Judge releases ruling on O’Bannon case: NCAA loses
BY STEVE BERKOWITZ USA TODAY Sports August 8, 2014 11:24PM
FILE - In this April 3, 1995 photo, UCLA's Ed O'Bannon celebrates after his team won the championship NCAA game against Arkansas in Seattle. A federal judge has ruled that the NCAA can't stop college football and basketball players from selling the rights to their names and likenesses, opening the way to athletes getting payouts once their college careers are over, Friday, Aug. 8, 2014. (AP Photo/Eric Draper, File)
Updated: August 8, 2014 11:25PM
A federal judge ruled Friday that the NCAA’s limits on what major college football and men’s basketball players can receive for playing sports “unreasonably restrain trade” in violation of antitrust laws.
U.S. District Judge Claudia Wilken, in a 99-page ruling in favor of a group of plaintiffs led by former UCLA basketball player Ed O’Bannon, issued an injunction that will prevent the NCAA the “from enforcing any rules or bylaws that would prohibit its member schools and conferences from offering their FBS football or Division I basketball recruits a limited share of the revenues generated from the use of their names, images, and likenesses in addition to a full grant-in-aid.”
Although Wilken’s ruling could enable football and men’s basketball players to receive more from schools than they are receiving now, Wilken imposed some limits and she rejected the plaintiffs’ proposal that athletes be allowed to receive money for endorsements. “Allowing student-athletes to endorse commercial products would undermine the efforts of both the NCAA and its member schools to protect against the ‘commercial exploitation’ of student-athletes,” she wrote.
Wilken’s ruling said the NCAA will be able to cap the amount of new compensation that FBS football and Division I men’s basketball players can receive while they are in school, but that cap will not be allowed to be an amount that is less than the athletes’ cost of attending school. (It is widely acknowledged that the NCAA’s current version of a scholarship -- which basically comprises tuition, room, board, books and manadatory fees -- does not cover costs of attendance like transportation and various incidental expenses.)
The ruling also will allow schools and conferences to deposit money in trust for football and men’s basketball players that will become payable when they leave school or their eligibility expires. Under this setup:
— The NCAA will be allowed to set a cap on the amount of money that may be held in trust, but that cap cannot be less than $5,000 in 2014 dollars for every year the athletes remain academically eligible.
— Schools will be allowed to offer less than the NCAA maximum amount if they so choose, but they cannot unlawfully conspire with each other in setting the amounts they offer.
— The NCAA will be allowed have rules that prevent the athletes from using the money being held in trust for them to obtain other financial benefits while they are in school.
— The NCAA also will be able to have rules that prevent schools from offering different amounts of deferred money to athletes who are in the same recruiting class on the same team.
— The amounts that schools decide to place in trust for the athletes may vary from year to year.
“We disagree with the Court’s decision that NCAA rules violate antitrust laws,” NCAA Chief Legal Officer Donald Remy said in a statement. “We note that the Court’s decision sets limits on compensation, but are reviewing the full decision and will provide further comment later. As evidenced by yesterday’s Board of Directors action, the NCAA is committed to fully supporting student-athletes.”
Kevin Sweeney, legal counsel for the Big 12 Conference, called the Wilken’s verdict a “thoughtful and narrow and focused ruling.”
“We will have to carefully evaluate this to figure out how we comply with this ruling,” Sweeney said. “ ... We will move forward with in promoting the collegiate amateur model. â(euro) ⅛ (Wilken) doesn’t throw out the collegiate amateur model.”
Michael A. Carrier, a Rutgers-Camden law school professor and antitrust expert, told USA TODAY Sports: “I think for the NCAA, this is a huge loss because for the first time you have a court looking at its prized defenses, things like amateurism and competitive balance, and saying this is not persuasive.
“This has to be viewed as a significant win for the plaintiffs and significant loss for NCAA.”
Although the case did not include a financial damages component, Wilken wrote that the plaintiffs “shall recover their costs from the NCAA.”
In a filing in late May related to the settlement of claims against video game manufacturer Electronic Arts and Collegiate Licensing Co., the nation’s leading collegiate trademark licensing and marketing firm, plaintiffs’ lawyers noted that in the O’Bannon antitrust case against the NCAA, the amount of the plaintiffs’ attorneys’ fees “exceeds $30 million and expenses exceed $4 million” -- and that was a few weeks before the start of a trial that lasted three weeks.
The NCAA is almost certain to appeal Wilken’s ruling, which may have an impact on another set of antitrust cases that are before her.
