Ninth Circuit rules that student-athletes are not entitled to monetary compensation

The United States Court of Appeals for the Ninth Circuit recently decided a significant case regarding whether college student-athletes should receive monetary compensation. In O’Bannon v. National Collegiate Athletic Ass’n,[1] a group of current and former college football and basketball players brought a class action lawsuit alleging anti-trust law violations against the National Collegiate Athletic Association (“NCAA”). The dispute primarily focused on the NCAA’s compensation rules which prevent college student-athletes from receiving monetary compensation for the use of a player’s name, images and likeness, such as in video game depictions of college student-athletes.[2] Further, NCAA rules prohibit student-athletes from receiving pay based on athletic ability and provide that a student-athlete can lose his/her amateur status by signing a contract with a professional league, hiring an agent, or entering a professional league draft.[3]

The Ninth Circuit found that the NCAA’s compensation rules are in fact subject to antitrust scrutiny and rejected the NCAA’s contention that prior case law established that its amateurism rules were “presumptively valid” and exempt from anti-trust scrutiny.[4] The Ninth Circuit also found that Plaintiffs did suffer injury as a result of the rules prohibiting compensation for use of student-athletes’ name, images, and likeness in video games.[5] To determine whether the NCAA compensation rules were considered an unlawful restraint of trade in violation of anti-trust laws the Ninth Circuit applied a test called the “Rule of Reason.”[6]

The District Court had previously ruled that the NCAA could not institute rules which prevent its member schools from providing student-athletes scholarships up to the cost of full attendance at a school, and that student-athletes should be paid up to $5,000 in cash compensation per year, which was to be deferred and distributed to student-athletes through trust funds after they leave school.[7] The Ninth Circuit reversed the District Court’s ruling permitting student-athletes to be paid up to $5,000 per year, noting that “not paying student-athletes is precisely what makes them amateurs.”[8] Thus, this ruling means that schools can provide student-athletes with full scholarships but do not need to provide any other monetary compensation to student-athletes.

This ruling is significant and may open up the door for future lawsuits which attempt to analyze other NCAA rules on student-athletes under the “Rule of Reason.” This may lead to the NCAA attempting to appeal the Ninth Circuit’s decision that its rules are subject to antitrust scrutiny. The Ninth Circuit also refused to rule on the NCAA’s claim that the Copyright Act preempts right of publicity claims based on sports video games, which could lead to more litigation in the future regarding that point.

Please contact our office if you have any questions regarding the information in this article.

Daniel Devine, Esq.
Santucci Priore, P.L.
Shareholder

[1] Nos. 14-16601, 14-17068, 2015 WL 5712106 (9th Cir. Sept. 30, 2015).
[2] Id. at 2015 WL 5712106 at *1.
[3] Id. at 2015 WL 5712106 at *3.
[4] Id. at 2015 WL 5712106 at *10-13.
[5] Id. at 2015 WL 571206 at *15-18.
[6] Id. at 2015 WL 571206 at *18.
[7] Id. at 2015 WL 5712106 at *9.
[8] Id. at 2015 WL 5712106 at *22-26 (emphasis in original).