Student-Athletes Win This Tournament Round: The Supreme Court Issues a Unanimous Decision Against the NCAA on Benefits Issue

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By a 9-0 vote, the U.S. Supreme Court yesterday ruled in favor of student-athletes on the NCAA rules restricting education-related benefits given to athletes. However, while the ruling in yesterday’s NCAA v. Alston case went in favor of the athletes, institutions of higher education need to proceed with caution as the decision did not dismantle all of the NCAA’s rules on athlete compensation. While the NCAA was hosting this year’s March Madness basketball tournament, it was also busy waging one of its biggest legal battles in decades – and those that followed the March 31 oral arguments at the Supreme Court anticipated this type of ruling given the harsh spotlight the Justices placed on the NCAA’s compensation ban. What do you need to know about yesterday’s pivotal decision?

The Important History of Antitrust Challenges Faced by the NCAA

In order to more fully understand yesterday’s decision, it is important to understand a brief history of two critical cases dealing with NCAA rules and challenges that have been made based on antitrust laws.

  • In 1984, the Supreme Court held the NCAA’s plan for televising football games violated the Sherman Act, which is the nation’s main federal antitrust statute. But although the Court held the restrictions violated restraints on trade, the majority in NCAA v. the Board of Regents said that most of the NCAA’s regulatory controls are justifiable means of fostering competition among amateur athletic teams and therefore procompetitive because they enhance public interest in intercollegiate athletics.” The Court found the NCAA needed “ample latitude” to play “a critical role in the maintenance of a revered tradition of amateurism in college sports.” The NCAA has continuously relied on this language to argue against the applicability of antitrust laws to its rules.
  • Then, in 2009, a group of current and former men’s college football and basketball players challenged the NCAA’s use of the players’ names, images, and likenesses. In O’Bannon v. NCAA, this group argued that former student-athletes should be entitled to financial compensation for the NCAA’s use of their image. The NCAA contended that paying student athletes would be a violation of its concept of “amateurism.” In 2014, Judge Claudia Wilkin of the U.S. District Court for the Northern District of California found for the plaintiffs, holding the NCAA’s rules were an unlawful restraint on trade. The NCAA appealed but the Court of Appeals affirmed the lower court’s ruling, stating that “although we agree with the Supreme Court and our sister circuits that many of the NCAA's amateurism rules are likely to be procompetitive, we hold that those rules are not exempt from antitrust scrutiny; rather, they must be analyzed under the Rule of Reason.” Both parties appealed to the Supreme Court, but it declined to hear the case.

Prior Decisions Set the Stage for Yesterday’s Ruling

While the O’Bannon case was pending, in 2014, former West Virginia running back Shawne Alston, representing a class of Division 1 level men’s and women’s college athletes, filed another claim against the NCAA and 11 Division 1 conferences. The class challenged the NCAA rules that limit the compensation they may receive for their athletic service, alleging the rules produce anti-competitive effects in violation of the Sherman Act.

In response, the NCAA claimed the restraints had procompetitve effects and should pass muster under antitrust law for two main reasons: (1) the protection of amateurism, which the NCAA alleges is the biggest distinguishing factor between college and professional sports, and (2) the protection of student-athlete integration into the college community and their overall educational experience.

After a 10-day bench trial in 2019, Judge Wilkin – the same judge from the O’Bannon case – issued a lengthy decision ruling in favor of the athletes and granting a permanent injunction against the NCAA. Judge Wilkin held that the NCAA must allow for certain types of education-related benefits and barred the NCAA from limiting education-related benefits to students. However, she did hold that the NCAA may still limit cash or cash-equivalent awards. Both sides appealed. The athletes felt Judge Wilkin did not go far enough and should have enjoined all of the compensation limits. On the flip side, the NCAA felt Judge Wilkin’s ruling went too far.

On appeal, U.S. Court of Appeals for the 9th Circuit affirmed the decision in its entirety. Chief Judge Thomas, in supporting Judge Wilkins’ decision, recognized her injunction created a good balance between “crafting a remedy that both prevents anticompetitive harm to student-athletes while serving the procompetitive purpose of preserving the popularity of college sports.” While the 9th Circuit recognized the NCAA’s interest in “preserving amateurism,” it still found that the rules, as written by the NCAA, violated antitrust law. The Supreme Court agreed to hear the NCAA’s appeal, leading to yesterday’s decision.

