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  • U.S. District Judge Claudia Wilken’s ruling in the grant-in-aid cap antitrust litigation has upended the NCAA’s long-standing model of limiting athletic scholarships. Legal analyst Michael McCann breaks down what that will mean for the schools, the conferences and the NCAA.
By Michael McCann
March 08, 2019

U.S. District Judge Claudia Wilken’s ruling in the grant-in-aid cap antitrust litigation has upended the NCAA’s long-standing model of limiting athletic scholarships to tuition, fees, room, board, course-related books and other expenses up to the value of the full cost of attendance. The NCAA has been ordered to change its rules by February 2020, giving schools the option to offer more than a full ride—at least so long as any surplus amount reflects "non-cash education-related benefits and academic rewards." Conferences, per Judge Wilken’s order, will also be able to develop policies to regulate scholarships in ways that were previously under the NCAA’s power.

This article focuses on the key implications of that ruling for colleges, conferences and the NCAA in their treatment of elite athletes.

Limits to the players’ victory and the uncertain applications of the ruling

The players and their attorneys realized early on that Judge Wilken would not support a free market for athletic scholarships that might resemble free agency in professional sports. Judge Wilken was bound by the Ninth Circuit’s 2015 ruling in Ed O’Bannon v. NCAA. While the Ninth Circuit upheld O’Bannon’s victory, which Judge Wilken had authored, the appellate court modified the accompanying remedy and stressed that college athletes are not professional athletes.

In his O’Bannon opinion, Ninth Circuit Judge Jay Bybee rejected Judge Wilken’s remedy that colleges were obligated to pay men’s basketball and football players up to $5,000 per year while they are in school for the use of their names, images and likenesses. Payment under this plan would occur after the players graduate. Judge Bybee, however, concluded that Judge Wilken “clearly erred in finding it a viable alternative to allow students to receive [name, image and likeness] cash payments untethered to their education expenses.” He argued that cash payments to college athletes, at least in the manner contemplated by Judge Wilken, would be “untethered to educational expenses.” These payments, Judge Bybee reasoned, would constitute “a quantum leap” for amateurism.

In her grant-in-aid cap ruling, Judge Wilken adhered to Judge Bybee’s logic in ruling that permissible scholarship caps must be related to education. Still, she stressed that the NCAA and its members (as opposed to colleges or conferences acting without anti-competitive coordination) had failed to prove that capping athletic scholarships to a fixed amount prevents the so-called “quantum leap” Judge Bybee feared. Instead, Judge Wilken reasoned that no such leap would occur so long as scholarships and related payments to college athletes are tethered to educational expenses.

That logic may sound straightforward, but it only raises a more instrumental question that university presidents and provosts, athletic department directors and athletic conference commissioners must soon confront: Which types of payments ought to be considered related to educational expenses?

For example, would payments to a college athlete for obtaining a high grade point average count? How about rewarding a college athlete who pursues a major from a comparatively difficult academic course of study, such as math, science or economics? Or perhaps the pursuit of a double major would, on its own, warrant payment for educational expenses? Judge Wilken’s injunction appears to answer these questions with “no” since she permits the NCAA to deny payments for “academic or graduation awards”—this phrase likely could be interpreted to apply to payment for high grades or a difficult course of study. Alternatively, would payments related to increased travel for college athletes justify higher scholarships? How about higher scholarships that include post-college annuity funds, which players could draw from in the years and decades after college? Might a pooled account for long-term insurance and disability from player injuries work within Judge Wilken’s ruling?

This list of questions could go on and on. There are numerous methods by which scholarship values can be increased. Each, on its own, could be construed as related to education. Whether each should be construed as related to education is bound to spark debate.

In their closing brief, NCAA attorneys warned Judge Wilken that linking permissible payments to the imprecise term “educational expenses” could open a Pandora’s Box for college corruption. Some payments might conflict with not only amateurism but also basic notions of college education. The NCAA’s five main attorneys—Jeffrey Mishkin and Karen Hoffman Lent from Skadden, Arps, Slate, Meagher & Flom and Beth Wilkinson, Brant Bishop and James Rosenthal from Wilkinson Walsh + Eskovitz—highlighted that “educational expenses” could be interpreted to “allow pay for anything ostensibly ‘related’ to education, including, for example, attending class, doing homework, completing a course, maintaining a minimum grade point average, or graduating.” The NCAA has stressed that if college athletes are paid to do homework and other academic activities, college sports would become “pay-for-play”—after all, college athletes are already obligated to meet academic requirements as a condition of their scholarship and enrollment.

The ambiguity of the word “tethered” in this context could trigger additional litigation. Players, schools and the NCAA are bound to disagree about the meaning of the term as it applies to specific types of payments. If the NCAA overplays its hand in trying to interpret such language, a new group of lawsuits could be filed.

