The Supreme Court of the United States has denied both the NCAA’s and plaintiffs’ petitions for certiorari in the O’Bannon case.  The parties had petitioned for review of the United States Court of Appeals for the Ninth Circuit’s decision issued in September 2015. In that decision, the Ninth Circuit sided with the NCAA by vacating that portion of the District Court’s decision that would have required the NCAA to allow member institutions to pay limited deferred compensation to student-athletes for the use of their names, images and likenesses. At the same time, the Ninth Circuit also partly favored plaintiffs by upholding that part of the District Court’s ruling that enjoined the NCAA from enforcing its rules precluding member institutions from providing athletic scholarships up to the full cost of attendance. The Supreme Court’s denial, which signifies only that it declined to review the case and not that it agreed with the Ninth Circuit’s decision, means that the Ninth Circuit’s decision will stand unchanged.

On March 15, 2016, plaintiffs in the O’Bannon case sought U.S. Supreme Court review of the United States Court of Appeals for the Ninth Circuit’s decision issued in September 2015.  In that decision, the Ninth Circuit sided with the NCAA by vacating that portion of the District Court’s ruling that would have required the NCAA to allow member institutions to pay limited deferred compensation to student-athletes for the use of their names, images and likenesses. The Ninth Circuit’s decision did not wholly favor the NCAA, however, as it also upheld that part of the District Court’s ruling that enjoined the NCAA from enforcing its rules precluding member institutions from providing athletic scholarships up to the full cost of attendance. Reports indicate that the NCAA had earlier requested an extension of time to file its own petition to seek U.S. Supreme Court review and that it continues to consider this option following the O’Bannon plaintiffs’ request.

Last week, a three-judge panel for the United States Court of Appeals for the Ninth Circuit voted 2-1 to deny the O’Bannon plaintiffs’ petition for a rehearing en banc of the Ninth Circuit’s September 30, 2015 decision on the NCAA’s appeal of the District Court’s 2014 decision.  On appeal, the Ninth Circuit had upheld that part of the District Court’s ruling which enjoined the NCAA from enforcing its rules precluding member institutions from providing athletic scholarships up to the full cost of attendance, but disagreed with that part of the District Court’s decision which would have required the NCAA to permit member institutions to pay deferred compensation to student-athletes in an amount up to $5,000 per year for the use of their names, images and likenesses.  While the parties’ next steps in the case are presently unknown, both the O’Bannon plaintiffs and the NCAA could potentially seek U.S. Supreme Court review of the Ninth Circuit’s decision.  

The United States Court of Appeals for the Ninth Circuit issued its highly anticipated decision in the O’Bannon case on September 30, 2015. This case was an appeal of the United States District Court for the Northern District of California’s decision finding that certain NCAA rules were an unlawful restraint of trade in violation of federal antitrust law. Specifically, the District Court issued a permanent injunction prohibiting the NCAA from enforcing rules regarding scholarship caps, and requiring the NCAA to allow member schools to pay deferred compensation to certain student-athletes of up to $5,000 per year of eligibility to compensate them for revenues generated from the use of their names, images and likenesses. The Court of Appeals affirmed the portion of the District Court’s decision regarding scholarship caps and vacated the portion pertaining to deferred compensation. In reaching its decision, the Court of Appeals found that while the NCAA rules in question were procompetitive, they were not exempt from antitrust scrutiny, and were subject to antitrust law’s “Rule of Reason” test. Using this test, the Court of Appeals agreed with the District Court that the plaintiffs had demonstrated that the NCAA’s amateurism rules had an anticompetitive effect on the college education market. The analysis then turned to the procompetitive justifications for the amateurism rules posited by the NCAA. The Court of Appeals accepted two of the NCAA’s four proffered justifications as identified by the District Court: “integrating academics with athletics” and “preserving the popularity of the NCAA’s product by promoting its current understanding of amateurism.” The Court of Appeals next observed that not all of the NCAA’s compensation rules that restrict the market are necessary to preserve the “character” of collegiate athletics, and moved to consideration of whether there were “substantially less restrictive alternatives” to the NCAA’s compensation rules at issue in this case. The Court of Appeals agreed with the District Court that permitting institutions to set the grant-in-aid cap at student-athletes’ full cost of attendance was a less restrictive alternative to the NCAA’s current restrictions on compensation. In so doing, the Court of Appeals observed that the NCAA’s current rule “has no relation whatsoever to the procompetitive purposes of the NCAA: by the NCAA’s own standards, student-athletes remain amateurs as long as any money paid to them goes to cover legitimate educational expenses.” However, the Court of Appeals disagreed with the District Court regarding the payment of compensation to student-athletes for the use of their names, images and likenesses. According to the Court of Appeals, when the District Court found “that paying student-athletes would promote amateurism as effectively as not paying them,” the District Court “ignored that not paying student-athletes is precisely what makes them amateurs.” (Emphasis in original). The Court of Appeals continued:

