Antitrust UCL and Privacy

The Northern District Of California Enjoins The NCAA From Capping The Amount Of Education-Related Compensation That Student-Athletes Can Receive

Harrison (Buzz) Frahn
Michael R. Morey
Loren Shokes
Omar Kanjwal
Simpson Thacher & Bartlett LLP

On March 8, 2019, the U.S. District Court for the Northern District of California ruled in favor of a class of current and former NCAA Division I basketball and FBS football players who brought a multidistrict class action antitrust suit against the NCAA and eleven of its member conferences challenging the NCAA’s rules capping the amount of compensation that student-athletes can receive in exchange for their athletic services. In re NCAA Grant-in-Aid Cap Antitrust Litig., 375 F. Supp. 3d 1058, 1062 (N.D. Cal. 2019) (the “Grant-in-Aid Litigation”).

In the March ruling, Judge Claudia Wilken found that: (1) the NCAA’s student-athlete compensation system had significant anticompetitive effects; (2) the purported procompetitive effect of the NCAA’s rules of promoting amateurism in college sports was insufficient to justify the NCAA’s cap on student-athlete compensation, except to the extent that certain of the challenged rules preserved consumer demand for college sports as distinct from professional sports by preventing unlimited cash payments unrelated to education; (3) the purported procompetitive effect of the NCAA’s rules of integrating student-athletes into their academic communities was also insufficient to justify the NCAA’s cap on student-athlete compensation; and (4) a less restrictive alternative to the NCAA’s rules existed to achieve the identified procompetitive effect of preserving consumer demand for college sports as distinct from professional sports by preventing unlimited cash payments unrelated to education.

Background

The Grant-in-Aid Litigation lies in the wake of the Ninth Circuit’s 2015 opinion in O’Bannon v. NCAA, which enjoined the NCAA from prohibiting its member schools from offering student-athletes limited shares of royalties derived from licenses to use their names, images, and likenesses (“NILs”) in addition to traditional “grant-in-aid” scholarships covering the costs of tuition, housing, and required books. 802 F.3d 1049, 1078-79 (9th Cir. 2015). However, the Ninth Circuit permitted the NCAA to cap the total amount of student-athlete compensation at the “cost of attendance,” a figure that included other education-related expenses on top of the costs of traditional “grant-in-aid.” Id. In light of O’Bannon v. NCAA, the crux of the Grant-in-Aid Litigation is whether the NCAA’s post-O’Bannon student-athlete compensation system that caps student-athlete scholarships at the cost of attendance and limits other benefits related to education or incidental to athletics that exceed the cost of attendance is an unreasonable restraint on trade in violation of Section 1 of the Sherman Act.

O’Bannon v. NCAA

In 2009, Division I student-athletes brought an antitrust class action in the U.S. District Court for the Northern District of California challenging the NCAA’s rules that prevented Division I football and basketball players from being paid, either by their school or outside sources, for the sale of licenses to use their NILs in videogames, live game telecasts, and other footage. O’Bannon v. NCAA, 7 F. Supp. 3d 955, 963 (N.D. Cal. 2014). These rules (the “NIL Rules”) fixed the value of student-athletes’ NILs at zero and capped the amount of financial aid that student-athletes can receive for their athletic services at “full grant-in-aid,” defined as “financial aid that consists of tuition and fees, room and board, and required course-related books.” Id. at 971. The “full grant-in-aid” cap excluded additional costs related to college attendance, such as supplies and transportation, which makeup a larger, school-specific figure called “cost of attendance” that corresponds to the full price of attending the college. Id. The O’Bannon plaintiffs asserted that the NIL Rules were an unreasonable restraint on trade in violation of Section 1 of the Sherman Act.

