Ed O'Bannon v. the NCAA: A complete analysis before the trial
It has been nearly five years since former UCLA basketball star Ed O'Bannon sued the NCAA, the Collegiate Licensing Company (CLC) and Electronic Arts over the commercial use of former Division I football and men's basketball players' names, images and likenesses. The case has morphed into a class action lawsuit on behalf of both current and former players, and only the NCAA remains as a defendant. The trial is scheduled to begin on Monday in the Oakland, Calif., courtroom of U.S. District Judge Claudia Wilken.
Here are the key issues to consider.
I. Possibility of pretrial settlement on the courthouse steps
It has happened before. Opposing sides in a bitter and lengthy lawsuit arrive at court for their long-awaited trial. They are flanked by attorneys who have prepared for this case for weeks. The two sides had repeatedly tried to settle their dispute, but never came close. Yet then, right before the trial begins, the two sides huddle one last time and shockingly find common ground. Contingent upon court approval, their agreement will constitute a settlement that ends the litigation and averts a trial. Everyone goes home.
Why the sudden change of heart? The parties might have developed cold feet upon realizing a judge will really decide their fate. Or one side finally gives into the demands of the other. No matter the rationale, a settlement usually feels like a lukewarm victory for both sides. Neither side obtains everything, but neither suffers a complete loss.
Attorneys for both O'Bannon and the NCAA have publicly rejected the idea of a settlement. The gulf between them seems unbridgeable. They fundamentally disagree about whether the NCAA and its members violate antitrust law through its rules for licensing the names, images and likenesses of Division I football and men's basketball players. For O'Bannon, a settlement would require a profound change in NCAA amateurism rules so that college athletes can be compensated for the commercial use of their names, images and likenesses. A settlement would also demand that colleges compete over players' names, images and likenesses. To date, the NCAA is unwilling to accept such dramatic shifts, although many conference commissioners, university presidents and athletic directors -- key stakeholders in the NCAA -- appear less dogmatic in their opposition.
Could a last-minute settlement occur here? The odds are low, but minds can be changed. Take Electronic Arts and the CLC. They opposed settling with O'Bannon until the parties recently reached a $40 million deal. Sources close to O'Bannon's legal team stress their side is open to a late settlement, but contend there is "radio silence" from the NCAA.
If O'Bannon and the NCAA nonetheless reach a settlement, both sides would control their fate rather than allowing Wilken to do so. A plausible settlement would be one in which the NCAA agrees that players can share in NCAA revenue from the commercial use of their names, images and likenesses, and that amateurism rules are modified so that players can sign endorsement deals. In exchange, the NCAA would likely share a smaller percentage of revenue than sought by O'Bannon and obtain more control over the disbursement of funds. The NCAA might also buy time in a settlement, with an agreement to change NCAA rules by a certain date -- say two or three years from now -- rather than immediately as potentially ordered by Wilken. A delay could prove crucial for college athletic administrators, as their budgets would shrink if money they expect to receive is instead shared with student-athletes. These administrators would also welcome time to determine how changes in compensation for male student-athletes would comply with the gender equity requirements of Title IX.
Public relations is another force that may drive a late settlement. Both the NCAA and O'Bannon could frame a settlement as a win for everyone and the first step toward constructive change in college sports. A settlement would also be well received by lawmakers and regulators who are closely following the O'Bannon case and are concerned about the state of college sports. If the NCAA and O'Bannon instead go to trial, one side will lose and the loss will be perceived as devastating.
II. A case that began about the past is now about the future
Assuming a settlement is not reached and the U.S. Court of Appeals for the Ninth Circuit does not intervene, the O'Bannon trial will start on Monday. This will be a bench trial, meaning there will be no jurors and Wilken will play two crucial roles: the finder of fact and the ruler on questions of law and procedure. Three weeks have been allotted for the trial, but bench trials tend to move quickly. Attorneys in bench trials are aware that they are speaking only to a highly sophisticated person -- the judge -- and thus they shelve trial strategies designed to sway jurors. It is possible that the O'Bannon trial will last only a couple of weeks.
For several reasons the trial will be narrower in scope than originally forecasted. Most notably, O'Bannon and his co-plaintiffs are no longer seeking money damages. They only want Wilken to compel the NCAA to change its rules. Wilken would do so by ordering an injunction, which the NCAA would have to follow or be held in contempt of court. The scope of law in the O'Bannon case has also shrunk. The O'Bannon case had implicated antitrust law and right of publicity law until Wilken removed right of publicity issues last month. Those issues will be addressed in a trial next March between former Arizona State quarterback Sam Keller and the NCAA.
During the O'Bannon trial several notable persons are expected to testify on behalf of the NCAA. They include NCAA president Mark Emmert and Big Ten commissioner Jim Delany. In cross-examination, O'Bannon's lawyers will try to portray them as profiting unjustly from college athletes and as engineering a college sports model that pays mere lip service to academic integrity. NCAA lawyers, for their part, will direct O'Bannon's witnesses -- including Ed O'Bannon himself -- to acknowledge that student-athletes consent to amateurism rules, that these rules help to separate college sports from professional sports and that fans of college sports are commercially attracted to amateurism.
