By Jeff Birren, Senior Writer
Several phrases likely give NCAA officials shivers. “Name, Image, and Likeness” rights (“NIL”) is one. Judge Claudia Wilken is another. The two together are a nightmare for the NCAA. It happened again when Judge Wilken certified three separate classes of plaintiffs in cases filed by past and present NCAA Division 1 student-athletes against the NCAA, the Pacific-12, the Big Ten, the Big 12, the Southeastern, and the Atlantic Coast Conference(s), (“Power Five Conferences”), (In Re: College Athlete NIL Litigation, No. 20-cv-03919 CW, N.D. Cal. (11-3-2023)).
Background
The NCAA ruled college sports for decades across the land, at colleges large and small, for those that offered college scholarships and those that did not, in virtually every sport and level of competition. In its desire to remain aloof from professional sports, schools collectively agreed that their athletes would only receive scholarships to attend school. This was usually short of the actual cost of attendance. Naturally, such financial restrictions did not apply to those who coach or administer sports. All seemed well, at least to the NCAA. However, this perceived playing field paradise was not to last.
Ed O’Bannon and others sued the NCAA in February 2012. They claimed the rules prohibiting college athletes from profiting from the use of their NIL violated U.S. antitrust law. The case was assigned to Judge Wilken. Dr. Daniel Rascher was the plaintiffs’ economic expert. The case went to trial in June 2014. O’Bannon won. After an appeal, the Ninth Circuit noted that the decision below was the first to hold an NCAA rule controlling amateur status violated the antitrust laws. The Ninth Circuit affirmed in part, holding NCAA rules violated the Sherman Act to the extent that scholarships did not pay the full cost of actual attendance, but reversed the relief that would have allowed athletes to be paid up to $5,000 a year. One would think this was a major victory for the NCAA, but apparently providing a full education to students was too much to bear, and the NCAA sought protection from the Supreme Court. Review was denied. O’Bannon’s relief was small, but it was just the beginning.
Judge Wilken’s next class action case was In re Nat’l Collegiate Athletic Ass’n Athletic Grant-In-Aid Antitrust Litig. (“Alston”). This case was filed on behalf of men who played college football and basketball from March 2014 to the date of class certification. The case was combined with Justine Hartman v. NCAA, whose plaintiffs were women who played college basketball in the same time frame. Judge Wilken certified both classes. The plaintiffs claimed that NCAA rules restricting NIL compensation violated the Sherman Act. Rascher was again the plaintiffs’ economic expert. Following a bench trial in 2019, Judge Wilken declared the NCAA’s rules violated the antitrust laws. Once again, the NCAA and conferences appealed. This time they were not as fortunate.
The Ninth Circuit acknowledged the NCAA had some interest in preserving amateurism, but their rules were imposed upon the students by a “cartel,” and this violated the Sherman Act. Consistent with past practice, the NCAA sought review in the Supreme Court. The NCAA was represented by former Solicitor General Seth Waxman. This case is another example of “be careful what you wish for.” The Supreme Court granted the petition for review.
The NCAA begged the Court to hold it exempt from the Sherman Act. The ever-enthusiastic Jeffrey Kessler argued for the plaintiffs. Possibly to the surprise, and certainly to the chagrin of the NCAA, a unanimous Supreme Court affirmed the ruling. The opinion praised Judge Wilken for “amassing a vast record and conducting an exhaustive trial.” Alston was no longer confined to the Ninth Circuit. The NCAA is free to create rules, but across the country it is subject to antitrust law.
With that, the race for NIL benefits was on. Athletes across the country began receiving compensation for the use of their NIL, which comes from advertisements, school alumni, or other donor sources.
NCAA President Charlie Baker recently testified before the Senate Judiciary Committee, admitting that the NCAA needed “modernization.” Baker proudly announced that the NCAA will create a fund to provide access to health care for “athletically related injuries up to two years after graduation.” So much for the permanently injured college athlete. He also noted that NIL rights are regulated “by nearly 30 state laws.” The NCAA therefore wants Congress to “curtail NIL Inducements,” but that still is not enough.
Baker further requested legislation that would “grant student athletes’ special status that would affirm they are not employees.” This, he claimed, was what student athlete representatives have told him that they wish. He did not name his informants. It is highly unlikely that injured athletes prefer to be denied workers compensation benefits, with possible lifetime medical coverage, rather than a mere two years’ medical coverage, or that all student athletes desire not to be paid for what they are already doing. To date, legislative efforts have failed.
In the House
One month after the Ninth Circuit ruling in Alston, Grant House v. NCAA was filed. Two days later it was reassigned to Judge Wilken. As of this writing there are 393 entries on the Docket Sheet, but many relate to motions for admission pro hac vice as counsel from across the country, jumping on the billing merry-go-round. Tymir Oliver v. NCAA was filed on July 8, 2020, which was also re-directed to Judge Wilken. These two cases were consolidated by stipulation. The plaintiffs asserted that NCAA’s rules against NIL compensation violated Sherman Act Section 1. Those rules prohibit the conferences and schools from sharing revenue that they receive from third parties for the commercial use of the students’ NIL and therefore is a conspiracy to fix prices and a group boycott. Rascher once more is the plaintiffs’ economic expert.
