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Federal Court Hands NCAA A Setback Allowing Some Payments to College Athletes

Posted on Tue, Sep 02, 2014 @ 02:51 PM

by Jack B. HarrisonJack B. Harrison

In a victory for student-athletes and in a setback for the NCAA, the United States District Court for the Northern District of California recently held that NCAA rules prohibiting major college football and men’s basketball student-athletes from receiving compensation for the use of their names, images and likenesses in video games and broadcasts violated federal antitrust laws.  Judge Claudia Wilken’s ninety-nine page opinion followed a three week trial which took place in June of this year. 

In the case, the plaintiffs, a group of athletes led by former UCLA basketball player Ed O’Bannon, alleged that the NCAA violated federal antitrust laws by colluding with universities and with athletic conferences to ensure that student-athletes could not receive any share of revenues that resulted from the use of their images in video games and broadcasts.  While the plaintiffs waived their right to seek damages in the case in order to be able to have the case heard by a judge, rather than a jury, Judge Wilken issued an injunction ordering the NCAA to cease enforcing rules that prohibited student-athletes from receiving funds that resulted from the use of their names and images.  In ordering the injunction, Judge Wilken specifically held that “[t]he challenged NCAA rules unreasonably restrain trade in a market for certain educational and athletic opportunities offered by NCAA Division I schools.”

In her ruling, Judge Wilken did hold that the NCAA was permitted to establish a cap on funds that could be paid to student athletes for the use of their names and images.  However, she indicated that the NCAA must permit at least $5,000 per student-athlete for every year of competition at major football and basketball schools.  Under the terms of the injunction issued by Judge Wilken, these funds could be paid into a trust by the school for every year that a student-athlete remains academically eligible to compete.  In practical terms, this would mean that student-athletes at major football and basketball schools could potentially receive no less than $20,000 when they leave school, so long as they were academically eligible for four years.  Judge Wilken indicated that she established the $5,000 cap in order to address fears expressed by witnesses on behalf of the NCAA who testified about the economic result of allowing large payments to student-athletes.  As Judge Wilken stated in her opinion, “the NCAA’s witnesses stated their concerns about student-athlete compensation would be minimized or negated if compensation was capped at a few thousand dollars per year.”

In further limiting the scope of her decision, Judge Wilken refused to hold that student-athletes should be allowed to receive funds for endorsing specific commercial products.  In so holding, Judge Wilken stated, “[a]llowing student-athletes to endorse commercial products would undermine the efforts of both the NCAA and its member schools to protect against the ‘commercial exploitation’ of student-athletes.”

Judge Wilken specifically held that her decision would not have an immediate impact on colleges and student-athletes.  The decision indicates that the court’s ruling regarding student-athletes receiving funds for the use of their names and images in video games and broadcasts would not take effect until the start of the next football and basketball recruiting period, having no effect on prospective football or basketball recruits before July 1, 2016.

While this decision would seem to erode the strong control that the NCAA has historically exercised over both schools and student-athletes, it is likely that the NCAA will appeal Judge Wilken’s ruling.  However, this decision represents a continued effort by student-athletes to be compensated in some fashion for their playing efforts, particularly when the schools for which they are playing are reaping millions of dollars in revenue from those athletic programs.  These legal developments should be of keen interest to all fans of college sports.  We will provide updates as other related developments occur.

Tags: Federal Court, NCAA