SCOTUS Delivers a Win for Student-Athletes – But Still Preserves NCAA’s Ability to Adopt Rules on Compensation

In an opinion written by Justice Neil Gorsuch, the Court affirmed the lower court’s decision that the NCAA cannot restrict educated related benefits to student athletes and that such restrictions are in fact a violation of anti-trust laws. However, Justice Gorsuch made it clear at the very beginning of the opinion that the ruling was very narrow and did not create a blanket ban on the NCAA’s ability to restrict athlete compensation.

Throughout the opinion, Justice Gorsuch reviewed the 9th Circuit’s ruling in detail and confirmed that decision was made under the appropriate principles of the law. At the end of the opinion, Justice Gorsuch recognized, “some will see this as a poor substitute for fuller relief.” However, he also went on to suggest that the lower court’s decision “may encourage scholastic achievement and allow student-athletes a measure of compensation more consistent with the value they bring to their schools."

Justice Brett M. Kavanaugh wrote a concurring opinion acknowledging that yesterday’s decision “marks an important and overdue course correction.” Throughout the opinion, Justice Kavanaugh harshly criticized the NCAA stating, “the NCAA Is not above the law” and “the bottom line is that the NCAA and its member colleges are suppressing the pay of student athletes who collectively generate billions of dollars in revenue for colleges every year.” Like Justice Gorsuch, Justice Kavanaugh acknowledged the narrowness of the opinion, but recognized the clear need for change.

Not So Fast, Educational Institutions

The U.S. Supreme Court decision yesterday only focused on the narrow issue of the NCAA’s rule education related benefits. While some may have hoped for a broader and more all-encompassing ban on the NCAA’s rules against compensation, in the words of a prominent college football commentator, “not so fast, my friends.”

What is clear from yesterday’s decision is that the focus on student-athlete compensation is far from done. Even though the ruling yesterday is narrow, it is likely that change is coming. At the federal level, the focus on college athlete compensation attracted the attention of Congress in 2019 when federal lawmakers formed a bipartisan group to review the issues. Although bills have been introduced, nothing official has transpired at the federal level – yet. It is possible yesterday’s SCOTUS ruling could speed up Congressional activity.

At the state level, several state legislatures have enacted laws in connection with student-athlete compensation. In 2019, for example, California Governor Gavin Newsom signed the “The Fair Pay to Play Act” into law, which will go into effect in 2023 and will guarantee college athletes the right to profit from their identities by allowing them to acquire endorsements and sponsorships while still maintaining athletic eligibility. In June 2020, Florida Governor Ron DeSantis signed a bill into law to allow college athletes to profit from use of their name, image, and likeness beginning as early as July 2021. Additionally, Alabama, Mississippi, and Georgia have followed Florida’s lead and all enacted laws allowing college athletes to share in the profit from the use of their name, image and likeness, also all going into effect in July 2021. Educational institutions should closely monitor state level legislation and expect this trend to continue.

Finally, the NCAA signaled its intent to make changes to its rules on name, image, and likeliness in May of this year when NCAA President Mark Emmert recommended that the NCAA’s members approve new rules allowing athletes to make money from their name, image, and likeness by or before July 1, 2021. To date, the NCAA Board has not acted. However, in response to the decision yesterday, the NCAA issued the following statement on its website:

While yesterday’s decision preserves the lower court ruling, it also reaffirms the NCAA’s authority to adopt reasonable rules and repeatedly notes that the NCAA remains free to articulate what are and are not truly educational benefits, consistent with the NCAA’s mission to support student-athletes.

‘Even though the decision does not directly address name, image and likeness, the NCAA remains committed to supporting NIL benefits for student-athletes,’ said NCAA President Mark Emmert. ‘Additionally, we remain committed to working with Congress to chart a path forward, which is a point the Supreme Court expressly stated in its ruling.’

What Should You Do?

This decision now allows student-athletes to receive education-related payments from schools. However, the full impact of this decision will likely be felt more in the days, weeks, and months to come given the potential for action at the federal and state level, along with anticipated action by the NCAA. To support educational intuitions moving forward, Fisher Phillips intends to publish future articles tracking the practical implications on yesterday’s decision.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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