One year later, the plaintiffs filed an Amended Complaint. The thrust of these allegations is that following Alston, the NCAA developed “interim rules” that allow student athletes to receive NIL compensation, but the NCAA did not repeal the rules prohibiting such compensation. (That is simply treading water.) However, the NCAA did not suspend all restrictive NIL rules, including prohibitions on the use of NIL to promote products related to the student’s sport, nor from allowing the schools to compensate students directly whether based upon enrollment, performance, or simple use by the school of the athletes’ NIL. Allegedly, this agreement has artificially depressed prices.
The certification motion hearing was held on September 21, 2023. It was widely reported, and before the Court ruled, Fox Sports and ESPN each filed notices that they were an “Interested Party.” CBS, Turner, the NFL Players Association, and the NBA Players Association filed notices as “Intervenor(s).” Other entities filed similar notices, including Ball State University. The word was out: trouble was brewing.
Class Certification Motion
After three years of litigation, the plaintiffs moved to certify three separate classes. To receive class certification, the plaintiffs must satisfy all four prongs of F.R.C.P. 23(a). If that happens, the plaintiffs must satisfy at least one prong of 23(b). The first claimed class is for men who received a “Grant-In-Aid” at a Division 1 school, who played either football or basketball between June 15, 2016 and the date of class certification. The second is for women who played college basketball, who received a Grant-In-Aid, and who compete on or for a school at one of the Power Five conferences, also between June 15, 2016 and class certification. The final alleged class is for all other student athletes who competed prior to July 1, 2021 “and who received compensation … for the use of their NIL.”
The first class seeks damages for: Broadcast-related injury (“BNIL”) and damages, that is, compensation they “would have received from conferences for the use of the NIL in FBS football or Division 1 basketball games in the absence of the challenged rules,” as well as video game related damages based on being deprived of compensation for the use of their NIL in college football or basketball video games, and for “having been deprived of compensation from third parties for the NIL use.”
The second class seeks damages for BNIL injury and damages, and for third-party BNIL injury and damages. The final class seeks compensation for third-party BNIL injury and damages, and “some members of the class, namely, those that played FBS football or Division 1 men’s basketball outside the Power Five Conferences and for all other college athletes who competed on a Division 1 team, outside of the Power Five Conferences, on a full grant-in-aid scholarship, allege to also have suffered video game injury and damages.” With the proposed classes defined, the Court applied the allegations to F.R.C.P. 23(a).
Numerosity
The defendants “do not dispute” that the first Class has at least 6,280 members, the Women’s Basketball Class has at least 856 members, and the Additional Sports Class has at least 7,384 members. Consequently, “it would be impractical to join them” individually. Check that box.
Commonality
This “requires ‘questions of law or fact common to the class.’” The requirements are “construed ‘permissively.’” This test requires the existence of only a “single” common question. The Court found that there are common questions of both law and fact, including whether the restraints “caused significant anticompetitive effects in the relevant market;” whether the “justifications” for the restraints are valid; and whether the justifications “can be achieved with less restrictive alternatives.” The defendants claimed in a footnote, despite Alston, that the alleged injuries were “not of the type the antitrust laws were designed to prevent” and “the question of damages” cannot be resolved by way of common proof.” The Court thought “otherwise.” “This argument is unavailing,” wrote the Court. Another box checked.
Typicality
This “looks to whether the claims or defenses of the representative parties are typical of the claims or defenses of the class.” The defendants “do not dispute that the Plaintiffs showing is sufficient to meet the typicality requirement.” Box three checked.
Adequacy of Representation
The defendants disputed this with gusto. They claimed the class representatives did not meet the test because they had abandoned claims, because the football representative, Oliver, “did not interact regularly” with athletes outside of football, and because he does not watch college basketball on TV. (This may be the first time any defendants argued a class representative failed the test based on not watching a type of television show.) The Court “is not persuaded.” After all, “he has the same interest” as all class members. A third argument relating to damage methodology was also a non-starter. The defendants did not bother to dispute that plaintiffs’ counsel met the test. They were lead counsel in Alston and do not have a conflict of interest. Therefore, all 23(a) boxes were checked.
Rule 23(b) Do questions of law or fact predominate?
This is precisely the type of injury the antitrust laws were designed to prevent: a horizontal restraint imposed by agreement, and each plaintiff consequently suffered the same injury. The defendants “do not dispute that the question of whether the challenged rules violate Section 1 can be answered on a classwide basis with common evidence.” The battle was joined on the issue of whether “the questions of antitrust impact and damages can be resolved on a classwide basis with common proof.”
The Court addressed “each of the three types of antitrust injuries and damages that the Plaintiff’s allege.” The burden of proof on a class certification motion is not the same as at trial. Courts “cannot decline certification merely because it considers plaintiffs’ evidence … unpersuasive and unlikely to succeed in carrying … the burden of proof at trial.” Edward Dresser is the plaintiffs’ expert on sports media and broadcasting rights. He worked at the NBA for twenty-three years, including negotiating “media agreements with” ESPN, Turner, and NBC. He did similar negotiating on behalf of the “NCAA and some NCAA conferences.” Dresser “concluded that at least ten percent of the value of (i.e., revenue from) the broadcast rights is attributable to the student-athletes’ NIL contained in the broadcasts.”
