NCAA makes strong counterargument to close O'Bannon trial
Stewart Mandel contributed to this report.
OAKLAND, Calif. -- After three long weeks, the O’Bannon v. NCAA trial has come to an end. There will be additional filings and U.S. District Judge Claudia Wilken likely won’t rule for at least a month, but the heart of this historic case is now over.
Glenn Pomerantz, on behalf of the NCAA, was the star of today’s hearing. He explained the NCAA’s antitrust argument in a logical way, and methodically delineated an area of law that was otherwise muddled during the trial. Pomerantz argued that for O’Bannon to win under antitrust law, there must be a showing that amateurism rules harm consumers. In other words, even if student-athletes are clearly harmed by the NCAA preventing them from negotiating for the use of their name, image and likeness, O’Bannon can still lose.
As Pomerantz reasoned, there must be harm to you -- the fan, the consumer of college sports. Pomerantz’s interpretation was guided by the earlier testimony of NCAA witness Lauren Stiroh, an economist who maintained that antitrust injury only arises when specific markets -- as opposed to individuals -- are harmed.
Later, Pomerantz asserted that consumers have thrived with amateurism rules. As he noted, there has been an explosion in the number of games broadcast on television and that play in sold-out arenas, while there has never been more consumer choice in purchasing NCAA merchandise. Pomerantz warned that without amateurism rules, “big money” schools would dominate the recruitment of star athletes because they would offer more money. This would, in the NCAA’s view, cause some schools to drop Division I sports, meaning there would be fewer games for fans to attend and watch on television. In antitrust terms, this would cause a reduction in "output."
Pomerantz further explained his antitrust argument by highlighting the purported benefit of amateurism rules in the educational market -- that is, the market of services provided by colleges and received by students and student-athletes. During the trial, the NCAA revealed how graduation rates among student-athletes have improved over the last two decades. Several NCAA witnesses also testified that colleges are better able to provide educational services to student-athletes if those students are not focused on compensation.
The final day ended on an unusual note for a trial. Trials normally conclude with closing arguments by each side’s lead counsel. Not the O’Bannon trial. Instead of closing arguments, Wilken utilized a format similar to an appellate court, where judges pepper the attorneys with questions. Here, the NCAA’s lead attorney, Glenn Pomerantz, and O’Bannon’s two leads, Michael Hausfeld and Bill Isaacson, squared off. Wilken asked them several dozen questions, several of which were difficult “what if” hypotheticals that are similar to those found on law school exams.
Several attorneys for both sides told SI.com that they had never before seen a trial end with a question-and-answer format. Before turning to a career in journalism and teaching, I was a litigator and never encountered this format. The question-and-answer format was designed to provide clarity, but instead triggered confusion and highlighted fundamental misunderstandings about the case.
Most glaringly, Wilken and the attorneys clearly do not agree on the meanings of core elements of the antitrust dispute, nor do they agree on the precise legal argument raised by O’Bannon against the NCAA. Who is the “buyer?" Who is the "seller?" What is the "price?" What is the “market?" What is the “harm?"
I have analyzed the O’Bannon lawsuit since it was filed in 2009 and I teach, write about and have practiced antitrust law. After today, I’m uncertain how to answer these questions. The same appears true for both side’s attorneys.
Uncertainty could pose particular problems for O’Bannon, who as the plaintiff has the legal burden to prove the case. NCAA general counsel Donald Remy was quick to raise this point after the trial. Outside of the courthouse he remarked, "We’ve been doing this for five years, 15 days, and we spent the last couple of hours here seeing that the plaintiffs still have not been able to articulate a coherent antitrust theory.”
Remy’s critique is tempered by fact that O’Bannon will have an opportunity to provide additional written materials before Wilken makes a decision. Expect O’Bannon's attorneys to provide as much clarity as possible on their core legal argument and on how to interpret key terms.
Here are my other takeaways from Day 15 of the O’Bannon trial:
Hausfeld and Isaacson deliver key points against the NCAA
Pomerantz’s clarity in oral advocacy should not be confused with a prediction that the NCAA will win. Indeed, clarity should not be confused with accuracy.
