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Antitrust UCL and Privacy

Judge Wilken Partially Grants and Denies the Parties’ Cross-Motions for Summary Judgment

Claim and Issue Preclusion

In ruling on the cross-motions for summary judgment, Judge Wilken began by rejecting Defendants’ arguments that the Grant-in-Aid Litigation was barred by the doctrines of claim or issue preclusion following the Ninth Circuit’s opinion in O’Bannon.Id.

Judge Wilken began her analysis by recognizing that, for either doctrine to apply, the Grant-in-Aid plaintiffs must be the same, or in privity with, the O’Bannon plaintiffs.Id. at *5.Because the Grant-in-Aid plaintiffs consisted of at least two categories of plaintiffs that were not involved in the O’Bannon casemale student-athletes who were recruited after O’Bannon and female student-athletes—Judge Wilken concluded that the plaintiffs in the two cases were not the same.Id.Alternatively, Defendants argued that the Grant-in-Aid and O’Bannon plaintiffs were in privity because the O’Bannon plaintiffs purportedly represented the interests of nonparty student-athletes adequately and the O’Bannon opinions “took special care to protect the interests of future student-athletes.”Id.Judge Wilken rejected this argument after reasoning that, in the federal class action context, privity only exists between members of a defined class, and does not extend to non-members.Id. (citing Taylor v. Sturgell, 533 U.S. 880, 900-01 (2008)).Therefore, because the Grant-in-Aid plaintiffs were not within the defined class of plaintiffs in O’Bannon, and because the “Court and the parties in O’Bannon focused their analysis on the claims of class members, the named plaintiffs represented only class members, and only class members were on notice that they were represented,” Judge Wilken held that there was no privity between the Grant-in-Aid plaintiffs and the O’Bannon plaintiffs.Grant-in-Aid Litigation, 2018 WL 1524005, at *5.Accordingly, Judge Wilken denied Defendants’ claim and issue preclusion arguments.

Judge Wilken also noted another justification for rejecting Defendants’ claim preclusion arguments—the Grant-in-Aid plaintiffs challenged a different student-athlete compensation system than the O’Bannon plaintiffs.Id. at *6.For example, the Grant-in-Aid plaintiffs challenged the post-O’Bannon system of capping student-athlete compensation at the “cost of attendance,” while fixing prices of other benefits falling outside the cost of attendance that O’Bannon did not address.Id. at *6-*7.

Section 1 of the Sherman Act

Judge Wilken next considered whether the NCAA’s post-O’Bannon student-athlete compensation rules constituted an unreasonable restraint on trade.To succeed on their motion for summary judgment under Section 1 of the Sherman Act, Plaintiffs had to establish “(1) that there was a contract, combination, or conspiracy; (2) that the agreement unreasonably restrained trade under either a per se rule of illegality or a rule of reason analysis; and (3) that the restraint affected interstate commerce.”Id. at *7 (quoting Tanaka v. Univ. of S. Cal., 252 F.3d 1059, 1062 (9th Cir. 2001)).Because the parties did not dispute the first and third elements, the only issue in the case was whether the post-O’Bannon student-athlete compensation rules satisfied the rule-of-reason antitrust scrutiny standard.Id.Under the rule-of-reason standard, Plaintiffs had the initial burden of establishing that the challenged post-O’Bannon compensation rules produced anticompetitive effects in the relevant market.Id. (citing O’Bannon, 802 F.3d at 1079).If Plaintiffs succeeded, then the burden would shift to Defendants to provide evidence of procompetitive effects resulting from the post-O’Bannon compensation rules.If Defendants succeeded, then the burden would return to Plaintiffs to establish that, despite the procompetitive benefits, substantially less restrictive alternatives exist to achieve the objectives of the post-O’Bannon compensation rules.Grant-in-Aid Litigation, 2018 WL 1524005, at *7.

Before proceeding to the rule-of-reason analysis, Judge Wilken addressed the threshold question of what “relevant market” was affected by the post-O’Bannon compensation rules.Plaintiffs claimed that the relevant market was the same as that in O’Bannon, and Defendants argued that stare decisis under O’Bannoncontrolled.Accordingly, Judge Wilken granted both parties’ motions for summary judgment on the issue, and found that the relevant market was the same as in O’Bannon, which was “the market for a college education combined with athletics or alternatively the market for the student-athletes’ athletic services.”Id. at *8.Judge Wilken then turned to the three steps of the rule-of-reason analysis.

