U.S. court voids NCAA ruling, seeks help on state law

A U.S. appeals court asked Indiana’s Supreme Court for guidance in determining whether a National Collegiate Athletic Association’s method of selling tickets to its championship basketball tournament is an illegal lottery.

A three-judge panel of the Chicago-based appeals court Monday reversed its own July ruling that said the NCAA must face a lawsuit by consumers claiming its ticket distribution method violates Indiana law.

“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,” the U.S. judges said.

The Indianapolis-based association sells tickets for its basketball and hockey championships by accepting applications for more tickets than are actually available. In the suit, three states challenged the NCAA practice of keeping a $6 to $10 “handling” fee for each entry, even from unsuccessful applicants.

Keeping the money and awarding some applicants a thing of greater value than its price, the ticket, might violate Indiana’s law barring any entity other than the state from running a lottery, the federal court said in July.

Its decision resurrected a lawsuit filed against the NCAA by residents of New York, Arizona and Oregon, seeking compensatory and punitive damages, as well as class-action status on behalf of anyone who paid the fee since May 1998.

“The NCAA’s process to distribute championship tickets to our fans is legal and fair, and we believe the Indiana Supreme Court will agree after further consideration,” spokesman Erik Christianson said in an e-mailed statement.

Christianson and consumers’ attorney Robert B. Carey each said the association has discontinued the practice of retaining the handling fees paid by those fans that aren’t selected to receive tickets.

Carey said he doubted Indiana’s high court would take up what he called an “arcane” issue.

“No one out there does this,” he said Monday in a telephone interview. “Really the only entity that would be affected by this is the NCAA.”

The association was making money off losing entries, said Carey. “That’s gambling.”

A partner in the Phoenix office of Seattle-based Hagens Berman Sobol Shapiro LLP, Carey said he couldn’t offer an estimate of the value of the case or the size if the proposed class.

The federal appeals court panel has asked Indiana’s high court to decide whether the NCAA’s former ticket-allocation method would have been considered a lottery under state law, whether the sales were exempt as a business transaction and if the consumers’ complicity nullified their ability to recover damages.

The suit was first thrown out by U.S. District Judge William T. Lawrence in Indianapolis, who concluded that prospective purchasers were aware of the “essential features” of the NCAA system and applied willingly.