On December 22, 1999, the United States Court of Appeals for the Third Circuit overturned the Eastern District of Pennsylvania's decision permanently enjoining the NCAA from using Proposition 16 to establish eligibility standards for freshmen athletes. Cureton v. NCAA, 1999 WL 1241077 (3rd Cir. 1999). The Third Circuit determined that the NCAA is not a program or activity receiving federal funds and, therefore, is not amenable to Title VI.

Cureton and Shaw are African-American students-athletes unable to participate as freshmen in NCAA competition because they failed to meet the required SAT score of the NCAA's initial eligibility requirements - Proposition 16. Proposition 16 became effective in 1992. It increased the number of core courses required for freshman eligibility and utilized an index to determine eligibility based on a formula combining a high school student's GPA and SAT scores.

Shaw and Cureton filed their complaint against the NCAA alleging that the standardized test score component of Proposition 16 has an unjustified disparate impact on African-American student-athletes in violation of Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d et seq. Cureton, 37 F.Supp.2d at 694 (Volume 1, Number 3). Title VI precludes discrimination on account of race, color, or national origin, under any program or activity receiving federal financial assistance.

The NCAA immediately filed a motion to dismiss the complaint and for summary judgment claiming that (1) there is no private right of action for unintentional discrimination under Title VI; (2) the NCAA is not subject to Title VI; and (3) the NCAA does not receive the federal funds necessary to subject it to Title VI. At the same time, the plaintiffs moved for partial summary judgment on the grounds that the NCAA does receive federal funding and is subject to Title VI.

The district court initially determined that there is a private right of action under Title VI and its accompanying regulations and that the NCAA is a program or activity covered by Title VI. The court found that the NCAA was subject to Title VI as a recipient of federal funds because the NCAA is (1) an "indirect recipient of federal financial assistance" through its control over the block grant given to the National Youth Sports Program (NYSP), and (2) because member schools cede controlling authority to the NCAA over their federally funded athletic programs. Cureton, 37 F.Supp.2d at 694 (Volume 1, Number 3). After discovery, the court denied the NCAA's motion, holding that Proposition 16 does result in a disparate impact on African American students and thus violates Title VI.

The district court then focused on the NCAA's proposed justifications for Title VI given the obvious disparate impact on African Americans. The court concluded that none of the NCAA's justifications met the standards of Title VI, even though the statute would not condemn the use of the SAT in some way as an eligibility component. The court permanently enjoined the NCAA from continued operation and implementation of Proposition 16.

The NCAA unsuccessfully sought a stay from the district court. However, the Third Circuit granted the NCAA a stay from the lower court's decision on March 30, 1999.

Regarding the merits, the Third Circuit began its review with a discussion of Title VI, section 601. Under this section, the Supreme Court has determined that Title VI only prohibits discrimination in, or exclusion from, programs which receive federal funding on the basis of intentional discrimination. The plaintiffs did not allege intentional discrimination; instead, they relied on implementing regulations, which extend the prohibitions of section 601 to programs or activities that result in a disparate impact.

The court then focused its analysis on the district court's rationale for bringing the NCAA under Title VI as a recipient of federal financial assistance. The court first examined plaintiff's argument that the NCAA is an indirect recipient of federal funding because it controls the NYSP fund, a program that provides summer education and sports instruction for youths on NCAA member and non-member campuses. The Department of Health and Human Services provides federal financial assistance to the program.

The court pointed out that section 601 does not preclude recipients of federal funding from discriminating with respect to a program not actually receiving such funding. According to the court, "the language of Title VI is program specific as it relates to 'participation in' '[denial of] the benefits of' or 'discrimination under' 'any program or activity receiving Federal financial assistance.' " Thus, regulations promulgated under section 602 to enforce the provisions of section 601 only apply to programs specifically receiving federal financial aid.

The regulations demonstrate this program specific nature by mandating that an application for such federal funding must include assurances of nondiscrimination. As the Third Circuit explained, "these provisions cannot possibly accommodate a reading of the regulations so that as a matter of course their discriminatory impact aspects are applied beyond the specific program receiving Federal assistance."

Even though Congress passed the Civil Rights Restoration Act of 1987 and modified Title VI to encompass programs on an institution-wide basis, the regulations have not been modified and remain program specific. The court held "to the extent this action is predicated on the NCAA's receiving Federal financial assistance by reason of grants to the Fund, it must fail as the Fund's programs and activities are not in issue in this case."

The Third Circuit then addressed the district court's holding that the NCAA is a recipient of federal funds because it controls its members athletic programs that receive such funding. According to the appellate court, the critical inquiry in determining whether the NCAA is an indirect recipient of funds from its members is whether the NCAA is the intended recipient of the funds.

In NCAA v. Smith, 119 S.Ct. 924, 929 (1999), the Supreme Court found no evidence that member schools paid dues to the NCAA with federal funds earmarked for the schools. Relying on Tarkanian, the Third Circuit found that the NCAA does not control its members. As the court explained, "the ultimate decision as to which freshman an institution will permit to participate in varsity intercollegiate athletics and which applicants will be awarded athletic scholarships belongs to the member schools. The fact that the institutions make these decisions cognizant of NCAA sanctions does not mean that the NCAA controls them, because they have the option, albeit unpalatable, of risking sanctions or voluntarily withdrawing from the NCAA."

The court also noted that applying Title VI's regulations to the NCAA is inconsistent with the contractual character of section 601. There is no contractual privity between the NCAA and the government with regard to federal funds received by member schools, and the NCAA is in no position to accept or reject such funds. The mere fact that institutions voluntarily chose to follow NCAA rules as a condition of membership does not mean that the NCAA has controlling authority over these schools.

The court held that the NCAA is entitled to judgment as a matter of law because its conduct is not covered by Title VI. Therefore, it did not consider whether Proposition 16 has an illegal racially discriminatory impact. The NCAA is now free to enforce Proposition 16.