Court Opinion

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Opinions of the United
1998 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

3-16-1998

Smith v. Natl Collegiate
Precedential or Non-Precedential:

Docket 97-3346

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Recommended Citation
"Smith v. Natl Collegiate" (1998). 1998 Decisions. Paper 49.
http://digitalcommons.law.villanova.edu/thirdcircuit_1998/49

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Filed March 16, 1998

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

Nos. 97-3346 and 97-3347

R. M. SMITH,

v.

NATIONAL COLLEGIATE ATHLETIC ASSOCIATION

Renee M. Smith,

       Appellant

On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civ. No. 96-01604)

Argued February 12, 1998

BEFORE: GREENBERG, NYGAARD and MCKEE,
Circuit Judges.

(Filed: March 16, 1998)

       Renee M. Smith (argued)
       5426 Fifth Avenue
       Shadyside Inn
       Pittsburgh, PA 15232

        Pro Se

       Larry A. Silverman
       Christine A. Ward
       Dickie, McCamey & Chilocote
       Two PPG Place
       Suite 400
       Pittsburgh, PA 15222-5402
John J. Kitchin (argued)
Robert W. McKinley
Swanson, Midgeley, Gagwere,
 Kitchin & McLarney
922 Walnut
Suite 1500
Kansas City, MO 64106

 Attorneys for Appellee

Marcia D. Greenberger
Deborah L. Blake (argued)
National Women's Law Center
11 DuPont Circle, N.W.
Suite 800
Washington, D.C. 20036

Attorneys for Amici Curiae National
Women's Law Center, American
Association for Active Lifestyles &
Fitness, American Association of
University Women, AAUW Legal
Advocacy Fund, American Civil
Liberties Union, Center for Women
Policy Studies, The Connecticut
Women's Legal Fund, Equal Rights
Advocates, Inc., National
Association for Girls and Women In
Sport, National Coalition for Sex
Equity in Education, National
Education Association, NOW Legal
Defense and Education Fund, Trial
Lawyers for Public Justice, Wider
Opportunities for Women, Women
Employed, Women's Law Project,
Women's Legal Defense Fund,
Women's Sports Foundation, and
The Young The YWCA of the USA

                          2
OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. INTRODUCTION

Renee M. Smith, a pro se litigant, appeals from the
district court's order of May 21, 1997, dismissing her
complaint for failure to state a claim, and from the district
court's order of June 5, 1997, denying her motion for leave
to amend her complaint. Smith's complaint alleges
violations of section 1 of the Sherman Act, 15 U.S.C. S 1,
and Title IX of the Educational Amendments of 1972, 20
U.S.C. S 1681, as well as a state law breach of contract
claim against the National Collegiate Athletic Association
("NCAA"). Smith's allegations arise from the NCAA's
promulgation and enforcement of a bylaw prohibiting a
student-athlete from participating in intercollegiate
athletics while enrolled in a graduate program at an
institution other than the student-athlete's undergraduate
institution.

The district court had jurisdiction over the federal claims
in this matter pursuant to 28 U.S.C. SS 1331 and 1337 and
15 U.S.C. S 15, and over the state law claim pursuant to 28
U.S.C. S 1367. This court has jurisdiction to review the final
orders of the district court pursuant to 28 U.S.C. S 1291.1
_________________________________________________________________

1. According to the NCAA rules, a student-athlete is eligible to
participate
in intercollegiate athletics for a total of four seasons within a five-
year
period. Because Smith's five year-period of eligibility has expired and,
according to the NCAA her complaint seeks only declaratory relief, the
NCAA concludes that her Title IX claim is moot. We disagree.

Smith's Title IX claim is not moot although her period of eligibility has
expired because she retains a claim for damages. See Ellis Bhd. of Ry.,
Airline & S.S. Clerks, 466 U.S. 435, 442, 104 S. Ct. 1883, 1889 (1984)
(holding that a claim is not moot where there is a viable damages claim);
National Iranian Oil Co. v. MAPCO Int'l, Inc., 983 F.2d 485, 489 (3d Cir.
1992); Jersey Cent. Power & Light Co. v. New Jersey, 772 F.2d 35, 41
(3d Cir. 1985). Although count II of Smith's complaint, which asserts a
Title IX claim, states that "[t]his action is a request for a declaratory

                               3
We exercise plenary review over the district court's
dismissal of Smith's complaint for failure to state a claim.
See Lake v. Arnold, 112 F.3d 682, 684 (3d Cir. 1997). We
accept all of her allegations as true, view them in the light
most favorable to her, and will affirm the dismissal only if
she can prove no set of facts entitling her to relief. See
Nami v. Fauver, 82 F.3d 63, 65 (3d Cir. 1996); ALA, Inc. v.
CCAir, Inc., 29 F.3d 855, 859 (3d Cir. 1994). We review the
district court's denial of her motion for leave to amend her
complaint for abuse of discretion. See In re Burlington Coat
Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997).

