Update on O'Bannon v. NCAA

Published 31 March 2014 By: John Wolohan

American Football

Welcome to March Madness. The month of the year when college basketball in the United States takes over television and the sporting world.

The National Collegiate Athletic Association (NCAA) basketball tournament, which features 68 teams, playing games all across the country over a three week period. To illustrate how pervasive the NCAA basketball tournament is, in March 2013, Las Vegas saw the highest total visitors with an estimated $200 million in revenue generate from sports betting during the NCAA tournament.1 The NCAA tournament is not just for gamblers and passionate sports fans, however. Paying a few bucks and filling out an NCAA bracket has become an annual workplace lottery. It has become so ingrained in American cultural that for the last six years, President Obama has filled out an NCAA tournament bracket on national television. This year, Quicken Loans and Warren Buffett offered $1 billion to anyone who could perfectly predict the winner of all the tournament games.

However, while the NCAA and college sports should be basking in March Madness and the popularity of the tournament, these are uneasy times for the NCAA. On March 17, 2014, a lawsuit was filed against the NCAA and the so-called five big conferences in federal court claiming that they were an unlawful cartel that violated federal antitrust laws by illegally restricting the earning power of football and men's basketball players while making billions off their labor. In addition to the lawsuit filed on March 17, the NCAA is also facing a similar antitrust suit by a former West Virginia football player. As well as an attempt by group of football players at Northwestern University who have filed papers to form what would be the first college athletes' union in U.S. history.

However, the biggest threat facing the NCAA and college sports and a case that is being closely watched by sports lawyers and college administrators all over the United States, due to the implications it could potentially have on the future of college athletics, is the legal battle involving Ed O'Bannon, Sam Keller and a group of former and current Division I men's basketball and football players against the NCAA. To those unfamiliar with the case, in 2009, Ed O'Bannon, who played for the UCLA basketball team from 1991 – 1995, filed an antitrust lawsuit on behalf of current and former Division I football and basketball players against the NCAA, Electronic Arts Sports (EA Sports) and Collegiate Licensing Company over their use of the players' images for commercial purposes in EA Sports NCAA Basketball and football video games. In a separate and concurrent suit, Sam Keller, who played college football at the University of Nebraska and Arizona State University from 2003 - 2007 filed a lawsuit against the NCAA, EA Sports and Collegiate Licensing Company claiming that they had misappropriated his image in EA Sports NCAA Football video game. In particular, both O'Bannon and Keller claimed that the characteristics of the players in the video games essentially mirrored theirs and those of other actual college athletes, violating their right of publicities and image rights. In addition to seeking damages from the video games, the O'Bannon lawsuit also claimed that the NCAA's conduct violated Federal Antitrust law. The two lawsuits were eventually combined into one, with additional former and at least five current players being added to the suit. As a result, the case has now morphed from one focused almost exclusively on the image rights of the colleges athletes in featured in the video games, into one where, because their likenesses are used in television broadcasts, college athletes are seeking to be paid and to share in the $10.8 billion dollars the NCAA and colleges earn in television, internet and wireless rights from CBS Sports and Turner Broadcasting System, Inc., to present the Division I Men's Basketball Championship (see previous article).

On July 31, the Ninth Circuit Court handed EA Sports a major setback in the case when it rejected their appeal in the Keller case. EA Sports claimed that their use of the players' images was protected and permissible under the Free Speech Clause of the First Amendment of the United States Constitution. In particular, EA Sports argued that they had sufficiently "transformed" the images of the players into a work that would qualify as free speech. In rejecting EA Sports' argument, the Ninth Circuit Court by a 2-1 vote found that the First Amendment does not apply to EA Sports' use of Sam Keller's image "because it literally recreates Keller in the very setting in which he has achieved renown."2 In support of this finding the court cited damaging emails between EA Sports and the NCAA showing that the two organizations knew that the video games were designed to replicate and use the images of the actual athletes.

As a result of all the litigation and the increasing costs associated with it, as well as the increasing likelihood that it will be found liable for misappropriating the athletes image rights, the NCAA announced in July 2013 that it would not be renewing its licensing agreement for video games with EA Sports. Following the NCAA's lead, a number of schools and athletic conferences, including the Southeastern, Big Ten and Pacific-12, also decided not to renew their agreements with EA Sports to license their trademarks for the video games. Unable to use the trademarks, EA Sports announced that it would not be producing the NCAA football video games in 2014 and would settle the case for $40 million. The settlement, which was announced September 26, 2013, covered all claims brought against EA Sports and Collegiate Licensing Company over their use of college athletes' names, images and likenesses and left the NCAA as the lone remaining defendant.3

