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Monday
Jul202015

NCAA files for stay of injunction issued in O'Bannon case

On Saturday, USA Today reported that the NCAA has filed for a stay of injunction with the 9th Circuit in regard to the August 2014 U.S. district ruling in O'Bannon v. NCAA, which stated that the NCAA's practice of denying student-athletes in perpetuity the ability to profit from the use of their image in likeness (specifically in the lucrative videogame market) constituted a violation of antitrust law. The district court's ruling ordered that Division-I  Football Bowl Subdivision (FBS) institutions begin putting $5,000 per year per athlete in trust for football and men's basketball players, beginning with student-athletes enrolling in Summer 2016.

A lawyer for the NCAA was quoted as saying, "If allowed to take effect, the injunction would radically alter an essential quality of college sports, amateurism. It would also fundamentally alter the way in which colleges recruit high school students, and thus redefine the process by which those students make one of the most momentous choices of their lives: which college to attend."

This argument baffles me, as the NCAA approved last summer a new governance structure that allows the "Power Five" conferences: SEC, ACC, Big Ten, Big 12, and Pac 12 the ability to enact policies that pertain only to them. Most notably, the Power Five created a distinct marketing advantage when it passed a resolution allowing their institutions to provide scholarships above and beyond what other institutions are allowed to offer, which is tuition, room and board, and books. (This calculation falls short of the federal estimation of "full cost of attendance".) So if the wealthiest conferences are allowed to create a recruiting advantage by offering larger scholarships, how would using the millions of dollars generated by the NCAA to create a post-graduation trust fund violate amateurism? The NCAA attorney also stated that the injunction levied in the O'Bannon case may force some institutions to cut teams as a result of the increased costs.

What does appear to be an issue is how this ruling will be construed vis a vis Title IX, and whether women's teams can benefit from the trust provison. Also unresolved is how tax law will affect the student-athletes, who may have to pay taxes on the deferred payments.

Monday
Jun292015

Fisher v. University of Texas Update

This morning, the Supreme Court of the United States granted a writ of certiorari (see page 5) to hear once again the Fisher v. University of Texas case in light of the Fifth Circuit Court of Appeals findings on remand. In doing so, the high Court is sure to add to its evolving body of precedent regarding the constitutionality of affirmative action in admissions.

Race-conscious admissions policies were first proposed at postsecondary institutions on the heels of civil rights legislation prohibiting discrimination on the basis of race. Guidelines for applying and interpreting these policies, however, were never clearly articulated until the Supreme Court’s 1978 opinion in Regents of the University of California v. Bakke, permitting postsecondary education institutions to consider race in admissions decisions, a practice which gained opposition in the twenty years following Bakke

In 1996, the Fifth Circuit’s decision in Hopwood v. University of Texas, an important precursor to the Fisher case, restricted admissions practices that consider race in university admissions decisions at public universities. But because the Supreme Court never granted a writ of certiorari, this case was only binding precedent in the Fifth Circuit jurisdictions of Texas, Louisiana, and Mississippi. In response to the Hopwood decision, the Texas legislature enacted H.B. 588 in 1997, known as the Top Ten Percent Plan, an ostensibly race-neutral admissions policy guaranteeing an applicant graduating in the top ten percent of his or her high school class admission to any Texas public university of his or her choice. However, the plan also permits the inclusion of 18 academic and socioeconomic criteria, several of which have been classified as proxies for race, that institutions may consider when considering admissions for students outside the top ten percent of their high school class.

Shortly after the Hopwood decision in the Fifth Circuit, the Supreme Court departed from its Bakke precedent in 2003, holding in Gratz v. Bollinger that automatically awarding admission points to applicants from certain racial minority groups was unconstitutional.