Hausfeld and Isaacson, for their part, raised several compelling arguments against the NCAA. For one, they ridiculed the idea that the NCAA has struck a balance between athletics and academics for student-athletes. Testimony by O’Bannon himself at the start of the trial amplified this point, as he discussed how he believed he was at UCLA to play basketball. Even the NCAA conceded during the trial that student-athletes frequently exceed the NCAA’s limit of 20 hours per week devoted to sports (although the NCAA framed this additional time as "voluntary").
O’Bannon’s lead attorneys also stressed how colleges are "lining up" to join Division I, and none want to leave. Throughout the trial, NCAA contended that if colleges must pay student-athletes some amount of money for use of their name, image and likeness, many colleges would exit D-1. Isaacson called the fear “pure speculation” and unsubstantiated by any data. He was also underwhelmed by the NCAA’s contention that the NCAA’s success necessarily indicates their rules are lawful.
"It's a tautology," Isaacson pleaded, "to say college sports are popular so therefore" the current level competitive balance is ideal.
Isaacson raised another strong point when countering the NCAA’s worry about how consumers would respond to paid student-athletes. The NCAA argued consumers would view NCAA men’s basketball as an inferior form of the NBA’s D-League. Isaacson rejected the concern as imaginary and emphasized how if student-athletes were paid some money, either during college or after college, “they would still be students and fans would still enjoy watching students play sports.”
In other words, according to Isaacson, student-athletes sharing in some of the colleges’ athletic revenue would not transform those students into minor league basketball and football players; they would remain students and still be associated with a particular school and fan base. This argument undermines the NCAA's belief that removal of amateurism rules would cause consumers to lose interest in the NCAA.
Questions by Wilken
Wilken’s questions to Pomerantz, Hausfeld and Isaacson illuminate issues she finds relevant in her decision-making. While Wilken stressed that no one should intuit the way she may be leaning from her questions, those questions noticeably centered around certain themes.
First, Wilken seemed unimpressed by the failure of both sides to present compelling statistical evidence. She repeatedly wondered why the NCAA is so sure college fans would lose interest if student-athletes were compensated. Pomerantz responded by noting that before 1905, college sports fandom was muted as colleges had professional and amateur athletes playing alongside one another. While Pomerantz may be right, comparing college sports in 2014 to what took place more than 100 years ago seems like a reach. Pomerantz also stressed that there would be a loss of historic rivalries if some colleges paid and others did not, but as Andy Staples noted on Twitter, schools themselves eliminated several rivalries during the last round of conference realignment. Wilken had doubts about O’Bannon’s numbers, too, namely the absence of those numbers: O’Bannon did not present survey data to counter the NCAA.
Second, Wilken was curious about how coaches’ salaries fit into the antitrust discussion. Pomerantz downplayed their role, noting that coaches’ salaries, like salaries paid to other university employees, are based on market demands and thus outside the scope of amateurism. Wilken, however, wryly suggested that colleges might afford to pay student-athletes by paying coaches less. Wilken’s focus on coaches’ salaries is probably a plus for O’Bannon.
Third, Wilken seemed stuck on a question perhaps most suitable for an experienced video game player: should a video game like Just Dance count as a substitute for a college sports video game? This question relates to consumer harm, and namely whether consumers suffer sufficient harm by the absence of college sports video games on the market. EA stopped publishing NCAA Basketball and NCAA Football to some extent due to legal worries over their alleged use of players’ images and likenesses. As a consequence, consumers are unable to buy new versions college sports video games.
The NCAA contends the loss of these games do not constitute a sufficient harm to consumers, who can buy other games, or to EA, which can publish other games. Hausfeld, however, called it "nonsense" that consumer harm is necessary to show antitrust harm with video games. He stressed, “the public knew the truth” about games that seemed to feature real college players without their names.