II. FACTS AND PROCEDURAL HISTORY

Smith graduated from high school in the spring of 1991
and enrolled in St. Bonaventure University the following
fall, where she participated in Division I athletics. Smith
played intercollegiate volleyball for St. Bonaventure during
the 1991-92 and 1992-93 athletic seasons. By her choice,
Smith did not participate in intercollegiate volleyball for St.
Bonaventure during the 1993-94 season.

Smith graduated from St. Bonaventure in two and one
half years. Thereafter, she enrolled in a postbaccalaureate
program at Hofstra, and then in 1995 she enrolled in a
second postbaccalaureate program at the University of
Pittsburgh. St. Bonaventure did not offer either of these
postbaccalaureate programs.

The NCAA is an unincorporated association comprised of
public and private colleges and universities and is
responsible for promulgating rules governing all aspects of
intercollegiate athletics, including recruiting, eligibility of
student-athletes, and academic standards. The member
_________________________________________________________________

relief challenging sex discriminatory practices and policies of the NCAA
. . . in violation of Title IX," her complaint also includes a clause
which
prays for additional relief including damages and any further relief which
the court finds appropriate. App. at 5. In our view, a fair reading of the
complaint establishes that it asserts an action for damages under Title
IX. See Franklin v. Gwinnett County Pub. Schs., 503 U.S. 60, 112 S. Ct.
1028 (1992) (holding that a claim for damages exists in an action to
enforce Title IX).

                               4
institutions agree to abide by and enforce these rules. The
NCAA denied Smith eligibility to compete for Hofstra and
the University of Pittsburgh in the 1994-95 and 1995-96
athletic seasons, respectively, based upon Bylaw 14.1.8.2 in
the NCAA Manual (the "Postbaccalaureate Bylaw"). The
Postbaccalaureate Bylaw provides that a student-athlete
may not participate in intercollegiate athletics at a
postgraduate institution other than the institution from
which the student earned her undergraduate degree. 2 Both
Hofstra and the University of Pittsburgh applied to the
NCAA for a waiver of the bylaw with respect to Smith, but
the NCAA denied both requests. Smith was, however, in
good academic standing and in compliance with all other
NCAA eligibility requirements for the 1994-95 and 1995-96
athletic seasons.

In August 1996, Smith instituted this suit challenging
the NCAA's enforcement of the bylaw as well as the NCAA's
refusal to waive the bylaw in her case. More particularly,
Smith alleged that the Postbaccalaureate Bylaw is an
unreasonable restraint of trade in violation of section 1 of
the Sherman Act and the NCAA's refusal to waive the bylaw
excluded her from intercollegiate competition based upon
her sex in violation of Title IX. Smith also asserted a state
law breach of contract claim based upon the NCAA's denial
of eligibility. On May 21, 1997, the district court dismissed
Smith's federal claims for failure to state a claim upon
which relief could be granted. The court held that the
_________________________________________________________________

2. The bylaw at issue provides that

       [a] student-athlete who is enrolled in a graduate or professional
       school of the institution he or she previously attended as an
       undergraduate (regardless of whether the individual has received a
       United States baccalaureate degree or its equivalent), a student-
       athlete who is enrolled and seeking a second baccalaureate or
       equivalent degree at the same institution, or a student-athlete who
       has graduated and is continuing as a full-time student at the same
       institution while taking course work that would lead to the
       equivalent of another major or degree as defined and documented by
       the institution, may participate in intercollegiate athletics,
provided
       the student has eligibility remaining and such participation occurs
       within the applicable five-year or 10-semester period . . . .

Rule 14.1.8.2 of NCAA Manual.

                                5
NCAA's refusal to waive the bylaw was not the type of
action to which the Sherman Act applied. It also held that
Smith's complaint did not allege adequately that the NCAA
was a recipient of federal funding so as to be subject to
Title IX. By the same order, the district court exercised its
discretion to dismiss Smith's state law contract claim
pursuant to 28 U.S.C. S 1367(c). See Smith v. National
Collegiate Athletic Ass'n, 978 F. Supp. 213 (W.D. Pa. 1997).

