Issues to Watch

The Ed O’Bannon Case: How It Has Affected the NCAA and the Future Prospects of Paying Student-Athletes


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Samuel Draper*

INTRODUCTION

Ed O’Bannon led the UCLA Bruins basketball team to a 31-2 regular season record and a national championship in 1995. Matt Simenstad, The Ed O’Bannon Class Action Lawsuit–A New Paradigm For College Sports, 45 Colo. Law. 31, 31 (2016). He was also named the tournament’s Most Outstanding Player and received the John R. Wooden Award for being the best college basketball player in the country. Id. It should be noted that O’Bannon was receiving no compensation, other than his athletic scholarship, while playing for UCLA. O’Bannon then went on to have an unsuccessful professional career and is now a car salesman in Las Vegas. Id. Meanwhile, the NCAA continued to benefit from his time at UCLA, including re-broadcasting his games and licensing the right to video game companies to feature his 1995 Bruins team that won the national championship. Id.

This is the basis for the claim that O’Bannon first brought against the NCAA in 2009. Joe Nocera, O’Bannon Ruling Stands, but N.C.A.A.’s Status Quo May Yet Collapse, N.Y. Times (Oct. 3, 2016), http://www.nytimes.com/2016/10/04/sports/ncaa-obannon-case-ruling-supreme-court.html?_r=0. The Supreme Court decided on October 4, 2016, to not hear the NCAA’s appeal of the case, which leaves the NCAA vulnerable to future litigation and keeps alive the possibility that student athletes will be paid in the future. Lester Munson, High Court Passes on NCAA Case, but Players Still Could Get Paid, ESPN (Oct. 3, 2016), http://www.espn.com/espn/otl/story/_/id/17704400/us-supreme-court-decision.

THE ED O’BANNON CASE

Ed O’Bannon originally brought his case in 2009 in the United States District Court for the Northern District of California. He was challenging the rules that prohibit student athletes from receiving a share of the revenue that the NCAA receives from the sale of licenses to use student athletes’ names, images, and likenesses. O’Bannon v. NCAA, 7 F. Supp. 3d 955 (N.D. Cal. 2014). The rules were being challenged for violating the Sherman Antitrust Act. Id. at *1. Specifically, § 1 of the Act makes it illegal to form any “contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States.” 15 U.S.C. § 1 (2012). In order to win, O’Bannon had to show: “(1) that there was a contract, combination, or conspiracy; (2) that the agreement unreasonably restrained trade under either a per se rule of illegality or a rule of reason analysis; and (3) that the restraint affected interstate commerce.” O’Bannon, 7 F. Supp. 3d at 984–85 (citing Tanaka v. Univ. of S. Cal., 252 F.3d 1059, 1062 (9th Cir. 2001)).

O’Bannon argued that the NCAA’s rules were an unreasonable restraint of trade. Id. at 985. The NCAA conceded that there was an agreement between the Division I member schools and that these rules affected interstate commerce. Id. It denied, however, that the rules restrained trade unreasonably. Id. O’Bannon identified two markets in which the NCAA caused anticompetitive effects: (1) the “college education market,” where schools compete to recruit players to play for their teams; and (2) the “group licensing market,” in which companies compete to use the likenesses of college athletes. Id. at 986.

The NCAA gave a multitude of reasons for why these restraints were not unreasonable. First, they claimed that the restrictions on FBS football and Division I basketball player compensation were necessary to preserve the amateurism of college sports and distinguish them from professional sports. Id. at 999. The court did not see this as a justification for the “sweeping prohibition on FBS football and Division I basketball players receiving any compensation,” but did admit that it could justify limited restrictions on compensation. Id. Next, the NCAA claimed that the rules were needed to maintain the current level of competitive balance in college sports that make the sports so popular. Id. at 1001. The court did not find this compelling and failed to see the connection between the restrictions and competitive balance. The court pointed to studies that showed the restrictions had no effect on competitive balance. Id.

The NCAA then said that the restrictions on compensation helped to integrate the student athletes into their schools’ academic communities and that this improved the quality of education that student athletes receive. Id. at 1002. The court acknowledged this benefit as important but did not see how the restriction on compensation would affect it. Id. at 1003. Finally, the NCAA argued that the restraints increase the output of its product, namely that it increased the number of opportunities for schools and student athletes to participate in Division I sports. Id. The court stated that the NCAA has not presented “sufficient evidence” to show that schools choose to compete in Division I athletics because of their commitment to amateurism. Id. at 1004.

Given these factors, the district court ruled that the restraints violated the Sherman Act. Id. at 1007. Furthermore, the court enjoined the NCAA from enforcing rules that would prohibit its member schools from offering their FBS football or Division I basketball recruits a share of the revenue that is generated from their likeness. Id. at 1008. It did not prevent the NCAA from placing a cap on the compensation. It also prevented the NCAA from prohibiting schools to create a trust of licensing revenue for FBS football and Division I basketball recruits, payable upon leaving school or expired eligibility. Id.

The NCAA appealed this decision to a three-judge panel of the United States Court of Appeals for the Ninth Circuit, which, on September 30, 2015, upheld Judge Wilken’s decision by declaring that the NCAA’s ban on student athlete compensation was a violation of federal antitrust law. Simenstad, supra, at 31. In doing so, the panel voided the injunction allowing student athletes to receive cash compensation. Id.

POTENTIAL RAMIFICATIONS

The Supreme Court’s refusal to hear this case on appeal leaves the door open for student athletes to be paid in the future. It leaves the possibility for more claims to be brought against the NCAA as it has been acknowledged that the NCAA rules are a violation of federal antitrust law. The courts have failed to identify a “less restrictive means” to preserve the amateurism in college sports that it acknowledges is important. See O’Bannon, 7 F. Supp. 3d at 963. Until the Supreme Court definitively rules on this issue, the NCAA will continue to be forced into litigation over whether its restrictions on compensation are absolutely necessary to preserve the interests cited in O’Bannon.

Lester Munson of ESPN points to a case that is pending in a federal court in Oakland as the next “big case” for the NCAA. Munson, supra. It is known as the “Kessler Case” and seeks an open market for college athletes where schools would compete for athletes’ services. Id. While the O’Bannon decision will not make it easy for this case to succeed, it does not guarantee that it will fail. The NCAA has long been taking advantage of its student athletes, and as it continues to make more money off of these student athletes, the justification that the NCAA should pay its student athletes strengthens.

*Samuel Draper is a second-year law student at the University of Baltimore School of Law, where he serves as a staff editor for the University of Baltimore Law Review. Sam was recently named as a Production Editor for the University of Baltimore Law Review Volume 47. In addition to serving as Law Scholar for the L.L.M. Program, he competed on the school’s Jessup International Law Moot Court Team, and is a Research Assistant for Professor Nienke Grossman. Currently, Sam interns with the Law Offices of Eldridge and Nachtman.

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