Opinion ID: 3011593
Heading Depth: 2
Heading Rank: 2

Heading: The NCAA's Relationship with the NYSP

Text: Smith also argues that the NCAA is subject to Title IX because it receives federal financial assistance through the NYSP and the Fund.6 The NCAA does not challenge this assertion and instead suggests that we remand to the District Court for discovery and resolution of whether the NCAA's relationship with the NYSP is sufficient to subject it to Title IX coverage. We agree and hold that Smith's allegations regarding the relationship between the NYSP, the Fund, and the NCAA, if proven, would establish that the NCAA is a recipient of federal funds within the meaning of Title IX. Under federal regulations, a recipient of federal financial assistance is defined as, any public or private agency, institution or organization, or other entity, or any other person, to whom Federal financial assistance is extended directly or through another recipient and which operates an educational program or activity which receives or benefits from such assistance, including any subunit, successor, assignee, or transferee thereof. 34 C.F.R. S 106.2(h). Thus, an entity may receive federal financial assistance indirectly and still be considered a recipient for purposes of Title IX. See Grove City Coll. v. Bell, 465 U.S. 555, 563-70, 104 S.Ct. 1211, 1216-19 (1984). In Grove City College, the Court held that Grove City College was an indirect recipient as a result of the federal grant money that students used to pay their tuition bills. The Court reasoned that Congress ultimately intended colleges and universities to receive the grant money at issue, even if it was transferred through students. See id. Later, in Department of Transportation v. Paralyzed Veterans of America, 477 U.S. 597, 106 S.Ct. 2705 (1986), _________________________________________________________________ 6. It is important to note that if the NCAA is a federal funding recipient based on the NYSP's receipt of federal dollars, then all of the NCAA's programs fall under Title IX's proscriptions, including its implementation of the Postbaccalaureate Bylaw, which is at issue in this case. See 20 U.S.C. S 1687 (Civil Rights Restoration Act of 1997) (amending Title IX to define program or activity to include institution wide coverage). 14 the Court drew the distinction between entities that indirectly benefit from federal financial assistance and those that indirectly receive assistance. It held that S 504 of the Rehabilitation Act of 1973 does not apply to commercial airlines by virtue of financial assistance the government provides to airports.7 The Court concluded that S 504 covers those who receive the aid, but not those who merely have a beneficial relationship with entities receiving such assistance. The Court's decision relied upon Congress' power to enact the Rehabilitation Act pursuant to the Spending Clause of the Constitution. The Court stated that: Congress limited the scope of S 504 coverage as a form of contractual cost of the recipient's agreement to accept the federal funds. Id. at 605, 106 S.Ct. at 2711. It concluded that commercial airlines, although beneficiaries of the funding, were not recipients of the assistance because only the airport operators were in a position to accept or reject their obligations as a part of the decision whether or not to `receive' federal funds. Id. at 606, 106 S.Ct. at 2711. As such, the intent of the grant-maker is not the only relevant consideration regarding whether an entity is an indirect recipient of federal financial assistance. Courts should also consider the degree to which the entity is able to control decisions made with respect to the money, the most important decision being whether the grant money should be accepted at all. Here, Smith alleges that the NCAA indirectly received federal financial assistance by virtue of its relationship with the NYSP and the Fund. According to Smith, the NCAA effectively controlled the NYSP and the Fund. Specifically, she alleges inter alia, that: 1) the NYSP Committee was an NCAA committee responsible for the administration of the NYSP; 2) the Council of the NCAA, the entity that directed the general policy of the NCAA during certain periods, limited the powers of the Fund's Board of Directors; 3) the Executive Director of the NCAA and the chairperson of the NYSP Committee were ex officio members of the Fund's Board of Directors; 4) all of the members of the Fund's _________________________________________________________________ 7. Section 504 prohibits discrimination based on disability in substantially the same terms that Title IX uses to prohibit gender discrimination. 