It appears that college student-players are still considered amateur athletes – at least for now – given a recent appeals court ruling.
In the latest case on the issue, a federal appeals court has weighed in on whether student athletes should be paid for the use of their names, images and likenesses.
By a 2-1 vote, the U.S. Court of Appeals for the 9th Circuit partially affirmed and partially reversed a district court ruling by Judge Claudia Wilken on O’Bannon v. NCAA.
The NCAA prohibits student-athletes from being paid for the use of their names, images, and likenesses. But that prohibition was challenged by Ed O’Bannon, who played basketball for UCLA.
The case turned into a class beyond just O’Bannon as the lead plaintiff with attorney Michael D. Hausfeld representing current and former college basketball and football players against the NCAA and its college members.
Their side wanted student athletes, following graduation from college, to get compensated for the use of their images by the NCAA.
There could be billions of dollars’ worth of TV revenue or licensing fees at stake, according to one estimate.
Wilken had ruled that the ban on student athletes receiving cash was a violation of antitrust laws.
The case brought up the Rule of Reason as applied to the Sherman Antitrust Act and the issue of the restraint of trade.
“We reaffirm that NCAA regulations are subject to antitrust scrutiny and must be tested in the crucible of the Rule of Reason,” according to the majority ruling from the 9th Circuit. “When those regulations truly serve procompetitive purposes, courts should not hesitate to uphold them. But the NCAA is not above the antitrust laws, and courts cannot and must not shy away from requiring the NCAA to play by the Sherman Act’s rules. In this case, the NCAA’s rules have been more restrictive than necessary to maintain its tradition of amateurism in support of the college sports market. The Rule of Reason requires that the NCAA permit its schools to provide up to the cost of attendance to their student athletes. It does not require more. We vacate the district court’s judgment and permanent injunction insofar as they require the NCAA to allow its member schools to pay student-athletes up to $5,000 per year in deferred compensation. We otherwise affirm.”
When asked if the ruling has an impact outside of collegiate sports, Scott Schneider, head of the higher education practice group for Fisher & Phillips, told InsideCounsel, “Not sure I see an application outside of college athletics.”
“I think the main takeaway is that the college athletics amateurism model survives for the time being,” Schneider said. “I say ‘for the time being’ because there is a broader attack on that model currently pending in California federal court, the Martin Jenkins lawsuit. That case is arguing that players should be paid without limitation. The O’Bannon opinion helps them because it says the NCAA’s rules are subject to anti-trust review. While the O’Bannon decision appears to say that the NCAA’s ban on compensation is an integral part of the ‘product’ it offers and withstands anti-trust scrutiny, there is a less sweeping way to read the decision which suggests that all the court decided was that the O’Bannon plaintiffs had failed to prove that paying student athletes would not reduce consumer demand for college athletics. If that’s the case, expect the plaintiff attorneys in the Jenkins case to summon considerable evidence on that issue which may render the NCAA’s victory temporary and open the door to damages and payments of student athletes.”
In addition, Joel G. Chefitz, an attorney at McDermott Will & Emery, told InsideCounsel that the majority opinion from the 9th Circuit “seems internally inconsistent.”
“On the one hand, the opinion repeatedly acknowledges that amateurism is itself a legitimate procompetitive end for the NCAA to pursue and ‘that not paying student-athletes is precisely what makes them amateurs.’ But then the court ignores its own repeated admission by stating that amateurism rules need to serve a procompetitive goal other than amateurism.”
“The test in cases like this is whether the restraint is reasonably necessary to serve a procompetitive goal,” Chefitz explained. “This is a fit test between the means and the end. What the Ninth Circuit seems to overlook is that the fit can’t get any better when amateurism is both the means and the end.”
“The court was right to reject the straw man argument that the NCAA’s rules were immune from antitrust scrutiny, but the 9th Circuit then applied the rule of reason incorrectly to an ancillary restraint serving one of the joint venture’s core objectives,” he added. “In any event, by reversing the district court’s remedy, the 9th Circuit panel has ensured that the practical effect of the case will be limited.”
From his point of view, Chefitz says that the decision by the 9th Circuit “should be of concern to any competitor collaboration or joint venture in any industry.”
“The 9th Circuit acknowledged that the NCAA's ancillary restraint (enforcing the amateur status of student athletes) directly served the joint venture's core value of amateurism,” Chefitz said. “That should have ended the truncated rule of reason test under the Supreme Court's decision in Texaco v. Dagher (which ironically reversed the 9th Circuit). But here the 9th Circuit extended the analysis beyond the Supreme Court's mandate and subjected the ancillary restraint to an unpredictable less-restrictive-means test. That approach threatens every joint venture with second guessing and micromanagement by the courts.”
Among the parties weighing in on the case were 15 professors of antitrust law who submitted an amicus brief in the O'Bannon v. NCAA 9th Circuit appeal in support of the NCAA.
Last year, they argued that “the district court’s approach to the antitrust rule of reason, if affirmed, would grant undue authority to antitrust courts to regulate the details of organizational rules, and would also undermine the NCAA’s goal of amateurism in collegiate athletics, a goal that courts have recognized universally as valid and important.”
Earlier this year, another important decision on college sports came from the National Labor Relations Board (NLRB). It declined to assert jurisdiction in the case involving Northwestern University student football players who wanted to be recognized as a union.
Under its ruling, the NLRB did not determine if the college players were statutory employees under the National Labor Relations Act. Instead, the NLRB decided not to assert jurisdiction and dismissed the representation petition.