Thereafter, Smith submitted a proposed amended
complaint and moved the district court for leave to amend
her complaint, which the district court denied "as moot" on
June 5, 1997. Smith filed timely appeals from these orders,
which we have consolidated.

III. DISCUSSION

A. SHERMAN ACT CLAIM

Count I of Smith's complaint alleges that the NCAA, in
promulgating and enforcing the Postbaccalaureate Bylaw,
violated section 1 of the Sherman Act because the bylaw
unreasonably restrains trade and has an adverse
anticompetitive effect. As we have indicated, the district
court dismissed this claim for failure to state a claim upon
which relief could be granted, holding that "the actions of
the NCAA in refusing to waive the Postbaccalaureate Bylaw
and allow the Plaintiff to participate in intercollegiate
athletics is not the type of action to which the Sherman Act
was meant to be applied." See Smith, 978 F. Supp. at 218.
Smith argues that the district court erred in limiting the
application of the Sherman Act to the NCAA's commercial
and business activities. We disagree.

Section 1 of the Sherman Act provides, in relevant part,
that "[e]very contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or commerce
among the several States, or with foreign nations, is
declared to be illegal." 15 U.S.C. S 1. Although the section
literally prohibits "every" contract, section 1 does not
preclude all restraints on trade, but only those that are
unreasonable. See National Collegiate Athletic Ass'n v.
Board of Regents of the Univ. of Okla., 468 U.S. 85, 98 &

                               6
n.17, 104 S. Ct. 2948, 2959 & n.17 (1984); Arizona v.
Maricopa County Med. Soc'y, 457 U.S. 332, 342-44, 102
S. Ct. 2466, 2472-73 (1982). The Clayton Act, 15 U.S.C.
SS 15, 26, grants a private right of action to, inter alia, a
person "injured in his business or property" by a violation
of section 1 of the Sherman Act.3

Smith misconstrues the law in arguing that the Supreme
Court has refused to limit antitrust remedies to commercial
interests. The cases she cites address whether the plaintiffs
alleged injuries within the meaning of the Clayton Act; in
that context, the Court held that the statute was not
limited to redressing injuries to commercial interests. See
Reiter v. Sonotone Corp., 442 U.S. 330, 338-89, 99 S. Ct.
2326, 2330 (1979) (holding that "injury to business or
property" was not limited to commercial interests); Blue
Shield of Va. v. McCready, 457 U.S. 465, 473, 102 S. Ct.
2540, 2545 (1982) (holding that a subscriber to a health
plan who had employed the services of a psychologist
alleged a redressable antitrust injury); see also McNulty v.
Borden, Inc., 474 F. Supp. 1111, 1115-18 (E.D. Pa. 1979)
(holding that an employee of an alleged antitrust violator
was injured in his business or property). The question
which we now face is different; it is whether antitrust laws
apply only to the alleged infringer's commercial activities.
Thus, rather than focus on Smith's alleged injuries, we
consider the character of the NCAA's activities.

In this regard, we recognize that the Supreme Court has
suggested that antitrust laws are limited in their
application to commercial and business endeavors. Thus,
the Court has explained that

       [the Sherman Act] was enacted in the era of`trusts'
_________________________________________________________________

3. Section 4 of the Clayton Act provides:

       [A]ny person who shall be injured in his business or property by
       reason of anything forbidden in the antitrust laws may sue therefor
       in any district court of the United States . . . without respect to
the
       amount in controversy, and shall recover threefold the damages by
       him sustained, and the cost of suit, including a reasonable
       attorney's fee.

15 U.S.C. S 15.

                               7
       and of `combinations' of businesses and of capital
       organized and directed to control of the market by
       suppression of competition in the marketing of goods
       and services, the monopolistic tendency of which had
       become a matter of public concern. The end sought (by
       these laws) was the prevention of the restraints to the
       competition in business and commercial transactions
       which tended to restrict production, raise prices or
       otherwise control the market to the detriment of
       purchasers or consumers of goods and services, all of
       which had come to be regarded as a special form of
       public injury.

Apex Hosiery Co. v. Leader, 310 U.S. 469, 492-93, 60 S. Ct.
982, 992 (1940). The Court also has noted that "in Apex [it]
recognized that the Act is aimed primarily at combinations
having commercial objectives and is applied only to a very
limited extent to organizations . . . which normally have
other objectives." Klor's, Inc. v. Broadway-Hale Stores, Inc.,
359 U.S. 207, 213 n.7, 79 S. Ct. 705, 710 n.7 (1959).

