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O'Bannon v. NCAA: With trial over, what comes next?

Photo: G Fiume/Getty Images

The O’Bannon v. NCAA trial concluded last Friday, but the case is far from over. During the next two weeks, both sides will submit legal briefs that clarify their arguments. U.S. District Judge Claudia Wilken is expected to issue an order by early August. The future of college sports is in her hands.

Wilken’s order could take various forms. Most dramatically, she could issue a sweeping injunction against the NCAA. Such an injunction would command the NCAA to remove its set of rules and policies that form the basis of amateurism. This would be a game-changing order. It would allow prospective, current and former Division I football and men’s basketball players to negotiate compensation for the use of their names, images and likenesses (better known as NIL rights). Such an order would also give rise to a brave new world for coaches, athletic administrators, financial aid officers, faculty, sports agents and the many others who interact with student-athletes.

Conversely, Wilken could categorically reject O’Bannon’s argument and rule that the NCAA and its members don’t need to make any changes. This would constitute a stunning defeat not only for O’Bannon, but also for the NCAA’s many critics. To be sure, some prominent members of the national media would express outrage if O’Bannon loses. But as a federal judge with a lifetime appointment, Wilken is likely unconcerned about potential condemnations in articles or tweets. Her only concern is applying the law correctly.

Or, Wilken could split the difference. She could partially grant and partially reject O’Bannon’s argument, leading to a limited injunction that both sides publicly hail as a victory, but privately regard as a disappointment.

No matter Wilken’s order, it will likely be appealed by one or both sides, setting the table for an appeals process that could take years to play out. For those who think instant replay in games is slow, just wait until you see the federal appeals process in action.

Here is a legal scouting report for what to expect in the weeks and months ahead.

Aftermath of Wilken’s question-and-answer session with attorneys

The O’Bannon trial ended with the NCAA’s attorneys feeling confident they had won. While O’Bannon’s attorneys often excelled throughout the three-week proceedings, the trial concluded with an unusual question-and-answer session in which Wilken appeared noticeably uncertain about some aspects of O’Bannon’s case. Glenn Pomerantz, the NCAA’s lead attorney, crisply answered Wilken’s questions and provided a defense that she seemed to understand. Whether she endorsed the defense is a separate matter. Still, clarity counts, especially in close calls.

Attorneys for O’Bannon remain confident they successfully proved their case and that, upon review of the trial transcripts, Wilken will find the NCAA was undermined by its own witnesses. The plaintiffs are also pleased with the attention Wilken paid to the economics of college sports and to alternative arrangements in which the NCAA would be forced to change its operations during the question-and-answer session.

Both sides are discouraged from reading too much into Wilken’s reactions during the question-and-answer session. Right before it began, Wilken admonished the attorneys that she might, at times, adopt the role of a devil’s advocate. This means that her choice of questions and visual expressions should not have been taken at face value. For instance, Wilken might have feigned confusion as a way of seeing the attorneys’ responses. Then again, she may have been genuinely confused. Only she knows.

The clear change to college sports at stake in this case

O’Bannon seeks a specific change to college sports: Division I football and men’s basketball players becoming able to negotiate compensation for the use of their NIL rights in commercial products without violating NCAA rules. These products include live broadcasts, re-broadcasts, video games, replica jerseys and trading cards. To be clear, O’Bannon does not seek salaries or employment rights for student-athletes, nor does he ask that student-athletes be compensated for their labor. He also supports student-athletes receiving any compensation accrued for their NIL rights after college in a trust. Payment after college would minimize the possibility of student-athletes being distracted by money while in school, a concern the NCAA repeatedly alleged during the trial.

If granted a right to negotiate, most student-athletes would likely be represented by a trade association rather than by sports agents. The trade association would negotiate with individual colleges, conferences, video game publishers, networks and apparel companies, among other businesses that profit from college sports. Some student-athletes, especially star players, might instead hire agents or perhaps utilize boosters to directly negotiate with businesses. O’Bannon’s legal team, however, contends the NCAA grossly exaggerated these possibilities during the three-week proceedings.

