Imagine if in Monday night's Villanova-Michigan NCAA men's basketball title game, the players’ athletic scholarships were limited not by NCAA rules but by what the market dictates.
Would Villanova forward Mikal Bridges—a projected lottery pick in the 2018 NBA Draft—have a scholarship worth more than reimbursement for the cost of his tuition, room and course-related books? Would the scholarship also reflect the considerable financial value Bridges has brought to Villanova in terms of encouraging fans to pay for tickets to watch him play? Likewise, would it contemplate the increased number of television viewers Villanova games attract because of Bridges’ talents? And would it incorporate the marketing impact a player like Bridges has on Villanova’s recruitment of high school students for admissions? How about the value to the university’s development office when, in soliciting alumni for financial contributions, it can highlight the spectacular play of Bridges and his teammates? Lastly, would the competing colleges that recruited Bridges a few years ago have bid against one another for his services by offering him more money in a scholarship, just like they bid for the services of coaches and athletic staff by offering them more money in salary?
For now, these are merely questions for our imaginations. But within the next few years, they could become real-world issues for players, schools and the many parties impacted by college sports.
That is because U.S. District Judge Claudia Wilken has ruled that the NCAA will stand trial in her Oakland courtroom this December for its system of capping athletic scholarships. This system is part of the NCAA’s larger network of rules found under the umbrella of “amateurism.” Amateurism refers to NCAA rules that attempt to distinguish college athletes from professional athletes. In Martin Jenkins v. NCAA (a.k.a. the related case In re: NCAA Athletic Grant-in-Aid Cap Antitrust Litigation), the NCAA will need to persuade Judge Wilken that athletic scholarship caps promote competition more than they harm it in the market for student-athletes’ athletic services.
To be clear, the Jenkins case is a long way from the finish line. Assuming the December trial takes place, Judge Wilken will likely take several months following it to render a decision. Her ruling would then face several rounds of appeals that could take several years to play out. Nonetheless, in the not too-distant future, the Jenkins case could reshape college sports as we know it.
Amateurism once again stands trial in Judge Wilken’s courtroom
Four years ago, the NCAA’s system of amateurism was brought to trial in Ed O’Bannon’s class action lawsuit. The case centered on whether Division I men’s basketball and football players ought to be compensated for the commercial use of their names, images and likenesses.
O’Bannon defeated the NCAA. Judge Wilken, and later three judges on the U.S. Court of Appeals for the Ninth Circuit, concluded that the NCAA and its nearly 1,300 members violated antitrust law by unlawfully conspiring to prevent players from negotiating the monetary value of their names, images and likenesses.
It was a landmark decision. For the first time, NCAA amateurism rules were found to have violated federal antitrust laws. It is a decision that will remain a problem for the NCAA. Indeed, other players who litigate against the NCAA —including Jenkins, who played defensive back at Clemson from 2010 to 2014, and his co-plaintiff, Sacramento Kings forward Nigel Hayes—can cite the O’Bannon decision as favorable precedent. While the O’Bannon precedent is influential in most of the country, it is fully binding in federal districts governed by the Ninth Circuit (which includes federal district courts in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington).
O’Bannon’s case pressured the NCAA into allowing schools to offer the “full cost of attendance,” which is an annual stipend worth several thousand dollars. While the full cost of attendance doesn’t make student athletes rich, it certainly helps them out. The value of the stipend varies by school and is based on, among other things, cost of living and travel expenses for students. The full cost of attendance is paid in addition to a full athletic scholarship, which is central to the “grant-in-aid.” The grant-in-aid lies at the heart of the Jenkins case. Under NCAA rules, the grant-in-aid is limited to tuition, fees, room, board, course-related books and other expenses up to the value of the full cost of attendance.
O’Bannon’s case also played an influential role in motivating the NCAA to relax other aspects of amateurism. To that end, the NCAA has in recent years permitted student athletes to receive unlimited snacks and meals; borrow against future earnings to purchase loss-of-value insurance and receive athletic performance bonuses from international organizations related to Olympic participation. O’Bannon’s case also led to a settlement with Electronic Arts, the publisher of college basketball and football video games that used real players’ images and likenesses without those players’ permission or pay.