The Supreme Court addressed the applicability of the
Sherman Act to the NCAA in National Collegiate Athletic
Ass'n v. Board of Regents, 468 U.S. 85, 104 S. Ct. 2948,
holding that the NCAA's plan to restrict television coverage
of intercollegiate football games violated section 1. The
Court discussed the procompetitive nature of the NCAA's
activities such as establishing eligibility requirements as
opposed to the anticompetitive nature of the television plan.
See id. at 117, 104 S.Ct. at 2969. Yet, while the Court
distinguished the NCAA's television plan from its rule
making, it did not comment directly on whether the
Sherman Act would apply to the latter.

Although insofar as we are aware no court of appeals
expressly has addressed the issue of whether antitrust laws
apply to the NCAA's promulgation of eligibility rules, cf.
McCormack v. National Collegiate Athletic Ass'n, 845 F.2d
1338, 1343 (5th Cir. 1988) (assuming without deciding that
the NCAA's eligibility rules were subject to antitrust
scrutiny and holding that the "no-draft" and "no-agent"
rules do not have an anticompetitive effect), many district
courts have held that the Sherman Act does not apply to
the NCAA's promulgation and enforcement of eligibility

                               8
requirements. See Gaines v. National Collegiate Athletic
Ass'n, 746 F. Supp. 738, 744-46 (M.D. Tenn. 1990)
(holding that antitrust law cannot be used to invalidate
NCAA eligibility rules, but noting in dicta that the"no-
agent" and "no-draft" rules have primarily procompetitive
effects); Jones v. National Collegiate Athletic Ass'n, 392 F.
Supp. 295, 303 (D. Mass. 1975) (holding that antitrust law
does not apply to NCAA eligibility rules); College Athletic
Placement Servs., Inc. v. National Collegiate Athletic Ass'n,
1975-1 Trade Cas. (CCH) P 60,117, available in 1974 WL
998, *2, *3 (D.N.J. 1974) (holding that the NCAA's adoption
of a rule furthering its noncommercial objectives, such as
preserving the educational standards of its members, is not
within the purview of antitrust law), aff'd , 506 F.2d 1050
(3d Cir. 1974) (table).

We agree with these courts that the eligibility rules are
not related to the NCAA's commercial or business activities.
Rather than intending to provide the NCAA with a
commercial advantage, the eligibility rules primarily seek to
ensure fair competition in intercollegiate athletics. Based
upon the Supreme Court's recognition that the Sherman
Act primarily was intended to prevent unreasonable
restraints in "business and commercial transactions," Apex,
310 U.S. at 493, 60 S.Ct. at 992, and therefore has only
limited applicability to organizations which have principally
noncommercial objectives, see Klor's, Inc., 359 U.S. at 214
n.7, 79 S. Ct. at 710 n.7, we find that the Sherman Act does
not apply to the NCAA's promulgation of eligibility
requirements.4
_________________________________________________________________

4. The recent decision of the Court of Appeals for the Tenth Circuit in
Law v. National Collegiate Athletic Ass'n, No. 96-3034, 1998 WL 23710
(10th Cir. Jan. 23, 1998), does not alter our result. At issue in Law was
the NCAA's bylaw restricting entry-level coaches' annual compensation.
The court held that although the restriction was a horizontal price
restraint, which is usually per se invalid, the rule of reason applied
because certain products, such as intercollegiate sports, require
horizontal restraints in order to exist. See id. at *5-*6 (citing National
Collegiate Athletic Ass'n v. Board of Regents, 468 U.S. at 100-01, 104
S.Ct. at 2959-60).

The bylaw at issue in Law concerned a restriction on the business
activities of the institutions, whereas the Postbaccalaureate Bylaw does

                               9
Moreover, even if the NCAA's actions in establishing
eligibility requirements were subject to the Sherman Act,
we would affirm the district court's dismissal of this claim.
The NCAA's eligibility requirements are not "plainly
anticompetitive," National Soc'y of Prof'l Eng'rs v. United
States, 435 U.S. 679, 692, 98 S. Ct. 1355, 1365 (1978), and
therefore are not per se unreasonable, see National
Collegiate Athletic Ass'n v. Board of Regents, 468 U.S. at
101, 104 S.Ct. at 2960 (refusing to apply per se rule to
NCAA's television plan because the NCAA is involved in an
industry where horizontal restraints are necessary to the
availability of the product); McCormack, 845 F.2d at 1343-
44; College Athletic Placement Servs., 1975-1 Trade Cas.
(CCH) P 60,117, available in 1974 WL 998, *3.
Consequently, if the eligibility requirements were subject to
the Sherman Act, we would analyze them under the rule of
reason.

