By Jeff Birren
In September 2016, Lamar Dawson filed a class action against the NCAA and Pacific 12 Conference in the United States District Court for the Northern District of California, home to the Pacific 12 headquarters. The Complaint listed ten causes of action, all based on a failure by the NCAA and Pacific 12 to pay the athletes minimum wage and overtime. Dawson did not name any individual schools.
Dawson was a highly honored high school player at Boyle County High School in Junction City, Kentucky. Among his many honors were being named a Parade Magazine and U.S. Army All-American following his 2010 senior season. That year he played linebacker, running back, and tight end while leading Boyle County to the 2010 Kentucky 4A championship. Dawson went on to USC and started four games as a 2011 freshman.
In 2012 he started at middle linebacker and played in all but one game. In 2013 he again began the season as a starter, but after seven games he injured his knee and missed the rest of that year and the entire 2014 season. As a senior in 2015 he appeared in eight games and had 31 tackles. He participated in USC’s March 2016 Pro Day but was not drafted by an NFL team.
By September 2016 his undoubted dreams of pro football glory were all but over so Dawson filed his lawsuit. Perhaps as a nod to his playing days, he used a veritable team of lawyers. First on the list was Wolf, Haddenstein, Adler & Freeman’s San Diego office, with Betsy Manifold, Rachelle R. Rickert, Marisa C. Livesy and Brittany N. DeJong, Wolf Haddenstein’s New York office, with Jeffrey G. Smith and Mark C. Rifkin, John Kelson from Oakland, California and Jerry Cimmet from San Mateo, California.
The Complaint was 45 pages. The alleged violations began at the bottom of page 27. The first cause of action (“CoA”) was filed as a class action for violation of minimum wage based on the Fair Labor Standards Act (“FSLA”) (29 U.S.C. 218(a)). The second CoA was for failure to pay overtime, filed on behalf of the California class. The third CoA was for failure to pay overtime on behalf of the FSLA class. The fourth CoA was for unlawful failure to pay overtime on behalf of the FSLA class. The fifth CoA was for unlawful failure to provide itemized wage statements on behalf of the California class. The sixth CoA, also on behalf of the California class, was for failure to pay wages upon termination. The seventh CoA was for unlawful underpayment of wages on behalf of the California class. The eighth CoA was for untimely payment of wages on behalf of the California class. The ninth CoA was as an action under California’s Private Attorneys General Act on behalf of the California class. The tenth and final CoA was for unlawful failure to pay overtime on behalf of the FSLA class. In sum, all ten causes of action required a finding that the plaintiff class were all employees of the NCAA and the Pacific 12 Conference.
The NCAA hired Constangy, Brooks, Smith and Prophete from Los Angeles to defend the case, and the Pacific 12 Conference hired the Los Angeles office of Seyfarth, Shaw. After the initial and typical filings, the defendants filed a Motion to Dismiss on November 22, 2016. The plaintiffs filed an opposition, and another Motion to Dismiss was filed on January 27, 2017. The plaintiffs filed an Opposition on February 27, 2017 and the Reply was filed on March 27, 2017. That Reply included exhibits and those were not considered by the District Court but were undoubtedly considered in the billing for the Reply Brief. In March, Dawson was the sole initial objector to the Shawne Alston v. NCAA proposed settlement, though the objections were swept aside at the hearing (see “Shawne Alston v. NCAA: Let the Games Begin” Sports Litigation Alert, Volume 14, Issue 5, March 17, 2017.)
The Court’s Docket states that the hearing on the Motion to Dismiss was Thursday April 20, 2017 though the Motion had been scheduled to be heard on April 21. The Motion was based on the simple notion that “student-athletes” are not employees under FLSA, nor are they such under California law. Moreover, there was a recent decision by the Seventh Circuit, Berger v. NCAA that reached that conclusion under federal law (843 F. 3d 285, December 5, 2016). Although the Seventh Circuit opinion was not binding on the Dawson court, it was a telling blow. In Berger the District Court granted the NCAA’s Motion to Dismiss on 2-16-16 (United States District Court for the Southern District of Indian, Indianapolis Division, Case 1:14-cv-01710-WTL-MJD Document 238). The Seventh Circuit stated its holding thus: “We agree with the district court and hold that student athletes are not employees and are not covered by the FLSA” (Id. at 288).