III. O'Bannon's core legal argument
O'Bannon's central thesis is that the NCAA and its members comprise a cartel in violation of federal antitrust law. This alleged cartel unjustly enriches schools and financially harms student-athletes by limiting how names, images and likenesses are licensed in various products. Those products include live television broadcasts, archival game footage and NCAA-branded video games. O'Bannon stresses that this conspiracy is embedded in all aspects of the NCAA, including in NCAA rules that preclude competition by student-athletes and member schools. One-sided contractual relationships between the NCAA and its broadcasters and sponsors are also cited as corruptively aiding the cartel.
To prevail on his antitrust claim, O'Bannon must prove that the NCAA causes harm to the marketplace for goods and services. O'Bannon identifies two harmed markets: (1) the "college education" market, in which Division I schools compete in student recruitment and (2) the "group licensing" market, in which broadcasters and video game publishers compete to use players' names, images and likenesses. By depriving student-athletes of opportunities to negotiate their own deals, the NCAA has allegedly rendered these markets anti-competitive. The NCAA also enables its members to avoid competing with one another, thus causing additional market harm. As a possible remedy, O'Bannon proposes a deferred compensation model whereby revenues earned by college athletes are placed in a trust. The trust would be released at the end of a student's athletic eligibility. Athletes would thus not be paid until after they are done playing college sports.
IV. The NCAA's core legal argument
The NCAA insists that O'Bannon's claims are baseless. In the NCAA's view, amateurism rules are essential to the NCAA attracting fans. If college athletes were regarded as professionals, the NCAA charges, fans would be less interested in college sports. Expert economists for the NCAA and O'Bannon disagree firmly about this point. Wilken will examine their dueling arguments.
The NCAA also identifies amateurism rules as essential to creating competitive balance in college sports. Without these rules, there would purportedly be great imbalance between colleges and conferences, with big-money schools buying up all of the best athletic talent. O'Bannon's attorneys dismiss this rationale as flawed, arguing that a massive imbalance between colleges and conferences already exists.
Academics also play a central role in the NCAA's defense. The NCAA frames academics and athletics as complimentary benefits of amateurism rules. O'Bannon's attorneys regard this argument as disingenuous given reports of widespread academic fraud involving athletes. They will also claim that O'Bannon does not seek to morph college athletes into professionals, but only safeguard their commercial rights.
The NCAA furthers its case by stressing broad opportunities provided for many colleges through NCAA rules. O'Bannon's lawyers will likely frame this argument as a red herring, since in their view O'Bannon does not seek to shrink athletes opportunities for colleges, but only guarantee opportunities for student-athletes.
V. The potential aftermath of O'Bannon winning
At its core, an O'Bannon victory would produce a radical change in college sports: Division I football and men's basketball players would be able to negotiate compensation for the use of their names, images and likenesses without losing NCAA eligibility. While colleges would not be obligated to offer these players royalties, they could choose to do so if they felt competition required it. Importantly, the NCAA would not punish colleges that offer players royalties. This would create a very different model of college sports. Here is what to expect.
1. Student-athletes would still be students
An O'Bannon victory would not change the required student status of college athletes, nor would it relieve them of accompanying academic requirements. An O'Bannon victory would similarly not guarantee college athletes wages or employee status. Changes along those lines are contemplated in Kain Colter's attempt to have Northwestern football players declared employees under federal law. If the National Labor Relations Board agrees with Colter, Northwestern players could unionize and negotiate salaries and other benefits. The same would likely be true of student-athletes at other private colleges, although student-athletes at state colleges would need to turn to state labor laws. O'Bannon winning under antitrust law would not necessarily change how college athletes are treated under federal and state labor laws.
2. Student-athletes' scholarships would still be capped
NCAA caps on athletic scholarships are the subject of separate litigation. 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. Without a cap, universities would purportedly be pressured to pay student-athletes market value scholarships. Star recruits might then command scholarships that approach or exceed seven figures. These lawsuits, however, could take years to play out. The O'Bannon case, for its part, is not about players' scholarships. It is about players' names, images and likenesses.
3. Few college players would become rich through an O'Bannon victory
O'Bannon winning would likely pave the way for Division I football and men's basketball players to sign endorsement deals and receive payment for signing autographs without running afoul of NCAA rules. Truly high-profile ones might even become rich. Take Johnny Manziel and Andrew Wiggins, for example. Had they been able to sign endorsement deals while at Texas A&M and Kansas, respectively, the duo might have become millionaire students.
But celebrity college athletes are few and far between. The vast majority of Division I football and men's basketball players are not household names, and only a small number would likely become rich through changes in amateurism rules. Most would likely gain relatively modest compensation through group licensing contracts negotiated on their behalf by a trade association. Accessing this compensation would probably be delayed until after college.
4. The business of sports agents could change
Should O'Bannon win, college players might be able to use agents, as NCAA rules barring student-athletes from agent representation could run afoul of Wilken's order. Few players are of such fame that they would command individual compensation. Still, some might and the NCAA would likely promulgate new rules on agent interaction with student-athletes. Alternatively, and as advocated on SI.com by former NBA executive director Charles Grantham, the NFLPA and NBPA could offer college players membership in their unions. In the scenario envisioned by Grantham, pro unions -- which certify and discipline agents -- could regulate agents who visit college campuses.
