Smith v. Natl Collegiate

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Precedential or Non-Precedential: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

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1998

Recommended Citation

"Smith v. Natl Collegiate" (1998). 1998 Decisions. Paper 49.

http://digitalcommons.law.villanova.edu/thirdcircuit_1998/49

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova

University School of Law Digital Repository. It has been accepted for inclusion in 1998 Decisions by an authorized administrator of Villanova

University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.

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