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Judge Claudia Wilken Issues Her Order On The Ed O'Bannon Lawsuit, But What Does It Mean?

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HAPPY LAWYERDAY, EVERYBODY!

Jamie Squire

THE NCAA IS UNDER ATTACK! THIS IS NOT A DRILL! THIS IS NOT A DRILL! All those times practicing our shirtless fight moves in NCAA President Mark Emmert's office are going to pay off! But what is attacking the NCAA and why does it matter now?


The "what" answer is complicated, because there are many different attacks on the NCAA right now. One is the attempt at unionization by the Northwestern athletes. Another is a lawsuit by former UCLA star Ed O'Bannon. The "why" is relevant to that case, because federal Court Judge Claudia Wilken has issued an Order on the case.

The Order is here. It is 99 pages, which is 100 pages of dense legal analysis, which is more than most people would ever want to read. If you want something more bite-sized, you can check out the Injunction here.

So, what is this Order/Injunction and what does it mean for the NCAA? To answer that question, first we have to look at what the Plaintiffs were arguing in the case. Basically, Ed O'Bannon turned on his NCAA video game one day and realized that he was in the game. You could play as Ed O'Bannon! He could play as himself!  Yet he hadn't received a single penny.

He should have received money, because people have rights to their Names, Image, and Likeness (NIL Rights).  Most times these rights are meaningless, because who would pay a penny for my NIL rights? Nobody. But for somebody like Ed O'Bannon, who poured years of his life into college athletics, and for many people like him, the situation is different. Due to their high profile, people would pay money for their NIL Rights. EA Sports, the maker of the NCAA video game, for example. Or TV channels. Then, the TV people can say "TUNE ON IN TO THE GAME TO SEE SUPERSTAR ED O'BANNON!" and get ratings.


As such, the NCAA forces all of its athletes to sign over their NIL Rights in perpetuity. The NCAA then bundles these rights and sells them to the highest bidder and keeps all the money. Seems pretty fucked up (legal latin term!) when you put it that way, don't you?

So, the NCAA and EA Sports profit off of O'Bannon's likeness and O'Bannon does not see a penny. O'Bannon sued, saying that that was an antitrust violation and that the Judge should issue an Order stopping them from doing so.

Vlad Belo: And O'Bannon wasn't the only one: among the 20 or so plaintiffs in the lawsuit were basketball legends Oscar Robertson and Bill Russell and former Connecticut basketball star Tate George, who would probably be on a Mount Rushmore of UConn basketball next to Jim Calhoun if such a thing existed.

TwistNHook: So, what did the Judge do exactly? Also, what didn't she do?

ORDER

When you have 99 pages worth of Order, you have an almost unlimited set of nooks and crannies you can dig into. There were three weeks of testimony and it's re-outlined in many ways in the Order. Let's skip all that. Let's just get to the bottom line. That is at the end of the Order PDF (scroll down to Remedy on Page 95 of the PDF) and in the Injunction. An Injunction is an Order that stops somebody or something from doing something. For example, all throughout the Stadium Tree-Sitter lawsuit, there was an Injunction in place that precluded Cal from cutting down the trees. That is really what stopped the trees from coming down, not the tree sitters. As soon as the Judge in that case dropped the Injunction, Cal almost immediately moved to remove the tree-sitters and chop down the trees.


Here, the Judge has issued an Injunction with basically two key parts. The Judge enjoined the NCAA from enforcing regulations that:

1. Prohibit deferred compensation in an amount of $5,000 per year or less (in 2014 dollars) for the licensing or use of prospective, current, or former Division I men's basketball and Football Bowl Subdivision football players' names, images, and likenesses through a trust fund payable upon expiration of athletic eligibility or graduation, whichever comes first;

2. Prohibit the inclusion of compensation for the licensing or use of prospective, current, or former Division I men's basketball and FBS football players' names, images, and likenesses in the award of a full grant-in-aid, up to the full cost of attending the respective NCAA member school, as defined in 20 U.S.C. § 1087ll and calculated by each school's financial aid office applying the same standards, policies, and procedures for all students.


Vlad Belo: So, the first thing that jumps out at me is the nature of the order itself. Judge Wilken is ordering the NCAA to stop enforcing certain rules. She did this in the context of an antitrust case, crafting a remedy that is supposed to improve the competition in the marketplace and amelioriate the monopolistic activities of the NCAA and the member institutions that follow their rules. Such a remedy is not unusual in antitrust cases: federal judges have broad powers to issue injunctions that provide a remedy to anticompetitive activity.

In her 99-page order, Judge Wilken specifically found that the NCAA's rules that prohibit compensating student-athletes for NIL rights restrained "price competition" among FBS and Division I basketball schools as "suppliers of the unique combination of educational and athletic opportunities that elite football and basketball recruits seek."  
Alternatively, Judge Wilken found that the challenged NCAA rules restrain trade "in the market where these
schools compete to acquire recruits' athletic services and licensing rights."