The less clear antitrust argument necessary for this change

Antitrust law is considered one of the most complicated areas of law. At its core, it is about protecting competition in the marketplace for the benefit of consumers and marketplace participants. O’Bannon’s attorneys bear the burden of proving the NCAA harmed a discrete market within the economy. The goal sounds simple enough, but words like “harm,” “market,” “buyer” and “seller” have technical meanings in antitrust law, and O’Bannon, as the plaintiff, carries the burden of explaining their relevance to this case.

In her question-and-answer session, Wilken struggled to identify the buyer and seller under O’Bannon’s antitrust theory, and she wondered whether the buyer and seller could at times be the same person. She also seemed unsure as to which economic markets are implicated by NCAA amateurism rules and whether those are the same markets raised by O’Bannon’s complaint. Perhaps most significantly, Wilken did not reject the NCAA’s contention that O’Bannon has not shown antitrust injury unless consumers are harmed by NCAA amateurism rules. O’Bannon’s attorneys know that not every perceived moral wrong or economic inequity is indicative of unlawful conduct. Even if Wilken believes student-athletes are treated unfairly by NCAA amateurism rules, she cannot rule in favor of O’Bannon unless the alleged harm actually violates antitrust law.

Part of the challenge for O’Bannon is that his antitrust argument is novel. The interaction of student-athletes’ NIL rights -- or, as NCAA attorneys called them, “so-called NIL rights” -- with antitrust law marks a new frontier. At the end of the trial, Pomerantz stressed that in the Sherman Antitrust Act’s 124-year history, a claim like O’Bannon’s has never prevailed. As Wilken noted, however, such a claim has never been brought. She also stressed that interpretation of law changes over time.

Watch for O’Bannon’s lawyers to simplify their argument in forthcoming filings. They will likely define the relevant market in a straightforward way: Colleges are the buyers and prospective and current student-athletes are the sellers. Through this lens, athletes sell their athletic services to colleges but are denied compensation for the commercial use of their names, images and likenesses. The denial arises because of amateurism rules, which allegedly reveal collusion by the NCAA and its member institutions. O’Bannon’s lawyers will also continue to portray the NCAA’s alleged outcomes of an O’Bannon win as unproven exaggeration and unbelievable fiction.

Attorney Alan Milstein, who has previously litigated sports antitrust cases, told SI.com that O’Bannon must stress this is a monopsony case. A monopsony is a variation of a monopoly, except instead of a seller harming consumers, a buyer conspires to harm sellers. “The anticompetitive effect is obvious when the NCAA and its members are viewed as the buyer,” Milstein said. “The players, as sellers, have no bargaining power and their images are exploited without compensation or even choice.”

Toward the end of Friday's question-and-answer session, Michael Hausfeld, an attorney for the plaintiffs, told Wilken the case involved both monopoly and monopsony theories. It will be interesting to see whether O’Bannon focuses more heavily on monopsony going forward.

NCAA attorneys will obviously respond to this line of reasoning. They will emphasize their core defenses, including the contention that consumers must be harmed by amateurism rules in order for O’Bannon to prevail, and the idea that amateurism rules both attract fans to college sports and help colleges successfully integrate athletics and academics. They maintain some colleges will drop out of Division I should O’Bannon prevail, since their operating costs would presumably rise. NCAA attorneys also insist that college sports are not the only vehicle for young players to hone their skills. For example, they stressed that basketball players can compete in the NBA's D-League right out of high school and that football players can do the same in the Arena Football League. NCAA attorneys consistently hit on these themes during the trial, and several witnesses provided valuable testimonial support. From the NCAA’s perspective, O’Bannon’s arguments are problematical and fail to identify both a relevant market and evidence of antitrust injury.