5. Rise of the Former College Athletes Association
O'Bannon and other named players no longer seek money damages, so even if they win, the NCAA would not be ordered to pay them anything. At least for now, they are only seeking to change rules that will impact current and former college athletes going forward. The primary impact of an O'Bannon victory on former athletes would be that they could join the Former College Athletes Association (FCAA). I explain the FCAA in more detail in my SI.com interview with Ken Feinberg, but in general, the FCAA would determine how much compensation a former athlete should receive for the use of his name, image and likeness.
6. Future Title IX lawsuits
The Title IX implications of an O'Bannon victory are uncertain and may give rise to future litigation. Title IX, which generally forbids discrimination on the basis of sex in higher education, became law in 1972 at a time when the college sports landscape was radically different. The drafters of Title IX never imagined a world in which college coaches would earn in excess of $6 million a year, or one in which -- if O'Bannon wins -- college athletes would negotiate compensation for the use of their names, images and likenesses. It could be argued that O'Bannon winning would not implicate Title IX, since male athletes might not be paid directly by their schools and might not be paid until after college. However, this argument could be dismissed as form over substance. Expect litigation to sort out Title IX ramifications.
7. College athletic budgets might shrink, but coaches' salaries would be unlikely to drop
Economists have debated the financial implications of an O'Bannon victory on college athletic budgets. One view holds that if players receive some share of video game, live broadcast and archival footage revenue, they would receive money that previously would have been paid to colleges. From that lens, colleges would receive less money from college sports if O'Bannon wins. This view is plausible, but seems to miss a larger point: NCAA revenues are growing, and regardless of the O'Bannon verdict most schools will likely continue to generate massive revenues (and enhanced alumni donations and applicants) from their sports.
Also, to the extent that schools cut back on athletic budgets, coaches seem unlikely to bear the burden. Not all coaches are on the level of Alabama football coach Nick Saban, who just signed a contract extension that will pay him an average of $6.9 million a year over the next eight years. But there will always be a competitive market for coaches, especially great ones, as they generate money for their schools. Anonymous staff members, most of whom lack bargaining leverage, would be the most likely to suffer budget cutbacks.
8. The NCAA would not disappear
The NCAA generates close to $1 billion a year in revenue and is not threatened with any damages in the O'Bannon case. The NCAA also provides various member services unrelated to the O'Bannon case. Foremost, the NCAA investigates fraudulent conduct among member institutions and plays a crucial role in scheduling games and postseason play. While conferences might eventually accomplish these functions on their own, the NCAA is poised to continue to play a vital role in college sports long after the O'Bannon ruling.
VI. The potential aftermath of the NCAA winning
In a technical sense, the NCAA defeating O'Bannon would mean that nothing would change. The NCAA would have defeated O'Bannon's legal challenge, thereby preserving the status quo. NCAA amateurism rules would continue and the organization would feel emboldened by favorable case precedent, which it would use against similar lawsuits.
This interpretation might be too narrow, though. Even losing lawsuits can precipitate change. Curt Flood, for instance, was defeated in court by Major League Baseball. Yet Flood's willingness to challenge a long-established system played a decisive role in big league players obtaining the right to free agency. O'Bannon's similar willingness to challenge a long-established system has rallied scores of athletes to support his cause. O'Bannon's cause probably won't end if he loses in court.
The NCAA also faces multiple other class action lawsuits that center on increased compensation for student-athletes. The odds of the NCAA running the table on all of these suits are low. Then there are the calls for major reform to the NCAA and the treatment of student-athletes -- these call grow louder with each passing day. One way or another, college sports will soon change, and the change will likely be dramatic.
VII. Prospects for review by the U.S. Supreme Court
One of the most misreported aspects of the O'Bannon case is that the Supreme Court will surely hear the case. To begin with, the loser of the O'Bannon trial must first appeal to the U.S. Court of Appeals for the Ninth Circuit. That appeal would likely take a year or two. Only after the Ninth Circuit has decided an appeal can the losing party then appeal to the U.S. Supreme Court. The odds of the Supreme Court hearing an appeal are extremely low. Each year the Supreme Court receives about 8,000 petitions for certiorari. In recent years the Supreme Court has granted cert to only about one percent of petitions.
To be sure, the O'Bannon case would be more notable than most cases, and it would implicate a major industry. But the Supreme Court routinely rejects to hear cases that are socially and economically significant. In the last year, for instance, the Supreme Court has declined to hear widely reported challenges under gun laws, antitrust law and the First Amendment. Making odds even longer for O'Bannon, the Supreme Court usually expects there to be a split among federal appeals courts as to how to interpret a particular law. O'Bannon's antitrust case is relatively novel and different from any other case to date, meaning there is no apparent circuit split.
Even in the unlikely event that the Supreme Court hears the O'Bannon case, the hearing would probably not occur until 2017 or '18. By then, some of O'Bannon's claims may be moot due to changes in college sports.
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.