On August 8, 2014, Judge Claudia Wilken, who presides over the Grant-in-Aid Litigation, held that the NIL Rules operated as an anticompetitive price-fixing agreement among the NCAA and its member schools to fix the amount of compensation that student-athletes can receive in exchange for their athletic services, and thus found that the NIL Rules violated Section I of the Sherman Act. In reaching this decision, Judge Wilken reasoned that the purported procompetitive effects of the NIL Rules identified by the NCAA—(1) preserving amateurism in college sports, (2) driving consumer demand for college sports products, and (3) integrating college academics and athletics—did not outweigh the NIL Rules’ anticompetitive effects. Judge Wilken also determined that the following less restrictive alternatives to the NIL Rules could achieve these procompetitive effects: (1) raising the “full grant-in-aid” cap on athletics-based scholarships by allowing schools to award stipends, derived from NIL licensing revenue, to student-athletes up to the “cost of attendance”; and (2) allowing schools to deposit limited shares of NIL licensing revenue above the cost of attendance into a trust fund payable to student-athletes after they left school. Id. at 982-83. Judge Wilken then enjoined the NCAA and its member schools from prohibiting these two less restrictive alternatives. Id. at 1007-08.

The NCAA appealed, and, in September 2015, the Ninth Circuit largely affirmed Judge Wilken’s injunction. O’Bannon, 802 F.3d at 1079. The Ninth Circuit determined that the “full grant-in-aid” cap “ha[d] no relation whatsoever to the procompetitive purposes of the NCAA,” and affirmed Judge Wilken’s injunction directing the NCAA to increase the “full grant-in-aid” student-athlete compensation cap up to the “cost of attendance.” Id. at 1075. However, the Ninth Circuit rejected Judge Wilken’s injunction as to the deferred compensation less restrictive alternative, reasoning that allowing “students to receive NIL cash payments untethered to their education expenses” after they left school would not promote the NIL Rules’ purported procompetitive effect of preserving amateurism in collegiate sports. Id. at 1076.

Thus, after O’Bannon, the NCAA could not cap student-athlete compensation at an amount less than the cost of attendance. Accordingly, following O’Bannon, the NCAA and its member schools implemented rules that capped student-athlete grant-in-aid compensation at the cost of attendance and also fixed the amounts of other benefits exceeding the cost of attendance that student-athletes can receive, such as benefits and compensation related to education (e.g., reimbursements for computers, science equipment, and musical instruments) or incidental to athletic participation (e.g.,reimbursements for meals and travel expenses).

The Grant-in-Aid Litigation

The Grant-in-Aid Litigationbegan in 2014 and 2015, when NCAA student-athletes playing in Division I men’s and women’s basketball and FBS football (collectively, “Plaintiffs”) filed several lawsuits against the NCAA and eleven of its member conferences (collectively, “Defendants”) throughout the country challenging the post-O’Bannon “cost of attendance” cap on student-athlete compensation as an unreasonable restraint on trade in violation of Section 1 of the Sherman Act. In re NCAA Athletic Grant-in-Aid Cap Antitrust Litig., No. 14-CV-02758-CW, 2018 WL 1524005, at *3 (N.D. Cal. Mar. 28, 2018) (“Summary Judgment Opinion”). The actions were consolidated in the Northern District of California before Judge Wilken. Id. Because Defendants settled with respect to all claims for damages, only claims for injunctive relief remain in the case. Id.

The Grant-in-Aid Litigation: Judge Wilken Partially Grants and Denies the Parties’ Cross-Motions for Summary Judgment

In 2017, the parties filed cross-motions for summary judgment. Plaintiffs asserted, inter alia, that the NCAA’s post-O’Bannon system capping student-athlete compensation at the “cost of attendance” had substantial anticompetitive effects, and that a trial was necessary to determine whether less restrictive alternatives exist to accomplish the purported procompetitive benefits of the NCAA’s post-O’Bannon system. Id. at *7. Defendants moved for summary judgment on the bases that O’Bannon precluded Plaintiffs’ claims under the doctrines of claim and/or issue preclusion, or in the alternative, that stare decisis barred all of Plaintiffs’ claims in light of the Ninth Circuit’s and the district court’s opinions in O’Bannon. Id.[1]

Claim and Issue Preclusion

Judge Wilken rejected 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 first determined that, for either doctrine to apply, the Grant-in-Aid Litigation plaintiff class must be the same, or in privity with, the O’Bannon plaintiff class. Id. at *5. Because the Grant-in-Aid Litigation class 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 plaintiff classes were not the same. Id.