Under the "rule of reason" test, a court considers all
relevant factors in determining a defendant's purpose in
implementing the challenged restraint and the effect of the
restraint on competition, see Orson, Inc. v. Miramax Film
Corp., 79 F.3d 1358, 1367-68 (3d Cir. 1996) (citing Board
of Trade of Chicago v. United States, 246 U.S. 231, 238, 38
S. Ct. 242, 243-44 (1918)), and asks essentially whether the
challenged rule promotes or hinders competition. See
McCormack, 845 F.2d at 1344.

As noted above, the Supreme Court has recognized the
procompetitive nature of many of the NCAA's restraints,
including eligibility requirements. See National Collegiate
Athletic Ass'n v. Board of Regents, 468 U.S. at 117, 104
S. Ct. at 2969. According to the Supreme Court,

       [w]hat the NCAA and its member institutions market in
       this case is competition itself--contests between
       competing institutions. Of course, this would be
_________________________________________________________________

not. Because our analysis regarding the applicability of the Sherman Act
focuses on the distinction between commercial and noncommercial
activities, Law is inapposite. Further, because of the significant
difference in the nature of the bylaw at issue in Law and the
Postbaccalaureate Bylaw, the Law court's rule of reason analysis is not
instructive here.

                               10
       completely ineffective if there were no rules on which
       the competitors agreed to create and define the
       competition to be marketed. A myriad of rules . . .
       must be agreed upon, and all restrain the manner in
       which institutions compete. . . . Thus, the NCAA plays
       a vital role in enabling [intercollegiate sports] to
       preserve its character, and as a result enables a
       product to be marketed which might otherwise be
       unavailable. In performing this role, its actions widen
       consumer choice . . . and hence can be viewed as
       procompetitive.

Id. at 101-02, 104 S.Ct. at 2960-61 (footnote omitted). In
particular, the Court explained that "[i]t is reasonable to
assume that most of the regulatory controls of the NCAA
are justifiable means of fostering competition among
amateur athletic teams and therefore procompetitive
because they enhance public interest in intercollegiate
athletics" and suggested that rules establishing eligibility
requirements of student-athletes were such controls, while
rules limiting television broadcasts were not. See id. at 117,
104 S.Ct. at 2969.

While the parties have not cited any opinion addressing
the particular bylaw at issue here, and we have found
none, other courts have held that the NCAA's "no-draft"
and "no-agent" rules, which disqualify a student-athlete
from further intercollegiate competition if the student-
athlete enters a professional draft or contacts an agent, are
reasonable because they are procompetitive. See
McCormack, 845 F.2d at 1343; Banks v. National Collegiate
Athletic Ass'n, 977 F.2d 1081, 1087-94 (7th Cir. 1992)
(holding that NCAA's "no-draft" and "no-agent" rules do not
have an anticompetitive impact on a discernable market);
Gaines, 746 F. Supp. at 746; Jones, 392 F. Supp. at 304
(noting in dicta that "any limitation on access to
intercollegiate sports is merely the incidental result of the
organization's pursuit of its legitimate goals"); see also
Justice v. National Collegiate Athletic Ass'n, 577 F. Supp.
356, 379 (D. Ariz. 1983) (holding that NCAA sanctions such
as rendering a college team ineligible for post-season play
and for television appearances imposed for violations of rule
against providing compensation to student-athletes did not

                               11
violate antitrust law because sanctions were reasonably
related to the NCAA's goals of preserving amateurism and
promoting fair competition).

We agree with these courts that, in general, the NCAA's
eligibility rules allow for the survival of the product,
amateur sports, and allow for an even playing field. See
McCormack, 845 F.2d at 1345. Likewise, the bylaw at issue
here is a reasonable restraint which furthers the NCAA's
goal of fair competition and the survival of intercollegiate
athletics and is thus procompetitive. Clearly, the rule
discourages institutions with graduate or professional
schools from inducing undergraduates at other institutions
to forgo participating in the athletic programs at their
undergraduate institutions in order to preserve eligibility
to participate in intercollegiate athletics on a
postbaccalaureate basis. Likewise, the rule discourages
undergraduates from forgoing participation in athletic
programs on their own initiative to preserve eligibility on a
postbaccalaureate basis at another institution. Indeed, we
think that the bylaw so clearly survives a rule of reason
analysis that we do not hesitate upholding it by affirming
an order granting a motion to dismiss Smith's antitrust
count for failure to state a claim on which relief can be
granted.

