By Jonathan Stempel
NEW YORK (Reuters) - A federal appeals court gave new life on Friday to a lawsuit accusing the National Collegiate Athletic Association of running an illegal "lottery" in how it had long allocated seats to popular sports tournaments, such as basketball's Final Four.
In a 2-1 ruling, the U.S. Seventh Circuit Court of Appeals in Chicago reversed a lower court's 2009 dismissal of a complaint by fans over how the NCAA had since 1994 awarded tickets for such events as the Division I men's and women's basketball and hockey tournaments.
The proposed nationwide class-action case challenged the NCAA policy before this year of forcing fans to pay potentially thousands of dollars in advance for tickets they wanted, with sums refunded if they lost out, and assessing nonrefundable service fees for the right to apply. The plaintiffs said this violated Indiana anti-gambling and consumer protection laws.
Writing for the appeals court majority, Judge John Darrah turned aside the NCAA argument that the process afforded fans only an "opportunity" to buy tickets at full price and thus did not constitute a "prize."
"Plaintiffs have alleged all elements of a lottery: they paid a per-ticket or per-entry fee (consideration) to enter a random drawing (chance) in hopes of obtaining scarce, valuable tickets (a prize)," Darrah wrote.
Judge Richard Cudahy dissented, saying that, while "there may be a basis" to conclude fans were overcharged, "it is hardly grounds for elevating the present procedure to the status of an illegal 'lottery.'"
The court returned the case for further proceedings to the U.S. district court in Indianapolis, where the NCAA is based, and which is host city for the men's Final Four in 2010 and women's Final Four in 2011.
NCAA spokesman Erik Christianson said, "The NCAA is disappointed by and disagrees with the court's decision, and we are considering our options."
Robert Carey, a partner at Hagens Berman Sobol Shapiro LLP representing the plaintiffs, said he was pleased with the decision. He said "we plan to dig" into NCAA records to learn more about the since-changed ticket distribution process.
The case is George et al v. National Collegiate Athletic Association, U.S. Seventh Circuit Court of Appeals, No. 09-3667.
(Reporting by Jonathan Stempel in New York; additional reporting by Ben Klayman in Detroit; editing by Andre Grenon, Bernard Orr)