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George v. National Collegiate Athletic Association

July 16, 2010

TOM GEORGE, CHRIS VITRON, LORICHAPKO AND EDWARDSNEAD, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
v.
NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, DEFENDANT-APPELLEE.



Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 08-CV-1684--William T. Lawrence, Judge.

The opinion of the court was delivered by: Darrah, District Judge.*fn1

ARGUED MARCH 29, 2010

Before CUDAHY and KANNE, Circuit Judges, and DARRAH, District Judge.

Plaintiffs brought this proposed nationwide class action against the National Collegiate Athletic Association ("NCAA") and Ticketmaster, alleging that both defendants operated illegal lotteries to sell and distribute tickets for certain Division I championship tournaments. The NCAA moved to dismiss Plaintiffs' Second Amended Complaint. The district court dismissed all claims with prejudice, and this appeal followed.

BACKGROUND

The named plaintiffs are residents of Arizona, Oregon, and New York. Each applied for tickets to NCAA men's basketball games through NCAA-owned websites, and each of them forfeited service fees when they were not selected as winners in the process. Plaintiffs claim the NCAA's ticket-distribution system, which the NCAA has operated since at least 1994, is an illegal lottery and a means of increasing revenues at Plaintiffs' expense. Plaintiffs believe the number of potential class members to be in the hundreds of thousands.

The ticket-distribution system has been used for inter alia the NCAA's Division I men's and women's basketball and hockey championship tournaments. In their Second Amended Complaint, Plaintiffs specifically describe the application of the NCAA's system for distributing tickets to the 2009 Men's Basketball Tournament. For the final games of that tournament, during which the top four teams (the "Final Four") compete for the Championship title, Plaintiffs explain the process as follows: Each person who applied for tickets to Final Four games submitted a single application with up to ten entries.

Each entry was a chance to win, at the most, two tickets and required a payment of a six-dollar "non-refundable handling fee." An applicant could win only once. Nonetheless, each applicant was required to submit the full face value of the tickets for each entry submitted. Accordingly, in order to maximize the chances for winning a single pair of $150 tickets, an applicant would have to submit $3,060 (the face value of ten pairs of tickets plus a six-dollar handling fee for each of ten entries). If the applicant were to win, he would receive a pair of tickets via overnight mail and, eventually, a $2,700 refund (the total ticket price for the remaining nine entries). The $60 in handling fees would be forfeited to the NCAA. If the applicant were to lose, he would receive a $3,000 refund (his entire up-front investment minus the handling fees).

Plaintiffs allege that these retained "service" or "handling" fees, as well as the NCAA's use of the applicants' money, constitute consideration for a chance to win the right to purchase "highly prized" tickets for priority seating at venues that "are much too small to meet ticket demand" and that the NCAA's ticket-distribution system constitutes an unlawful lottery. (Second Am. Compl. ¶¶ 46-47.)

Plaintiffs allege that "the number of applicants greatly exceeds the number of tickets on virtually every occasion," that the NCAA falsely advertises the availability of certain seats and "manipulate[s]" the purportedly random drawings "to accommodate business needs," and that the resale market value of the tickets is high due to their scarcity. (Second Am. Compl. ¶¶ 25, 47, 49.) Plaintiffs further allege that the "service fees" and "handling fees" charged by the NCAA bear "no relationship to the costs of running the lottery and grossly exceed[] any costs associated with the lottery." (Second Am. Compl. ¶ 41.) According to Plaintiffs, the NCAA reaps huge profits by holding and using the money received from applicants (approximately $100 million in 2008).

Plaintiffs' Second Amended Complaint asserts six claims, five of which remained at the time the NCAA filed its motion to dismiss.*fn2 Count I seeks a declaratory judgment that the NCAA's ticket-allocation process constitutes illegal gambling in violation of Indiana law; Count II is a claim for unjust enrichment;*fn3 Count III alleges a civil conspiracy between the NCAA and Ticketmaster; Count V is for monies had and received; and Count VI claims the NCAA violated the Indiana Deceptive Consumer Sales Act ("DCSA"), codified at Ind. Code § 24-5-0.5-1 et seq.

The district court dismissed the entire Second Amended Complaint with prejudice on the NCAA's Motion to Dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b).

LEGAL STANDARD

A district court's grant of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) is reviewed de novo. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008). All well-pleaded facts are accepted as true, and all reasonable inferences are drawn in the plain-tiff's favor. Id. The allegations in the complaint "must plausibly suggest that the plaintiff has a right to relief, raising that possibility above a 'speculative level'; if they do not, the plaintiff pleads itself out of court." Equal Employment Opportunity Comm'n v. ...


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