Last week was perhaps the most transformative week in college sports law in decades, if not ever.
You might not be aware of one reason why.
Last Thursday, U.S. District Judge Claudia Wilken mostly denied NCAA and Power Five conferences’ motions to dismiss two lawsuits brought against them by two current players and one former one. Arizona State swimmer Grant House and Oregon basketball player Sedona Prince are joined in one case, while former Illinois football player Tymir Oliver has brought the other.
The two cases challenge the denial of pay for college players’ appearing in TV game broadcasts and could lead to current and recent college athletes receiving money they would have earned had NIL been allowed. The three players seek certification of classes on behalf of different groups of current and former Division I college athletes who have competed since 2016. Judge Wilken has permitted the two cases to continue but has dismissed Oliver’s claim for injunctive relief since he is no longer a current player (though he can continue to seek monetary damages).
This development was understandably overshadowed by the sacking of two pillars of amateurism.
First, on Monday, the U.S. Supreme Court unanimously ruled against the NCAA in the Shawne Alston case. The Court found the NCAA and member schools illegally capped education-related expenses for college athletes. In doing so, the Court voided time-honored NCAA legal arguments for preferential treatment under federal antitrust law.
A few days later, the NCAA largely capitulated on name, image and likeness. After long opposing the right of athletes to sign endorsement deals and hire agents, the NCAA instructed schools to invent their own NIL policies or follow state NIL statutes, with minimal NCAA interference.
Going forward, the NCAA will be restrained in limiting how much money schools can pay athletes for education-related benefits, while Title IX should ensure those benefits aren’t supplied in ways that discriminate against female athletes. Meanwhile, college athletes will soon be able to sign endorsement, sponsorship and influencing contracts with third parties, possibly including video game publishers.
On the heels of all of this, House could topple other pillars of amateurism while directly drawing support from the Alston ruling and the NCAA’s “NIL Interim Policy.”
Understanding House v. NCAA
The core argument of the three players is fairly straightforward. They claim the NCAA and member schools, as well as the Power 5 conferences, have violated Section I of the Sherman Act and been unjustly enriched. Section I prohibits competing businesses (including colleges) from colluding in ways that unreasonably restrain competition. The NCAA was found to have violated Section I in both O’Bannon v. NCAA and NCAA v. Alston.
Here, the alleged illegal act is a conspiracy, through NCAA amateurism rules, to prohibit college athletes from using their NIL to sign endorsement deals, promote their own business ventures, engage in self-employment or obtain other benefits from the commercialization of their identities.
To that end, the players insist that NCAA rules unlawfully preclude financial benefit from “social media posts, personal brands apparel sponsorships” and similar opportunities tied to NIL. The trio also avers illegal conduct on the part of schools when they use players’ NIL in advertisements and social media posts. Restrictions on NIL compensation, as the players see it, illegally price fix the amount college athletes can be paid for NIL to $0 and unlawfully foreclose NIL opportunities.
The NCAA has long maintained that prohibitions on athlete compensation are crucial to sustaining consumer demand in college sports. In the absence of those prohibitions, college athletes could morph into quasi-pro athletes of an inferior quality to those who play in the major pro leagues. College fans, in turn, would tune out, finding college players as resembling minor leaguers. Such a dire outcome would undermine the entire college sports industry, thus financially harming member schools and leading to fewer athletic opportunities for students. To be clear, those arguments failed in Ed O’Bannon’s case and failed in Alston. Data from fans’ surveys didn’t persuade the judges. Wilken was notably the district court judge in both O’Bannon and Alston.
Represented by Steve Berman and other counsel from the Hagens Berman Sobol Shapiro and the Spector Roseman & Kodroff law firms, House, Prince and Oliver reject NCAA arguments that NIL prohibitions are necessary for sustaining consumer demand. They also contend the NCAA doesn’t seem to view NIL restrictions as necessary.
