Swathi Bojedla’s career has spanned a wide range of practice areas at Hausfeld, focusing most notably on...
Scott Schneider leads the Hausfeld Law Firm’s Higher Education Practice Group where he focuses on providing counsel...
J. Craig Williams is admitted to practice law in Iowa, California, Massachusetts, and Washington. Before attending law...
| Published: | October 21, 2015 |
| Podcast: | Lawyer 2 Lawyer |
| Category: | News & Current Events |
Back in 2009, former UCLA basketball player Ed O’Bannon filed a lawsuit on behalf of the NCAA’s Division I players. O’Bannon challenged the NCAA’s use of the images of its former student athletes for commercial purposes. Later, District Judge Claudia Wilken found for O’Bannon stating that the NCAA’s rules violate antitrust laws. However, on September 30, 2015, a three-judge panel upheld Judge Wilken’s ruling, but threw out the proposal that the NCAA should pay athletes $5,000 per year in deferred compensation.
On Lawyer 2 Lawyer host, J. Craig Williams joins Attorney Swathi Bojedla from Hausfeld Law firm and Attorney Scott D. Schneider from Fisher & Phillips LLP, as they take a look at O’Bannon v. NCAA, amateurism and anti-trust laws, the appeal and how this opinion will impact future cases.
Swathi Bojedla‘s career has spanned a wide range of practice areas at Hausfeld, focusing most notably on the Sports & Entertainment, Antitrust, and Mass Torts practice areas. Swathi is an O’Bannon case trial team member working alongside Attorney Michael Hausfeld, as well as a member of the firm’s appeal team.
Scott Schneider leads the firm’s Higher Education Practice Group where he focuses on providing counsel and litigation support on a host of higher education issues with a particular emphasis on institutional policies and handling of allegations of sex assault and violations of Title IX. He also maintains a blog dealing with higher education legal issues:https://highereducationlawyer.wordpress.com/.
Special thanks to our sponsor, Clio.
Advertiser: To me, if you were to say, “Who’s the big winner in this case?” it’s probably the NCAA, because from their perspective, maintaining the amateurism model is a big deal. Although the plaintiff scored a significant victory as well by saying all of these restraints, constrictions are subject in trust review.
People ask all the time, “What does Ed get out of this?” Ed is just a total advocate for college athletes. What he saw was a system that was fundamentally unfair.
Welcome to the award-winning podcast Lawyer to Layer, with J. Craig Williams and Robert Ambrogi, bringing you the latest legal news and observations with the leading experts in the legal profession. You’re listening to Legal Talk Network.
Swathi Bojedla: Thank you.
Scott Schneider: Thank you.
Swathi Bojedla: Sure. As you mentioned, the case was brought in 2009 by Ed O’Bannon, who is a UCLA legend. He was part of the championship team back in 1995 and his number was then retired at UCLA in ‘96, so he’s a very well known figure. What happened was he was living in Las Vegas after his NCAA career and later basketball career had ended. He was selling cars at a dealership, and he was at his friend’s house one day and his friend’s son was playing an EA basketball game, the NCAA-branded EA basketball game. And his son comes up and says, “Hey, Ed, Ed, come over here! Check this out!” So Ed went over, and on the screen was Ed. It didn’t have his name on the jersey or anything like that, but was the same height, same build, bald as Ed is – by choice, I should say – and same number, same left handedness, everything was the same. His friend’s kid says, “You know what’s so funny about this? You’re not getting paid for this.” And Ed obviously did not think that was very funny. So Ed eventually came to us and said, “I don’t think this is fair.” The NCAA has these rules that say that kids can’t get paid for their name, image and likeness while they’re in school or they lose their eligibility, and then they own your image and they can do whatever they want with it. The case initially started out as a case by former players and along the way, current players were added to the case. So basically, what the case alledges is there’s an anticompetitive restraint where the NCAA and its number of schools have a rule in place that says that if you receive any compensation of any kind what so ever – and they define compensation however they wanted to and in this case it includes compensation for your name, image and likeness – NCAA says that you cannot be an NCAA athlete. So this forecloses student athletes who are coming in for negotiating the terms of their entire scholarship package and it depresses the payment to them to zero dollars. We felt that this was a violation of antitrust laws, and the district court, after five years of litigation including a three year bench trial agreed with us. And as you mentioned, the appeals court of the Ninth Circuit, just two weeks ago, upheld the finding of antitrust liability. So that is kind of the brief summary of where we are in the case right now.