The second thing that jumps out is that this does not seem to technically actually require the schools to do anything. It just stops the NCAA from keeping them from doing something. In other words, the NCAA cannot enforce its regulations that prohibited the member schools from compensating the student-athletes (in some way) for their NIL rights. So, it is a "can" instead of a "must." What does it "allow" the schools to do?

PART 1 - $5,000.00

TwistNHook: The first thing that it allows them to do is provide no more than $5,000.00 per year to the players of the men's basketball and Div 1 football players. Women's basketball, baseball, etc etc, they get nothing.

Vlad Belo: This is not to say that other athletes can't get something in the future: The Judge did not rule on those athletes because the O'Bannon class action was limited to men's basketball and Div. I-A/FBS football players.

TwistNHook: This up to $5,000.00 payment is for the players' NIL Rights. They do not get what their NIL Rights might actually fetch on the open market.

However, the football/men's basketball players do not get it when they are at school. The schools are allowed to put the money into a trust fund, from which the student-athlete can get compensated upon graduation or when his athletic eligibility expires.   My question, of course, is what happens if you fail out after two years? Do you get paid your $10,000 at that time? Wouldn't you in theory have a few more years of eligibility available if you can get your grades back up? Do you then not get your $10,000.00 until after those years are up, years later?

This, of course, is if the schools pay the full $5,000. I suspect they will, because it'll be a quick arms race to the top. "Come to Alabama and get $5,000 per year!" "Come to Auburn and get $1,000.00." Well, that was an easy decision! Looking at my crystal ball, I see the full $5,000 being maxed out across the board pretty goddamn quick. Per the Order, whatever the school pays its players, it has to pay it equally. So, the backup punter makes the same amount as the star QB.

Scope Of Order

There are a few other aspects to this section of the Injunction that merit discussion. For example, does it apply to walk ons? If not, there are 85 scholarships for football and 13 scholarships for men's basketball. That is 98 total scholarships. If my prediction of the full $5,000.00 coming into effect quickly, that is an additional $490,000.00 worth of coins to find in couches across America. For an athletic department like Cal, which is desperately trying to get off the school's teat, while also paying millions in extra money a year to debt service, another half mil to pay is not a small issue.


I cannot quite find language in the Order/Injunction about the $5,000.00 applying solely to scholarship players and not to walk ons. It would be substantially more if it applied to walk ons.  Additionally, the language specifically states "players" without specific notation about "scholarship-recepients" or something like that.  Additionally, the money is not for playing on the team, but instead for having your name, image, or likeness be rebroadcast on TV etc etc.  If a walk-on sees the field, their NIL Rights are as violated as a scholarship receipient's rights.

Vlad Belo: This can be an expensive proposition depending on the program. Particularly in football, the number of walk-ons varies from program to program. The legacy programs may have a lot more than others. Thus, the more walk-ons you have, the bigger budget for the "trust fund" that a school will have to consider.


TwistNHook: Also, what is interesting is that this makes redshirting a $5,000.00 decision.  If you are a true freshmen and you play 4 in 4, you get $20,000.00.  If you play 4 in 5, you get $25,000.00.  Who would want to be a true freshman????

So, that is the first part of the Injunction. Players get paid up to $5,000 per year for their NIL Rights. What is part 2?

PART 2 - Full Cost Of Attendance

This is a bit more opaque, but it is essentially the same as the first part. The players get some money for their NIL Rights. Instead of getting straight cash, the players can get a stipend for their NIL rights, up to the full cost of attendance scholarship. This is significant because current rules (i.e., the rules that Judge Wilken enjoined) cap stipends at something below the "full cost of attendance."  This part of Judge Wilken's injunction is more complicated as noted here:

Each university publishes a full cost of attendance number based on the miscellaneous expenses over and above what's normally included in the scholarship, and those numbers vary significantly for two reasons: One, each school calculates them differently; and two, there are inherent cost-of-living factors that differ from one school to the next.

"When our kids move off-campus they get a huge check because our on-campus room and board is expensive," Buffalo athletics director Danny White said. "Some other universities it could be $3-4,000 less. Nobody's talking about that discrepancy, and that's huge before you even start thinking about a stipend."


If you look at the specific language of the injunction, the Judge left it vague and allowed each school to determine their own full cost of attendance scholarship. So, this is more money above and beyond the $490,000.00 that will come from section 1. That USA Today article above states the following about the potential cost:


At minimum, athletics directors are expecting that once implemented, the full cost of attendance will add $500,000-$600,000 to their budgets, but the number could easily be larger than that depending on what's included in the final calculation.

