Yesterday, the U.S. Court of Appeals for the Seventh Circuit, in an about face, reversed its earlier ruling that a class action lawsuit against the NCAA over a contest involving the distribution of tickets to its wildly popular NCAA Basketball Tournament could proceed.
In July, the Court of Appeals — reversing the decision of Judge William T. Lawrence of the Southern District of Indiana dismissing the case — determined that the plaintiffs had sufficiently pled a cause of action for violation of Indiana’s illegal lottery law by claiming that the NCAA’s contest involved the distribution of a prize, by chance, among persons who were required to pay valuable consideration to enter. The Court of Appeals also found that the District Court had erred in ruling that the plaintiffs were equally at fault for their participation in the NCAA’s contest.
Following that decision, the NCAA filed a petition for rehearing with the Court of Appeals arguing that the case involved issues of “exceptional importance” and that the decision of the Court of Appeals “directly conflicts” with an Indiana Court of Appeals decision. Upon consideration of the NCAA’s petition, the Court of Appeals vacated its July opinion and certified three questions for determination by the Indiana Supreme Court, namely,
- Whether the NCAA’s contest allocating tickets to its basketball tournament was an illegal lottery under Indiana law?;
- If so, whether the NCAA’s contest falls within Indiana’s “bona fide business transaction” exception to its illegal lottery rules?; and
- Whether plaintiffs were equally at fault for their participation in the NCAA’s contest?
In vacating its prior decision and certifying these questions to the Indiana Supreme Court, the Court of Appeals noted that the question of whether
the NCAA’s “ticket-distribution system constitutes a lottery under Indiana law is a close one, and our holding could have far-reaching effects on sports-ticket distribution systems utilized by the NCAA and others. At this juncture, we believe that affording the Indiana Supreme Court the opportunity to interpret the application of the Indiana statutes involved here appears to be the most prudent course of action.”
Not only could the determination of the legality of the NCAA’s contest have “far-reaching effects on sports ticket distribution systems”, but it may also have consequences on whether non-sport related contests involving the payment of indirect fees to enter are legal.
