College Players Win Antitrust Suit Against NCAA

The U.S. District Court for the Northern District of California ordered the National Collegiate Athletic Association (NCAA) to pay top college football and basketball players the full cost of their education, plus up to $5,000 a year in broadcast and video game licensing in finding in favor of the athletes in their class action antitrust suit. O'Bannon v. National Collegiate Athletic Association, 09-3329.

The class was led by former UCLA basketball star Edward O'Bannon Jr. and included professional legends Oscar Robertson and Bill Russell. They challenged rules that prevent student-athletes from receiving a share of the revenue that the NCAA and its member schools earn from the sale of their names, images and likenesses. The NCAA settled a similar claim ' that player likenesses were broadcast without their consent ' for $20 million just before trial. Video-game maker Electronic Arts Inc. previously settled its portion of both cases for $40 million.

In the latest stage of the dispute, Northern District Judge Claudia Wilken, who presided over a bench trial in June, ruled “that the NCAA has the power ' and exercises that power ' to fix prices and restrain competition in the college education market that plaintiffs have identified.”

“The NCAA has revised its rules governing student-athlete compensation numerous times over the years, sometimes in significant and contradictory ways,” the judge wrote. “Rather than evincing the association's adherence to a set of core principles, this history documents how malleable the NCAA's definition of amateurism has been since its founding.”

District Judge Wilken entered an injunction ordering the NCAA to increase men's football and basketball scholarships at the largest colleges to the full cost of attending school ' about $3,000 a year more than the value of a scholarship now. She also ordered the NCAA to permit schools to pay those athletes up to $5,000 in licensing revenue from television and video game contracts, while requiring that players on each team be compensated equally. The money will be held in trust until after students graduate.

“Schools may offer lower amounts of deferred compensation if they choose but may not unlawfully conspire with each another in setting these amounts,” Judge Wilken wrote. She also turned down the athletes' request that they be allowed to earn endorsement money during their college careers.

Some 33 law firms led by Michael Hausfeld of Washington DC's Hausfeld entered appearances in the five-year-old case.

The NCAA was represented by firms including Munger Tolles & Olson and Schiff Hardin. The NCAA argued that the rules were reasonably related to preserving its tradition of amateur competition and maintaining competitive balance, among other things.

Judge Wilken found those arguments unpersuasive, in part because the NCAA allows for professional earnings in other sports, such as tennis. Rather than promote balance, its bylaws favor schools with the largest budgets for athletics, she concluded. Restrictions on student compensation “lead many schools simply to spend larger portions of their athletic budgets on coaching, recruiting, and training facilities,” the judge wrote.

Hausfeld claims, “The injunction will affect athletes at the college level from now until forever. It marks a significant and permanent change in that enterprise.”

Scott Graham is a Reporter for The Recorder, a San Francisco-based ALM sibling publication of Entertainment Law & Finance. Jan Wolfe contributed to this report.

The U.S. District Court for the Northern District of California ordered the National Collegiate Athletic Association (NCAA) to pay top college football and basketball players the full cost of their education, plus up to $5,000 a year in broadcast and video game licensing in finding in favor of the athletes in their class action antitrust suit. O'Bannon v. National Collegiate Athletic Association, 09-3329.

The class was led by former UCLA basketball star Edward O'Bannon Jr. and included professional legends Oscar Robertson and Bill Russell. They challenged rules that prevent student-athletes from receiving a share of the revenue that the NCAA and its member schools earn from the sale of their names, images and likenesses. The NCAA settled a similar claim ' that player likenesses were broadcast without their consent ' for $20 million just before trial. Video-game maker Electronic Arts Inc. previously settled its portion of both cases for $40 million.

In the latest stage of the dispute, Northern District Judge Claudia Wilken, who presided over a bench trial in June, ruled “that the NCAA has the power ' and exercises that power ' to fix prices and restrain competition in the college education market that plaintiffs have identified.”

“The NCAA has revised its rules governing student-athlete compensation numerous times over the years, sometimes in significant and contradictory ways,” the judge wrote. “Rather than evincing the association's adherence to a set of core principles, this history documents how malleable the NCAA's definition of amateurism has been since its founding.”

District Judge Wilken entered an injunction ordering the NCAA to increase men's football and basketball scholarships at the largest colleges to the full cost of attending school ' about $3,000 a year more than the value of a scholarship now. She also ordered the NCAA to permit schools to pay those athletes up to $5,000 in licensing revenue from television and video game contracts, while requiring that players on each team be compensated equally. The money will be held in trust until after students graduate.

“Schools may offer lower amounts of deferred compensation if they choose but may not unlawfully conspire with each another in setting these amounts,” Judge Wilken wrote. She also turned down the athletes' request that they be allowed to earn endorsement money during their college careers.

Some 33 law firms led by Michael Hausfeld of Washington DC's Hausfeld entered appearances in the five-year-old case.

The NCAA was represented by firms including Munger Tolles & Olson and Schiff Hardin. The NCAA argued that the rules were reasonably related to preserving its tradition of amateur competition and maintaining competitive balance, among other things.

Judge Wilken found those arguments unpersuasive, in part because the NCAA allows for professional earnings in other sports, such as tennis. Rather than promote balance, its bylaws favor schools with the largest budgets for athletics, she concluded. Restrictions on student compensation “lead many schools simply to spend larger portions of their athletic budgets on coaching, recruiting, and training facilities,” the judge wrote.

Hausfeld claims, “The injunction will affect athletes at the college level from now until forever. It marks a significant and permanent change in that enterprise.”

Scott Graham is a Reporter for The Recorder, a San Francisco-based ALM sibling publication of Entertainment Law & Finance. Jan Wolfe contributed to this report.