Mindful of this dynamic, Judge Wilken’s injunction lists a series of “education-related” items that the NCAA is now permanently restrained from capping. They include education benefits related to “computers, science equipment, musical instruments and other tangible items not included in the cost of attendance calculation but nonetheless related to the pursuit of academic studies.” This list can also be amended by a court-approved motion of the NCAA or the players.

In addition, the NCAA cannot limit “post-eligibility scholarships to complete undergraduate or graduate degrees at any school; scholarships to attend vocational school; tutoring; expenses related to studying abroad that are not included in the cost of attendance calculation; and paid post-eligibility internships.” However, the NCAA can restrict academic or graduation awards and related incentives that are paid in cash or through a cash-equivalent (though as noted above, this limitation invites different interpretations). Judge Wilken has also permitted the NCAA to develop its own definition of “related to education” but it must comply with her antitrust analysis.

While the language of Judge Wilken’s injunction limits the universe of additional benefits that schools can fund, defining these terms in practice could lead to debate.

Conferences will be able to cap scholarships—but they may have competition to keep in mind

As noted above, the players and their attorneys were unable to convince Judge Wilken that individual schools should have free rein in determining appropriate scholarship values. Instead, the values must be connected to education.

Judge Wilken nonetheless agreed with the plaintiffs’ proposed remedy that individual conferences ought to be able to develop their own rules for capping scholarship values and accompanying benefits (so long as those rules comply with the limitations that benefits be "related to education"). The plaintiffs argued that individual conferences deciding the maximum value of an athletic scholarship would act more competitively than the NCAA deciding that question.

The related logic is that a conference that sees substantial economic value in sports, such as the Southeastern Conference, might reason that its top student-athletes should be eligible for scholarship values that far exceed the current NCAA cap. Those players play in stadiums that in some cases seat over 100,000 fans and appear on national television as part of lucrative broadcast contracts.

Smaller conferences might view the calculus in a different light and continue to employ the grant-in-aid cap. These leagues might reason that their members feature players whose college experience is not entirely dissimilar from that of their classmates, playing in smaller stadiums out of the national spotlight.

The Power 5 might also be guided by the extent to which new professional football leagues, such as the XFL or the Pacific Pro Football League (PPFL), compete with colleges for players. While the Alliance of American Football (AAF) has adopted the NFL's eligibility rule, which requires that players be at least three years out of high school, the XFL and PPFL intend to allow younger players to join.

Don Yee, who is best known as Tom Brady’s agent but who is also the chief founder of the PPFL, recently attracted headlines when he remarked that his league hopes to sign away star quarterback Trevor Lawrence from Clemson. Lawrence isn’t eligible for the NFL until the 2021 draft, but he could develop his game while being paid in the PPFL. It’s unclear how much the PPFL would pay Lawrence, who has not expressed any interest in leaving Clemson for a professional opportunity, but it may be more meaningful for Lawrence that he could sign endorsement deals while playing in the PPFL. If the Power 5 leagues find their members competing with pro leagues for star freshmen and sophomores, it stands to reason these conferences would adapt and offer more lucrative scholarships.

The NCAA could face competition even within college sports. The Historical Basketball League is set to start next year and will feature college teams. Players on those teams will be able to earn between $50,000 and $150,000 “based on athletic talent and marketability, in addition to receiving a guaranteed scholarship and having the ability to sign with an agent to fully commercialize their name, image, and likeness, all without jeopardizing their eligibility with the HBL.”

For the NCAA, the empowerment of conferences will mean less control over amateurism from on high. Conferences will become more autonomous and more adaptive to their individual circumstances. Whether individual members of conferences agree with proposed grant-in-aid changes remains to be seen. It’s conceivable that Judge Wilken’s ruling could lead to conference realignment, particularly if a conference adopts scholarship rules that are opposed by some of its members. Conferences could also evolve or transform into different creatures when it comes to methods of investigations and enforcement of rules. College sports could take on unique forms depending on the conference in question.

There are still other possible consequences that could reshape the landscape of conferences, including NCAA division reform. In an American Bar Association article last summer, Amy Perko, the chief executive officer of the Knight Commission on Intercollegiate Athletics, envisioned the possibility of removing elite college football programs from the current Division I structure. These programs generate a disproportionate amount of revenue in college sports, and players in them experience college quite differently from other college athletes and students. Perhaps D-I encompasses too many college programs and sports, and an NCAA “Football Division” or something along those lines would better reflect reality.

Other legal changes related to college sports could also be on the way. As I detail in an associated story, applications of Title IX, tax law, immigration law, sports betting law and other federal and state laws will be impacted by Judge Wilken’s ruling in the grant-in-aid cap litigation and its appeal.

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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