A place like Berkeley could be hit harder than most. Rent for an apartment is much more in Berkeley than most other places where colleges are. Cal actually had a page where it talks about this.  Tuition is about $13,000.00. If you live off campus, by their math, you pay about $26,000.00, for a $13,000.00 increase per person. I have no idea how accurate these numbers are if you apply them to football/MBB players, but you can get a feeling for what additional sums of money that the Athletic Department could be in a position to pay.

Again, this doesn't force the schools to pay the full cost of attendance. However, similar to the $5,000.00, I see there being an arms race ensuring the schools quickly do. Also, the PR of somebody like Shabazz Napier saying he sometimes goes to bed hungry when he just won the National Championship will also lead schools to provide these full cost of attendance scholarships.

I think the NCAA proposed a flat $2,000.00 stipend, but I'm not sure what the likelihood of that happening is. Schools might like that, because they like the certainty of it. $2,000.00 goes a lot further in Stillwater or Corvallis than it does in Berkeley, of course.

Scope Of Order

Vlad Belo: Another interesting aspect of Part 2 of the injunction is that its terms appear to apply only to scholarship athletes. Whereas Part 1 encompasses walkons, the fact that Part 2 speaks specifically to "grants-in-aid" means that walk-ons are necessarily excluded. This means that scholarship athletes can essentially double-dip in a way: they may get compensated (as part of the grant-in-aid) for their NIL rights during their time with the school and get compensation from the trust fund after they leave school, but the walk-ons only have a chance at getting compensation from the trust fund after their eligibility is exhausted.

BIGGER PICTURE

TwistNHook: SBNation's Kevin Trahan wrote an article on this, which I think he got slightly wrong. It's not that his analysis is wrong. His conclusions are a bit confusing to me. He views this as a great victory for the NCAA.

Vlad Belo: In one sense, it is a "victory" for the NCAA.  Judge Wilken did not conjure the injunctive remedies we illustrated above out of thin air.  As described in the 99-page order, the O'Bannon plaintiffs suggested these remedies as "less restrictive alternatives" to the NCAA's categorical ban on compensating student-athletes for their NIL rights.  Without getting too much into the minutae of antitrust law, the court does not have to inquire into "less restrictive alternatives" unless it has determined that the restriction(s) at issue yielded some procompetitive benefit.  Judge Wilken found so in her ruling, agreeing with the NCAA that the rules advanced procompetitive goals of (1) preserving the popularity of the NCAA's product by promoting some aspect of amateurism and (2) "improving the quality of educational opportunities for student-athletes by integrating academics and athletics."  Even though Judge Wilken rejected other justifications espoused by the NCAA, the NCAA was at least able to convince her that these were legitimate ones.

TwistNHook: If you were coming at this from the point of view of the Joker and you wanted to see the NCAA burn, then yes it is a great victory for the NCAA. Many people wanted to see the whole system just burn down and something new emerge. But would something new be better? If every player is on the open market, what does that mean? How much do you value the backup punter? How do you value the star QB? That creates an insane mess of trying to sign players to "deals" and I do not think it'd be better than what this sets up.

If you come from it from the point of view of trying to actually benefit the players, I think this is a pretty good deal (except for one part that I will get into in a moment). Are the NIL Rights of most college football/basketball players worth $5,000.00 per year? My honest opinion is no. Sure, if you get a Johnny Manziel in there, they are worth that, if not more. The vast majority of people watch college sports for the teams. There might be a small amount of players who can drive eyeballs, usually on the best teams. The majority of players probably do not have a lot of NIL Rights value and it is probably less than $5,000.00.  This is especially true since the players would be negotiating without the help of an agent.


So, if they are going to get thousands more in a full cost of attendance scholarship and then an additional $5,000.00 on top of that per year (i.e. $25,000 for a full 5 year term at school), I think that that is a great deal. This hurts schools by requiring them to pony up a significant amount more in money, which you may be 100% fine with altogether. However, the ruling does hurt the players in one key way. It still allows the NCAA to preclude players from being involved in endorsement deals.

My personal opinion is that players should be allowed to be involved in endorsement deals. A player like Johnny Manziel has a lot of natural talent and has worked incredibly hard (or so his PR team tells me) to be in the position that he is in. If people are willing to pay you money for endorsement/signatures etc etc, you should be able to make that money. That is what differentiates you from the backup punter. Very few players would actually have sufficient name recognition to take advantage of this scenario. They will not be able to take advantage of their hard work, unfortunately, due to this Order.

The Judge stated that this was due to potential "commercial exploitation" on these players, but I do not see that to be the case. Not being able to make money off of their name is commercial exploitation, not the other way around.

Finally, please note that this does not affect any players until July 1, 2016. That is a ways away and given the seachange in the NCAA right now, who knows what things will look like in 2016.

What is your thought here? Tell us in the comments and GO BEARS!