In O’Bannon case, appeals panel nixes deferred payments for college athletes

1 Oct 2015 | Author: | No comments yet »

Appeals court rules NCAA in violation of antitrust laws.

If the National Labor Relations Board’s August ruling that Northwestern University football players cannot unionize threw some cold water on the idea of college athletes getting paid, a new ruling may douse the idea entirely. A federal appeals court agreed Wednesday that the NCAA’s use of college athletes’ names, images and likenesses in video games and TV broadcasts violated antitrust laws but struck down a plan to allow schools to pay football and basketball players up to $5,000 per year.When it was announced during the summer that Fred Hoiberg would be leaving his position as head coach at Iowa State to take on the same role with the Chicago Bulls, few were surprised. “The Mayor” made a name for himself in his hometown of Ames as a high school and college player at Iowa State, and returned to lead the program to multiple NCAA tournament appearances and two Big 12 tournament titles. Court of Appeals for the Ninth Circuit on Wednesday affirmed Ed O’Bannon’s central thesis that certain NCAA amateurism rules violate federal antitrust law.

However due to his experience in the NBA as a player and executive, a move to the pro game was seen by many as a matter of “when” it would occur as opposed to “if.” What many may not have bargained for was some of the circumstances that reportedly may have influenced Hoiberg’s decision to make the move to Chicago. The court, however, limited the scope of O’Bannon’s victory by holding that member schools only need to provide up to the cost of attendance to their student athletes. The NCAA had appealed US District Judge Claudia Wilken’s 2014 decision to allow players in the top division of college football and in Division I men’s basketball to be paid.

Limiting the amount college athletes can be paid to the arbitrary figure of $5,000 was always a silly idea, but it’s significant that the appeals court did not offer an alternative proposal for compensating athletes beyond their educational expenses. Judge Claudia Wilken of the Northern District of California ruled that these amateurism rules were an unlawful restraint of trade and thus violated the Sherman Act.

The day after claiming the Diamond Head Classic championship in Hawaii in December 2013, the Iowa State men’s basketball team used luggage as beds and pillows in a hotel ballroom. The NCAA was accused of violating antitrust laws by conspiring to block the athletes from getting a share of revenue generated by the use of their images. The Cyclones, on their way to the best start in school history, went without hotel rooms in order to save ISU from paying an extra night’s rate as they waited hours for their return flights to Iowa, sources with direct knowledge of the situation told the Ames Tribune. Once the court found that restricting payments to students was reasonably necessary to the amateurism/integration justifications, it should not have condemned the restraints solely because it thought a different level of athlete compensation was preferable to the level chosen by the NCAA.

Writing for a three-judge panel, Judge Jay Bybee expressed concern that “offering [student-athletes] cash sums untethered to educational expenses”—such as $5,000 a year for NIL rights—would transform NCAA sports into ‘minor league status.’” Advocates for college sports reform who contend that student-athletes should receive greater compensation will likely greet Judge Bybee’s worry with hostility. The NCAA said paying college athletes would destroy its system of amateurism, and the rules designed to protect that system had never previously been found by courts to violate antitrust law. At that point the NCAA will have surrendered its amateurism principles entirely and transitioned from its “particular brand of football” to minor league status.” What that passage means is that Ed O’Bannon’s lawsuit against the NCAA has thus far only produced one significant change despite six years of legal wrangling and untold millions in legal fees. It should be noted that both Pollard and Hoiberg were guests on 1460 KXNO-AM in Des Moines Wednesday afternoon, and they denied having issues with each other (in separate segments). They have insisted that a system where student-athletes do not receive compensation for NIL rights is exploitative, particularly in an era where the NCAA and top conferences negotiate billion-dollar TV contracts and where college coaches earn millions of dollars a year to coach student-athletes.

That additional money is currently being applied throughout college sports. “The NCAA is not above the antitrust laws, and courts cannot and must not shy away from requiring the NCAA to play by the Sherman Act’s rules,” the three-person panel wrote. “In this case, the NCAA’s rules have been more restrictive than necessary to maintain its tradition of amateurism in support of the college sports market. There’s still a chance the O’Bannon lawsuit could lead to further change if either side appeals this decision to the Supreme Court, but for now the NCAA should be pleased with this outcome. The debate over college athlete pay heated up with the 2009 lawsuit of Ed O’Bannon, a former UCLA basketball star who successfully sued EA Games for using his likeness, and then brought his fight to the NCAA.

In other words, the court below rested a finding of antitrust liability on the court’s disagreement with the details of the restraint’s implementation rather than a finding that the restraint itself was unreasonable. Plaintiffs’ attorney Michael Hausfeld countered that the Supreme Court’s comment was made in passing and was not integral to the outcome of that case. Absent a showing by the plaintiff class that an approach other than restriction of student-athlete compensation would have achieved the valid justifications with equal efficacy, the restraints should have been upheld.

The lawsuit has since come to exemplify the broader debate over whether college athletes in revenue sports should receive more compensation than just their scholarships. The panel wrote that “in finding that paying students cash compensation would promote amateurism as effectively as not paying them, the district court ignored that not paying student-athletes is precisely what makes them amateurs.” Chief Judge Sidney Thomas concurred in part and dissented in part with the opinion.

That has the potential to be damaging for the NCAA with so many challenges still on the horizon — most notably a lawsuit filed by the sports lawyer Jeffrey Kessler seeking to establish a free market for top college athletes. The NCAA, meanwhile, got a “strong win” on the issue of NILs that will make it hard for the Shawne Alston and Martin Jenkins lawsuits to seek more money for college athletes. To the contrary, the evidence at trial showed that the grant-in-aid cap has no relation whatsoever to the procompetitive purposes of the NCAA: by the NCAA’s own standards, student-athletes remain amateurs as long as any money paid to them goes to cover legitimate educational expenses.

He has written numerous articles and commentaries on law and economics, privatization, antitrust, prisons, constitutional law, regulation, torts, and legal history. The appellate court disagreed with the NCAA’s opinion of the 1984 case, which ended the NCAA’s monopoly on television broadcasts and had little to do with paying players.

Rather, the Court discussed the amateurism rules for a different and particular purpose: to explain why NCAA rules should be analyzed under the Rule of Reason, rather than held to be illegal per se. NCAA attorney Seth Waxman said the O’Bannon ruling creates “flat conflict” with decisions in other circuits and strengthen the NCAA’s possible bid for a Supreme Court review.

Shawne Alston, Martin Jenkins and several other current and former players have sued the NCAA, arguing that the cap on athletic scholarships to tuition, room, board, books and fees is a violation of antitrust law. But they judges said they did not tackle the “thornier questions” of whether athletes on live TV broadcasts have enforceable rights of publicity. Michael McCann is a Massachusetts attorney and the founding director of the Sports and Entertainment Law Institute at the University of New Hampshire School of Law.

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