United States District Court Judge Richard Seeborg must have taken the bench knowing what he was going to do since he issued his “Order Granting Motion To Dismiss” on Tuesday, April 25, 2017 (“Order”). He began his Order by noting that although the Berger decision “is not binding and the parties dispute its applicability, its reasoning is persuasive and defendants’ motion will be granted” (Dawson Order Granting Motion to Dismiss at 1).
Judge Seeborg noted that the parties agreed that the initial Article III “standing inquiry converges with the substantive FLSA employer inquiry” (Id. at 4.) Thus the question turned to whether the NCAA and the Pacific 12 Conference were the employers. The Court noted that the Ninth Circuit test enunciated in Bonnette v. Cal. Health & Welfare Agency did not provide the entire answer (704 F. 2d 1465 (2983)). Rather, the focus had to be on the nature of the relationship (Id.). At this point the Court turned to Berger.
Dawson’s counsel tried to distinguish Berger “because it involved track and field athletes at the University of Pennsylvania, while this case involves Division 1 football players who earn ‘massive revenues’ for their schools”, yet this was done with supporting authority (Id. at 6). Dawson also pointed to a recent opinion from an NRLB Regional Director in a case involving Northwestern University. However, the Board did not accept jurisdiction for review and thus that tome “is not entitled to deference” (Id.).
Conversely, not only did the recent Berger opinion support the defendants’ motion, the Berger court noted that a “majority of courts have concluded—albeit in different contexts—that student athletes are not employees, Berger 843 F. 3d at 291 (citing cases)” (Id. at 7). Furthermore, the United States Department of Labor stated in its “Field Operations Handbook” that “students who participate in activities generally recognized as extracurricular are generally not considered to be employees within the meaning of the (FSLA)” and “intercollegiate athletics” was “not the kind of work contemplated by (the FSLA) and do not result in an employer-employee relationship between the student and the school” (Id.).
Dawson tried to distinguish that by claiming that major athletics generate large revenues for the schools. However, the Court noted that the Labor Department’s Field Operations Handbook did not distinguish between programs that generate large revenues for schools and those that did not (Id. at 8). Moreover, the Court went to state: “the premise that revenue generation is determinative of employment status is not supported by the case law” (Id.). In Townsend v. State of California, a San Jose State player struck UCLA basketball player Raymond Townsend with his fists during a game (191 Cal. App. 3d 1530 (1987)). Townsend sued the player and San Jose State. He argued that since basketball made money for the school, the athlete-defendant was the employee of the school. The Court of Appeal rejected this claim: “[w]hether on scholarship or not, the athlete is not ‘hired’ by the school to participate in interscholastic competition” (Id. at 1537).
At the hearing Dawson pointed to a snippet in the Ninth Circuit’s opinion in O’Bannon v. NCAA where that court referred to the relationship between the student athlete and the college or university as “labor for in-kind compensation” (Id., citing O’Bannon v. NCAA, 802 F.3d. 1049, 1066 (2015)). Yet as Judge Seeborg noted, the O’Bannon decision “says nothing about the existence of an employment relationship between student athletes and the NCAA…The Ninth circuit reasoned ‘that not paying student-athletes is precisely what makes them amateurs’” (Id. (sic) at 1076 (emphasis in the original—i.e. the O’Bannon opinion)). It concluded that the “difference between offering student-athletes education-related compensation and offering them cash sums untethered to educational expenses is not minor; it is a quantum leap” (Id. at 1078). Ultimately, the plaintiff is looking for O’Bannon to carry a weight it cannot shoulder (Id. at 9).
