O’Bannon v. NCAA et al., United States District Court Nor. Cal. Case No. 4:09-cv-03329-CW—(“O’Bannon”)- Amicus Briefs and Oral Argumentto the Ninth Circuit

Apr 3, 2015

By Jeff Birren and David Stern
 
Amicus briefs were filed from a variety of groups and organizations. Each brief provides unique perspectives of certain elements of the case, depending on the amici’s area of expertise.
 
Briefs for the Alston Kindler Group, Martin Jenkins and Nigel Hayes
 
Alston, Kindler, Jenkins and Hayes, former NCAA athletes, point to a lack of evidence supporting the notion of a negative impact on college sports can be caused by compensating college-athletes. Further, NCAA members “have expanded their control of athletes in the name of ‘amateurism’, which is considered to be “a modern-day misnomer for economic tyranny [and] a transparent excuse for monopoly operations” (Byers, Walter, UNSPORTSMANLIKE CONDUCT at 347,388 (1995), in Amicus Brief by Jenkins and Hayes, at 5). NCAA ByLaw 12.5.2.1 states that college athletes cannot accept remuneration for the use of their NILs. “Schools agree to value NILs at zero by agreeing not to compete with each other to credit any other value to the recruit in the exchange. This is an anticompetitive effect” (7 F. Supp. 3d at 973, Id. at 22). The NCAA should not be able to shield such rules by labeling them as “eligibility” rules, when they are actually restricting how individual schools can compete economically for the play services that generate billions of dollars in revenue.
 
Brief for Sport Management Professors
 
According to the amici, the college sports audience does not care about “amateurism”; it is rather a concept that justifies the NCAA’s unfair practices of not allowing its athletes to share in the billions of dollars of revenue from broadcast license deals. There is no evidence to support that “amateurism” is a “driving motivation behind college sport consumption” (Amicus Brief for Sport Management Professors, at 2).
 
Brief for the Screen Actors Guild, et al
 
The amici focus on the right of publicity, which is a form of intellectual property that society deems to have social utility, representing the inherent right of every individual to control the commercial use of his identity (Comedy III Productions, Inc. v. Gary Saderup, Inc., 25 Cal. 4th 387 (2001), in Amicus Brief for Screen Actors Guild et al., at 3). There is an inherent value in these athletes’ personas; they are ripe for exploitation and must be protected by the law. The NCAA should not be able to rely on “transformative use” defenses to copyright infringement for exploitation. The transformative use test can be successfully passed when an object or persona is imitated while adding an alternation or transformation into the mix. Literal depictions of an individual are not transformative, regardless of the creative elements surrounding the individual.
 
Brief for Intellectual Property and First Amendment Scholars
 
The amici note the substantial difference between a protected interest in NILs through the lens of news reporting for public events and live broadcast rights for the purpose of trade. News reporting is typically exempt from publicity rights because it would be extremely different to obtain such rights from all persons shown in the news. Athletes’ NILS, on the other hand, have tremendous value in competitive markets, often illustrated through multi-million dollar sponsorship agreements. Student-athletes’ exploitation also covers the entire live broadcast. It is one of the main reasons why the sporting event is widely viewed. The amici further explain that while some of NCAA’s uses of publicity for these athletes are protected (documentary footage), their primary uses are not (exclusive broadcast licenses and the sublicensing of avatars into videogames) (Amicus Brief by Intellectual Property and First Amendment Scholars, at 10).
 
Brief for Law and Economics and Antitrust Scholars, et al.
 
If O’Bannon is upheld, the focus of educational institutions would shift away from academics. Further, creating property rights for students would open schools up to widespread federal antitrust claims: “the District Court failed to account for other potential risks in creating a property right, such as higher transaction costs, the likelihood of holdouts, and potential deleterious effect on the students’ educational and athletic experience in extrinsic financial incentives crowd out intrinsic motivation and non-market norms” (Amicus Brief by Law and Economics and Antitrust Scholars et al., at 3). 
 
The amici compared O’Bannon to the plaintiff in Zacchini v. Scripps-Howard Broad. Co. (422 U.S. (1977)); a human cannonball who was against the notion of televising his act due to lost profits. The amici explained that for a property right for one’s NIL to exist, several economic conditions must also exist: (1) financial incentive must encourage the individual to make the effort in creating the product; (2) the economic value of the performance must be capable of being misappropriated which impairs the performer’s ability to earn a living; (3) absent economic incentive, the performer would not perform; and (4) granting a property right must represent the best way to advance the public interest. The District Court did not consider such economic conditions (Id. at 8). Student-athletes do not earn a living from playing sports; most students pursue sports for amateur motives. Participation in high-school and college sports has increased over the past decade, with no connection to the hope of financial incentive. Zacchini, on the other hand, would not perform if his act was televised. That is not the case here.
 