The defendants argued, and re-argued, that the methodology proposed by Rascher was inadequate. Those arguments, and the Court’s responses, begin at page 17 and end on page 51 of the 52-page opinion. Rascher was the plaintiffs’ economic expert in O’Bannon and Alston. His conclusions were admitted in both cases and were not reversed by the Ninth Circuit, nor by the Supreme Court in Alston. Try as they might, the defendants were not going to get relief at this stage of the proceedings in attacking his methodology or opinions.
Rascher “opined that, in the absence of the challenged rules” the schools “would have competed with each other to attract FBS football and Division 1 basketball student athletes by offering them payments for their NIL in broadcasts.” He further opined that students’ BNIL rights “have value” and media companies “require contractual assurances from the Power 5 Conferences or the NCAA that all rights” to use student NIL “are being conveyed” or the conferences or NCAA “are indemnifying the media partners for their use.”
The Court stated that “Dr. Rascher’s methodology and the assumptions underlying it are well-developed and sufficiently reliable and capable of establishing BNIL antitrust injury and damages for the members of the Football and Men’s Basketball Class and Women’s Basketball Class.” His methodology is “consistent with Plaintiffs’ theory of liability.” The defendants asserted that Rascher’s methodology would violate Title IX, but they “have not cited any authority to support the proposition.” (This, from schools that are usually Title IX defendants?) The Court excluded the defendants’ expert opinions “on the grounds that they are impermissible legal conclusions and unreliable.” The arguments related to BNIL go on for another five pages, but as the Court pointed out, the defendants “cite no authority that compels a different conclusion.”
Video Game NIL
Rascher noted that prior to O’Bannon, Electronic Arts (“EA”) “developed and sold very successful college football and men’s basketball video games through licensing arrangement with the NCAA, its FBS and Division 1 conferences and hundreds of NCAA member schools, “but the NCAA and several Defendants ceased participating in those arrangements after the O’Bannon litigation began.” Curiously, EA filed notice of being an “Interested Party” prior to the class certification hearing. The Court stated that Rascher’s methodology was “sufficiently reliable and capable of supporting a reasonable jury finding that the proposed class members who allege video game NIL injury would have received video game NIL compensation in an amount greater than zero.” Most counter-arguments merely go to the persuasiveness of the methodology and failed to convince the Court.
Third Party NIL
This question is whether the plaintiffs “would have received compensation from third parties for the use of their NIL prior to July 1, 2021, in an amount greater than zero.” Thanks to Alston, student-athletes are currently receiving NIL revenue from third parties. Therefore, the only real dispute is the reliability of Rascher’s methodology and opinions. “The Court has carefully reviewed Dr. Rascher’s opinions on third-party NIL and his third-party NIL methodology and finds that they are reliable and capable of supporting a reasonable jury finding”. “Defendants’ arguments to the contrary lack merit.” There is little reason to go through chapter and verse the Court’s rejection of their arguments, including one that “cited no binding authority.” Another box checked.
Superiority
This involves a three-part test. First, plaintiffs are unlikely to proceed individually because the amount they may receive is less than the cost of litigating their individual cases. Secondly, the plaintiffs want to proceed as a class because there are no individual suits. Finally, “this forum is desirable because this Court has presided over several other actions involving antitrust challenges to NCAA rules and involving the same Defendants.” Left unsaid is that as a Senior Judge, Judge Wilken can devote far more time to the case than can the average district court judge. The Court went through the defendants’ arguments over the next three pages and was not “persuaded.” Each class was certified as requested.
Twilight?
According to NCAA tax returns, this “non-profit” controls over $1B a year. In 2019-2020, NCAA revenue plunged by over 50% due to Covid, but its president, Mark Emmert, took home $2.9M. The year the NCAA lost Alston in the Supreme Court, 2021, Emmert was paid close to $3.3M. In March, he left the NCAA a rich man.
The defendants are now facing the prospect of a jury trial with billions of dollars at issue. Colleges may wish to set back the hands of time, but a wing and a prayer does not eliminate the Sherman Act. Many schools are awash with cash generated by their students. Texas A & M just fired football head coach, Jimbo Fisher, with his jumbo contract. He will receive $76M for doing nothing over the next eight years. Nothing is what the schools paid the players for decades. The NCAA and Power Five have lots of money. The question is will they finally have to pay?
Without judicial or legislative relief, all the kings’ lawyers may not be able to put the NCAA back together again. That may not be an easy task. Several years ago, one close observer noted that: “the NCAA and its member colleges are suppressing the pay of student athletes who collectively generate billions of dollars in revenues for colleges every year. Those enormous sums of money flow to seemingly everyone except the student athletes. … Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate… The NCAA is not above the law” (Alston, Kavanaugh, J., concurring).