The announced settlement by EA Sports and Collegiate Licensing Company in September, which could cover more than 100,000 current and former athletes, now leaves the NCAA as the only party defending the lawsuit. However, due to the fundamental change any agreement between the NCAA and the student athletes would have on college athletics, the NCAA has stated that it will not settle the case and is willing to take it all the way to the United States Supreme Court if needed. Because of the stakes involved, the NCAA's stance is not surprising. For example for EA Sports, the case impacted only a small part of their business. Therefore, settling the case and moving on was clearly in their best interest. The NCAA, however, has a lot more at stake in the outcome of the case. For the NCAA, the case impacts the very foundation of collegiate sports. If the NCAA loses the case, or even settles the case like EA Sports, the entire system of amateurism that the NCAA and college athletics has been built on would have to change.

An interesting aspect of the settlement is that current college players would be eligible to receive payments from EA and CLC. Since this could be considered a violation of NCAA rules, which prohibits athletes from making money off their name in school, the NCAA must still sign off on any such payments. In truth, however, the NCAA has no option but to allow such payments. If the NCAA deemed such payments a violation of NCAA rules, they would be required to declare every athlete accepting the payment ineligible to compete in college athletics. However, since the payments will be sent to almost every major football and basketball player, the NCAA would be forced into the position of declaring each and every athlete that were to accept a payment ineligible, rendering the entire football and basketball seasons a obsolete.

Another major legal step in the case came November 8, 2013, when the United States District Court for the Northern District of California handed down its decision on whether to certify the former and current athletes into a class-action lawsuit. In what could be a major victory for current college athletes, District Court Judge Claudia Wilken certified the class for current Division I men's basketball and football players challenging NCAA rules preventing college athletes from entering into group licensing deals. If the class eventually wins the suit and athletes playing for colleges and universities are allowed to enter into group licensing deals, the NCAA would not only have to enter into a financial partnership with the students, but would also have to modify its rules prohibiting student-athletes from being paid and entering into such licensing contracts.4

Judge Wilken's decision was not a complete victory for the O'Bannon plaintiffs, however. In her decision, Judge Wilken refused to certify as a class the former Division I men's basketball and football players in their request to be compensated for the past use of their image and likeness on television and in video games. In support of her decision, Judge Wilken found that since EA Sports games contained smaller rosters than actual college teams, not every former college athlete would be on the video game rosters. Therefore, since not every former college athlete would have suffered an injury and there was no legitimate way of determining who should be part of the class, Judge Wilken rejected certifying the entire class. In addition, Judge Wilken rejected the O'Bannon plaintiffs claim that the NCAA's policy of not paying athletes injured student athletes. The O'Bannon plaintiffs' argued that if college athletes were paid while in school, more athletes would have stayed in college and received their education instead of turning professional. In rejecting this argument, however, the court noted that it would be impossible to determine how many former college athletes would have been even awarded scholarships under the NCAA's current system if some athletes stayed in school longer such as under the O'Bannon theory. For example, under the current system if you have 12 athletes on the basketball team, three freshmen, three sophomores, three juniors and three seniors, and at the end of the school year five students leave the university – the three seniors and two from the other three groups who decided to go professional, that would allow the coach to offer 5 new scholarships. If however using O'Bannon's reasoning and the two students eligible to stay in school stayed because they were paid, the coach would only have three scholarships to offer to new students, thereby depriving two students the opportunity to even play college basketball. Therefore, since it was impossible to determine who would or would not have been part of college athletics, Judge Wilken rejected the entire class.

The decision was not a complete defeat to the O'Bannon plaintiffs, however. Instead of bring one large class action suit, now, O'Bannon, Keller and other former athletes featured in the video games will be forced to go to court individually to collect damages against the NCAA that they may have suffered. However, since it is clear that a number of players have been represented by avatars in EA Sports video games, and the NCAA and EA Sports have admitted that the avatars are based on the actual athletes, the former athletes should be have little difficulty in showing that their images were misappropriated by the video games.

With all the legal maneuvering over, the case is now scheduled for trial on June 9, 2014. Although it is still possible that a settlement may be reached before the case is heard, and with everything at stake it would seem to make sense for the NCAA to enter into such talks, the outcome of the case promises to change the way college sports are run in the United States.

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John Wolohan

John Wolohan

John Wolohan is an Attorney and Professor of Sports Law in the Syracuse University Sport Management program and an Adjunct Professor in the Syracuse University College of Law. In addition to being one of the lead editors of the book "Law for Recreation and Sport Managers" by Cotten and Wolohan, John has been teaching and working in the fields of doping, antitrust, gaming law, and sports media rights for over 25 years.

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