Brief for A&E Television Networks, et al.
 
The amici explain that no state has ever recognized a right of publicity in the scope of broadcasting, for a variety of reasons. First, it would be impossible for a broadcaster to obtain the rights to broadcast an event if each participant had the exclusive right to control the broadcast of their “NIL”. Even if an event can be broadcast, each participant would be able to dictate how, if and when their persona could be used. Further, “because such putative rights of publicity would be fundamentally incompatible with basic freedoms to present events of interest to the public, the First Amendment would stand as a bar in the unlikely event any state were to ever decide to recognize them” (Amicus Brief by A&E Television Networks et al., at 1). The law allows one person to hold a right to license such a broadcast; the producer. If the producer had to secure licenses from the hundreds of participants, then no one could promise exclusivity for the broadcaster.
 
A right of publicity can be granted to individuals in the event of free speech for the “purpose of trade”, however, a person’s identity in a news reporting or entertainment fails to satisfy this criterion. This has been widely supported in U.S. case law. In NFL v. Alley Inc. (624 F. Supp. 6 (S.D. Fla. 1983)), Miami Dolphins players had no right of publicity in the broadcasts of Dolphins games because their images “were not used to promote any commercial product, and further, because their presentations served a legitimate public interest” (Id.at 10). 
 
Brief for the American Council on Education, et al.
 
The amici fundamentally disagree with the court’s assessment of collegiate athletics as a business. College sports are extra-curricular educational activities, designed to prepare students for the real world. They believe that “pay for play” would eliminate the core concepts of college sports; education, teamwork, honor and tradition: “Colleges and universities exist to educate students in preparation for life’s work. Intercollegiate athletics advances that mission. The precise contours of amateurism in intercollegiate athletics have evolved over time, but its necessity and basic features have not” (Id.at 3). The amici worry that a ruling in favor of O’Bannon would result in the fall of amateurism and the irreparable suffering of the American education system.
 
Oral Argument
 
It was argued on March 17, 2015, to the same panel that rejected the NCAA appeal in Keller v. Electronic Arts, (724 F.3d 1269 (9th Cir. 2013)), Chief Judge Sydney Thomas, Jay Bybee and Gordon Quist, Senior District Court Judge (W. Mich.). Former Solicitor General Seth Waxman represented the NCAA. Michael Hausfeld represented the plaintiffs. 
 
Waxman noted that never before had a court stated the antitrust laws apply to amateur eligibility in sports; it was an attack on the NCAA ban on “pay to play.” Judge Bybee asked if they were just appealing the portion of the ruling that allowed schools to place up to $5,000 a year in trust for FBS and Division 1 basketball players. Waxman said no. Judge Bybee said the cost of attendance (“CoA”) reimbursement aspect of the ruling was under the NCAA’s definition of reimbursable expenses. Waxman agreed it is now permitted.
 
He argued the ruling was incorrect as it impermissibly allows revenue sharing with student athletes from commercial revenue sources. Judge Thomas asked how the trial court’s ruling was different from the NCAA’s current rule, as both allow CoA. The NCAA’s current rule is permissive, not mandatory, and allows schools to pay the athlete up to the full cost of attendance. Judge Bybee forced Waxman to concede that the ruling was also permissive, not mandatory.
 
Waxman stated it cannot be the role of an antitrust court to redefine amateur rules. “It does not compute.” He claimed NCAA v. Board of Regents, (“BoR”) (468 U.S. 85 (1984)), gave the NCAA blanket immunity to define its rules. Judge Bybee said defining the “fifth year of eligibility” is different than scholarship rules. The NCAA believes that it is lawful per se, the “molten core of the rule” that the NCAA should have ample latitude to determine its rules and that is consistent with the Sherman Act. 
 
He attacked the District Court’s rule of reason analysis. He claimed the plaintiffs had not demonstrated a “significant antitrust injury.” He said name, image and likeness rights, NILs, do not exist, and thus there is no injury. Judge Bybee interjected that if NIL rights are mentioned in the broadcast contracts that “may indicate that they do have some value.” Waxman responded it was speculative and speculative harms are not significant harms.
 