Scott Schneider: I think it’s a bit of a mixed back and that’s putting it mildly. I think on the student athlete’s side, the Ed O’Bannon side, clearly they score a victory by the Ninth Circuit coming in and saying, “Look, the NCAA’s restrictions, number one in this case, violated antitrust law.” But on a go forward basis are subject to review pursuant to antitrust law. So that’s a clear victory for Ed O’Bannon and the players. On the other side, from the NCAA’s perspective, from the member institution’s perspective, I think the big battle here is maintaining the status, the amateurism model. And the status of student athletes and participants in college athletics not being paid anything over and above; in essence, tuition and cost of attendance. And on that score, whether it’s a matter of principle, depending on how you read the Ninth Circuit opinion, or just a failure to basically introduce significant evidence to shoot down one of the NCAA’s arguments, the court came back and gave, to me, the NCAA a fairly significant victory. And at least the end result being that the NCAA’s amateurism model lives to fight another day. So it’s a bit of a mixed bag. To me, if you were to say who’s the big winner in this case, from my perspective it’s probably the NCAA because from their perspective, maintaining the amateurism model is a big deal. Although the plaintiff’s score a significant victory as well by saying all of these restraints, conditions, are subject to antitrust review.
Swathi Bojedla: Sure. Let’s just take a step back and talk about what the district court judge did and didn’t rule. So the district court judge, Judge Claudia Wilken, she found the antitrust liability finding, and she looked at the issue of amateurism and whether it was necessary to retain consumer demand. And in finding liability for the NCAA, she found that it wasn’t essentially enough of a procompetitive justification at the amount of zero dollars to justify the demand. In her injunctive release, she said that there were two things that the NCAA could no longer do. First, it could no longer have a rule in place that forbade schools from paying costs of attendance. And for those of you who are not familiar with what that means, basically the cost of attendance is the amount of money between tuition, room and board and what it actually costs to attend university, and that is different from a school to school basis. And the second thing she did was say, “You can not have a rule in place that prohibits deferred compensation to athletes in the amount of up to $5,000 a year.” And it wasn’t to say that they have to pay $5,000 a year, she just said that if they want to put any cap on the amount of money of deferred compensation there would be, it would have to be $5,000 or more. So basically setting a floor for what a cap on that type of compensation would be. And as was just mentioned, the Ninth Circuit overturned the latter portion of her injunction. And so people ask all the time, “What does Ed get out of this?” And Ed is just a total advocate for college athletes. What he saw was a system that was fundamentally unfair and he wanted to go in and rectify it. You couldn’t ask for a better class plaintiff for a case like this. This is something that he’s incredibly passionate about and wanted to make sure that future generations of college athletes who put their body on the line every week, forgo immense opportunities to sell their name, image and likeness if they weren’t subject to these rules couldn’t play for schools because they really do love to do it. So he’s not going to get paid any back damages in this case, but I think if you asked him, he would tell you he’s incredibly proud of the case that his name has attached to and will forever be attached to; probably almost just as much as iconic as a basketball championship.