Alternatively, Defendants argued that the Grant-in-Aid Litigation and O’Bannon plaintiffs were in privity because the O’Bannon plaintiffs purportedly represented the interests of nonparty student-athletes adequately and that O’Bannon “took special care to protect the interests of future student-athletes.” Id. Judge Wilken disagreed and held 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 Litigation plaintiffs were not within the defined class of plaintiffs in O’Bannon, Judge Wilken found a lack of privity between the two plaintiff classes. Summary Judgment Opinion, 2018 WL 1524005, at *5.

Section 1 of the Sherman Act – Unreasonable Restraint on Trade – Rule of Reason Analysis

Judge Wilken next considered whether the NCAA’s post-O’Bannon student-athlete compensation rules constituted an unreasonable restraint on trade in violation of Section 1 of the Sherman Act. To succeed on summary judgment for their claim 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 Defendants conceded the first and third elements, the only disputed issue was whether the post-O’Bannon student-athlete compensation rules constituted an unreasonable restraint of trade under 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 substantially less restrictive alternatives to the NCAA’s post-O’Bannon compensation rules exist to achieve the identified procompetitive effects. Summary Judgment Opinion, 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 and found that the relevant market was the same as in O’Bannon: “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 because 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 had not meaningfully disputed that evidence. Id. In particular, Judge Wilken found that the post-O’Bannon rules limited athletics-based grants-in-aid at the cost of attendance, and also allowed and fixed the prices of numerous and varied additional benefits and compensation that had a monetary value exceeding the cost of attendance—such as benefits/compensation related to education (e.g., reimbursements for computers, science equipment, and musical instruments) and benefits/compensation incidental to athletics participation (e.g., travel expenses and monetary awards rewarding performance in athletics). Without these limits imposed by the NCAA’s post-O’Bannon rules, according to Judge Wilken, Plaintiffs would receive more compensation in exchange for their athletic services. Thus, Plaintiffs established this element of the rule-of-reason test.

Procompetitive Benefits

Defendants next argued that O’Bannon conclusively established, via stare decisis, that the NCAA’s prior rules capping student-athlete compensation at “grant-in-aid” (i.e., the cost of tuition, housing, and required books, but less than the full “cost of attendance”) had at least two procompetitive benefits: (1) “preserving the popularity of the NCAA’s product” by promoting amateurism is college sports; and (2) “integrating academics with athletics. 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. Summary Judgment Opinion at *8.

In addressing this element of the rule-of-reason standard, Judge Wilken explained that, although O’Bannon required the NCAA to adhere to the new “cost of attendance” rule on student-athlete grant-in-aid compensation––meaning the NCAA could not set a cap for grant-in-aid below the cost of attendance—the NCAA’s new 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 on summary judgment to create a factual dispute over whether the two procompetitive effects identified by the NCAA in O’Bannon continued to apply in the Grant-in-Aid Litigation. Id. at *9-*11. Thus, Judge Wilken reserved the issue for trial.

Less Restrictive Alternatives

Instead of moving for summary judgment on the issue of whether less restrictive alternatives exist to the post-O’Bannon compensation rules, Plaintiffs identified two less restrictive alternatives they proposed 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 moved for summary judgment on this issue 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’Bannon compensation rules “in advancing Defendants’ procompetitive objectives.” Id. at *14. Accordingly, Judge Wilken also reserved this issue for trial. Id. at *15.

The Grant-in-Aid Litigation: Judge Wilken’s Post-Trial Findings

On December 18, 2018, Judge Wilken held a bench trial for the parties to address the issues of: (1) whether the purported procompetitive effects of the NCAA’s post-O’Bannon student-compensation rules justified their restraint on trade, and (2) whether less restrictive alternatives existed to achieve those purported procompetitive effects. On March 8, 2019, Judge Wilken ruled largely in favor of Plaintiffs and issued an injunction limiting the extent to which the NCAA can cap student-athlete compensation.

Purported Procompetitive Effects Justifying The NCAA’s Restraint On Trade

At trial, Defendants asserted two procompetitive effects justifying the restraint of trade resulting from the NCAA’s post-O’Bannon limits on student-athlete compensation: (1) the challenged compensation limits are procompetitive because they promote amateurism in college sports and “amateurism is a key part of demand for college sports”; and (2) the challenged compensation limits “promote the integration of student-athletes with their academic communities, which improves the college education student-athletes receive.” Grant-in-Aid Litigation, 375 F. Supp. 3d at 1098-1103.