Photo: Isaac Brekken/AP
                                                        

Possible injunctions against NCAA and the two key variables of scope and size

As noted above, an injunction by Wilken against the NCAA could take various forms. In a perfect world for the plaintiffs, she would enjoin the NCAA from preventing prospective, current and former Division I football and men’s basketball players from negotiating for the use of their NIL rights in every way they seek. O’Bannon filed a proposed order for Wilken to consider last Friday. In it, he recommended several NCAA changes related to the NIL rights of prospective, current and future DI football and men’s basketball players. The proposed changes include the following:

a. Players can negotiate and enter into NIL rights group licenses with television networks and video game publishers.

b. Players can receive deferred NIL rights compensation through a trust payable upon expiration of athletic eligibility or graduation, whichever comes first.

c. Players can receive NIL rights compensation in addition to athletic scholarships.

d. Players can receive NIL rights compensation for endorsements with third parties, including companies.

e. Colleges are barred from requiring players to relinquish NIL rights in exchange for tuition, medical benefits and monies for family travel.

If Wilken finds for O’Bannon, she would order the NCAA to change its rules to comply with some or all of these proposed changes. For example, she might generally agree with O’Bannon but have concerns about student-athletes entering into endorsement deals. In that scenario, she could enjoin the NCAA from prohibiting student-athletes from compensation for NIL rights except for endorsement deals. Alternatively, Wilken could limit an injunction to certain products. As an illustration, she could grant injunctive relief for NIL revenue for re-broadcasts and video games, but exclude the main source of potential NIL money -- live broadcasts. Such a scenario would constitute a far less lucrative victory for student-athletes than O’Bannon seeks, but a victory nonetheless.

Consider also that O’Bannon seeks changes for three distinct categories of athletes: prospective, current and former. At times during the trial, Wilken seemed responsive, if not sympathetic, to NCAA concerns about corruption in athlete recruitment. With that in mind, she might limit an injunction to benefit only current and former athletes. Such an order would still constitute a significant legal victory for the O’Bannon team, but not the complete one it seeks. If Wilken is swayed by NCAA concerns that NIL rights would aid corrupt boosters in recruiting transfer athletes, she could limit the beneficiaries of an injunction to only former athletes. That would still reflect a victory for O’Bannon -- a former college athlete himself -- but a more modest one than his lawyers demand.

In short, Wilken issuing an injunction against the NCAA could be sweeping or limited in scope, and could benefit prospective, current and future athletes or only some of them. The judge has complete discretion.

Only football and men’s basketball players would directly benefit from an O’Bannon victory

An O’Bannon victory would only benefit Division I football and men’s basketball players (prospective, current and/or former), as only they are plaintiffs in this litigation. Other student-athletes who might generate significant NIL revenue for schools, including women’s basketball, hockey and baseball players, would not benefit as a result of this case. Those student-athletes would need to pursue their own litigation, which would be aided by the precedent of an O’Bannon victory but not automatically assured of success. It is also possible that if Wilken ordered rules changes for football and men’s basketball players, the NCAA might voluntarily do the same for all student-athletes.

The aftermath of an O’Bannon victory on negotiation of NIL rights

If former student-athletes secure the ability to negotiate NIL rights, it is expected that the vast majority would join the Former College Athletes Association (FCAA). The FCAA would negotiate NIL rights with various businesses on behalf of former athletes. I explain the FCAA in more detail in my SI.com interview with Ken Feinberg.

If current and prospective student-athletes secure the ability to negotiate NIL rights, a trade association would likely emerge quickly. This association would offer negotiation services to those student-athletes with their colleges and with companies -- including broadcast companies -- that are in contract with the NCAA and member schools. Student-athletes would not be obligated to join a trade association and could instead negotiate their own NIL rights contracts, perhaps with assistance from a sports agent. It is expected that most student-athletes would join a trade association.

Prospects for appeal to the Ninth Circuit and U.S. Supreme Court

The likelihood of one side appealing Wilken’s order is extremely high. In fact, if neither side is satisfied by her order, both could appeal. The U.S. Court of Appeals for the Ninth Circuit would hear any appeals. The Ninth Circuit is regarded as relatively liberal and sympathetic to labor interests. This type of ideology would seem to favor O’Bannon, who is suing on behalf of labor and seeks change rather than continuity. Appellate judges, however, are notoriously hard to predict, particularly with novel legal issues such as those raised by the O’Bannon case.

