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5 Key Takeaways from the Ruling Against NCAA in Ed O'Bannon Case

Ben KerchevalCollege Football Lead WriterAugust 11, 2014

5 Key Takeaways from the Ruling Against NCAA in Ed O'Bannon Case

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    Isaac Brekken/Associated Press

    All things considered, Friday's ruling in the Ed O'Bannon antitrust lawsuit against the NCAA served more as a compromise than an outright victory for the plaintiffs or a loss for the NCAA. 

    In a 99-page document, Judge Claudia Wilken determined that the NCAA violated antitrust laws by restricting compensation for the use of an athlete's name, image and/or likeness (NIL). It's a monumental ruling, to be sure. Until now, college athletes have never been given a piece of the revenue pie for television broadcasts or paid for the purchase of their "jersey number." 

    Though Wilken's decision cited those restrictions as unlawful, she also created a set of rules by which athletes could cash in on those revenue streams:

    • Players at every position will be paid equal shares for their NIL rights from a trust fund after they leave college. It is not a free-market system where the star quarterback can make more than the backup linebacker. 
    • Though the NCAA can cap that amount, it cannot prevent schools from offering at least $5,000 per athlete per year. Once the cap has been set—the NCAA would likely keep it at $5,000—schools can choose to participate if they want. This is done to promote competition in the "marketplace" of college athletics. 
    • The NCAA is also free to cap stipends, so long as they don't fall below the actual cost of attendance.
    • Wilken prohibited athletes from making money for endorsing products/services. 

    Wilken's ruling takes effect on July 1, 2016. Here are five takeaways from that decision. 

     

     

The NCAA Lost, Yet Somehow Won

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    Pablo Martinez Monsivais/Associated Press

    Technically, Wilken ruled in favor of the plaintiffs. This will go down as a win for O'Bannon and a loss for the NCAA. But it could have been worse for the NCAA. Way worse. 

    As Bryan Fischer of NFL.com tweeted, Wilken thoroughly debunked the NCAA's amateurism arguments, claiming its definition changed over the years. Furthermore, she opined that the NCAA wasn't adhering to its latest definition, even though it was price fixing an athlete's NIL rights at $0 in the name of amateurism. 

    Wilken's injunction mandates that the NCAA change those rules. 

    Stewart Mandel of Fox Sports (formerly of Sports Illustrated), who is as even-keeled as sports writers come, torched the NCAA's defense in his June column

    I did not make up my mind before the trial began. I came to the courthouse fully open-minded to the prospect of either side winning me over. But I’ve been thoroughly unimpressed -- and, quite frankly, stupefied -- by the NCAA’s characteristically tone-deaf defense strategy.

    The national narrative was that the NCAA was doomed by its faulty rationale. Yet, the association will still have a say over how much its athletes can make through NIL rights and cost of attendance. There's no free-market system in place. Florida State quarterback Jameis Winston, for example, can't have numerous endorsements and be paid his actual value to play college football. 

    "Wilken did not fundamentally change the business model for major college sports -- even though she could have," wrote Andy Staples of Sports Illustrated

    Wilken's dismissal of amateurism suggested she was prepared to level the NCAA. That didn't turn out to be the case. However, the NCAA may be wary of using amateurism as an argument in any future cases. 

The NCAA Will Appeal—And Could Win

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    Jae C. Hong/Associated Press

    An appeal was coming regardless of who lost. In that sense, Wilken's ruling was going to be far from the only voice in this matter. 

    So it was no surprise when NCAA chief legal officer Donald Remy announced that the defendants would challenge Friday's ruling, via Steve Berkowitz and Thomas O'Toole at USA Today Sports

    "We remain confident that the NCAA has not violated the antitrust laws and intend to appeal," Remy said. "We will also be seeking clarity from the District Court on some details of its ruling."

    Sports Illustrated legal expert, Michael McCann explains the steps the NCAA will take: 

    The NCAA would first ask her to reconsider the stipulation. Assuming that fails, it could then appeal to the U.S. Court of Appeals for the Ninth Circuit, which has appellate jurisdiction over Wilken. 

    [...]

    [I]t would then petition the Ninth Circuit to vacate Wilken’s injunction. This petition would be part of an appeals process that could last two or three years, or substantially longer should the NCAA win along the way.

    [...]

    The NCAA’s last step would be to petition the U.S. Supreme Court for review. The Supreme Court, however, is unlikely to hear the case, as it only grants cert to about one percent of petitions. 

    [...]

    The NCAA could also petition Congress and President Obama to pass a law that would effectively reverse Wilken’s order.

    Wilken's ruling won't take effect for another two years, so the NCAA has time to have the decision overturned. McCann notes that the Ninth Circuit is a "labor-friendly appellate court," but there's no incentive for it to side with Wilken. It can rule however it wants. 

    The NCAA refused to settle before or during the O'Bannon trial—beyond an Electronic Arts video game lawsuit, that is. That suggests it will explore every possible avenue to overturn Wilken's ruling. 

    In other words, don't expect for the NCAA to go quietly into this new era of college sports. 

This Won't End Lawsuits Against the NCAA

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    Louis Lanzano/Associated Press

    O'Bannon's victory didn't mark the end of the NCAA's multifront battle against lawsuits. In fact, there's a suit on the horizon with potentially greater ramifications. 

    Jeffrey Kessler, the sports labor attorney who helped bring about free agency in the NFL, is essentially looking to blow the roof off of the NCAA and the collegiate model altogether. The crux of the Kessler suit is explained by Tom Farrey of ESPN.com

    It simply states that no cap is legal in a free market and asks the judge to issue an injunction against the NCAA ending the practice. It contends that NCAA member universities are acting as a cartel by fixing the prices paid to athletes, who presumably would receive offers well in excess of tuition, room, board and books if not restricted by NCAA rules.

