Federal Judge Hands Partial Victory to the NCAA and the Plaintiffs/Student Athletes Suing It in Antitrust Case

Mar 15, 2019

U.S. District Judge Claudia Wilken of the Northern District of California delivered a partial victory last week to a nationwide class of student athletes, who challenged NCAA-imposed caps on college-athlete scholarships.
In granting their request for a preliminary injunction in the Alston v. NCAA litigation, the court invalidated NCAA rules that prohibit schools from providing additional education-related benefits to athletes — like post-graduate scholarships, internships, computers, study abroad programs, and academic awards — as an inducement to coveted student athletes.
The ruling clears the way for individual Division I athletic conferences to independently set the rules for education-related compensation or benefits that their member institutions may provide to college-athletes, free from NCAA rules.
Jeffrey Kessler of Winston & Strom, the co-lead class counsel and well-known antitrust and sports litigator, called the ruling “a big step forward for the athletes and another loss for the oppressive NCAA system. This is the second time the NCAA compensation rules have been held unlawful and it will not be the last. While more needs to be done, this is a turning point in the fight to create a fair system for all. One of the most significant new benefits that will now be permitted is that schools will be able to provide thousands of dollars a year in academic incentive payments to students who make progress towards their degrees. This is change which will both reward the athletes economically for the enormous revenues they generate and encourage them in their studies. It is a win-win for improved economic fairness to the athletes and the pursuit of educational values.”
The Winston & Strawn LLP team was led by Kessler, David Greenspan, David Feher, Sean Meenan, and the late Derek Sarafa, and supported by associates Joseph Litman, Jeanifer Parsigian, Ben Gordon, Adam Dale, and Georgino Hyppolite, and senior paralegal Corinne Kyritsopoulos.
NCAA Claims Victory, Too
However, the judge also provided a victory to the NCAA when it subscribed to the idea that the NCAA rules that prohibit non-education related compensation are shielded from antitrust laws.
Donald Remy, NCAA chief legal officer, noted that “the court’s decision recognizes that college sports should be played by student-athletes, not by paid professionals. The decision acknowledges that the popularity of college sports stems in part from the fact that these athletes are indeed students, who must not be paid unlimited cash sums unrelated to education. NCAA rules actively provide a pathway for tens of thousands of student-athletes each year to receive a college education debt-free.
“Although the court rejected the plaintiffs’ desire for a free market system, we will explore our next steps as appropriate. We believe the ruling is inconsistent with the decision by the 9th Circuit Court of Appeals in O’Bannon. That decision held that the rules governing college athletics would be better developed outside the courtroom, including rules around the education-related support that schools provide.”
The court’s decision followed a 10-day bench trial before Judge Wilken, of the U.S. District Court for the Northern District of California, which pitted the plaintiffs against the NCAA and the Power 5 athletic conferences, including the Pac-12, Big Ten, Big 12, SEC and ACC. The court previously granted partial summary judgment for plaintiffs, finding that the NCAA’s rules inflict significant anticompetitive harm, causing college-athletes to be compensated less than they would have been absent the challenged rules. The question for the trial was whether these anticompetitive rules could withstand scrutiny under antitrust laws.
After presentation of evidence by plaintiffs and the NCAA and Conference defendants, the court determined that the defendants’ alleged procompetitive justifications only supported national rules limiting cash compensation untethered to education-related expenses. The court also found that the alleged justifications — maintaining consumer demand for college sports and the integration of college-athletes into their campus or academic communities — could be achieved without extinguishing all competition for student athletes’ services on the basis of educational compensation and benefit, according to plaintiffs’ lawyers.
The court’s injunction will permit individual conferences to set their own rules concerning compensation and benefits tethered to education, as long as the conferences do not collude with one another. The conferences and their member institutions will be able to make decisions about what is in their own best interests, while competing with one another for the attendance of talented college-athletes. The court’s injunction will take effect in 90 days unless the defendants appeal.
Hardly new to the debate, Judge Wilken, in late 2017, also granted final approval of a $208 million settlement on behalf of tens of thousands of current and former NCAA Division 1 college-athletes impacted by a prior NCAA cap on grant-in-aid scholarships. Currently, distribution of the settlement proceeds is being held up pending resolution of the Ninth Circuit appeal of Darrin Duncan, the only person out of 53,748 class members to object to the deal.
And the Winner Is?
Gabe Feldman, director of the Tulane University sports law program, told the Associated Press that “technically, the plaintiffs won the case, and the NCAA will not be happy that they were found to be in violation of antitrust law. But ultimately this allows the NCAA to keep the bulk of their amateurism rules in place.”
Others aren’t so sure. “Judge Wilken has effectively ordered the NCAA to revise its grant-in-aid rules so that they both permit member schools to compete more fully and enable conferences to establish their own policies for scholarships,” wrote Michael McCann, Founding Director of the UNH Law Sports and Entertainment Law Institute, favoring the plaintiffs.
The full opinion can be viewed here: http://www.hbsscreative.com/downloads/3-8-19-In-re-NCAA-GIA-Findings-of-Fact-and-Conclusions-of-Law.pdf


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