Anticompetitive Effects

Judge Wilken first found that Plaintiffs established that the NCAA’s post-O’Bannon compensation rules created significant anticompetitive effects in the relevant market.Id.Specifically, Judge Wilken found that Plaintiffs demonstrated with “undisputed evidence” that “greater compensation and benefits would be offered in the recruitment of student-athletes absent the challenged rules,” and that Defendants, again relying on stare decisis to rebut Plaintiffs’ arguments relating to anticompetitive effects, had not meaningfully disputed that evidence.Id.Thus, the first step of the rule-of-reason analysis resolved in Plaintiffs’ favor.

Procompetitive Benefits

Defendants next argued that O’Bannon conclusively established, via stare decisis, that the NCAA’s prior rules capping student-athlete compensation at “full grant-in-aid” had at least two procompetitive benefits: “integrating academics with athletics, and ‘preserving the popularity of the NCAA’s product’” by promoting amateurism is college sports.Id. (quoting O’Bannon, 802 F.3d at 1073).In response, Plaintiffs argued that stare decisis was inapplicable because the post-O’Bannon student-athlete compensation rules were different than the pre-O’Bannon rules.Grant-in-Aid Litigation, 2018 WL 1524005, at *8.In addressing this element of the rule-of-reason standard, Judge Wilken explained that, although O’Bannon required the NCAA to implement the “cost of attendance” cap on student-athlete compensation, the current rules challenged by Plaintiffs “have generally increased” and “continue to fix various benefits related to athletic participation that a member school may provide for its student-athletes or permit them to receive from outside sources.”Id. at *9.Because of these and other changes to the pre-O’Bannon rules,Judge Wilken held that stare decisis did not govern the issue of procompetitive benefits.Id.Judge Wilken, however, declined to rule in Plaintiffs’ favor on this issue because she found that Defendants presented sufficient evidence to create a factual dispute over whether the procompetitive benefits identified in O’Bannon continued to apply in the Grant-in-Aid Litigation.Id. at *9-*11.Thus, Judge Wilken held that the issue will go to trial.

Less Restrictive Alternatives

Plaintiffs did not move for summary judgment on the issue of whether less restrictive alternatives exist to the post-O’Bannon compensation rules.Instead, they identified two proposed alternatives that they preferred to address at trial: (1) “allowing the Division I conferences, rather than the NCAA, to set the rules regulating education and athletic participation expenses that the member institutions may provide,” and (2) “enjoin[ing] all national rules that prohibit or limit any payments or non-cash benefits that are tethered to educational expenses, or any payments or benefits that are incidental to athletic participation.”Id. at *12-*13.Defendants, however, did move for summary judgment on the question of less restrictive alternatives and argued that O’Bannon foreclosed Plaintiffs’ proposed alternatives under the doctrine of stare decisis because O’Bannon purportedly addressed the same proposed alternatives.Id. at *11.

Judge Wilken denied Defendants’ motion for summary judgment on this issue after finding that Plaintiffs challenged different rules and proposed different less restrictive alternatives than those at issue in O’Bannon.In particular, Judge Wilken reasoned that Plaintiffs provided evidence supporting two possible less restrictive alternatives “not previously presented for decision or ruled upon,” which created a genuine issue of material fact as to whether “[Plaintiffs] can meet their evidentiary burden to show that such alternatives would be virtually as effective” as the post-O’Bannoncompensation rules “in advancing Defendants’ procompetitive objectives.”Id. at *14.Accordingly, Judge Wilken held that the parties will also address this issue at trial.Id. at *15.

Conclusion

Judge Wilken concluded that the case will proceed to trial beginning on December 3, 2018 to resolve whether (1) the two procompetitive justifications found in O’Bannon for the NCAA’s prior “full grant-in-aid” cap on student-athlete compensation apply to the post-O’Bannon rules, and (2) whether less restrictive alternatives exist to the NCAA’s current student-athlete compensation system.Whatever the outcome of trial, the March 28 ruling demonstrates that the NCAA’s antitrust woes regarding student-athlete compensation are far from over.And, should Plaintiffs succeed at trial, the landscape of college sports in the near future could change significantly.

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