Consumer Demand for Amateurism

To support their assertion that the NCAA’s post-O’Bannon rules capping student-athlete compensation had the procompetitive effect of preserving consumer demand for amateurism in college sports, Defendants relied on expert witness testimony and lay witness testimony from NCAA, conference, and school administrators regarding the preferences of viewers of college sports. Id. at 1098.

Defendants Failed to Affirmatively Define Amateurism

In analyzing the Defendants’ first purported procompetitive effect, Judge Wilken determined that Defendants failed to offer “an affirmative definition of amateurism” and that “no link appears” between the “Principle of Amateurism” described in the NCAA’s Division I constitution and the challenged compensation limits because “the principle does not mention or address compensation; nor does it prohibit or even discourage compensation.” Id. at 1098-99. Judge Wilken explained that Defendants defined amateurism based on what it is not: “amateurism is not ‘pay for play.’” Id. at 1099. However, Judge Wilken found this indirect definition to be unpersuasive because the concept of “pay for play” itself is undefined as Defendants failed to identify “any NCAA bylaws that define amateurism, pay for play, or pay.” Id.

In light of Defendants’ failure to affirmatively define amateurism, Judge Wilken reasoned that the “only thing that can be inferred is that compensation constitutes ‘pay for play’ or ‘pay’ if the NCAA has decided to forbid it, and compensation is not ‘pay for play’ or ‘pay’ if the NCAA has decided to permit it.” Id. Judge Wilken then summarized that “the NCAA permits grants-in-aid up to the cost of attendance” and permits student-athletes to “receive cash or cash-equivalent compensation that exceeds the cost of attendance by thousands of dollars.” Examples of the latter compensation include (1) cash awards for a student-athlete’s performance in their sport, as well as other expenses incidental to athletic participation, such as travel expenses for family members of a student-athlete to attend games; (2) education-related compensation, such as funding for graduate school and reimbursements for laptops or tutoring. Id. Judge Wilken determined that because such awards and expenses exceeding the cost of attendance are “directly correlated with athletic performance, they appear, on their face, to be ‘pay for play,’ and thus, inconsistent with amateurism as Defendants and their witnesses describe that term.” Id.

Student-Athlete Compensation in Excess of the Cost of Attendance Has Not Reduced Consumer Demand for College Sports

On top of the Defendants’ failure to affirmatively define amateurism in support of their argument that the NCAA’s post-O’Bannon limitations on student-athlete compensation have the procompetitive effect of preserving consumer demand for amateurism in college sports, Judge Wilken found that Defendants failed to show that the challenged compensation limitations indeed increased or preserved consumer demand for college sports. In direct contrast, the record showed that consumer demand for viewing college sports has not decreased as the permitted amount of student-athlete compensation has increased.

First, Judge Wilken was not persuaded by the opinions of the Defendants’ expert witnesses that increased student-athlete compensation reduces consumer demand in viewing college sports. Instead, Judge Wilken explained that “the only economic analysis in the record that addresses the impact of changes to student-athlete compensation on consumer demand”––i.e., the analysis of Plaintiffs’ economics expert––“shows that recent increases in student-athlete compensation, related and unrelated to education, have not decreased consumer demand.” Id. at 1100. Accordingly, Judge Wilken reasoned that “[i]f limits on student-athlete compensation were necessary to maintain consumer demand, one would expect to see increases in compensation leading to decreases in consumer demand,” yet the record showed that “actual increases in compensation have not decreased demand” and suggested “that future increases in compensation likewise would not do so.” Id. Indeed, the NCAA’s Rule 30(b)(6) witness even testified that he was not aware of any instance in which the NCAA considered consumer demand for college sports in setting student-athlete compensation rules. Id. at 1100-01.

Judge Wilken next deemed unpersuasive the Defendants’ lay witness testimony that tried to establish a connection between the challenged compensation rules and consumer demand. For example, Judge Wilken found unpersuasive the Defendants’ attempt to establish through lay witness testimony that, if the challenged rules were changed, certain conferences or schools could leverage their resources to pay student-athletes more than other conferences or schools, which would negatively impact consumer appeal for college tournaments or, in general, result in conference realignment. Id. The weight of the evidence, however, showed that “significant variance already exists among conferences in terms of student-athlete compensation schemes, resources, and performance, and that conference realignment has been frequent. None of this has negatively affected consumer demand or revenues.” Id.