15 Board were either employees of the NCAA or members of the NCAA's NYSP Committee; 5) the Fund had to report to the Council of the NCAA on an annual basis; 6) upon dissolution of the Fund, its assets will be distributed exclusively to the NCAA; and 7) the NCAA's Executive Director remarked that the NYSP is one of the NCAA's best kept secrets. Appellant's Br. at 13-14 (citing Bowers v. NCAA, 9 F. Supp. 2d 460, 493-94 (D.N.J. 1998)). In our view, these allegations, if proven, are sufficient to bring the NCAA under the purview of Title IX. Although we are hesitant to impose Title IX obligations on an entity that is not a direct recipient of federal financial assistance, we have nonetheless noted that those who truly assume control of federally-funded programs are in a position to accept or reject that control as part of a decision whether or not to receive the federal funds indirectly. See Cureton, 198 F.3d at 118. We believe that Smith's allegations establish that the NCAA truly assum[ed] control of the NYSP and its Fund. Smith's allegations render the NCAA, the NYSP, and the Fund virtually indistinct. In light of this alleged control, the NCAA did more than indirectly benefit from federal assistance like the commercial airlines in Paralyzed Veterans; rather, through the NYSP and its Fund, it was in a position to decide whether to`receive' federal funds and thereby accept the concomitant obligations of [Title IX]. Paralyzed Veterans, 477 U.S. at 606; 106 S.Ct. at 2711. Several district courts have arrived at this same conclusion.8 First, in Cureton v. NCAA, No. Civ. A. 97-131, 1997 WL 634376 (E.D. Pa. Oct. 9, 1997), the United States District Court for the Eastern District of Pennsylvania examined the NYSP relationship theory in the context of the NCAA's motion for summary judgment against student athletes who alleged violations under Title VI. The court held that if the National Youth Sports Program Fund is nothing more than a sham to disguise the NCAA's use of _________________________________________________________________ 8. Additionally, the Department of Health and Human Services has issued two letter determinations that the NCAA is a recipient of federal assistance by virtue of the Department's grant to the NYSP Fund. See Appellant's Br. at 14 n.2. 16 federal funds for its own benefit, then the NCAA does receive federal financial assistance. Id. at . However, based on the record before it, the court was unable to make a determination. As such, it denied the motion and held that, at trial, the plaintiffs had to prove that the NCAA received federal financial assistance. Similarly, in Bowers v. NCAA, 9 F. Supp. 2d 460 (D.N.J. 1998), the United States District Court for the District of New Jersey dismissed the NCAA's motion for summary judgment in a suit claiming discrimination underS 504 of the Rehabilitation Act. Bowers made extensive findings to support its conclusion that there was a genuine issue of material fact regarding whether the NCAA receives federal funds through the [Fund] or whether the NCAA is intertwined with the [Fund] such that it cannot be considered separate. Id. at 494. Smith's allegations mirror these findings. The District Court revisited the issue two years later. See Bowers v. NCAA, 118 F. Supp. 2d 494 (D.N.J. 2000). The court found that there is evidence that the NCAA may be in control of the NYSP and the federal funds the NYSP receives. Id. at 528. In particular, it noted that the NYSP was established in 1969 and was run exclusively by the NCAA until 1989, when a not-for-profit corporation, the Fund, was created to administer the NYSP. According to a member of the NYSP's Board of Directors, the Fund was established because the NCAA wanted to ensure that it was not a recipient of federal grant dollars or a contractor with the federal government. The court explained that, despite the creation of the Fund, the NCAA's role in relation to the NYSP essentially remained the same. For example, it administers the Fund for a fee of one dollar per year. The Fund has no employees and its business address is the same as the NCAA's. Moreover, the court stated that the NCAA seems to have the ability to influence significantly how the NYSP's federal funding is spent[ ] given the involvement of the NCAA with the Fund's Board of Directors. Id. at 528. In spite of some evidence to the contrary, the court held that there was a genuine issue of material fact as to whether the NCAA was a recipient of federal financial assistance. The court concluded,[t]o 17 ignore this evidence and hold that the NCAA does not exercise control over the [Fund's] federal funding would be to elevate form over substance in a way that should not be countenanced. Id. at 529. We agree with the District Courts of Pennsylvania and New Jersey. Amending Smth's complaint to include an allegation that the NCAA is a federal funding recipient by virtue of its relationship with the NYSP and the Fund would allow it to survive a motion to dismiss and thus would not be futile. See Cureton, 198 F.3d at 190 (citations omitted) (explaining that a district court justifiably may deny leave to amend on grounds such as undue delay, bad faith, dilatory motive, and prejudice, as well as on the ground that an amendment would be futile). In other words, Smith's complaint, as amended, would survive a motion to dismiss for failure to state a claim upon which relief can be granted. See id. at 190 (citations omitted) (explaining that an amendment is futile if the complaint, as amended, would not survive a motion for failure to state a claim upon which relief could be granted). As such, we will remand to the District Court to allow Smith to amend her complaint to include the NYSP relationship theory. The District Court should conduct discovery and make findings with respect to this allegation.9