Scott Schneider: I think Swathi is being humble here. One of the things that the NCAA did, I think primarily in response to this litigation was to allow for schools to pay for cost of attendance, and that was prior to the ruling – both from Judge Wilken and from the Ninth Circuit – which I think was a fairly significant development. I think this is a fair statement: big picture, the NCAA and this model is under assault in a number of different directions. A couple of months ago, it was the Northwestern Unionization case. In essence, the labor board gave, frankly, an odd win to the NCAA by essentially punting on that issue. We had the O’Bannon case, we have the Jenkins case coming right down the pipe, which is yet another antitrust challenge to the NCAA model. Big picture, I think what has happened is over the last twenty or thirty years as more money has come in to college athletics, whether it’s from ticket sales, but primarily from television and media revenue, that athletes are saying, “We want some slice of this,” and there has been pressure in a lot of different directions. I mentioned the labor board and organizing antitrust; that direction for the NCAA to do something, and frankly, to do something outside of the context of litigation to try to resolve these issues. The only big thing at this point that has been done is, again, that they’ve allowed now for schools to pay cost of attendance.
Swathi Bojedla: It’s funny that you mention that because about a decade ago, maybe longer, there was a cap on the amount of money that could be paid to coaches and that was challenged and it was found to be a violation of antitrust laws. And that has led to where we are today where schools compete on all of these different things. There’s a whole package of student athletes who are looking at Alabama or Auburn or Stanford are looking at and some of that is coach. If you’ve got Nick Saban, that’s really cool, that guy on TV all the time, he’s a great coach, and he properly gets paid a good amount of money in a competitive coaching, hiring atmosphere. And schools compete on stadiums and facilities, the LSU Tigers have a tiger pen. When kids are coming to see the school, they can take a picture of them and say, “Oh my gosh, this is so cool, I’m going to school with a tiger.” And that’s kind of an efficient system that’s been built up, because what they really are doing is competing for students, and normally they could do that and our model is with some amount of share with the revenues that are coming in from contracts. I think Scott kind of hit the nail on the head when he was talking about all the money that’s in the system and this case is kind of bringing attention to that. The college football playoffs just started last year, and I believe in the first year, each different contract ends up paying $610 million, and that’s all new money. That’s money that didn’t exist in the system just a year ago. So I think people are starting to wake up and say, “Hey, maybe this isn’t like back in the day when people were wearing letterman sweaters and going to all their classes and spending some small number of hours on practice and football games and playing schools that are in the same town.” Kids are flying across the country on a Wednesday or a Thursday for a basketball game. The system has changed dramatically, and I think the more attention that can be brought to that, whether it’s by litigation, whether it’s by Kain Colter’s unionization efforts, I think the better for some kind of systematic change for student athletes just so that they are not being exploited and that they can be equal members of the system that’s being built on their backs.
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Scott Schneider: I thought there were some contradictions in the opinion. But let me say one thing, before we went to break you asked this question and I wanted to address it. And I also want to take issue with Swathi saying Nick Saban is a great coach. As an LSU fan, I think he’s a terrible coach, just pointing that out.
Swathi Bojedla: Haha, but you do like that tiger though.
Scott Schneider: Yes. You asked the question about now, are schools in essence required to make these costs of attendance payments and the answer is no. What the Ninth Circuit came back and said is the NCAA as a matter of antitrust law, can’t, in essence, bar schools from making those payments. But schools now have discretion as to whether or not they want to make those payments or not. Some schools I imagine in smaller conferences that don’t have the athletics budgets, for instance, that the University of Alabama might have or the LSU might have, might make the decision that financially, we can’t afford to make that sort of payment. The Jenkins lawsuit, the plaintiffs in that case had prevailed. You might see a model where if you’re in a big five conference and you’re getting tons of money from TV revenue and all of that sort of stuff, the playing field is going to be different for those sorts of schools, assuming that all the restrictions go away then for lesser tiered schools and smaller conferences. In terms of the Ninth Circuit division and if they’re trying to send a message, I don’t know. There’s a part of me that looks at the long play here and I go slowly but surely, you start to get the sense that traditional NCAA model is being chipped away. And the Ninth Circuit decision can be viewed, I thin, in that vain that here, again, is another chip at that boulder. The other way of looking at it is at least the two person majority, to me, was in part fairly strident about saying amateurism and that these student athletes aren’t getting paid is precisely what distinguishes college athletics from, say, minor league baseball or minor league football. We think this is an important principle no one has demonstrated to us. The NCAA apparently provided some evidence suggesting that to pay athletes would substantially diminish the internet in college athletics, and at least from the Ninth Circuit’s perspective, they said no one has provided us with any evidence contradicted that or suggesting otherwise. So in terms of sending a message, it’s one of those two. We’re going to continue to chip away at this and fundamentally change how this system works or it was really in affirmance of the amateurism model.
