Court Rules Against NCAA in O’Bannon Case

August 12, 2014

By: Paul J. Avery

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.