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  • The judge who decided O'Bannon v. NCAA is set to deliver another key student-athlete compensation ruling with wide-ranging implications.
By Michael McCann
September 04, 2018

Four years after she presided over the trial for Ed O’Bannon v. NCAA, U.S. District Judge Claudia Wilken is about to preside over a second college sports trial that could be a game-changer. On Tuesday, a trial for a lawsuit led by former West Virginia running back Shawne Alston and former Cal center Justine Hartman will begin in an Oakland federal courthouse. Alston and Hartman are co-lead plaintiffs in In Re: NCAA Grant-in-Aid Cap Antitrust Litigation v. NCAA, a class action brought on behalf of former men’s and women’s college players against the NCAA and the 11 major athletic conferences.

Once again, the NCAA will need to defend the unusual economics of big-time college sports from legal rebuke—and once again the 69-year-old judge will decide how to shape the relationship between universities and the student-athletes who bring them notoriety and revenue.

Alston and Hartman assert that the NCAA’s system of capping the value of athletic scholarships unlawfully prevents conferences and individual colleges from competing with each other. They stress that colleges compete for athletes in myriad ways—by spending millions of dollars to hire elite coaches, by building massive stadiums and arenas, by investing in state-of-the-art training facilities and so on—and yet none of those ways pays the actual athletes. The NCAA and the 11 conferences dismiss this assertion as not only baseless under the law but also potentially damaging to college sports: If athletic scholarships become de facto employment contracts, then college sports would morph into minor league sports, college athletes would become disassociated from their classmates and college fans would tune out.

Understanding Alston and Hartman’s legal argument

The players’ core argument is best understood through an illustration. Imagine the most coveted high school football player in the country is being pursued by Clemson, Alabama and Georgia. Each program has carefully studied this prospect, determined he is incredibly valuable and decided to aggressively recruit him.

All three schools assure the recruit that their respective football programs will best prepare him for the NFL and contend that their coaching staffs, playbooks and training facilities are optimally designed for him. Along the way, each program highlights reasons why the recruit shouldn’t pick the other two schools, such as warning the recruit about the more experienced players that would be ahead of him on the depth chart.

In short, the programs compete with each other for talent—up to an important limit. Under NCAA’s grant-in-aid rules, Clemson can’t offer this recruit an athletic scholarship worth an amount of money consistent with his real value to the team and the university, which would reflect the improved TV ratings, ticket sales and merchandise demand that stems from a championship season. A fair offer would also incorporate the extent to which this recruit’s affiliation to Clemson would boost prospective high school applicants’ interest in applying to Clemson and propel Clemson alumni to donate to their alma mater. NCAA grant-in-aid rules simply prohibit Clemson from offering a figure that reflects this value.

Most schools are forced by rule to offer essentially the same financial package, consisting of tuition, fees, room, board, course-related books and other expenses up to the value of the full cost of attendance. The recruit, therefore, is denied the full benefits of the competition for his services. In turn, the school that lands the recruit retains the value of the recruit’s contributions to the school that exceed the amount of money the school “paid” the recruit through the grant-in-aid. Stated differently, if the value of the grant-in-aid paid by the school to the athlete is $100,000 per year while the value of the athlete to the school is $500,000 per year, the athlete theoretically loses out on $400,000 per year. The school then pockets that gain, which it could then use to pay coaches’ salaries and other institutional expenses.

The players charge that this blatant restriction on the ability of schools to compete through market-based scholarships violates federal antitrust law, which is designed to ensure that competing businesses—including conferences, colleges and other NCAA members—actually compete. Competitors are barred from conspiring through anti-competitive measures that, among other things, deprive labor of their rightful value and trigger more anti-competitive harms than pro-competitive benefits.

