Yankee Stadium had been built for the Yankees. The 49ers are more than a favored tenant; they manage the venue and profit from booking and hosting unrelated events such as rock concerts and college football bowl games. Santa Clara essentially rationed the public stadium to a single user and thereby transformed the team into a state actor. The public-private entwinement is substantial.

Since Kaepernick’s protest took place prior to the game and did not interfere with its playing, the act of kneeling during the national anthem was protected speech.

In contrast, when MLB, NBA and other athletes boycotted and effectively postponed events as part of the ongoing social protests, they arguably enjoyed no First Amendment protection because they fundamentally interfered with the events. Athletic organizations enjoy a substantial right to stage their competitions as planned and this right would outweigh the participants’ right to free expression. Fortunately, the governing bodies of the events ceded to the players’ wishes and thereby averted a legal and social controversy.

Should owners and organizers be less accommodating to activist athletes in the future, things are sure to get a lot more interesting — both legally and culturally.

This post originally appeared in the Sports Litigation Alert, the leading sports industry publication.

Tim Tebow’s Sports Law Legacy Is The Home-Schooled Athlete Debate

[Reprinted from the Sports Litigation Alert, the leading sports law newsletter.]

Tim Tebow will forever be revered in Florida as the Heisman-winning quarterback who helped lead the Gators to national titles in 2006 and 2008. But outside Florida, many identify Tebow as the symbol of a movement towards permitting home-schooled students to participate in interscholastic sports for high schools they don’t physically attend. Tebow was homeschooled in Florida and because, in 1996, Florida had enacted a law allowing home-schooled students to participate in public school sports, Tebow played as quarterback for the Allen D. Nease High School team in St. Augustine. His success at the University of Florida inspired several states to allow homeschoolers to participate in high school athletics.

In many communities across the country, permitting homeschoolers to play sports is a heated issue. The latest state to consider this option is West Virginia, where both legislative bodies passed The Tim Tebow Act that would permit homeschoolers to participate in public school sports and other extracurricular activities. Those students would pay the same activity fees charged to public school students and they would need to prove they are academically eligible based on transcripts, a portfolio of their work and standardized test scores. The bill is on the desk of Governor Jim Justice, who vetoed a similar bill in 2017.

Opponents of the Tim Tebow legislation assert the following:

  • It dilutes high school athletics resources that are already stretched thin.
  • It is unfair because homeschoolers don’t have to comply with the same rules as those attending the school.
  • Permitting “outsiders” to participate diminishes school spirit.
  • It encourages recruiting of star athletes.

Those who support Tim Tebow laws make the following points:

  • The parents of homeschooled students are taxpayers who have the right to benefit from public school services.
  • We need to encourage all students to participate in athletics.
  • School spirit is not the primary goal of high school sports.
  • High school athletic associations can effectively regulate recruiting.

 [https://www.publicschoolreview.com/blog/can-homeschoolers-be-team-players-for-public-schools].

The issue of whether to permit homeschoolers to participate in interscholastic sports is a substantial one, due to the growth of homeschooling. From 1999 to 2016, the number of homeschoolers in the U.S. jumped from 850,000 to nearly 1.7 million, according to the U.S. Department of Education [https://nces.ed.gov/programs/digest/d18/tables/dt18_206.10.asp].

The number of homeschooled children represents about 3.4 percent of all students from kindergarten through 12th grade. This trend is explained in part by the fact that homeschooling has become a more inviting option through technology; there has been an explosion in homeschooling choices through a variety of online books, CD-ROMs, DVDs, and interactive TV programs.

Do homeschoolers have a constitutional right to participate in scholastic athletics? No, according to the Sixth Circuit Court of Appeals. In Alerding v. Ohio High School Athletic Association, 779 F.2d 315 (6th Cir. 1985), non-resident high school students from northern Kentucky who attended St. Xavier High School in Cincinnati were prohibited from playing high school sports in Ohio. The defendant was the governing body that had passed a rule which barred non-resident students from participating. The plaintiffs brought a civil rights action in which they argued that the rule violated the Privileges and Immunities Clause of the U.S. Constitution. The court held that participation in interscholastic athletics is not a fundamental right subject to protection under the Privileges and Immunities Clause, as it is not akin to economic opportunity or medical care.

Similarly, in Bradstreet v. Sobol, 60 N.Y.S. 2d 486 (N.Y. 1995), a homeschooled 9th grader claimed a violation of due process and equal protection when the local school district denied her request to participate in public school sports. The New York Supreme Court held that the policy did not violate due process because participation in athletics is merely an expectation and not a right. The court held that the district did not violate equal protection because the state was upholding the legitimate goals of maintaining academic standards, promoting school spirit and securing role models for other students.