From O’Bannon to Jenkins
If the NCAA thought its legal troubles with amateurism were over with the O’Bannon case, they were wrong. The Jenkins case and its associated litigations, including Shawne Alston v. NCAA, utilize the O’Bannon ruling to advance a related, but distinct antitrust theory: the NCAA and its members have unlawfully conspired to suppress the monetary value of athletic scholarships. As noted above, NCAA rules limit the value of athletic scholarships to reimbursement for tuition, room, board, fees and course-related books.
On a practical level, the Jenkins case asks what would be the value of an athletic scholarship if colleges could increase that value as a recruiting inducement? If the value would exceed the grant-in-aid, then NCAA rules have denied the player the marginal value between the grant-in-aid and the amount of money the player would have received. On behalf of Jenkins, attorneys Jeffrey Kessler and David Greenspan contend that such a practice is plainly anti-competitive and inconsistent with basic tenets of American capitalism.
Jenkins’s attorneys also insist that NCAA’s scholarship rules are contradicted by how colleges otherwise recruit top athletes. To that end, colleges already compete for star recruits in an assortment of ways. They build expensive stadia and training facilities to create the image of a professional team. They also pay big-name coaches millions of dollars of year, at least in part based on those coaches’ ability to recruit high school students. Further, schools hire various staff in hopes that it will give their programs a competitive advantage. In a sense, colleges spend a considerable amount of money on what is around the athlete. To some degree they do so because NCAA rules deny those colleges an opportunity to spend money directly on the athletes.
The Jenkins case is not about past money; It is about changing rules going forward
As explained in Sports Illustrated last year, the NCAA and 11 major athletic conferences reached an out-of-court settlement that resolves claims for past money owed to athletes over athletic scholarships. The settlement compels the NCAA to pay about $209 million to a class of approximately 40,000 persons who played or have played Division 1 football, men’s basketball and women’s basketball.
This December, Judge Wilkins will focus on the claims for “injunctive relief”—that is, claims that would force the NCAA to change rules going forward. While her views will be influenced by courtroom testimony and accompanying briefs, Judge Wilkins at this point appears receptive to the players’ legal arguments that amateurism rules ought to change. Last week, the judge denied the NCAA’s motion for a summary judgment. Had she granted it, the case would have essentially ended.
Judge Wilken’s decision to deny the NCAA summary judgment does not mean the NCAA will lose the trial. Judge Wilken would have only granted summary judgment if the NCAA had satisfied a high threshold. The NCAA needed to convince the judge that no genuine and disputed issues of material fact remain, and when viewing the evidence most favorably to the players, that the NCAA would be clearly entitled to prevail as a matter of law. This was a lofty goal for the NCAA to reach and a higher one than will be needed in a trial.
Still, in denying the NCAA summary judgment in the case, Judge Wilken noted potential flaws in the NCAA’s arguments. For instance, the NCAA cites a survey of consumer preferences. From the NCAA’s vantage point, the survey indicates that amateurism plays a meaningful role in drawing to college football and basketball. Judge Wilken questioned this conclusion, noting that the survey “reflects consumers' stated preferences rather than how consumers would actually behave if the NCAA’s restrictions on student-athlete compensation were modified or lifted.”
Judge Wilken also dismissed some of the NCAA’s arguments as duplicative to those considered—and rejected—in the O’Bannon case. For instance, the judge granted summary judgment against the NCAA on its argument that scholarship rules “improve[e] the quality of the collegiate experience for student-athletes, other students, and alumni by maintaining the unique heritage and traditions of college athletics and preserving amateurism as a foundational principle, thereby distinguishing amateur college athletics from professional sports, allowing the former to exist as a distinct form of athletic rivalry and as an essential component of a comprehensive college education.” Judge Wilken stressed that such purported logic is more of a rehash of other NCAA arguments than a new theory.