Most recently, in 2013, the Court was asked to consider the constitutional validity of the “race-neutral” Texas plan in Fisher v. University of Texas. The University of Texas' admission plans relies on two, complementary plans: (1) the Top Ten Percent Plan, a mechanistic, race-neutral plan guaranteeing admission to high school graduates in the top ten percent of their class to a public university of their choice; and (2) a holistic review admissions plan to supplement the remainder of University of Texas admittees, on the basis of individual factors, including academic credentials, family characteristics, and inter alia, race. However, the Supreme Court punted on the merits of the case. Recapitulating the judicial standard of review the Court articulated in Gratz and Bakke, the Supreme Court held that the lower courts did not view the admissions plan in the light of strict scrutiny, and remanded the case to the Fifth Circuit for findings consistent with the judicial standard. On remand in July 2014, the Fifth Circuit found, in a 2-1 panel decision, the policy to be narrowly tailored to achieving Texas’ stated interest. The plaintiff’s request for an en banc hearing of her appeal was denied in November 2014, and as this post previously mentioned, her petition for a writ of certiorari was granted today.

Since the Supreme Court’s 2013 decision never reached the merits of the case, it is expected that the Court will now have to address the admissions plans at the University of Texas head-on, rather than, as it did in its previous decision, remanding the case on procedural grounds. For every higher-ed-law-head out there, this Texas showdown has the makings of a must-read SCOTUS opinion due out next summer.

Tuesday
Jun232015

A Sweet Briar College Update in Two Parts (Part 2: A Cy-Près –er Answered)

As I mentioned in my post yesterday, a Virginia circuit court approved a settlement agreement on Monday allowing Sweet Briar College to remain open though at least the 2015-2016 academic year, bringing resolution whirlwind of controversy surrounding the college administration’s announcement of its decision in March 2015 to close the college at the end of the 2014-2015 academic year. 

The settlement agreement (between: Sweet Briar Institute, the parent charitable corporation operating Sweet Briar College; Ellen Bowyer, the county attorney for the County of Amherst, Virginia, representing the county’s interest as well as several plaintiffs named collectively, the “Bowyer Plaintiffs”; and Saving Sweet Briar, Inc., a body of students, faculty, alumnae, and supporters of keeping the College open) is memorialized in a Memorandum of Understanding made public by Attorney General Mark Herring of Virginia, who led the mediation process and ultimately brokered the settlement.

Unlike so many instances of higher education litigation, which are seldom resolved in a public fashion—to the chagrin of higher-education-law-junkies/yours truly, who, in the name of research, rapaciously seek court filings in proceedings like these—this settlement agreement importantly includes an agreed consent on the part of the Attorney General of Virginia to release “restrictions on $16 million from the College’s endowment for the ongoing operation of the College,” which together with $12 million to come from donations fulfilled by the Saving Sweet Briar collective, is expected to be sufficient to operate the college for the coming academic year. Importantly, however, this case marks one of just a very few times a state attorney general has permitted the release of an institution’s endowment from restrictions under the Uniform Prudent Management of Institutional Funds Act (UPMIFA).

In an UPMIFA jurisdiction, which includes Virginia, an institution’s petition to modify restrictions on gifts or endowments is only granted with attorney general approval. While it is relatively rare for a state attorney general to release an institution from restrictions on endowment assets, the alternative, in this case, would altogether foreclose the practicable use of the endowment funds in the event of closure of the college. Rarer, still, is the publication of a Memorandum of Agreement—a settlement agreement, mind you—disclosing the release from restrictions of endowment funds as a condition of settlement.

In short, this case comprises the very extreme fact pattern necessary to invoke the cy-près doctrine rationale for releasing the college from its endowment restrictions, and provides us with a glimpse of the rare, public application of UPMIFA requirements for a petition for release from endowment restrictions.

Tuesday
Jun232015

A Sweet Briar College Update in Two Parts (Part 1: A Trust Will Not Fail for Want of a Trustee)

Earlier today, a circuit court judge in Virginia approved a settlement agreement allowing Sweet Briar College to remain open though at least the 2015-2016 academic year. The settlement marks a swift resolution to a whirlwind of controversy surrounding the college administration’s March 2015 announcement of its decision to close the college at the end of the 2014-2015 academic year, despite its seemingly solvent financial status. 

