O'Bannon settles with EA and CLC in class action, NCAA still remaining

Friday September 27th, 2013

Ed O'Bannon's class action lawsuit has agreed to settle with EA and the Collegiate Licensing Company.
Isaac Brekken/AP

Ed O'Bannon's class action lawsuit against the NCAA, Electronic Arts and the Collegiate Licensing Company took a major step forward Thursday. O'Bannon has agreed to a settlement with EA, which has published top-selling college football and basketball video games, and CLC, which represents more than 200 colleges, universities, conferences and bowl games in licensing contracts. The terms of the proposed settlement remain confidential but are poised to accomplish a key goal: compensate college athletes for their image and likeness in video games and retail sales. The NCAA remains a defendant in the case.

The proposed settlement

U.S. District Judge Claudia Wilken will have to approve the settlement. She is likely to do so, especially since she has urged the parties to reach an agreement out-of-court. But before she approves any settlement, Wilken will demand details about how the settlement would impact college athletes. She will want to know, for instance, which players are entitled to benefit from the settlement and what methodology will be used to determine how much money each player receives. Timing of payments will also be of interest to Wilken, such as whether current college players are compensated immediately or whether they have to wait until their NCAA eligibility expires. Wilken will want assurance that the settlement is, on average, fair to those who would gain from it. Along those lines, she will likely consider whether a star player deserves more than a typical player for the use of their image and likeness.

Wilken will also want specifics as to how the settlement would be administered. It has been long rumored that a settlement or players' victory in O'Bannon would lead to the creation of an administrated plan to collect and distribute money. The so-called "Former College Athletes Association" is referenced in a lawsuit filed by former O'Bannon attorney Jon King against O'Bannon's law firm, Hausfeld LLP. Kenneth Feinberg, who has administered the September 11th Victim Compensation Fund and BP Deepwater Horizon Disaster Victim Compensation Fund, is thought to be a candidate to administer an O'Bannon-related fund.

As with any class action settlement, class members -- in this case former and potentially current college players -- will have an opportunity to opt-out of the settlement and preserve their right to sue EA and CLC. Many players, however, would likely be deterred by the potential wait and associated expense of litigating. Keep in mind, the O'Bannon case began in 2009. Barring a settlement between O'Bannon and the NCAA, the case could last several more years.

By settling prior to Judge Wilken's decision on class certification, EA and CLC are likely paying either a discount or premium depending on how Wilken decides. Here's why: the price tag of settlement from O'Bannon's vantage point would be higher if Wilken certifies his class. A certified class would mean potentially tens of thousands of plaintiffs are suing EA and CLC instead of merely the handful of plaintiffs named by O'Bannon. Conversely, if Wilken declines to certify O'Bannon's class, the case would become smaller and EA and CLC may have then paid more to settle than necessary. An analysis by SI.com of Wilken's prior certification decisions suggests she will likely certify O'Bannon's class. If she does, it would reflect well upon EA and CLC's decision to settle.

The remaining litigation

The NCAA is the primary target of the O'Bannon litigation. It remains so after this proposed settlement. The NCAA insists it will continue to wage a fight in court and continue to challenge the legal merits of O'Bannon's claims. It is a fight, especially with appeals, that could last years.

While the NCAA presents a fighting spirit to the public, it has likely adopted a more nuanced approach behind closed doors. The truth is the O'Bannon case was and remains unlikely to go to trial. The litigation is a potentially massive class action lawsuit that, in a worst-case scenario, could cause the NCAA and its members to collectively pay billions of dollars. Not only would a loss in a trial threaten massive damages, but the NCAA would not control when payments are required. With a settlement, the NCAA would likely pay much less and over a longer period of time. A settlement could also be portrayed as "win" for everyone. Perhaps most important, a settlement would provide the NCAA valuable time to gradually implement changes to the economics of college sports and to address subsequent legal issues, such as how male basketball and football players could be compensated without running afoul of Title IX.

The NCAA may also be concerned by the kind of information that would be shared by EA and CLC in a settlement with O'Bannon. As a condition of the settlement, O'Bannon's lawyers are likely demanding information that would help them advance legal claims against the NCAA. A settlement with EA and CLC, in other words, makes one with the NCAA more likely. Along those lines, schools that are not represented by CLC and thus are not parties to an O'Bannon-CLC settlement may become more vocal advocates of an O'Bannon-NCAA settlement. Non-CLC members include several schools with major programs, such as Ohio State, the University of Southern California, Oregon, Michigan State, Baylor, Northern Illinois and Virginia Tech.

Also paying attention to the proposed settlement are broadcast and media companies that O'Bannon or other players could next target. Companies which entered into lucrative television and other media contracts to broadcast college players may represent the next phase of the O'Bannon litigation.

Impact of proposed settlement on video games

Earlier today, EA Sports announced it would not publish a college football video game next year, and it cited legal concerns for the decision. The timing of the EA Sports announcement and news of the proposed O'Bannon settlement suggests they may be connected. EA Sports not publishing a college football game next year means the company will not "damage" players who would have arguably appeared in the game.

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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