Fourth, Wilken tested Pomerantz, Hausfeld and Isaacson with a series of hypothetical outcomes from the case. Essentially, she wanted to gauge their reactions to various states of the world in college sports, and whether there are less restrictive means for the NCAA to obtain its amateurism goals. She inquired about a world where student-athletes can negotiate for their name, image and likeness, one where there is a salary cap on how much student-athletes could be paid and one where there is a salary cap or luxury tax on how much money colleges could spend on sports.
She cautioned these ideas were merely in her head and not fully-developed. While Hausfeld and Isaacson identified some merit in these states of the world -- which is not surprising, since every idea posed by Wilken envisioned the NCAA having to make changes -- Pomerantz returned to his core arguments that O’Bannon has failed to offer an antitrust argument.
Other highlights from today
Before Wilken put the lead attorneys on the spot, the court heard the testimony of two key NCAA witness: Dr. Daniel Rubinfeld, the NCAA’s top economist, and Mark Lewis, the NCAA’s executive vice president of championships.
Rubinfeld testified on Thursday and continued his testimony today. He faced aggressive cross-examination by Hausfeld. Throughout a tense exchange, Rubinfeld maintained that NCAA amateur rules are essential for attracting fans to college sports and facilitating the integration of athletics and academics in college sports. These are key antitrust arguments for the NCAA, which must convince Wilken that amateurism rules enhance competition more than they harm it.
Hausfeld attempted to undermine Rubinfeld. He made Rubinfeld acknowledge that he had not conducted his own studies on how lifting amateurism rules would impact consumer interest. Along those lines, Hausfeld wondered how Rubinfeld could draw conclusions without having independently measured the impact of other important influences on consumers. Those influences include the rapid growth of sports media and the proliferation of games broadcast by ESPN, Time Warner, Fox and other networks. Hausfeld's point was that NCAA revenues have grown not necessarily because of amateurism rules but perhaps because of other factors that have nothing to do with the NCAA. Rubinfeld was undeterred. He referred to consumer impact studies conducted by another NCAA expert, Dr. J. Michael Dennis, and also doubted that precise measurement is even possible.
"You can’t predict the future of a world we don’t know much about today." Rubinfeld assured the court.
Rubinfeld also reluctantly conceded to Hausfeld that the NCAA restrains competition in some ways. One key way is to cap athletic-scholarships. Hausfeld also advanced O’Bannon’s case when he showed Rubinfeld a NCAA Presidential Task Force report. The report stated the educational value of athletics often plays a secondary role to the win-loss column at universities. Rubinfeld admitted that, as a professor, he was sympathetic to this concern, but insisted the idea of a "secondary role" for academics does not constitute an economic statement. Wilken didn't appear so sure with Rubinfeld's reasoning.
Lewis, an attorney and former student-athlete at the University of Georgia, coordinates the NCAA’s 89 national championships, including March Madness. He relayed core NCAA arguments concerning the educational value of college sports. For instance, he stressed that participating in college sports teaches lessons about hard work and overcoming adversity. Like other NCAA witnesses, Lewis also maintained that the educational aspect of college sports distinguishes it from the NBA D-League and other minor league sports leagues. He added that if student-athletes do not want to attend college, they can always pursue professional sports in other leagues, including the D-League and Arena Football League.
Lewis also tackled name, image and likeness rights. He testified that the NCAA never contractually requires student-athletes to transfer their name, image and likeness rights to the NCAA. Lewis then argued that amateurism rules promote competitive balance in college sports, since without those rules wealthier schools would purportedly be able to buy talent. He reasoned there would be fewer upsets in college sports in a world where student-athletes are compensated, and warned fans love upsets.
On cross-examination, Lewis was confronted with evidence that results in March Madness reveal major upsets are exceedingly rare. Lewis also was told that depicting the D-League as a substitute for D-1 men’s basketball is misleading. According to O'Bannon, the average attendance in the D-League is approximately 2,600 and only 42 of the D-League’s 400 games are televised. In other words, the D-League is nothing like D-1 men’s hoops.
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.