Post-O’Bannon Rules Preserve Consumer Demand for College Sports as Distinct from Professional Sports to the Extent that They Prevent Unlimited Payments Unrelated to Education

Judge Wilken next reasoned that evidence at trial established that consumer demand for college sports depended to a certain degree on the difference between college sports and professional sports. Id. In particular, Judge Wilken explained that the relevant distinction between college and professional sports for purposes of analyzing the proposed procompetitive effect of preserving amateurism in college sports is the “the fact that student-athletes do not receive unlimited cash payments, especially those unrelated to education, like those seen in professional sports leagues.” Id. However, Judge Wilken found that, “when compared with having no limits on compensation, some of the challenged compensation rules may have an effect on preserving consumer demand for college sports as distinct from professional sports to the extent that they prevent unlimited cash payments unrelated to education such as those seen in professional sports leagues.” Id.

Accordingly, Judge Wilken divided the challenged compensation limits into three categories: (1) the “cost of attendance” limit on grant-in-aid; (2) limits on compensation and benefits unrelated to education paid on top of grant-in-aid; and (3) limits on compensation and benefits related to education paid on top of grant-in-aid. Id. The first and second categories were procompetitive, according to Judge Wilken, “to extent that they help maintain consumer demand for college sports as a distinct product by preventing unlimited cash payments unrelated to education.” Id. at 1102. For the third category, however, Judge Wilken found that “limits or prohibitions on most other benefits related to education that can be provided on top of a grant-in-aid, such as those that limit tutoring, graduate school tuition, and paid internships, have not been shown to have an effect on enhancing consumer demand for college sports as a distinct product” and are not necessary “to prevent unlimited cash compensation unrelated to education.” Id. Thus, Judge Wilken held that the third category of compensation limits cannot be included in a less restrictive alternative to the post-O’Bannon limits on student-athlete compensation. Id.

Accordingly, Judge Wilken found that the challenged post-O’Bannon limitations on (1) the limit on the grant-in-aid at not less than the cost of attendance, and (2) limits on compensation and benefits unrelated to education paid on top of grant-in-aid had the procompetitive effect of preserving consumer demand for college sports as distinct from professional sports by preventing unlimited cash payments unrelated to education.

Integration of Student-Athletes with their Academic Communities

Judge Wilken next rejected the Defendants’ assertion that the post-O’Bannon compensation limitations had the procompetitive effect of promoting integration of student-athletes into their academic communities. While Judge Wilken agreed that college education is beneficial to student-athletes, the Defendants failed to show a link between the challenged compensation limits and educational outcomes for student-athletes. Id. Judge Wilken also rejected the Defendants’ argument that greater compensation to student-athletes would create economic tension among non-student-athletes and students-athletes because considerable economic disparities already exist on college campuses due to students’ socioeconomic backgrounds and other sources of wealth. Id. at 1102-03. Further, Defendants failed to provide any evidence that increased compensation to student-athletes in the past impacted student-athletes’ education. Id. at 1103. Judge Wilken next explained that, if anything, the record supported that the challenged compensation limitations increased separation among students because they allowed schools to spend significant resources on opulent, athletes-only facilities. Id. Accordingly, Judge Wilken rejected the Defendants’ asserted procompetitive effect on increased student-athlete integration.

Less Restrictive Alternatives To Achieve The Identified Procompetitive Effects

Judge Wilken next addressed the Plaintiffs’ proposed less restrictive alternatives to the post-O’Bannon compensation limits to achieve the identified procompetitive effects. Plaintiffs offered three alternatives. First, Plaintiffs proposed “an alternative that would prohibit the NCAA from placing any limits on compensation or benefits, whether or not related to education, given in exchange for athletic services,” and “permit individual conferences to set limits on such compensation or benefits.” Id. at 1086. Second, Plaintiffs proposed an alternative that would allow the NCAA to continue limiting the compensation or benefits given in exchange for athletic services except for (1) benefits that are related to education, and (2) certain identified benefits incidental to athletics participation that the NCAA currently allows and caps. Id. Third, Plaintiffs proposed an alternative that would allow the NCAA to continue to limit the compensation or benefits given in exchange for athletic services, but would not allow NCAA limits on compensation and benefits related to education, and education-related benefits could be set by individual conferences. Id.