Swathi Bojedla: I can only hope that they would. I think that from what I read, for example, Steve Spurrier has said in the past, “I wish that I could give these kids some money. It’s kind of ridiculous that I’m making this much money and these kids can’t go out and get a pizza at night.” I think there is some appetite amongst coaches and some administrators to find a way to share some of this money. I can’t imagine that anybody’s in this system and sees how much money’s coming through it would truly, if they thought about it, have an issue with athletes getting – for example, $5,000 a year in deferred compensation. That’s not a huge amount of money for a school to pay when they’re paying their coches multi millions of dollars a year and their assistant coaches are making $200,000 to $400,000 a year. If it’s not done through litigation, I do very strongly believe that the current system as it’s constituted cannot last that much longer. Just because when you have this much money constantly coming into the system, and as I mentioned, another $610 million a year. Where is that money going to go? Eventually, it has to trickle down to the kids. I just can’t see a way where it could not eventually.
Scott Schneider: I’d like to just jump in on that briefly. If I see areas where I see a little bit of flexibility from the NCAA, it’s in two areas. Number one, it is in giving big five conference schools more and more autonomy to basically set their own rules outside of the kind of traditional NCAA structure. There seems to be a lot of pushback from the conferences and the member institutions and big five conferences to say, in essence, we want to have our own set of rules. And frankly, there’s more money involved with those big five conferences than for the overwhelming majority of college athletics programs. I’ve thought of those programs, that’s number one. Number two, and I might be reading way too much into this, but set aside whether or not institutions should be paying over and above tuition or cost of attendance. Should they, for instance, we have a football player in Baton Rouge, Leonard Fournette. He’s the greatest football player in the country; I love him to death, he’s a New Orleans kid. I’m going to takes a wild guess that if he could, if NCAA regulations allowed him to, he could probably make a ton of money doing promotions. Not getting paid directly from the university, but selling, in essence, his name, image and license and profiting off of that. I don’t know if for sure – and I would hate to speak for the NCAA – but I have to think there’s some talk within the NCAA and member institutions about should we allow this. Recently, it sort of bubbled up a little bit when Fournette comes out and he says, “I want to sell my jersey to benefit South Carolina flood victims,” and the NCAA came out and said, “Yes, we’ll allow you to do that.” It also sort of came up in the Johnny Manziel context when he was signing autographs for money and was only suspended by the NCAA for a half of a game. But if I had to take a guess, those are the areas where if you’re trying to figure out reform from within where I go there’s real potential.
Swathi Bojedla: I think you’re right, Scott, because that’s the way to grow the pie. I’m talking about it on one side of the case where there’s a lot of money on the pie that can easily be distributed to the athletes. And what you’re saying and I completely agree with is that there’s so much money out there that could be going to students that’s going to nobody right now. And players like Leonard Fournette, for example, maybe they’d want to stay for longer if they could make some money. I think I saw something about Johnny Manziel saying something like if he could have made some money on the side selling his autographs, he may have stayed an extra year. And that benefits everybody. That benefits the school to have their star player staying in longer and they also make a decision that’s entirely based on money, and it helps the kids out. If they want to stay in college and make a little money on the side, that would be great for them. What the NCAA rules do now is when somebody like Leonard Fournette – and maybe he’s not the best example because he will probably have a lot of marketing power for a long time, but maybe a smaller time player – this is the prime of their money making careers. A lot of them won’t make it to the NFL. And to allow them to capitalize on that at the time where they’re most marketable is a great compromise position for the NCAA. I think you’re absolutely right, Scott that that should, if cooler heads prevail to the next frontier.