The difference between offering student-athletes education-related compensation and offering them cash sums untethered to educational expenses is not minor; it is a quantum leap. Once that line is crossed, we see no basis for returning to a rule of amateurism and no defined stopping point…

To summarize, the Court of Appeals’ decision permits the offering of grants-in-aid up to the full cost of attendance (which, notably, had already been approved by the so-called “autonomy conferences” and was scheduled to take effect on August 1, 2015), but continues to permit the NCAA to enforce its rules prohibiting (among other things) the payment of deferred compensation to student-athletes in the form contemplated by the District Court. At this point, either party could seek review of the decision by the full Court of Appeals (as this decision was rendered by a three judge panel) or seek to appeal to the U.S. Supreme Court. The Court of Appeals’ decision is important in that it makes clear that the NCAA’s rules are not exempt from scrutiny under antitrust law, and specifically a “Rule of Reason” analysis. However, the decision regarding deferred compensation signifies a potentially important victory for the NCAA’s tradition and principles of amateurism, and may prove beneficial to the NCAA in its defense of Jenkins v. NCAA and other similar lawsuits. Elizabeth D’Agostino, a 2015 graduate of Albany Law School who is awaiting admission to the New York State bar, contributed to this blog post.

On September 30, 2015, the United States Court of Appeals for the Ninth Circuit issued its highly anticipated opinion on the NCAA’s appeal of the District Court’s decision in the O’Bannon case (a summary of the District Court’s decision is available here). After a lengthy discussion in which the Ninth Circuit ruled that the NCAA’s compensation rules are subject to scrutiny under antitrust laws, the Ninth Circuit affirmed in part and reversed in part the District Court’s decision. The Ninth Circuit upheld that part of the District Court’s ruling which enjoined the NCAA from enforcing its rules precluding member institutions from providing athletic scholarships up to the full cost of attendance. The Ninth Circuit reasoned that this constituted a substantially less restrictive alternative to the NCAA’s current compensation rules because this would have virtually no impact on amateurism. The Ninth Circuit disagreed, however, with that part of the District Court’s decision which would have required the NCAA to permit member institutions to pay deferred compensation to student-athletes in an amount up to $5,000 per year for the use of their names, images and likenesses. The Ninth Circuit was particularly critical of the District Court’s decision here, noting that the District Court ignored the fact that not compensating student-athletes is precisely what renders them amateurs. As a result of the Ninth Circuit’s ruling, member institutions may provide FBS football and Division I basketball recruits with grants-in-aid up to the full cost of attendance, but remain prohibited by NCAA rules from providing the $5,000 per year deferred compensation contemplated by the District Court’s decision. A more detailed summary of the Ninth Circuit’s decision will be published on Bond’s Higher Education Law Report in the coming days.

On July 31, 2015, the United States Court of Appeals for the Ninth Circuit granted the NCAA’s request to stay the injunctions ordered by the District Court in the O’Bannon v. NCAA case. In August 2014, the District Court enjoined the NCAA from enforcing its rules that prohibited member schools and conferences from offering FBS football or Division I basketball recruits a limited share of the revenues generated from the use of their names, images, and likenesses and from offering to deposit a limited share of licensing revenue in trust for such student-athletes. As a result of the stay, the NCAA’s current rules may continue to be enforced until such time as the Ninth Circuit rules on the NCAA’s appeal of the District Court’s decision.

Bond attorneys Mike Glazier and Paul Avery authored an article discussing the United States District Court for the Northern District of California’s decision in O’Bannon v. NCAA which was published on October 6, 2014 as a NACUANOTE by the National Association of College and University Attorneys.  The article, entitled O’Bannon v. NCAA: The District Court Decision, can be viewed here.