To that end, the players insist that the scholarship cap unlawfully prevents conferences and individual colleges from competing with each other. They demand that if there can’t be a free market for athletic scholarships, then at least individual conferences should be able to determine their own rules for capping scholarship compensation and accompanying benefits. The Southeastern Conference and the American Athletic Conference, for example, do not necessarily have to land on the same set of scholarship rules—the Grant-in-Aid plaintiffs believe each conference should have autonomy to decide those rules.

Understanding the NCAA’s chief legal argument

The NCAA would swiftly identify perceived flaws in conclusions drawn from the above hypothetical. As the NCAA and the 11 conferences will argue before Judge Wilken, grant-in-aid restrictions establish the “ground rules” for maintaining the longstanding integration of athletics and academics in college sports. In a recent filing, NCAA attorneys link restrictions on scholarships to the full integration of college athletes into the broader campus community. The NCAA stresses that these restrictions help college athletes remain part of the campus community. This is because the players can focus less on money and more on school and thereby “get more out of their college experience, leading to tangible benefits for the rest of their lives.” Likewise, NCAA attorneys warn Judge Wilken that a world where college athletes are paid “substantial sums for their performance” is one that would “inevitably reduce their incentives to achieve academically and participate in all other aspects of campus life and drive a wedge between them and other students.”

Further, the NCAA and its co-defendants insist that in the absence of scholarship restrictions, college sports would devolve into a second-rate imitator of minor league sports. That outcome, the defendants contend, would harm—not advance—competition in college sports. This is because college sports fans and consumers currently perceive college athletes as playing more for the love of the game and love of their school than for money. As the NCAA recently stressed in a court brief, “despite the abundance of professional minor leagues such as Minor League Baseball and the NBA G League filled with very skilled athletes, none has ever attracted anything close to the popularity of college sports.”

If the NCAA convinces Judge Wilken that altering the system of grant-in-aid would damage consumer interest in college sports, the NCAA will more likely convince her that scholarship restrictions promote competition more than they harm it.

Neither a jury trial nor a trial about money

Like the O’Bannon trial, the Grant-in-Aid trial will be a bench trial, meaning there will be no jury. Instead, the decision will rest entirely in the hands of Judge Wilken. The trial is scheduled to last between eight and 10 days, though not all of the trial days will occur in a row. The trial will run Sept. 4–8, Sept. 17–21 and, if necessary, Sept. 25 and Sept. 26.

Also, like O’Bannon himself, Alston and Hartman aren’t seeking money from their trial. They instead demand injunctive relief—namely, a change in NCAA rules that would permit a more competitive, market-oriented approach to athletic scholarships. The focus on injunctive relief reflects an out-of-court settlement reached last year between the NCAA, the 11 major conferences and about 40,000 persons who played or have played Division I football, men’s basketball and women’s basketball. The settlement called for those players to be paid $209 million, which reflects the players’ contention that the NCAA and its members unlawfully conspired to deny student-athletes the full cost of attending their respective schools. The settlement also extinguished Alston and Hartman’s claims for financial penalty, leaving the question of injunctive relief as undecided.

The relationship between O’Bannon v. NCAA and In Re: NCAA Grant-in-Aid Cap Antitrust Litigation v. NCAA

On the surface, the Grant-in-Aid case involves a very different set of facts than the one presented in O’Bannon, but a closer look reveals important connections between the two cases that will shape the upcoming trial.

In 2014, O’Bannon convinced Judge Wilken that the NCAA’s unauthorized use of players’ names, images and likenesses in video games and other products constituted a violation of antitrust law. Although a three-judge panel on the U.S. Court of Appeals for the Ninth Circuit would later limit the accompanying remedy, the panel nonetheless concurred with Judge Wilken’s core finding that the NCAA had violated antitrust law. The U.S. Supreme Court declining to grant certiorari left O’Bannon’s victory in place, and that victory governs the parties in the Grant-in-Aid case.

O’Bannon’s antitrust claim stemmed from how the NCAA and its nearly 1,300 members jointly used amateurism rules to restrict intercollegiate competition. Such rules denied players the right to license their identities when their names, images and likenesses were used, without their consent or compensation, in popular NCAA video games, expensive apparel and merchandise, and valuable re-broadcasts of classic games.

