Federal Judge Rules Against NCAA In Antitrust Lawsuit

Author: Wendy Hillger & Scripta Ad Astra Staff

It has been a little over a week since U.S. District Judge Claudia Wilken of the Northern District of California issued her August 8, 2014 landmark ruling against the National Collegiate Athletic Association (“NCAA”) in O’Bannon v. NCAA.  While it is too early to know the ramifications of the ruling (the NCAA has already stated it will appeal), the opinion has roundly been seen as favorable for collegiate athletes.

How The Challenge Started
The road to get to this ruling did not start with the lead plaintiff, former UCLA basketball star, Ed O’Bannon, simply filing suit.  Rather, Mr. O’Bannon stood on the accomplishments of an evolution in public opinion and challenges that chipped away at the NCAA’s “defense of amateurism”.

The challenge to NCAA’s reign was, in part, started by the very man who helped commercialize college sports, Sonny Vaccaro.  After spending decades building endorsement relationships between shoe companies such as Nike, Adidas, and Reebok, with universities all over the country, Mr. Vaccaro eventually soured on what he saw as colleges taking advantage of athletes. While universities and the NCAA were making money hand-over-fist from merchandising, television rights, and other endorsement deals, they were withholding those revenues from the athletes (called “student-athletes” by the NCAA for the purposes of avoiding paying workers compensation insurance), suggesting that these athletes were playing as students and amateurs, not professionals, and thus not entitled to that money.

In 2001, in front of the Knight Commission on Intercollegiate Athletics, Mr. Vaccaro addressed a panel of his detractors, many of them administrators of universities:

“Why,” asked Bryce Jordan, the president emeritus of Penn State, 
          “should a university be an advertising medium for your industry?”

          Vaccaro did not blink. “They shouldn’t, sir,” he replied. “You sold your 
          souls, and you’re going to continue selling them. You can be very moral 
          and righteous in asking me that question, sir,” Vaccaro added with 
          irrepressible good cheer, “but there’s not one of you in this room that’s 
          going to turn down any of our money. You’re going to take it. I can only 
          offer it.”

That quote came from a seminal 2011 article in the Atlantic that broke open the public’s opinion about the NCAA’s “amateurism” model and questions began to follow.

Since then, doubts and direct challenges began to mount against the NCAA.  Earlier this year, football players at Northwestern University won the right to vote to form a union.  National Labor Relations Board Region 13 director, Peter Sung Ohr, issued an opinion stating that the football players were “employees” of Northwestern.

In March 2014, sports labor attorney Jeffrey Kessler filed a lawsuit against the NCAA and five conferences arguing that the practice of limiting athlete compensation to simply tuition, room, board, and books is below what they might normally be able to get if universities were not restricted by NCAA rules.  Calling the NCAA and the conferences a “cartel” the lawsuit does not seek damages, only asking for a permanent injunction ending the practice.

Feeling the heat, the NCAA has proposed common-sense changes to help ease its public relations problem. In April 2014, the NCAA proposed allowing athletes unlimited food provided by their university.  Soon, athletes will not get in trouble for eating too much pasta at their graduation banquets.

On the eve of Judge Wilken’s opinion, the NCAA issued new rules allowing greater flexibility for the “power conferences” – the Pac 12, SEC, Big 12, Big Ten, and ACC – within 11 “areas of autonomy.”

O’Bannon v. NCAA
The centerpiece to the challenge of the NCAA has been O’Bannon v. NCAA.  In 2009, Mr. O’Bannon and 19 other putative class members filed a class action lawsuit against the NCAA.  The O’Bannon lawsuit sought a share of the money received from the NCAA as a result of the usage of the college athletes’ names, images and likenesses (“NIL”).  This includes broadcasting the games on television, jersey sales and licensing for videogames.  The lawsuit sought treble damages, disgorgement of profits for the NCAA’s use and sale of the class members’ images, declaratory relief and an injunction against future misuse, among other remedies.

During a 3-week trial in June 2014, former players testified that due to rigorous practice and playing schedules they have no time to participate in school above the minimum necessary to maintain eligibility to play.  The NCAA argued the restrictions on athlete compensation were necessary for four reasons: to preserve its tradition of amateurism, maintain competitive balance among small and power conference teams, promote the integration of academics and athletics, and increase the total output.

Judge Wilken rejected these claims, and in her 99 page decision, ruled that the NCAA violated federal antitrust laws by colluding with its member schools to restrain the schools’ ability to compensate their football and basketball athletes for more than the NCAA’s rules currently allow for.  This includes restrictions against giving student-athletes a share of the revenues earned when their NIL were used.

The Court ruled that each player whose NIL is used shall receive not less than $5,000, per year they compete.  This money will go into a trust until the player leaves school.  In addition, each school may also now pay the full cost for an athlete to attend that school, if it wants to.  The NCAA currently prohibits student athletes from receiving any compensation beyond scholarships covering their tuition, fees, room and board, and books.  This restriction lead to players being “paid” (allegedly) by school boosters in order to have spending money, as the players did not have time to work part-time jobs for money and many came from families unable to financially contribute much.

Beyond O’Bannon
Judge Wilken’s ruling strikes at the heart of the NCAA’s amateurism argument that has allowed the organization and its member schools to profit for so long.  Given the number of suits and actions currently being taken against the NCAA, as well as the access to media that many people, such as a current and former athletes now have, the current existence of college sports may be very different five or ten years from now.  Athletes who attend universities could now be monetarily compensated for their work on behalf of their schools; medical benefits could extend to athletes beyond their playing days; athletes could be eligible for workers compensation like any other university employee; and schools could guarantee scholarships to athletes until they graduate regardless of injury or on-field performance.  If the Northwestern labor opinion holds up, it will allow athletes to organize for even greater benefits and treatment.  The Wilken opinion is not the final word in this extraordinary saga – indeed, both parties will appeal it.  But, it certainly lays down the gauntlet and blazes a path for future athletes to follow.

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