Since homeschoolers have no constitutional right to participate in interscholastic activities, the states must confer that right. Here is a general overview of state laws, provided by the Coalition for Responsible Home Education:

  • Twenty states permit homeschoolers to participate in interscholastic activities, though in states such as Ohio, Pennsylvania and Florida they must pass an academic assessment test.
  • Five states allow homeschooled athletes to participate in interscholastic activities with the approval of the local school district.
  • Five states allow homeschoolers to participate in interscholastic activities if they are enrolled part-time or dual-enrolled.
  • Twenty states’ athletic associations bar homeschooled students from participating in interscholastic activities by requiring students to “attend” the school, be enrolled “full time,” or be “bona fide” students of the school.

(A state-by-state summary is available at: https://responsiblehomeschooling.org/policy-issues/current-policy/homeschool-sports-access-by-state/.)

To further complicate the issue, some states offer their own online public schools [https://www.thoughtco.com/free-online-public-schools-4148138]. These virtual programs usually operate from a state office or school district. West Virginia is one such state, which begs the question: If a student is taking virtual classes offered by the state, then why should the state prohibit the student from participating in interscholastic sports or other public-school activities?

Colleges Must Consider the Legal Risks of Re-starting Sports in a Pandemic

[Reprinted from the Sports Litigation Alert – the premier sports law newsletter. Gary is a contributor to the publication.]

Universities are grappling with the question of whether to conduct classes remotely or to open their campuses in the fall, amid a pandemic. A corollary issue is whether to conduct intercollegiate athletics at schools that do admit students to their campuses. There will certainly be economic pressure to forge ahead with revenue-producing sports, such as football and men’s basketball. But engaging in athletic competition presents some thorny legal issues, especially if there is a COVID-19 outbreak within a team.

Will student athletes who are infected by the virus through athletic competition have any legal recourse against colleges who fail to take adequate steps to protect them, or will the organizers of events find protection under the legal doctrine of assumption of risk?

As businesses across the country begin to reopen, workers have sought assurances from their employers that every necessary step is being taken to maximize safety. Employers, who are understandably concerned with potential liability should an outbreak affect their employees, are seeking protection from state and federal governments that they will not bear legal liability for workplace contagion.

University presidents, and presumably their athletic directors, are also concerned with possible liability should they open their campuses and conduct sporting events. On May 14, a little over a dozen college presidents conferred online with Vice President Mike Pence and Secretary of Education Betsy DeVos for guidance. One takeaway from the conference was that universities would like to receive legal immunity protecting them against civil liability should a coronavirus outbreak occur on campus.

Educational institutions and other employers received some encouraging signs from Senate majority leader Mitch McConnell, who said on the Senate floor that Republicans are working on a proposal that would give people confidence that they won’t be held liable [https://www.athleticbusiness.com/civil-actions/colleges-worry-about-liability-as-they-look-to-reopen.html]. McConnell did not get specific, but that sounds a lot like statutory immunity.

But do colleges need statutory immunity to hold football games and other athletic events with confidence, or would student athletes assume the risk of contracting COVID-19 and relinquish any potential cause of action should they agree to play during the pandemic?

Assumption of risk is an affirmative defense to negligence and other torts that applies when a plaintiff has actual knowledge of a risk, understands the risk and voluntarily exposes him/herself to the risk. It has been eliminated or merged with comparative negligence in many jurisdictions. For instance, in Carrender v. Fitterer, 503 Pa. 178 (1983), the Pennsylvania Supreme Court effectively held that assumption of risk is simply another way of stating that the operator of a facility or property owes no duty of care to an invitee. In other words, it is no longer an affirmative defense to negligence, but the defense that a defendant had no legal duty to act. The practical effect is that those who voluntarily expose themselves to a known risk might not have their claim completely barred; instead, they might have a potential recovery reduced when the trier of fact apportions fault between the parties. See, Anderson v. Ceccardi, 6 Ohio St. 3d 110 (1983).

Athletes assume the risk of harm associated with the normal and accepted activities that are inherent in playing a particular sport. If transmission of the flu and other contagious ailments is a normal and accepted part of sports (and other activities), then would the law view transmission of COVID-19 differently? If not, then universities might feel confident in proceeding with scheduled games.

Yet, as in any aspect of the law, there are exceptions to the general rule. An exception to the assumption of risk doctrine comes into play when the defendant’s conduct enhances the risk of harm. For instance, batters in baseball assume the risk of being struck by a pitched ball, whether it be intentional or unintentional. However, the defense may not apply if the organizer of the game has acted or failed to act in a manner that increased the risk of injury from a pitched ball. This was the ruling in Fithian v. Sag Harbor Union Free School District, 864 N.Y.S.2d 456 (App. Div. 2008), where the appellate court uphold a denial of summary judgment where a player who was struck in the head with a pitch was issued a cracked batting helmet that allegedly increased the risk of injury. The court stated that participants do not assume risks that are “concealed or unreasonably increased.”