O’Bannon’s case essentially placed the NCAA’s system of amateurism on trial. Both directly and indirectly, the case led to important changes in the ways in which NCAA rules 1) prevent college athletes from gaining compensation for their identity rights and 2) preclude colleges and conferences from competing for athletes in a more market-based environment. For example, college athletes can now accept athletic performance bonuses related to Olympic participation, obtain unlimited snacks and meals, and finance the purchase of loss-of-value insurance through borrowing against future earnings. As a separate component of O’Bannon’s litigation, Electronic Arts agreed to a settlement whereby the video game publisher paid about $40 million to more than 29,000 current and former college players. The payments, which compensated individual players up to $7,200 and on average about $1,200, reflected EA impermissibly using college players’ images and likenesses in college football and basketball games.

The O’Bannon case also forced the NCAA into rethinking the impact of cost of living expenses on college athletes. The NCAA agreed to permit colleges to offer athletes a “full cost of attendance” stipend. The value of the stipend varies by each school and is shaped by data provided by the federal government and by interpretations of university financial aid offices. In general, the stipend reflects the amount of money needed for a student-athlete to maintain a moderate lifestyle at the school. Such lifestyle might necessitate transportation and travel expenses, as well as payments for academic-related supplies and laundry services. Previously, the NCAA forbid schools from offering the full cost of attendance, which at many colleges is worth between $3,000 to $6,000 per year. The full cost of attendance is part of the grant-in-aid, the legality of which is now at the center of the Grant-in-Aid trial.

As the Grant-in-Aid trial commences, the fact that O’Bannon proved to Judge Wilken that NCAA amateurism rules violate antitrust law is a relevant—and, for the NCAA, a worrisome—point. Given that Judge Wilken agreed with O’Bannon that amateurism rules unlawfully suppressed competition for the use of players’ names, images and likenesses, it would not be a long logical leap for Judge Wilken to similarly regard amateurism rules as unlawfully suppressing competition for athletic scholarships. In both instances, the NCAA and its membership agreed to rules that prevent competition that would likely occur but for those rules and that would advantage athletes.

On the other hand, the concept of a grant-in-aid, which is directly connected to tuition, housing and books, is a different matter from the use of players’ names, images and likenesses in video games and other products, which has little or nothing to do with the players’ college education. To that end, NCAA attorneys are attempting to use the Ninth Circuit’s decision in O’Bannon against the Grant-in-Aid plaintiffs. In a recent filing, they cite the Ninth Circuit opinion that “not paying student-athletes is precisely what makes them amateurs,” and that “offering them cash sums untethered to educational expenses” would be “a quantum leap.”

Of equal concern to attorneys for the Grant-in-Aid plaintiffs, Judge Wilken has defined the relevant market of antitrust analysis to be the market for student-athletes’ athletic services. Such a market incorporates college education and academic integrity as part of the student-athlete experience. Therefore, Judge Wilken seems unlikely to authorize a free market for athletic scholarships unless she can also be persuaded that such a market would not hinder student-athletes’ educational integrity.

Key witnesses and what they will likely testify to while under oath

A handful of former college players are expected to testify on behalf of the Grant-in-Aid plaintiffs. They include Alston, Hartman, former Wisconsin forward Nigel Hayes (who played in the NBA last year) and former Clemson defensive back Martin Jenkins. Hayes and Jenkins are also lead plaintiffs in a separate but related litigation, Jenkins v. NCAA, which has been postponed indefinitely (see below). In this trial Hayes and Jenkins will appear as witnesses for the plaintiffs.

While on the stand, these four players will detail their experiences playing college football, women’s basketball and men’s basketball, highlighting the negative impact of team requirements on their academic studies. They will also depict how the requirements of playing big-time college sports clashes with the academic expectations placed on full-time college students. Their comments will be geared to persuade Judge Wilken that the NCAA’s system of amateurism is incompatible with the values of college education and that a freer marketplace for scholarships would help, not hurt, both the education of student-athletes and their college experience.