B. TITLE IX CLAIM

Title IX provides that "[n]o person in the United States
shall, on the basis of sex, be excluded from participating in,
be denied the benefits of, or be subjected to discrimination
under any education program or activity receiving Federal
financial assistance." 20 U.S.C. S 1681(a). Intercollegiate
athletics is an educational program or activity within the
statute. See 20 U.S.C. S 1687; 34 C.F.R. S 106.41 (a).5
_________________________________________________________________

5. The statute defines "program or activity" as

       (2)(A) a college, university, or other postsecondary institution,
or a
       public system of higher education; or . . .

       (4) any other entity which is established by two or more of the
       entities described in paragraph (1) (2), or (3);

                               12
Thus, the NCAA is subject to Title IX provided that it
receives federal financial assistance within the meaning of
section 1681(a).

Federal regulations define "recipient" as including

       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) (1997) (emphasis added). The plain
language of the statute and regulation is quite broad and
encompasses indirect recipients of federal funds. See Grove
City College v. Bell, 465 U.S. 555, 564, 104 S. Ct. 1211,
1216 (1984) (holding that a college received federal funds
where the funds were granted to its students asfinancial
aid rather than directly to the college because the language
of the section does not distinguish between direct and
indirect receipt of federal funds).

The Court of Appeals for the Sixth Circuit addressed the
applicability of Title IX to a state high school athletic
association in Horner v. Kentucky High Sch. Athletic Ass'n,
43 F.3d 265 (6th Cir. 1994). In Horner, the plaintiffs, female
student-athletes, alleged that the association received dues
from its member high schools, many of which receive
federal funds, and that a state statute authorized the
designation of the association as an agent of the state
_________________________________________________________________

       any part of which is extended Federal financial assistance . . . .

20 U.S.C. S 1687. In addition, federal regulation in part provides that

       [n]o person shall, on the basis of sex, be excluded from
participation
       in, be denied the benefits of, be treated differently from another
       person or otherwise be discriminated against in any
interscholastic,
       intercollegiate, club or intramural athletics offered by a
recipient,
       and no recipient shall provide any such athletics separately on
such
       basis.

34 C.F.R. S 106.41(a).

                               13
board of education. See Ky. Rev. Stat. Ann. S 156.070(1),
(2). In that capacity, the association performed the board's
statutory duties with respect to interscholastic sports. The
plaintiffs alleged that the association violated Title IX by
sanctioning fewer sports for girls than boys and by refusing
to sanction a particular sport for girls. The court held that
the association would be subject to Title IX if the plaintiff
could prove her allegations with respect to its functioning
and financing. See id.

The district court attempted to distinguish Horner by
noting that "even if the [NCAA] receives dues from member
schools which receive federal funds, unlike the situation in
Horner, there is no statutory connection between the
parties such that the Defendant can be considered the
`agent' of its member institutions that receive federal
financial assistance." See Smith, 978 F. Supp. at 220. Thus,
according to the district court, the distinguishing
characteristic here is the lack of statutory authority for the
NCAA. We disagree. The NCAA acts no less than the
association in Horner as an agent of its member institutions
merely because it lacks statutory authority for its activities.
The NCAA is a voluntary organization created by and
comprised of the educational institutions which essentially
acts as their surrogate with respect to athletic rules.

In its construction of section 504 of the Rehabilitation
Act, which contains language identical to that of Title IX in
20 U.S.C. S 1681(a) regarding receipt of federal assistance,6
the Supreme Court has indicated that Congress, as in Title
IX, did not distinguish between direct and indirectfinancial
assistance. See United States Dep't of Transp. v. Paralyzed
Veterans of Amer., 477 U.S. 597, 606-07, 106 S. Ct. 2705,
2711-12 (1986) (citing Grove City College, 465 U.S. at 564,
104 S.Ct. at 1216 (holding that a college received federal
_________________________________________________________________

6. The Rehabilitation Act states that

       [n]o otherwise qualified individual with a disability in the United
       States, as defined in section 706(8) of this title, shall, solely
by
       reason of her or his disability, be excluded from the participation
in,
       be denied the benefits of, or be subjected to discrimination under
       any program or activity receiving Federal financial assistance.