In those cases, two sets of plaintiffs are challenging the NCAA’s limits on what athletes can receive under and athletic scholarship. One of those cases -- which is against the NCAA and 12 Division I conferences -- seeks monetary damages based on the difference between the value of an athletic scholarship as currently defined by the NCAA -- tuition, mandatory fees, room, board and books -- and the actual cost of attending college, a figure that includes out-of-pocket costs such as transportation to and from school. The damages in that case, which would be tripled under antitrust law, could run into the hundreds of millions of dollars if the plaintiffs prevail.
The NCAA and the conferences must give Wilken their responses or motions to dismiss the suits by Aug. 20.
“I think it’s a fantastic win for the student-athletes, and it’s rare that you have victories against the NCAA and victories in this type of antitrust case but I think it shows the facts were clear that there was an unfairness here,” said Robert Carey, the attorney for Arizona State and Nebraska quarterback Sam Keller, who sued in a separate case focusing on college sports-themed video games.
“I think there are more fights that are going to occur here, but this is a very important victory for the student athletes. You can’t say otherwise. You just can’t.
“She found that it was unfair and that the student-athletes were entitled to have some of the restrictions the NCAA was imposing struck.”
Michael Hausfeld, the lead attorney for the O’Bannon plaintiffs, could not be reached for immediate comment.
However, in the wake of Thursday’s NCAA vote granting autonomy to the Power Five conferences, he said: “The movement toward autonomy establishes a number of essential elements that were addressed at trial. It shows the association restrains members in a cartel-like fashion to act to a bottom line” when schools that have the financial resources are interested in spending more “to the benefit of athletes.”
“This is a major step toward decency for college athletes,” said Bill Isasscon, the co-lead counsel for the plaintiffs. “The judge’s decision strikes down NCAA rules restricting their compensation and permits reasonable but significant sharing with athletes -- both for the costs of education and to establish trust funds -- from the billions in revenues that schools earn from their football and basketball players.”
Former Arizona linebacker Jake Fischer, one of the O’Bannon plaintiffs, said: “It’s a big step in helping out with basically student-athlete rights. It’s getting things moving in the right direction.”
Fischer, who works for Primerica Financial Services in Tucson with plans to become an investment adviser, praised the NCAA’s recent decision to provide unlimited meals to athletes.
“The food they’re now feeding athletes is a huge step forward,” he said. “I was a huge advocate of that.”
In a critical part of the ruling, Wilken found that television networks “often seek to acquire the rights to use the names, images and likenesses of the participating student-athletes during the telecast.”
She rejected the contention of the NCAA and its TV expert -- former CBS Sports president Neal Pilson -- that broadcasters “need not acquire the rights to use student-athletes’ names, images, and likenesses and that the primary reason they enter into licensing agreements with event organizers is to gain exclusive access to the facility where the event will occur.”
To succeed in the case, the plaintiffs had to show there was a bona fide TV market for their names and images. Absent such a market, they could make no claim that they are being denied compensation for the use of their names and images.
Wilken wrote that Pilson’s testimony “is not convincing.”
She cited provisions from CBS’ 1994 and 1999 NCAA basketball tournament contracts in supporting the plaintiffs’ contention. She also cited language from the TV contract for 2007, 2008 and 2009 Bowl Championship Series games, which “provides that the event organizer will be solely responsible for ensuring that Fox has ‘the rights to use the name and likeness, photographs and biographies of all participants, game officials, cheerleaders’ and other individuals connected to the game.”
Equally significant, in examining whether the NCAA’s limits on what athletes can receive while playing sports constitute a restraint on competition, Wilken cited the trial testimony not only of the plaintiffs’ main economics expert, Roger Noll, but also that of the NCAA’s economics expert, Daniel Rubinfeld.
“Dr. Noll’s opinions are consistent with the opinions of the NCAA’s own economic expert, â(euro) ⅛ who testified that the NCAA operates as a ‘joint venture which imposes restraints’ on trade,” Wilken wrote. “Dr. Rubinfeld specificallu acknowledged that ‘the NCAA does impose a restraint, the restraint we have been discussing in this case.”
Wilken wrote that she “rejects” the testimony and theories of another NCAA economic expert, Lauren Stiroh, who had testified that the plaintiffs could not show the athletes were being harmed. “The evidence â(euro) ⅛demonstrates that student-athletes themselves are harmed by the price-fixing agreement” among the schools, Wilken wrote.
“A lot of this lawsuit seemed to be about fairness,” Carrier said. “It didn’t seem right that the players’ images were used and they were not able to be paid for it at the same time that coaches are making millions of dollars, there are brand new facilities. â(euro) ⅛ Those athletes today will feel like justice is done.”
Contributing: Rachel Axon, George Schroeder