If Jenkins wins, expect a less restricted market but not a free one
At the start of this article you were asked to consider what a free market would lead to if top recruits were the beneficiaries of bidding wars for their services. While Jenkins and many other players would embrace such a world, it is not one that is likely to emerge. This is because Judge Wilken has defined the relevant antitrust “market” not as the business of college athletics. Instead, she classifies it as the market for student-athletes’ athletic services, alternatively described as the market for a college education combined with athletics. In other words, college education and academic integrity still matter in assessing how colleges could compete with one another in offering athletic scholarships.
With that in mind, the players suggest to Judge Wilken a couple of alternative ways athletic scholarships could be regulated. First, they propose a model that empowers Division I conferences to make choices that reflect their unique qualities. In this decentralized model, conferences, rather than the NCAA, would determine how colleges could compete with another in offering athletic scholarships.
The decentralized model is not without logic. Conferences vary in terms of size and location. Each has different values and prioritizing in balancing academics and athletics. The powerhouse Southeastern Conference, for example, might focus on the fact their member schools generate so much revenue through college sports. With that in mind, the SEC might allow member institutions the chance to offer athletic scholarships that are twice or three times the size of academic scholarships. In contrast, the less economically prosperous Colonial Athletic Conference might continue to limit athletic scholarships to the value of academic scholarships. Keep in mind, Jenkins winning would not force any school to pay more in an athletic scholarship—a victory would only provide eligible schools an opportunity to pay more.
As a second alternative, Jenkins proposes that Judge Wilken simply abolish NCAA restraints on payments or non-cash benefits that are “tethered to educational expenses” or “incidental to athletic participation.” This viewpoint stresses that it would not betray NCAA amateurism if student athletes were compensated more for educational expenses or other aspects of their college experience that are not directly about athletics.
The December trial may never happen
There is a long time to go before December. It is quite possible that an out-of-court settlement is reached before the winter. The NCAA could reason that if they go to trial and lose, Judge Wilken will craft a new system for the NCAA. She did so in the O’Bannon case, stipulating that colleges would be authorized to pay athletes up to $5,000 per year for use of their names, images and likenesses (this remedy was vacated on appeal).
While the NCAA could appeal Judge Wilken’s ruling to the U.S. Court of Appeals for the Ninth Circuit and potentially to the U.S. Supreme Court, the NCAA might prefer an easier and more certain approach. For instance, it could craft new rules on athletic scholarships. Consider an athletic scholarships system where conferences are, within boundaries, empowered to determine scholarship rules. Provided there are NCAA-approved limitations and opportunities for NCAA enforcement of those limitations, maybe such a system would be acceptable to the NCAA.
The NCAA may also view the core arguments in Jenkins as limited to a relatively small group of college athletes. As mentioned above, Jenkins winning would not force any school to offer more than the grant-in-aid—it would only empower the school to offer more. It stands to reason that many, and perhaps most colleges, might continue to limit athletic scholarships to amounts paid for academic scholarships. Even those that are wiling to go higher than the grant-in-aid might restrict such offers to truly superstar players.
The NCAA has also exhibited a willingness to settle in this litigation. It did so in regards to monetary damages. It might not be a long conceptual leap to do so in regards to injunctive relief.
Lastly, the NCAA might conclude that a trial would bring about more adverse publicity. NCAA president Mark Emmert, along with other NCAA officials, would likely be called to testify. While federal trials are not televised, there would be reporting of Emmert’s testimony and it would likely raise themes that many college sports fans oppose. It could also renew periodic calls in Congress and state houses for legislation that would force the NCAA to change.
Of course, predicting how the NCAA will act is hardly a science. If no deal is reached before December, get ready for NCAA Amateurism on Trial, Round 2.
Michael McCann, is SI's legal analyst. He is also the Associate Dean for Academic Affairs at the University of New Hampshire School of Law and co-author with Ed O'Bannon of the new book Court Justice: The Inside Story of My Battle Against the NCAA.