After review by the Ninth Circuit, either side could petition the U.S. Supreme Court for review. The Supreme Court, however, only takes about one percent of petitions, and it routinely rejects controversial and high-profile cases. If the O’Bannon case nonetheless beats the odds and is heard by the Supreme Court, an argument could be made that the NCAA would be slightly favored. Four of the nine justices (Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas and Samuel Alito) are considered a conservative-leaning bloc, and Justice Anthony Kennedy usually votes with them. The other four justices (Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan) are considered a liberal-leaning bloc. It's also worth noting that in the last five Supreme Court terms (beginning with the 2009 term), the Supreme Court reversed decisions by the Ninth Circuit -- which would hear an appeal by O'Bannon or the NCAA -- at a higher rate than it has any other federal circuit court.

Predicting a 5-4 vote in favor of the NCAA, though, would be a fool’s errand. This is especially true given that any Supreme Court hearing wouldn’t occur for years, by which point there could be new justices.

Impact on athletic scholarship litigation and unionization efforts

There are several antitrust litigations concerning whether the NCAA’s cap on student-athletes’ scholarships to tuition, room, board, books and fees violates antitrust law. Shawne Alston, Martin Jenkins and several other current and former players filed scholarship lawsuits earlier this year. Additional suits are expected in the coming months. The plaintiffs’ core theory is that the NCAA and its member institutions have unlawfully conspired to limit the value of scholarship amounts. They insist that in a free or less restricted market, some student-athletes -- especially star athletes -- would attract substantially larger scholarships, perhaps even seven-figure amounts.

The topic of athletic scholarships was raised during the O’Bannon trial, mostly in the context of the actual cost of a college education. Wilken’s order, however, is unlikely to directly address the legal issues raised by the scholarship lawsuits. These suits are poised to continue whether the O’Bannon plaintiffs win or lose, with resolution unlikely for several years. (Consider the O’Bannon lawsuit was filed in July 2009 and it took until June '14 for a trial.)

Still, if O’Bannon wins, plaintiffs in the scholarship cases would feel emboldened. The O’Bannon case concerns different types of NCAA restrictions on student-athletes, but it is similar in that it involves NCAA restrictions on student-athletes and likewise implicates antitrust law. Scholarship plaintiffs would be pleased to know that a federal judge had ruled against NCAA restrictions on an antitrust claim. Such an order might also provide language that helps the scholarship plaintiffs’ legal arguments.

Separately, members of the Northwestern University football team are seeking to be declared employees by the National Labor Relations Board (NLRB). The leader of the effort, quarterback Kain Colter, has completed college and signed with the Minnesota Vikings, but his successors on the Wildcats have taken over. In March, the players received a favorable order by NLRB regional director Peter Sung Ohr. The NLRB is currently reviewing Sung Ohr’s order and is expected to issue a decision later this year. The agency’s decision could then be challenged in federal court. As employees, Northwestern football players would likely unionize and seek collective bargaining with their school over salary, benefits and workplace conditions. The Northwestern matter is proceeding on its own track and implicates a different area of law, federal labor law.

Title IX

Compliance officers at universities have worries about how an O’Bannon victory might implicate Title IX, a federal law that prohibits discrimination on the basis of sex in higher education. Title IX prevents colleges from treating male athletes differently than female ones. A college paying male student-athletes but not female student-athletes would run afoul of Title IX.

The O’Bannon plaintiffs, however, do not seek payment for football and men’s basketball players; they seek their right to negotiate compensation for the use of their NIL rights. Any payment, moreover, would likely be made through a group license that considers royalties and other measurements of NIL use, rather than in direct payment. Title IX does not directly address NIL rights or group licensing contracts. Still, if colleges are required to pay to use the NIL rights of football and men’s basketball players, their ultimate payment could be construed as payment to male athletes. Then again, if payments are not made until after players exhaust their eligibility or graduate, the connection to Title IX may be weaker. The Office for Civil Rights at the U.S. Department of Education, which enforces Title IX, could issue guidance following an O’Bannon victory. Litigation would likely clarify the impact of an O’Bannon victory on Title IX compliance.

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. He is also the distinguished visiting Hall of Fame Professor of Law at Mississippi College School of Law.

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