Judge Thomas asked how he dealt with Keller. Waxman stated that the NCAA did not renew the Electronic Arts contract and thus no NIL rights exist. Judge Thomas noted the District Court stated the NCAA could “change on a dime.” Waxman replied it would never happen. 
 
Waxman then addressed the less restrictive alternative (LRA) analysis. Here, “the court erred the most” and was “erroneous as a matter of law.” Raising the price a little was not an LRA. Judge Bybee asked if this only went to the $5,000 payment and not the increase to CoA. Waxman said no. It is not the mission of an antitrust court to increase the grant in aid. Moreover, a small price increase is only incrementally, not significantly, different and thus the ruling fails. He added the antitrust laws protects competition and not competitors, and there was no showing of an increase in competition. Judge Bybee interjected that raising the scholarship to the cost of attendance by some would lead to competition for athletes. 
 
Hausfeld asserted the NCAA over-stated BoR in various ways, ignoring the finding that it was “a classic cartel,” there were no findings of fact on amateurism or whether the rules were procompetitive to athletes. Hausfeld continued that BoR did not deal with eligibility; it did not give blanket immunity and subsequent cases never made that finding. He said the NCAA cites BoR dicta as a “talisman.”
 
He said the question was whether the challenged restraint enhances competition and the NCAA had not addressed it. NCAA growth has come at the expense of the college athletes and this is the “great hypocrisy.” The NCAA has constrained competition between members and forces all to the lowest common denominator.
 
Judge Thomas asked about the connection between NILs and antitrust injury, and whether NILs have value. Hausfeld responded affirmatively because commercial enterprises pay for it. Judge Thomas said: “what concerns me is that those rules are not in play.” Hausfeld said they were as the rules were a binding restraint, that either increases the cost of attendance by the athletes or decreases the value of attendance, and no court has said agreement to not compete on price is not an antitrust violation. 
 
Judge Thomas asked how a market that does not currently exist could create an antitrust injury. Hausfeld said this was just one source of revenue that could be used to make the payments. Judge Quist asked: “who is to say if it is $5,000, or $ 6,000 or $10,000…who is to say it stops there?” He further said it is not a federal court’s job to regulate college sports. Hausfeld replied: “their own witnesses said nothing would change” if $5,000 was provided, and it would not violate amateurism principles. Moreover, original Big Ten rules said schools could only play three pros at one time.
 
Judge Bybee said it was reasonable to increase payments up to CoA, but paying $5,000 into trusts “crosses some theoretical line.” Hausfeld said the number came from defense witnesses. Judge Thomas said the payments “are troubling.” Judge Bybee asked if Hausfeld was saying the payments could not go above the cap and Hausfeld agreed. Hausfeld said the NCAA has been very “malleable” when defining the rule. He quoted the rule and then read NCAA President Emmert’s testimony that was their “intention” or their “interpretation,” so there is “no immutable principle.” 
 
He said on remand in BoR, that court referred to the “recalcitrance” of the NCAA. He ended by quoting a Supreme Court case said the courts cannot allow active market participants to self-regulate and the courts must guard against predatory conduct.
 
During rebuttal, Judge Quist mentioned a New York Times article that said the schools could now pay the CoA and asked how it differed from Judge Wilken’s order. Waxman said schools could now pay the CoA. Waxman said the courts have declared the NCAA needs ample latitude to set its rules. 
 
Judge Thomas asked about the source of the funds. Waxman said the District Court injunction required the payments to come from NIL rights. Judge Bybee said the injunction was in front of him. “I don’t see it in the order.” Judge Bybee read the injunction and it did not say the payments had to come from NILs. Waxman responded if it not linked to NILs it is pay to play. He added there was no need for the injunction because the NCAA had already said paying to the CoA was permitted.
 
Judge Thomas concluded by stating the amicus briefs were well done and very helpful to the court. The waiting began.
 
Birren worked for the LA/Oakland Raiders for 34 seasons and was general counsel for much of that time. During that time he worked closely with owner Al Davis and Amy Trask, the NFL’s first female Club Chief Executive. He has an MA in History from USC and a JD from Southwestern, where he taught sports law for three years. He can be reached at jebirren@comcast.net.
 
Stern is a Toronto-based entertainment lawyer at Lewis Birnberg Hanet LLP, whose practice is focused on film and television production and distribution. He was previously legal counsel at Maple Leaf Sports & Entertainment and interned in the law department of the Oakland Raiders. He has a BA in Industrial Relations at McGill and a JD from University of Ottawa. He can be reached at daves@lbhmedialaw.com.


 

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