On the opening day of trial proceedings, the Grant-in-Aid plaintiffs opened with the expert testimony of two well-known sports economists: Roger Noll of Stanford University and Daniel Rascher of the University of San Francisco. Both Noll and Rascher testified on behalf of O’Bannon four years ago. This time around they are expected to advocate for “less-restrictive” models for restrictions on athletic scholarships and depict a freer market for athletic scholarships as advancing competition in college sports.

The witness list for the NCAA and the 11 conferences includes several prominent names: Greg Sankey (Southeastern Conference commissioner), Lynn Holzman (NCAA vice president of women’s basketball and former West Coast Conference commissioner), Larry Scott (Pac-12 Conference commissioner) and Michael Aresco (American Athletic Conference commissioner). They will assert that scholarship caps and grant-in-aid rules are procompetitive in that they help to distinguish college sports as clearly different from pro sports. Such a distinction, these witnesses will claim, helps college sports retain and recruit fans, networks and sponsors.

These officials will also discourage Judge Wilken from the Grant-in-Aid’s proposed framework where conferences would gain autonomy to determine rules for scholarship compensation and benefits. They will likely tell Judge Wilken that the plaintiffs do not appreciate the costs associated with conference-level rulemaking and enforcement, as well warn her that rule changes could negatively impact conference membership.

Several expert witnesses, including economists James Heckman of the University of Chicago and Kenneth Elzinga of the University of Virginia, will also testify on behalf of the NCAA and the 11 conferences. These economists will contend that changes to scholarship rules would damage the economics of college sports. To bolster that contention, the NCAA will introduce public opinion and consumer demand data that suggest fans would quit on college sports if they regarded college athletes as de facto minor leaguers.

The media's role in this lawsuit

A number of media companies, including ESPN and the major news networks, have joined the litigation as “intervenors.” Intervenors refer to parties which possess a financial interest in a lawsuit but that are not themselves litigants. Such parties have the right to petition the court to be heard and a right to access court records, even if neither the plaintiff nor defendant welcomes intervenors’ involvement.

Media companies such as ESPN, Fox and CBS all have a stake in how legal changes could impact the economics of college sports. These media companies have entered into lucrative broadcasting contracts with the NCAA, conferences and tournaments and plan to enter into similar contracts in the future. Their rights and duties under those contracts could be altered significantly if college athletes gained the legal right to new kinds of compensation. Media companies might value these contracts at different levels if college athletes were entitled to additional compensation.

Judge Wilken’s options and their impact on college sports

If Judge Wilken rules for the players, she is unlikely to order the NCAA to drop all of its rules on athletic scholarships. She has made clear that the relevant market for athletic scholarships is one that places value on the academic requirements and intellectual expectations of college education. Instead, she would probably authorize targeted and limited changes.

Judge Wilken could direct the NCAA to empower conferences with the autonomy to determine relevant limits on scholarships. As alluded to above, a powerhouse athletic conference such as the SEC might decide to limit scholarships at an amount significantly higher the value of the grant-in-aid but still not authorize a complete free market. For instance, maybe an athletic scholarship in the SEC could be worth twice the value of a grant-in-aid. Other conferences may decline to use that autonomy for fear of the message sent by valuing athletic scholarships higher than academic scholarships. They may also worry about Title IX implications of paying football and men’s basketball players more in scholarships.

The point is, it would be up to the conferences and their members to decide. Some might not change the current scholarship rules. Others might pursue massive changes. Could that type of disruption motivate some member schools to leave one conference for another? Sure. But that’s how competition works. Besides, schools already switch conferences anyway due to other financial incentives.

