It’s been ten months since U.S. District Judge Claudia Wilken’s landmark decision in O’Bannon v. National Collegiate Athletic Association, where Judge Wilken found that NCAA rules that prohibited basketball and football players from receiving more than the value of a full grant-in-aid scholarship constituted an unreasonable restraint of trade. The impact of the ruling is still making waves as the parties—and the rest of collegiate athletics—await a decision in the appeal to the Ninth Circuit Court of Appeals, where a three-judge panel heard oral arguments in March.
NCAA Division I Board of Directors Chairman Harris Pastides said recently that the NCAA is already working on creating new bylaws that would allow football and men’s basketball players to be paid if the O’Bannon injunction goes into effect. Pastides also said he would not be inclined to take an unfavorable decision by the Ninth Circuit to the U.S. Supreme Court. But that’s getting a step ahead. In anticipation of the decision in O’Bannon, we’ll be discussing different aspects of the case and how it impacts collegiate athletic departments. First, how did we get here?
Almost six years ago, Ed O’Bannon, a former UCLA men’s basketball player and 1995 NCAA National Champion, filed a class action lawsuit requesting injunctive relief for alleged federal antitrust law violations. O’Bannon and a group of current and former college student-athletes essentially challenged the NCAA Rules that barred a student-athlete from receiving compensation for use of their names, images, and likenesses (NILs) as a violation of the Sherman Antitrust Act. The NCAA asserted that the restrictions on student-athlete compensation were reasonable because they were necessary to preserve amateurism, maintain competitive balance, promote the integration of academics and athletics, and increase the total output of its product. Judge Wilken ultimately found that the “challenged NCAA rules unreasonably restrained trade in the market for certain educational and athletic opportunities offered by NCAA Division I schools,” and that the “procompetitive justifications that the NCAA offers do not justify this restraint and could be achieved through less restrictive means.”
The O’Bannon plaintiffs proposed three less restrictive alternatives to the NCAA’s rules: compensation for the full cost of attendance, a trust fund for deposits of licensing revenue, and permission for student-athletes to receive compensation for third party endorsements. Judge Wilken’s ruling adopted two of these alternatives—permitting schools to cover the full cost of attendance for student-athletes, and allowing schools to pay for student-athletes’ NILs by placing money in a trust that would be available to the student-athletes after they leave school or their eligibility expires. For NILs, the ruling requires every player in a recruiting class to receive the same amount, and prohibits the NCAA from setting a payment cap at less than $5,000 per year (by 2014 value). The court rejected the ability of student-athletes to endorse commercial products.
In its briefing in the Ninth Circuit, the NCAA relied heavily on the 1984 Supreme Court ruling in Oklahoma v. Board of Regents, where the Supreme Court stated that “athletes must not be paid” in order to “preserve the character and quality” of the NCAA. The O’Bannon plaintiffs, however, argued that the sports industry has substantially changed since 1984, and pointed to the “Rule of Reason” analysis by Judge Wilken in addition to showing that the commercialization of football and men’s basketball has led to inconsistent application of amateurism in college sports.
The collegiate athletic community is anxiously awaiting the Ninth Circuit’s decision, which is widely expected prior to August 1. If reversed, the NCAA will for now have dodged another challenge to amateur status of college athletes, but an appeal to the Supreme Court by the O’Bannon plaintiffs would be likely. If affirmed, and the NCAA does not appeal to the Supreme Court, as Pastides suggested it may not do, then the effect on athletic departments, recruiting, and many other aspects of college athletics will be markedly changed—issues we we’ll discuss leading up to the Ninth Circuit’s decision.
This article was co-authored by Seth Traub and Dana Drew Shaw.