29 U.S.C. S 794 (emphasis added).

                               14
funds where the funds were granted to its students as
financial aid rather than directly to the college)). The Court,
however, drew a distinction between those entities which
indirectly benefit from federal assistance and those that
indirectly receive federal assistance, holding that only those
the receive federal funds are within the statute. Thus, the
Court rejected the argument that all commercial airlines
are "recipients" of federal funds simply because airport
operators receive federal funds which benefit the airlines in
the form of runways, inter alia. See id. at 606, 106 S.Ct. at
2711. The Court defined "recipient" from a contractual
perspective, limiting "recipients" of federal funds, and
therefore the obligations of the act, to those who are in a
position to decide whether to "receive" federal funds and
thereby accept the concomitant obligations of the statute.
See id.7

Notwithstanding the parallel language of the
Rehabilitation Act and Title IX, we do not apply the
Paralyzed Veterans Court's definition of "recipient" to Title
IX in the circumstances here. In our view, the broad
regulatory language under Title IX, which defines a
recipient as an entity "which operates an educational
program or activity which receives or benefits" from federal
funds, 34 C.F.R. S 106.2(h) (1997) (emphasis added),
requires that we reach a different result. Application of
Paralyzed Veterans here would render the regulatory
definition of "recipient" under Title IX a nullity. After all,
unlike the commercial airlines in Paralyzed Veterans, the
NCAA is not merely an incidental beneficiary of federal
funds. Quite to the contrary, it seems to us that the
relationship between the members of the NCAA and the
organization itself is qualitatively different than that
between airlines and airport operators, for we think that it
_________________________________________________________________

7. The Court noted that "Congress enters into an arrangement in the
nature of a contract with the recipients of the[federal] funds: the
recipient's acceptance of the funds triggers coverage under the
nondiscrimination provision." 477 U.S. at 605, 106 S.Ct. at 2711. The
Court further noted that "[b]y limiting coverage to recipients, Congress
imposes the obligations of S 504 upon those who are in a position to
accept or reject those obligations as a part of the decision whether or
not
to `receive' federal funds." Id. at 606, 106 S. Ct. at 2711.

                               15
would be unreasonable to characterize the latter as
surrogates for the airlines. Given the breadth of the
language of the Title IX regulation defining recipient, we
hold that allegations in Smith's proposed amended
complaint, that the NCAA receives dues from its members
which receive federal funds, if proven, would subject the
NCAA to the requirements of Title IX.

The district court found that Smith's original complaint
did not allege that the NCAA was a recipient of federal
funds, and therefore dismissed the Title IX claim. See
Smith, 978 F. Supp. at 219. Smith's complaint included the
following allegation:

       This action is a request for declaratory relief
       challenging sex discriminatory practices and policies of
       the NCAA, Hofstra University, and the University of
       Pittsburgh in violation of Title IX of the Educational
       Amendments of 1972, 20 U.S.C. S 1681. Title IX
       prohibits sex discrimination in an educational program
       or activity receiving federal financial assistance.

Compl. P 25. We agree that Smith's original complaint did
not contain an allegation that the NCAA receives federal
financial assistance. Thus, the district court properly
dismissed her original Title IX complaint.8

But we have not confined our analysis to Smith's original
complaint for, as we have indicated, following the district
court's dismissal of her claims, Smith moved for leave to
amend her complaint pursuant to Fed. R. Civ. P. 15. By
order dated June 5, 1997, the district court denied this
motion, stating only that the motion "is denied as moot, the
court having granted defendant's motion to dismiss on May
20, 1997." App. at 117. Because the district court gave no
further explanation, it is unclear whether the district court
was unaware of its discretion to allow the proposed
_________________________________________________________________

8. However, Judge McKee would hold that Smith's original complaint
sufficiently states that the NCAA receives federalfinancial assistance
under the pleading requirements that we apply to pro se complaints. See
Zillich v. Lucht, 981 F.2d 694 (3d Cir. 1992) ("When, as in this case,
plaintiff is a pro se litigant, we have a special obligation to construe
[her]
complaint liberally.").

                                16
amended complaint despite the dismissal or whether the
court believed that the amendment would be futile even if
pleaded. Nevertheless, under either view, the district court
erred in denying Smith's motion for leave to amend.

Pursuant to Fed. R. Civ. P. 15(a), a plaintiff has an
absolute right to amend her complaint once at any time
before a responsive pleading is served. Thereafter, a plaintiff
must seek leave of the district court to amend her pleading,
and although it is within the district court's discretion,
district courts should grant such requests freely when
justice so requires. Id.