To wit: Since 2015, the NCAA has granted more than 200 waivers for players to earn from their NIL. WNBA player Arike Ogunbowale, who in 2018 starred for Notre Dame, was one such recipient. The NCAA allowed her to compete on ABC’s Dancing with the Stars and accept as much as $325,000 had she won. Demand for college sports hasn’t dropped in recent years, in spite of Ogunbowale and some other players, but not most others, enjoying NIL opportunities.
The trio also attack the financial consequences of being denied a chance to enter into group licensing. Such licensing—which is currently banned by the NCAA, though apparently permitted under the NCAA’s Interim Guidance Policy that could take effect on July 1—could occur through a trade association or a 501(c)(4) nonprofit. An entity of that vein could bargain with a TV network or video game publisher on behalf of athletes without those athletes needing to be classified as employees.
Here, the trio demand that football and men’s and women’s basketball players share telecast group licensing revenue from the airing of football and men’s and women’s basketball games. In arguments for case dismissal, the NCAA maintained the players lack publicity rights in live or archived broadcasts.
Judge Wilken wasn’t persuaded.
She concluded there is a “reasonable inference” that without players being denied TV revenue, “competition among schools and conferences would increase . . . and this increased competition would incentivize schools and conferences to share their broadcasting and other commercial revenue with student-athletes even if the student-athletes lacked publicity rights in broadcasts.” In other words, if schools and conferences could compete with one another by sharing TV revenue with players, Judge Wilken sees a potentially more competitive marketplace.
The potential financial repercussions for the NCAA, conferences and schools if they owe money to players who appeared in televised games—just the NFL, NBA, MLB and NHL share TV revenue with their players—could prove massive. Those broadcasts have generated billions of dollars.
Three important notes of caution
First, the NCAA faced long odds in persuading Judge Wilken to dismiss the two cases. Likewise, her unwillingness to grant the denials should not be construed as the trio “winning” or assurance that they will win. Judges grant motions to dismiss only when the plaintiff’s complaint fails to provide the defendant with fair notice of a legally cognizable claim. That is a fairly low bar for the plaintiff to meet, especially in fact-intensive cases (which often describes antitrust litigation) where empirical analysis and thorough fact-finding are frequently needed.
Second, this litigation, which began last year, could last many years. Both O’Bannon and Alston took more than seven years. House is set for a jury trial in Oakland on Jan. 24, 2024; any verdict could then be appealed, triggering what would likely be multi-year appellate process. Long before a trial, there would be hearings and rulings on whether to certify the putative classes and other topics. A motion for class certification is scheduled for Aug. 31, 2022. Business litigation, particularly federal antitrust litigation, often proceeds at a glacial pace.
Third, the potential fallout of House, like other cases against the NCAA, is not neatly predictable. Antitrust law is especially complex, while NIL draws on much-debated principles within intellectual property law. Judges have interpreted applications of antitrust and IP law to NCAA rules differently and issued varying remedies.
Why the NCAA should be very worried about House
First, the trio can draw from the Supreme Court’s Alston ruling to bolster legal arguments. While the Alston ruling, as authored by Justice Neil Gorsuch, doesn’t address the legality of NCAA rules limiting athletics-related benefits, it makes clear there is skepticism among the justices towards NCAA athlete restrictions—the same restrictions that Justice Brett Kavanaugh blasted in his concurring opinion.
Second, through its newfound “Interim NIL Policy,” the NCAA may have unwittingly boxed itself into a difficult corner to challenge House.
As Sportico detailed on Saturday, the policy contains relatively few restrictions on NIL. Assuming the guidance goes into effect on July 1, remains in place for months, and college sports continues without major disruption or appreciable diminishment of fan interest, House’s attorneys could logically argue that outcome proves their point: There is a less restrictive model for college sports wherein athletes can sign NIL deals and fans don’t tune out. If that proves correct, then it would bolster the trio’s legal argument that players should be compensated for the past denial of their NIL.
In short, if you thought last week was interesting in college sports and the law, stay tuned.