Alternatively, Judge Wilken could direct the NCAA to empower colleges with the capacity to increase compensation for educational expenses and other non-sports features of scholarships for student-athletes. In such a directive, the NCAA would need to lift restraints on scholarships that are “tethered to educational expenses.”

Judge Wilken could also combine these options, or come up with others. No matter how Judge Wilken would rule for the players, keep in mind that no college would be ordered to pay their student-athletes more in scholarships. This case is not about compelling schools to do anything—it’s about giving schools the option to pay more. Many, if not most, colleges would not pay their student-athletes more than the grant-in-aid. Most schools claim to lose money on athletics (whether those schools “need to” pay their coaches as much as they do or whether they “need to” build new training facilities and state-of-the art stadiums is an important and related question). If schools determine they can’t pay more, then they won’t.

Alternatively, Judge Wilken could rule for the NCAA and the 11 conferences. She could decide that the NCAA’s system for athletic scholarships is compatible with antitrust law. Judge Wilken could reach that conclusion by determining that the current system promotes the integration of athletics and academics and makes it more possible for smaller-revenue schools to compete for top student-athletes.

Next steps after a ruling is reached

Once the trial ends later this month, Judge Wilken will take time to review the arguments and craft an opinion. In the O’Bannon case, 42 days passed between the last day of the trial and Judge Wilken’s ruling. If a similar amount of time passes here, she will likely issue her ruling on the Grant-in-Aid case sometime in November.

But it almost certainly won’t end there.

Unless the parties reach a settlement before, during or after the trial, the litigation will go on long past Judge Wilken’s ruling. Both sides have retained small armies of prominent attorneys and law firms, who have invested considerable time and energy into this litigation. The losing side will almost certainly appeal to the U.S. Court of Appeals for the Ninth Circuit, an appeal that would likely take between a year and a year-and-a-half to play out. The losing side in the appeal could then petition the U.S. Supreme Court, which, depending on whether the Supreme Court accepts or rejects the petition, could take between one and two years.

Adding to the complexity, Judge Wilken has stayed the Jenkins case, which raises similar facts and largely the same set of legal issues as the Grant-in-Aid case. While Jenkins is expected to testify in the Grant-in-Aid trial, and while (for the most part) the same set of attorneys represent both cases’ plaintiffs, a trial for Jenkins could occur at a later date. Yet after Judge Wilken rules in the Grant-in-Aid case and presumably after relevant appeals have been heard, Judge Wilken might determine that the Jenkins case is too duplicative of the Grant-in-Aid case to warrant a trial of its own. She could reason that a trial for Jenkins would be barred by the concept of “res judicata,” which is Latin for “a thing decided.” Res judicata instructs that once a claim has been resolved, it typically can’t be re-litigated.

Should Wilken rule for the NCAA in the Grant-in-Aid case, it’s possible that attorneys for Jenkins could attempt to transfer his case back to the court where it began (the U.S. District Court for the District of New Jersey) before Judge Wilken rules on Jenkins. However, the NCAA would oppose such a transfer on grounds that Jenkins would be attempting to opportunistically engage in forum shopping and that it would be unjust to disaggregate his case from the Grant-in-Aid. Jenkins’s attorneys would disagree and insist that the case would be most appropriately heard in its original forum. If the Jenkins case were transferred back to New Jersey and if Jenkins then wins a trial and also wins on appeal before the U.S. Court of Appeals for the Third Circuit, there would be a circuit split between the Ninth Circuit and the Third Circuit on issues raised in the Grant-in-Aid and Jenkins decisions. One federal jurisdiction would have ruled that the NCAA can lawfully cap scholarships a certain way and the other would have ruled something else. At that point, the U.S. Supreme Court might be willing to resolve the circuit split, given its impact on college sports and education.

Needless to say, it would be complicated.

Michael McCann is SI’s legal analyst. He is also Associate Dean of the University of New Hampshire School of Law and editor and co-author of The Oxford Handbook of American Sports Law and Court Justice: The Inside Story of My Battle Against the NCAA.

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