After the district court enters judgment on a motion to
dismiss, a plaintiff no longer may amend her complaint as
of right. See Newark Branch, NAACP v. Town of Harrison,
907 F.2d 1408, 1417 (3d Cir. 1990); Kauffman v. Moss, 420
F.2d 1270, 1276 (3d Cir. 1970). However, even though
Smith no longer was entitled to amend her complaint as of
right after the dismissal of her claim, it was within the
district court's discretion to grant her leave to amend. See
Newark Branch, NAACP, 907 F.2d at 1417; Kauffman, 420
F.2d at 1276; In re Sverica Acquisition Corp. v. Load Rite
Trailers, Inc., 179 B.R. 457, 459 (E.D. Pa. 1995); Fearon v.
Community Fed. Sav. & Loan of Phila., 119 F.R.D. 13, 15
(E.D. Pa. 1988) (plaintiff had no right to amend where both
complaint and action dismissed, but could seek leave of
court to do so). Thus, her motion to amend was not moot
in the sense of being too late or being foreclosed by the
dismissal.

While "the grant or denial of an opportunity to amend is
within the discretion of the District Court . . . outright
refusal to grant the leave without any justifying reason
appearing for the denial is not an exercise of that
discretion; it is merely an abuse of that discretion and
inconsistent with the spirit of the Federal Rules." Foman v.
Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 230 (1962). On the
other hand, 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. See id.; In re Burlington Coat
Factory Sec. Litig., 114 F.3d at 1434; Massarsky v. General
Motors Corp., 706 F.2d 111, 125 (3d Cir. 1983). An

                               17
amendment is futile if the complaint, as amended, would
not survive a motion to dismiss for failure to state a claim
upon which relief could be granted. See In re Burlington
Coat Factory, 114 F.3d at 1434 (citing Glassman v.
Computervision Corp., 90 F.3d 617, 623 (1st Cir. 1996)). In
determining whether the amendment would be futile, the
district court applies the same standard of legal sufficiency
as under Fed. R. Civ. P. 12(b)(6). See id.

Smith alleged facts in her proposed amended complaint
which, if proven, would establish that the NCAA was a
recipient of federal funds within the meaning of Title IX.
Her motion states that she intended the amended
complaint to cure any allegational defects, and the
proposed amended complaint includes an allegation that
the NCAA is an indirect recipient of federal funds. In
particular, her proposed amended complaint alleges that
"[t]he NCAA is a recipient of federal funds because it is an
entity which receives federal financial assistance through
another recipient and operates an educational program or
activity which receives or benefits from such assistance."
App. at 98. This allegation plainly alleges that the NCAA
receives dues from member institutions, which receive
federal funds. As discussed above, this allegation would be
sufficient to bring the NCAA within the scope of Title IX as
a recipient of federal funds and would survive a motion to
dismiss.

If a district court concludes that an amendment is futile
based upon its erroneous view of the law, it abuses its
discretion in denying a plaintiff leave to amend to include
a legally sufficient allegation. See Centifanti v. Nix, 865 F.2d
1422, 1431 (3d Cir. 1989) (holding that the district court,
which erred in its conclusion that there was jurisdictional
defect, abused its discretion in denying a plaintiff's motion
for leave to amend his complaint because the proposed
amendment would not cure the jurisdictional defect). Thus,
if the district court denied Smith leave to amend because it
viewed the proposed amendments as futile, it erred because
the conclusion was based on an error of law. Furthermore,
we see no basis to conclude that the district court
justifiably could have denied the motion to amend on the
grounds that Smith had acted in bad faith, with a dilatory

                               18
motive, or had delayed unduly in bringing the motion or
that granting the motion would prejudice the NCAA. Indeed,
there is nothing in the record to support a conclusion that
the district court denied the motion to amend on any of
these grounds. Overall, therefore, we are satisfied that the
district court abused its discretion in denying the motion to
amend the complaint.9

IV. CONCLUSION

For the foregoing reasons, we will affirm the district
court's dismissal of appellant's Sherman Act claim, vacate
its dismissal of the Title IX claim, and reverse the district
court's denial of her motion for leave to amend her
complaint with respect to her Title IX claim. In light of this
conclusion, we will remand to the district court for further
proceedings consistent with this opinion and direct the
district court to reinstate her state law contract claim, over
which the district court declined to exercise jurisdiction
pursuant to 28 U.S.C. S 1367(c). The parties will bear their
own costs on this appeal.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit
_________________________________________________________________

9. We do not imply that we have any view of the merits of Smith's Title
IX claim. The parties have not briefed the merits, and the district court
will address those issues on remand if Smith can prove her allegations
to support the applicability of Title IX to the NCAA. Thus, we emphasize
that we merely hold that the amendment would not have been futile in
the sense that it would not have pled adequately that the NCAA was
subject to Title IX.
                                19