No Clear Winner

A federal appeals court backs ruling that NCAA violates antitrust laws with limits on athlete compensation, but rejects allowing athletes to receive up to $5,000 a year in pay.

October 1, 2015

The U.S. Court of Appeals for the Ninth Circuit on Wednesday upheld a lower court’s opinion that National Collegiate Athletic Association rules to limit what college athletes can be paid violate antitrust laws. But the appeals court also tossed out a federal judge’s requirement that the NCAA allow athletes to receive deferred compensation of up to $5,000 per year.

Instead, the three-judge panel wrote in its decision, the NCAA is required only to allow colleges to provide scholarships that cover an athlete’s full cost of attendance. In January, using a new governance structure that granted them greater autonomy, the five wealthiest conferences passed a measure allowing just that.

The change means that Wednesday's ruling is a mixed bag for the NCAA, legal experts said, potentially weakening the association's argument for preserving the association’s amateurism model while also largely maintaining the status quo for big-time college sports.

“We agree with the court that the injunction ‘allowing students to be paid cash compensation of up to $5,000 per year was erroneous,’” Mark Emmert, president of the NCAA, said in a statement. “Since Aug. 1, the NCAA has allowed member schools to provide up to full cost of attendance. However, we disagree that it should be mandated by the courts.”

In August 2014, Judge Claudia Wilken ruled in a lawsuit brought by former college basketball player Ed O’Bannon that the NCAA violated antitrust law by not allowing athletes to be paid for the use of their names and likeness. The ruling would have allowed, but not required, colleges to pay players about $5,000 each year beginning on Aug. 1. The payments would have been capped at that amount, and held in a trust fund until the students completed their athletic eligibility.

The decision was seen at the time as a major blow to the NCAA, and the association appealed the ruling. The appellate court said Wednesday that it agreed with the original ruling that the NCAA violated antitrust laws, but it backed the association’s opinion that college athletics should not be thought of as minor league sports. Thus, the judges wrote, compensation for athletes should be limited to funds related to their education.

“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 [Antitrust] Act's rules,” the 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. The Rule of Reason requires that the NCAA permit its schools to provide up to the cost of attendance to their student athletes. It does not require more.”

Legal experts said Wednesday that there was no clear winner or loser in the appellate court’s ruling. And both sides of the lawsuit offered up complaints and praise for certain aspects of the decision. Neither party has decided yet whether they will appeal the ruling.

“Each side is going to claim some victory here, and each side is going to recognize that they didn’t get everything they wanted,” said Daniel Lazaroff, former director of the Loyola Sports Law Institute and a professor emeritus at Loyola Law School. “The ruling certainly doesn’t endorse the idea that these players are not students first and that they generate a lot of money. It takes the position that amateurism is legitimate. It recognizes that this is a commercial activity, but the focus is on how that activity functions in the context of the athletes still being students.”

In vacating the injunction requiring the NCAA to allow its members to pay athletes deferred compensation, the panel wrote that the $5,000 cap was an “arbitrary limit” that could be easily challenged. The panel stated that the “difference between offering athletes education-related compensation and offering them cash sums untethered to educational expenses is not minor.”

That difference, the panel wrote, “is a quantum leap.”

“That’s a pretty telling comment,” said Scott Schneider, a lawyer with the firm Fisher & Phillips who focuses on college athletics. “In essence, the court is saying that the product that is being provided to the public is different than minor league sports and it relies in large measure on not compensating the athlete for anything other than education-related expenses. On that principle, this is a major win for the NCAA in the sense that the court is saying amateurism is important from a market perspective. It’s saying that striking down amateurism would fundamentally alter that product.”

At the same time, by upholding the original ruling that the association does violate antitrust law, the appellate court’s decision could potentially weaken the NCAA’s argument in other pending lawsuits. Most prominently, legal experts said, lawyer Jeffrey Kessler could use the case as precedent in a lawsuit brought against the NCAA by a former Clemson University football player named Martin Jenkins.

The Jenkins lawsuit is much broader than previous antitrust lawsuits against the NCAA. It focuses not just on issues of name and likeness or full cost of attendance, but on unlimited compensation. It seeks to completely upend the NCAA’s theoretical amateurism model. Like the O’Bannon case, the Jenkins lawsuit will also be decided by Judge Wilken.

And, thanks to Wednesday’s ruling, the NCAA can no longer rely so greatly on a 1984 Supreme Court ruling in defending amateurism. That case was about control over college football television rights and had little to do with paying athletes, but the NCAA has depended heavily on the ruling to defend its model.

The new ruling states that the opinion does not “support the tremendous weight that the NCAA seeks to place upon it,” meaning that the 1984 case should be considered only as related guidance. “We are not bound by [the 1984 opinion] to conclude that every NCAA rule that somehow relates to amateurism is automatically valid,” the judges wrote.

“The [Jenkins] case has a lot of traction at this point and this ruling has implications for that case,” said Eddie Comeaux, an associate professor of higher education at the University of California at Riverside. “If it’s now established that the NCAA is violating antitrust law, then the Jenkins case may be the one that really opens up the door for athletes to really negotiate in an open market. I don’t see this ending now, and it’s clearly going to end up playing out in the Supreme Court.”


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