    What Kessler seeks would make Wilken's ruling look charitable by comparison. 

    There's also the possibility, however small, of another athlete challenging Wilken's ruling. As Jon Solomon of CBSSports.com explains, the $5,000 payment from NIL rights is comparable to other available grants: 

    Wilken pointed out that witnesses at trial -- namely former CBS Sports president Neal Pilson and Stanford AD Bernard Muir -- testified they would have fewer concerns about paying players if the compensation was capped at a few thousand dollars per year. Wilken noted this range is also comparable to how much money the NCAA currently permits athletes to receive if they qualify for a Pell Grant and the amount that tennis players may receive prior to enrolling.

    There could be a time when someone else decides $5,000 a year isn't enough. When that time comes—if it comes—remains to be seen. 

The Power 5 Will Separate Even More

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    PAUL BEATY/Associated Press

    Perhaps no group had a better two days last week than athletes in so-called power-five conferences.

    On Thursday, one day before Wilken's ruling, the NCAA Division I Board of Directors voted overwhelmingly in favor of giving power-five conferences (ACC, Big 12, Big Ten, Pac-12 and SEC) legislative autonomy. Assuming it passes a 60-day veto period, power conferences would have more authority to govern their own interests than ever before. 

    The first item on the agenda should be calculating the full cost of attendance for athletes. Since this was already a front-burner issue for autonomy, Wilken's ruling does little to affect the NCAA negatively on this front. 

    Couple the cost of attendance boost with the rest of Friday's ruling, and power-five athletes will be on the receiving end of more money beginning in 2015 and '16, respectively. Sports Business reporter Kristi Dosh does an excellent job of explaining how this works

    You’ve probably heard about the $5,000 tied to the trust fund idea. It does not mean every football and men’s basketball student athlete is automatically accruing $5,000 per year in a trust fund to access after graduation or exhaustion of eligibility. What the judge said was that the NCAA cannot prevent schools from offering at least $5,000 per year to football and men’s basketball student athletes (to be placed in a trust for disbursement upon graduation or exhaustion of eligibility). The NCAA will likely set the cap at the minimum $5,000/student athlete/year. Each individual school can then decide if they want to participate, but they are not required to do so. One school might decide on the $5,000 number, another might only be able to do $2,500, and yet another might decide they cannot afford to do anything. Whatever the schools choose, they must implement it equally across a recruiting class. You can’t offer higher-profile recruits more than other recruits. You can, however, change the amount with each new recruiting class.

    Generally speaking, schools in power-five conferences are equipped to handle the task of further dividing the revenue pie to include players. That doesn't mean, however, that there won't be disagreement among members about how to calculate/cap the amount and from where it will come. 

    Much is made about the "haves" and "have nots" of college athletics, but in major college football and basketball, it's more about the "haves" and "have mores." Wilken wrote as much in her ruling: 

    The high coaches' salaries and rapidly increasing spending on training facilities at many schools suggest that these schools would, in fact, be able to afford to offer their student-athletes a limited share of the licensing revenue generated from their use of the student-athletes' own names, images and likenesses. 

    For example: Louisiana-Lafayette, a Sun Belt conference member, recently awarded head coach Mark Hudspeth a new contract that averages $1.075 million over the length of the now six-year, $6.45 million deal, per the Lafayette Advertiser. Clearly, ULL is able to find the money to pay its head coach, but it will be challenged to simultaneously pay football and basketball players for their NIL rights—if it can at all. 

    That's not much of an issue for schools like Ohio State or Alabama, which pulled in more than $100 million in revenue in 2013, according to USA Today

This Isn't the Death of College Football

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    Gregory Bull/Associated Press

    Fear mongering is a powerful tool. 

    If there's one thing college football fans hate, it's the idea that their beloved sport will forever change for the worse or otherwise "die." Widespread change is a hard thing to accept, especially when it creates a brave new world, so to speak. 

    And, indeed, the O'Bannon ruling stands to change college athletics. Some football players at one school in the SEC will be paid more than others at North Texas. Title IX is a concern too, but it's one that did not apply to Wilken's ruling. As Dosh ponders, "would a court consider the new stipend and trust fund for football and men’s basketball players 'athletically-related financial aid'?"

    If a the answer is yes, then there's a problem. But, as it stands now, this is solely a matter of redistributing a percentage of revenue to football and men's basketball players. 

    "What we did is just a small amount of change," O'Bannon said via Farrey. "This is just the tip of the iceberg. I think that a lot of change is going to happen. This is just the beginning." 

    However, paying athletes is not the greatest threat to college football. There will be college football in 2014. And in '15. And in '16 and so on. 

    A unionization push, like the one made by Northwestern football players this spring, was a different situation because it 1) redefined an athlete's title respective to the university and 2) introduced the idea of collective bargaining. That's not to say unionization was a "threat" to college football, per se, but there could be strikes at individual schools that affect games.

    (Of course, Grambling State players briefly, and unofficially, went on "strike" last fall because of poor conditions.)

    If anything, concussions stand to be football's greatest threat from a long-term perspective. Player safety has become a major issue in football, one for which there seems to be no immediate answer. 

    Crunching the numbers of an athletic budget to better compensate players is far from the worst thing to happen to college football. Provided Wilken's decision ultimately stands, the NCAA and its membership will adjust and move on. And so will the rest of us. 

     

    Ben Kercheval is a lead writer for college football at Bleacher Report. 

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