Although there are surely significant remaining challenges ahead for the college as it seeks to remain open for the coming academic year and beyond, it appears that the Virginia Supreme Court’s prediction that the “controversy is far from over,” was inaccurate—at least as far as litigation is concerned.

The prediction came from a decision rendered earlier this month by Virginia Supreme Court, which ordered a circuit court to re-consider granting an injunction, which the lower court had earlier denied, that would temporarily stay the closing of the college. The court’s rationale, which will be the subject of this post, gives insight to the legal status of certain private higher education institutions, as well as illustrates another common-sense principle masquerading as a legal doctrine—estoppel.

First, with respect to the legal status of certain private higher education institutions, the Virginia Supreme Court’s rationale and decision is clarified by a brief contextual history of the creation of the college. The Sweet Briar Institute, which operates Sweet Briar College, was established in 1901 as a Virginia corporation by the trustees named in the will of Mrs. Indiana Fletcher Williams. The will devises personal and real property, which had been known as Sweet Briar Plantation, to the trustees to be used in perpetuity for the education of girls and young women, and as the Virginia Supreme Court noted: “the Charter instructs the corporation established by the trustees to ‘accept the real and personal property . . . subject to the terms and conditions’ prescribed in the Will. That is sufficient to create a trust.”

The Virginia Supreme Court’s finding that such a bequest does in fact constitute a trust is vital, because the original suit brought by the plaintiffs against the college charged that, inter alia, Sweet Briar College leaders failed in their duties to keep the college running under Virginia’s Law of Trusts. In April, a Virginia circuit court found this argument unpersuasive, ruling that because the board that governs Sweet Briar Institute is a corporation, Virginia’s Law of Trusts doesn’t apply, and the court doesn’t have the authority to halt the closure. Citing its own precedent and Virginia law, the Virginia Supreme Court found the notion--that the college is a nonstock, charitable corporation, and as such cannot also be a trustee--to be “a false dichotomy, and . . . not the law.” As the Virginia Supreme Court noted, in fact, the 2010 Uniform Trust Code (UTC), elements of which have been enacted by the Virginia legislature, and Virginia statute both reference “corporate trustees” and “trustees [that are] corporation[s]. 

Last, in a palm-to-face moment, the institute argued, and the lower court initially agreed, that the institute was not a trustee. This is an interesting tactic, given that Sweet Briar Institute had previously acknowledged its status as a trustee in a case that was decided by the Supreme Court of the United States (Sweet Briar Institute v. Button, 387 U.S. 423 (1967)), when the institute sued the Commonwealth of Virginia in federal court, seeking to invalidate a racial restriction in the will that created the institute. In fact, as the Virginia Supreme Court’s decision notes, the institute stated that it sought to “enjoin Virginia state officers from enforcing a racial restriction contained in a will under which appellant holds property as trustee of an educational trust” (emphasis added). In its decision, the Virginia Supreme Court made sure to remind the institute of its status as a trustee by its own admission, estopping the institute from denying its earlier self-characterized status as a trustee.

While the Virginia Supreme Court unfortunately did not decide the case on the merits, it did find that—at least in the jurisdiction of the Commonwealth of Virginia—under the circumstances of this case, an education corporation could also be considered a trust. And probably in every jurisdiction, a party could be estopped from later arguing that it is not something it previously argued—to the Supreme of the United States—that it was.

Saturday
Jun202015

Nat'l Center Of Collective Bargaining In Higher Education And The Professions 2016 Conference

The National Center for the Study of Collective Bargaining in Higher Education and the Professions has announced that its 43rd annual conference will take place on April 3-5, 2016 at the CUNY Graduate Center. I was able to attend the conference this past spring and found it an engaging event with many excellent presenters. The Center has released podcasts from selected presentations at the recent 42nd conference, which are available here, and I encourage you to check out. Beyond the conference, the Center is a great resource overall, such as through its support for the Journal of Collective Bargaining in the Academy.