In the event of an outbreak affecting one or both teams who recently competed against each other, it is not difficult to imagine an expert in infectious diseases opining that the universities who participated enhanced the risk of spreading COVID-19 to their student athletes by failing to take proper precautions. This sort of opinion might prove sufficient to overcome a defendant’s assertion of assumption of risk or contributory negligence. If so, universities might be reluctant to proceed with sports unless they enjoy immunity.

Applying assumption of risk or statutory immunity presents ethical, as well as legal considerations. In the case of the former, is it fair to burden schools with potential liability for the spread of an uncontrollable virus among student athletes who decided to engage in a voluntary activity? It may be particularly inequitable to force colleges to defend legal actions where proximate cause might be extremely difficult to prove. But if the universities were granted immunity, would it be fair to deny any potential recourse to student athletes who might contract the virus as a result of gross negligence on the part of the school that is charged with safeguarding their health?

Of course, legal liability is but one consideration in the overall equation. The safety of student athletes must be paramount. For many, television revenue and obligations will constitute a material factor in the decision-making process. Yet, the decision to play or not to play will be made in the larger context of the underlying purpose of intercollegiate athletics. Educators will need to decide whether sports are a fundamental aspect of higher ed or merely an extracurricular adjunct to formal learning. Stay tuned.

The Biggest Contest in College Sports

The most intriguing contest in college sports is not taking place in any football stadium, basketball arena or any athletics venue.

It is playing out in the United States District Court for the 9th Circuit.

That is where the case of Jenkins v. NCAA is on appeal. The case began in a federal court in California in 2014. Former NCAA student-athletes sued the NCAA for limiting their athletic scholarships, claiming that it was illegal to exclude certain college-related costs from athletic scholarships.

The trial judge ruled that the NCAA had violated federal antitrust law (The Sherman Act). The court said that the NCAA could no longer dictate the terms of athletic scholarships and that only the conferences could do so. The decision was a direct assault on the NCAA’s authority over its member institutions, 347 of which are larger schools in Division 1. So the NCAA filed an appeal that should be decided in the next few months.

If the 9th Circuit upholds the lower court decision, it would be a major erosion of the the NCAA’s authority.

In a second challenge to the NCAA’s authority, California passed the so-called “Fair Pay To Play” law that will allow student-athletes to profit from product endorsements when it takes effect in 2023. Florida and several other states are expected to pass similar laws.

The NCAA is scrambling to devise rules that will preserve some semblance of amateurism while respecting the right of student-athletes to profit from the use of their names, images and likenesses.

What’s behind all of this?

In part, it is a reaction to the enormous growth in revenue from television, apparel sales and other sources. The NCAA is collecting nearly $20 billion over 22 years from CBS and Turner for TV rights to March Madness alone.

Universities are sharing their revenue with coaches, but not players. Even average coaches such as Mike Leach are being paid excessive salaries. Leach amassed a so-so 52-46 record as football coach at Washington State for eight years and was rewarded last month with an extension until 2024 at $4 million a year. And that does not include lucrative side deals with apparel companies and others.

Leach was so grateful that he breached his contract less than five weeks later by signing to coach Mississippi State at $5 million annually. So the fair market value for a head coach who will never be confused with Nick Saban or Urban Meyer appreciated 20% in just one month. This is what can happen in a market that is awash in money.

Another reason for the push against the NCAA is its failure to keep up with the times. As more and more cash flowed in, it took no steps to address the financial concerns of student-athletes unless a court ordered it to do so.

As with most businesses that are not responsive to changes in the market, the NCAA’s day of reckoning seems to have arrived.

The Case That Nobody Knows About

The truly important cases in the sports industry are few and far between.

A case of epic proportions, Jenkins v. NCAA, was recently tried in federal court in California, but few have heard of it. It is an antitrust lawsuit brought by former NCAA student-athletes who are seeking to recover money from the NCAA to compensate them for their TV appearances.

The former players asserted their right of publicity – the right to profit from the use of one’s name, image or likeness – in claiming that the NCAA violated antitrust laws by not permitting universities to compensate them for appearing in televised games.

If the players win, it will smash the longstanding model of college sports and raise serious questions about the future of televised sports in America.

We are anxiously awaiting the decision of the trial judge, who has favored the position of the athletes in the past. In a case where former student-athletes sued EA Sports for unauthorized use of their images in a video football game, the judge ruled that EA Sports had violated the players’ right of publicity by using their avatars without permission.

Now the players are hoping to get a ruling that the right of publicity extends to televised events and that the NCAA has acted illegally by prohibiting its member universities from compensating the players when they appear in televised games.

If the players prevail, it will increase the cost of televising college sports, which raises serious questions, including:

*Will there be fewer college football and basketball games on TV?

*Will sponsors pay the increased cost of televising college sports such as volleyball, lacrosse, tennis and golf?

Stay tuned.