In re Student-Athlete Name & Likeness Licensing Litigation
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Judge Rules NCAA Ban on Student-Athlete Compensation Violates Antitrust Law

On Friday, August 8, 2014, the Northern District of California determined that the National Collegiate Athletic Association’s (NCAA’s) rules banning student-athletes for being compensated for the use of their names, images and likenesses violated antitrust laws.  In re Student-Athlete Name & Likeness Licensing Litigation, case number 4:90-cv-01967.  During the three week-long bench trial in June 2014, the student athletes argued that the NCAA and its member schools and conferences conspired to fix compensation for the use of athletes’ likenesses at zero.  The NCAA countered by contending that not paying athletes stopped some schools from being able to compensate students more than others, that athletes received benefits, such as an education and room and board, for playing college sports, that the rule protected these students’ amateur status, that paying athletes would cause tension with non-athlete classmates, and that fans would not watch college sports if athletes were paid.  District Judge Wilken was unpersuaded by the NCAA’s arguments.  In her ruling, Judge Wilken stated that the NCAA did not provide credible evidence that fans would abandon supporting their teams if athletes were paid.  Moreover, because schools compete for recruits with impressive facilities and highly-paid coaches, the NCAA undercut its argument that not compensating student-athletes leveled the competitive playing field between colleges.  Instead, Judge Wilken determined that without these rules, Division I basketball and Football Bowl Subdivision schools would compete for recruits’ athletic talents and licensing rights as well as compete to offer athletic and educational opportunities for students.

In entering an injunction against the NCAA, Judge Wilken suggested that NCAA member schools should increase the stipends paid to students to cover the full cost of attending college, and she also recommended that schools hold money collected from the use of students’ likenesses in a trust for the students until they graduate.  At the same time, however, she refused to allow student athletes to receive money from product endorsements.  On Monday, August 11, 2014, the NCAA asked Judge Wilken to clarify the application of her order, which stated that the injunction prohibiting the NCAA’s ban on compensating players would begin with athletes who enroll after July 1, 2016.  The NCAA requested that Judge Wilken explain whether the injunction applied to current student athletes beginning in July 2016 or whether it only applied to recruits who start college after that date.

This case originated in 2009 when two former NCAA student-athletes filed class action suits against the NCAA, Electronic Arts Inc. and Collegiate Licensing Co., alleging that these organizations profited from student-athlete likenesses on television, in video games and on merchandise while prohibiting the athletes from receiving payment.  The NCAA previously settled with plaintiffs for $20 million over the use of students’ likenesses in video games, and Electronic Arts and Collegiate Licensing also reached a settlement with both plaintiff groups for $40 million.  Both settlements received preliminary approval from Judge Wilken in July 2014.

Court Won’t Reconsider Prior Ruling in NCAA Class Action

On May 12, 2014, the National Collegiate Athletics Association (NCAA) lost its motion for leave to file a motion for reconsideration of a prior ruling, which barred the NCAA from arguing at trial that not paying student-athletes for their likenesses increased competition by raising financial support for women’s and less prominent men’s athletics.  A former NCAA basketball player originally filed a class action suit against the NCAA in 2009 in the Northern District of California, alleging that the NCAA profited from student-athlete likenesses on television and in video games while prohibiting the athletes from receiving payment.  In re Student-Athlete Name & Likeness Licensing Litigation, case number 4:90-cv-01967.  In April 2014, upon consideration of the parties’ opposing motions for summary judgment, District Judge Claudia Wilken ruled that plaintiffs were entitled to summary judgment as to the NCAA’s fourth justification for the challenged restraint – greater support for women’s and less prominent men’s sports – because this argument was not legitimately pro-competitive.  Judge Wilken first determined that the NCAA could not restrain competition in the relevant market, football and men’s basketball, to allegedly promote competition in the markets for women’s sports and less prominent men’s sports.  Second, the NCAA could financially support women’s sports and less prominent men’s sports through less restrictive means by forcing member conferences to redistribute a greater portion of profits made from football and men’s basketball to these other sports.  In moving for leave to file a motion for reconsideration, the NCAA submitted a declaration and report from an economic expert, who argued that the relevant market should be broadened to include athletes who play sports other than football and men’s basketball.  In response to the NCAA’s arguments, Wilken concluded that plaintiffs’ allegations challenged conduct with respect to football and men’s basketball, and the possibility that the challenged behavior affected student-athletes in other sports did not redefine the relevant market.  Judge Wilken thus denied the motion, reiterating that the purported pro-competitive justification did not address competition in the relevant market of football and men’s basketball.  Trial is set to begin on June 9, 2014.





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