On March 17, 2015, a Ninth Circuit panel consisting of Chief Judge Sidley R. Thomas, Circuit Judge Jay S. Bybee and Senior U.S. District Judge Gordon J. Quist, of the Western District of Michigan heard oral argument in O’Bannon v. NCAA (a case that this blog has covered here). In August 2014, U.S. District Judge Claudia Wilken, of the Northern District of California, held that the NCAA’s rules on “amateurism” – used to justify the organization’s ban on compensation to college athletes – violate the antitrust laws by “unreasonably restrain[ing] trade in the market for certain educational and athletic opportunities offered by NCAA Division I schools.” The district court barred the NCAA from imposing rules preventing payment for use of athletes’ names, images, and likenesses. The ruling impacts student-athletes enrolled in school after July 2016. The NCAA appealed.
A major focus of the Ninth Circuit appeal in O’Bannon is the district court’s application of NCAA v. Board of Regents of the University of Oklahoma, a United States Supreme Court decision from 1984. The Supreme Court in that case held that the NCAA’s rules on amateurism and compensation to student-athletes were pro-competitive. The NCAA’s position is that the holding in Board of Regents requires a ruling in its favor.
During oral argument, counsel for the NCAA emphasized repeatedly that amateurism is at the heart of the NCAA mission, and argued that prior to the district court’s ruling, “no court had ever found that the antitrust laws condemn a rule whose purpose and design is to protect amateurism.” “Pay to play,” he said, is completely antithetical to amateur athletics. The panel, in turn, asked questions about the boundaries of the NCAA’s rules on compensation to student-athletes, including the current rules permitting payment of “reasonable expenses” for athletes on scholarships. The definition of reasonable expenses, the NCAA submitted, is for the athletic association – and not a federal judge – to decide. The NCAA, in contrast to the district court’s analysis below, also argued that there are no anticompetitive harms caused by the NCAA’s amateurism rules.
Counsel for the putative class of student-athletes, in turn, disputed the NCAA’s assertion that its stance on payment of amateur athletes causes no harm to competition. For example, the NCAA member-schools agree not to compete with one another for athletes by offering scholarships in excess of the association’s cap, and that this decreases the economic value of the athlete’s skills. He also argued that the NCAA “overstated and misinterpreted” Board of Regents, in which the district court found and the Supreme Court did not reject that the NCAA was a “cartel.” The attorney for the class posited that the language on payment of individual student athletes in Board of Regents – that “[i]n order to preserve the character and quality of the ‘product,’ [college athletics] athletes must not be paid” – was “dicta.”
The March 17 oral argument ran almost 20 minutes over the allotted 60 minutes. The panel asked numerous questions of both sides, with no clear indication of how it will resolve the thorny issues the case raises. The Ninth Circuit’s decision will be a pivotal one for student athletes, NCAA schools, and the broadcast, entertainment, and retail industries that promote them.
Interestingly, this is not the first time this three-judge panel had confronted arguments concerning the use of NCAA student-athlete likenesses for profit, although the panel’s previous exposure to the issue was not in the antitrust context. In 2013 this same panel heard arguments in Keller v. Electronic Arts, Inc., in which a putative class of former college football players alleged that use of their likenesses in video games violated their right of publicity under California law, which would bar appropriation of a plaintiff’s name or likeness to a defendant’s commercial advantage. Defendants filed a motion to strike the complaint as a strategic lawsuit against public participation, which the district court denied. Judges Bybee and Quist affirmed, while Judge Thomas dissented on the grounds that the First Amendment would protect defendants.