Scott Schneider: There are a number of principal positions, but I’ll talk about just the economic position. The way we distinguish our product from other athletics products out there is these are kids who are foremost students and representatives of particular institutions and nor mercenaries. That’s part of the appeal of the product and why people are interested in going to games and why people are interested in watching this on TV and that from a product perspective, if you start making payments from this, you diminish in some tangible way the product. The example that I think they would probably point to is if you make this minor league baseball, or minor league football, there is a market for that. It’s not lucrative, it’s not well attended, and no one seems to really care about it. So from the market standpoint, the NCAA is basically taking the position, I think, that this is an inherent part of what we’re offering. This is part of the allure of this product is that these people who are participating, the athletes who are participating are students. They are not employees, they’re not mercenaries, and they have to go to school and they get to go to school for free but they don’t get paid. And to change that would fundamentally change the market.
Swathi Bojedla: I think that’s interesting because the question you’ve asked is basically exactly what the O’Bannon trial is about. This is exactly the issue we tried. Is amateurism tied to consumer demand? Is it a valid procompetitive defense? And after a three week bench trial with expert testimony from both sides, Judge Wilken found no, it is not. And at the level of zero dollars, amateurism is not a valid procompetitive justification for the restraint. You mentioned, Scott, a little bit about minor league, and that is an argument that the NCAA makes a lot. But there are analogistic examples in the past. For example, when the olympics decided to allow non amateurs to compete, everybody had doom and gloom predictions. Nobody’s going to watch the olympics anymore, it’s going to be awful. They did polling and everybody said, “I’m going to stop watching the olympics.” We had this testimony on a trial and the ship has only gone up. It’s hard to gage exactly what consumer behavior is going to be. But if you look at what’s happened in the past, people say things in polls that they don’t mean. It’s hard if you’re an LSU fan to say, “I’m going to stop watching LSU because I’m really mad that the players are getting – for example – the $20,000 in deferred compensation.” I think at trial, the University of Texas, women’s athletic director Christine Plonsky said, “If the University of Texas had a tiddlywinks team, people would watch that because it’s the University of Texas.” I think a lot of it is branding and geographical affiliation and all of that sort of thing that there’s a really special connection that people have to college sports apart from what’s called amateurism by the NCAA.
Scott Schneider: I think it’s a fascinating issue. Clearly, there will be significant developments over the next several years. It will be interesting. I know the O’Bannon plaintiffs applied for an unbonked hearing from the full Ninth Circuit. It will be interesting to see if that’s granted. I also know that of all the Circuits, the Supreme Court takes a particular interest in cases that come from the Ninth Circuit. Maybe there’s a chance the Supreme Court takes this one up. In terms of my contact information, the best place to get me if you want to follow me is on Twitter, and I am @EdLawDude on Twitter. And you can also reach out to me via email at [email protected].
Swathi Bojedla: This is a very contensive subject on both sides and I have always been strongly on the side that I am on and hoping that in the next couple of years, the public name will continue to turn and continue to see that the current system can be sustained at the level it’s at now. My hope is that we’ll find a way, whether it’s through litigation, whether it’s through mediated resolution, whether it’s through smart people on both sides just making the right decision for kids and for the schools that we’ll get past this dispute and find a way to let student athletes get a portion of these huge amounts of revenue that are coming to the system and we’ll find a fair way to deal with all of this. If you want to get ahold of me, you can reach me by email. That’s [email protected] and our website is Hausfeld.com.
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