Last Thursday, the NCAA announced that it had filed a notice of appeal of Judge Claudia Wilken’s August 8, 2014 decision in O'Bannon v. National Collegiate Athletic Association et al.  The appeal was widely anticipated as the decision has been broadly viewed as a major setback for the NCAA.  Although this is certainly true insofar as the court concluded that current NCAA rules represent a violation of federal antitrust law, the decision actually somewhat measured and contained some content beneficial to the NCAA, including (a) an acknowledgement of the NCAA’s interest in limiting payments to student-athletes while enrolled in order to promote the educational goal of integrating student-athletes into their respective campus communities, (b) an acknowledgement that limiting payments to student-athletes might help the NCAA maintain viewer interest in, and demand for, broadcasts of intercollegiate athletic contests, (c) an acknowledgement that permitting student-athletes to endorse commercial products would undermine the NCAA’s goal of preventing commercial exploitation of student-athletes, and (d) authorization for the NCAA to cap the amount of compensation paid by institutions to student-athletes for use of their likenesses.  These aspects of the O’Bannon decision could be helpful to the NCAA, among other things in the context of Jenkins et al. v. National Collegiate Athletic Association et al. (the so-called Kessler litigation), in which the plaintiffs are expected to argue that the NCAA cannot limit student-athlete compensation at the cost of attendance.  As a result, the NCAA’s decision to appeal is, on some level, interesting from a strategic standpoint. In announcing its appeal, the NCAA made specific reference to a passage in Judge Wilken’s decision suggesting that reform of NCAA principles governing student-athlete compensation would be best achieved outside the courtroom.  It is possible that discussion of such reforms may occur against the backdrop of the NCAA’s appeal and in advance of the decision becoming effective for the 2015-2016 academic year, though the pendency of Jenkins and other litigation will necessarily pose challenges in this regard.

The United States District Court for the Northern District of California issued its highly anticipated decision in the Ed O’Bannon case on August 8, 2014.  The Court ruled in favor of the plaintiffs, a class consisting of current and former college student-athletes who filed suit in 2009, concluding that the NCAA’s rules which prohibit payment to student-athletes are an unreasonable restraint on trade, and thus violate federal antitrust law.  In so finding, the Court issued injunctions prohibiting the NCAA from enforcing certain of its rules:

 …the Court will enjoin the NCAA from enforcing any rules or bylaws that would prohibit its member schools and conferences from offering their FBS football or Division I basketball recruits a limited share of the revenues generated from the use of their names, images, and likenesses in addition to a full grant-in-aid. The injunction will not preclude the NCAA from implementing rules capping the amount of compensation that may be paid to student-athletes while they are enrolled in school; however, the NCAA will not be permitted to set this cap below the cost of attendance…

 The injunction will also prohibit the NCAA from enforcing any rules to prevent its member schools and conferences from offering to deposit a limited share of licensing revenue in trust for their FBS football and Division I basketball recruits, payable when they leave school or their eligibility expires. Although the injunction will permit the NCAA to set a cap on the amount of money that may be held in trust, it will prohibit the NCAA from setting a cap of less than five thousand dollars (in 2014 dollars) for every year that the student-athlete remains academically eligible to compete.

Notably, the injunction does not preclude the NCAA from continuing to enforce its other existing rules, including those prohibiting student-athletes from endorsing commercial products. The Court’s decision, which came one day after the NCAA voted to afford schools in its major conferences additional autonomy to, among other things, increase the value of scholarships, will not affect prospective student-athletes who enroll prior to July 1, 2016.  Yesterday, the NCAA filed a request with the Court seeking clarification regarding the effective date.  The NCAA has announced that it will appeal the decision. Among the multitude of questions raised by this decision are (1) the likelihood and prospects of future antitrust challenges against the NCAA’s other amateurism based rules, (2) how the potential compensation of student-athletes will impact recruiting and competitive balance in college athletics, (3) how any significant compensation of student-athletes will impact athletic department and non-revenue generating sports’ budgets and, potentially, threaten the continued existence of non-revenue generating sports, and (4) the Title IX and other regulatory impact of any resulting changes in athletic department offerings.  Only time will tell how these and others specific questions stemming from this decision will be answered, but at this point it is clear that the game has changed for the NCAA and its longstanding principles of amateurism.