Judge Wilken rejected Plaintiffs’ first two proposed alternatives on the ground that they left open the possibility for unlimited cash payments, which conflicted with the procompetitive effect of the post-O’Bannon compensation limitations of preserving consumer demand for college sports as distinct from professional sports by preventing unlimited cash payments unrelated to education. Id.

Judge Wilken then found that a modified version of Plaintiffs’ third proposed alternative was an adequate less restrictive alternative to the post-O’Bannon rules that achieved the identified procompetitive effect of preserving demand for college sports as distinct from professional sports by preventing unlimited payments unrelated to education. In particular, Judge Wilken found “that a less restrictive alternative to the current set of challenged NCAA limits would be to: (1) allow the NCAA to continue to limit grants-in-aid at not less than the cost of attendance; (2) allow the association to continue to limit compensation and benefits unrelated to education; (3) enjoin NCAA limits on most compensation and benefits that are related to education, but allow it to limit education-related academic or graduation awards and incentives, as long as the limits are not lower than its limits on athletic performance awards now or in the future.” Id. at 1087-88.

The Grant-in-Aid Litigation: Judge Wilken’s Post-Trial Injunction

After issuing her post-trial findings and conclusions of law, Judge Wilken issued an injunction limiting the extent to which the Defendants can restrict student-athlete compensation. In particular, Judge Wilken’s injunction enjoined the NCAA and its member conferences and schools “from agreeing to fix or limit compensation or benefits related to education that may be made available from conferences or schools to Division I women’s and men’s basketball and FBS football student-athletes on top of a grant-in-aid.” In re NCAA Athletic Grant-in-Aid Cap Antitrust Litig., No. 14-md-02541-CW, Dkt. No. 1163, Permanent Injunction (N.D. Cal. March 8, 2019). The injunction further provided that such education-related compensation and benefits consisted of “computers, science equipment, musical instruments and other tangible items not included in the cost of attendance calculation but nonetheless related to the pursuit of academic studies; post-eligibility scholarships to complete undergraduate or graduate degrees at any school; scholarships to attend vocational school; tutoring; expenses related to studying abroad that are not included in the cost of attendance calculation; and paid post-eligibility internships.” Id. The injunction, however, allowed any NCAA member conference to “fix or limit academic or graduation awards or incentives that may be made available from that conference or its member schools to Division I women’s and men’s basketball and FBS football student-athletes on top of a grant-in-aid.” Id.

Conclusion

The Defendants have appealed Judge Wilken’s decision on the grounds that the ruling conflicts with O’Bannon. In its appeal, the Defendants argue that O’Bannon found that it is not the domain of the district courts to determine rules that govern college athletics, and that the NCAA should be exempt from antitrust laws. The Plaintiffs cross-appealed, asserting that Judge Wilken’s injunction should be broadened to further enjoin the Defendants from capping student-athlete compensation and benefits unrelated to education. In addition to the Grant-in-Aid Litigation, Judge Wilken is presiding over another similar case: Martin Jenkins v. NCAA (“Jenkins”). Jenkins similarly utilizes the court’s decision in O’Bannon to argue that the value of an athletic scholarship would be higher if colleges could increase grants-in-aid to include recruiting inducements. Judge Wilken has yet to issue a dispositive ruling in Jenkins, and has indeed stayed the case pending the resolution of the appeals in the Grant-in-Aid Litigation. Accordingly, in light of the foregoing, the outcome of the Grant-in-Aid Litigation and Jenkins may have expansive implications for the future of compensation in college athletics. For now, however, student-athletes can benefit from the provisions of Judge Wilken’s injunction enjoining the Defendants from limiting education-related benefits and compensation on top of “cost of attendance” grant-in-aid.


[1] For an in-depth analysis of Judge Wilken’s summary judgment opinion, please see Simpson Thacher & Bartlett LLP’s May 2018 Antitrust E-Brief at https://calawyers.org/antitrust-ucl-and-privacy/judge-wilken-partially-grants-and-denies-the-parties-cross-motions-for-summary-judgment/. Back in text

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