The Court then turned to the California-based claims. The defendants’ argument began with an analysis of California Labor Code § 3353(k). By way of background, in 1960 the plane carrying the California State San Luis Obispo went down, and most of the players and coaches were killed. The widow of Gary Van Horn filed a claim for workers compensation benefits, and won (Van Horn v. Industrial Acc. Com. 219 Cal. App. 2d 457 (1963)). Thereafter, the California legislature amended Section 3353(k) to exclude any person “participating in sports or athletics who receives no compensation for such participation other than the use of athletic equipment, uniforms, transportation, travel, medals, lodging, or other expenses incidental thereto” (Graczyk v. Workers’ Compensation Appeals Board, California State University 184 al. App. 3d 997 (1986)). When that did not cut off all such cases, including Graczyk’s, the legislature again amended Section 3353(k), this time stating that “Employee” excludes any “student participating as an athlete in amateur sporting events sponsored by any public agency, public or private nonprofit college, university or school, who receives no remuneration for such participation other than…scholarships, grants-in-aid or other expenses incidental thereto” and the legislature declared this act an “urgency statute” (Id. at 1005-1006). The Dawson decision referenced this section of Graczyk and the legislative history recounted there.
The Court again discussed the Townsend decision and Shephard v. Loyola Marymount University (102 Cal. App. 4th 837 (2002)). In Shephard, Kisha Shephard sued LMU after she was removed from the women’s basketball team. She claimed that she was the victim of racial discrimination. This cause of action was based on California’s Fair Employment and Housing Act (“FEHA”), Government Code § 12960 et seq. The Superior Court dismissed the FEHA claim, finding that Shephard was not an employee and the Court of Appeal affirmed. The Shephard court took note of Labor Code § 3352(k) and concluded by stating that both that section and FEHA “both of which are designed to provide workplace protections for employees, should be construed together in a harmonious fashion” (Id. at 846).
The Dawson court agreed. Dawson argued “much has changed concerning the status of athletes since the time that Shephard was decided (Opp. at 23). Yet, the Shephard decision, issued in 2002, acknowledged that basketball and football ‘generate significant revenue.’ 102 Cal. App. 4th at 844 (citing Townsend, 191 Cal. App. 3d at 1536). There is no reason to ignore or distinguish this line of cases” (Dawson at 11).
The Court dismissed the California claims, and the derivative claims, as those were derivative of the dismissed FLSA and California Labor Code claims (Id.). Finally, the Court stated that because “Dawson’s complaint is based on an untenable legal theory, amendment would be futile. The complaint is thus dismissed without leave to amend” (Id.).
The year before the Dawson complaint was filed, there may have been room for optimism. The District Court decision in O’Bannon had allowed schools to make deferred payments to athletes for in return for the use of their name, image and likeness, and the Martin Jenkins v. NCAA case had been filed, seeking an end to all payment restrictions to college athletes. Then the tide turned.
It began with the Ninth Circuit’s opinion in O’Bannon v. NCAA (802 F. 3d 1049 (September 30, 2016)). That court concluded that in allowing for deferred payments the District Court “clearly erred”, and that paying athletes anything beyond expenses was a “quantum leap” (Id. at 1077, 1080). Next came the District Court ruling in the Berger case in early 2016.
Later that year the District Court that had ruled in O’Bannon dealt with Jenkins v. NCAA. The court declined to dismiss Jenkins, but noted that the O’Bannon decision “simply forecloses one type of relief Plaintiffs previously sought: cash compensation untethered to education expenses” (Jenkins v. NCAA, No. C 14-2758 CW, Docket No. 459) (See “What to Make of Martin Jenkins et al v. NCAA In Light of O’Bannon,” SLA Volume 13, Issue 23, 12-9-16). Finally, in December 2016 came the Seventh Circuit’s Berger opinion.
Back in March these pages predicted that “the task ahead of Dawson may be Herculean” (SLA Volume 14, Issue 5, 3-17-17). In view of how quickly the Dawson complaint was dismissed following the hearing that may have been understated.
