The Ed O'Bannon Class Action Lawsuit—A New Paradigm for College Sports, 0216 COBJ, 2016, February, Pg. 31

AuthorMatt Simenstad, J.

45 Colo.Law. 31

The Ed O'Bannon Class Action Lawsuit—A New Paradigm for College Sports

Vol. 45, No. 2 [Page 31]

The Colorado Lawyer

February, 2016

Articles

Intellectual Property Law

The Ed O'Bannon Class Action Lawsuit—A New Paradigm for College Sports

Matt Simenstad, J.

Intellectual Property Law articles are sponsored by the CBA Intellectual Property Section. They provide information of interest to intellectual property attorneys who advise clients on protecting and exploiting various forms of intellectual property in the marketplace.

Coordinating Editors

K Kalan, Denver, Administrative Patent Judge—(720) 480-1500, kmkalan@yahoo.com; William F. Vobach, Denver, of HolzerlPLaw, PC—(720) 204-5673, vobach@holzeriplaw.com

About the Author

Matt Simenstad is an attorney at U.S. Bank in Minneapolis, where he works as a contract analyst and negotiator. He graduated from the University of Denver Sturm College of Law in 2013—(612) 940-4514, simensta@gmail.com.

This article describes the class action antitrust lawsuit by current and former NCAA student-athletes against the NCAA for prohibiting them from receiving compensation for the use of their names, images, and likenesses.

On the night of April 3, 1995, Ed O'Bannon was the biggest college basketball star in the country. A confetti curtain had just drawn on a season in which O'Bannon led the UCLA Bruins to a 31-2 regular season record, rolled through the NCAA's postseason basketball tournament, and won the national championship over the defending champion Arkansas Razorbacks. In the championship game, O'Bannon dominated the Razorbacks, scoring 30 points, grabbing 17 rebounds, and carrying the Bruins to their first national title in 20 years. He had already received the John R. Wooden award as the best college basketball player in the country, and on that night he was also named the tournament's Most Outstanding Player.

Today, 20 years after his shining moment, O'Bannon is a car salesman in Las Vegas. After a brief, disappointing stint in the NBA, and several uninspiring years playing overseas, he retired at age 32. Meanwhile, UCLA and the NCAA have continued to profit from O'Bannon's college achievements in myriad ways, including selling DVDs of games in which he played, re-broadcasting those games on ESPN Classic, and licensing to video game companies the right to feature the 1995 Bruins team in their annual NCAA basketball video games, all of which contributes to the $4 billion market for NCAA merchandise.1 Memorable NCAA Tournament runs like the '95 Bruins' have helped grow the mythology of March Madness to such a level that the NCAA recently negotiated a 14-year, $10.8 billion television contract with CBS to broadcast the NCAA basketball tournament each year.2 Yet O'Bannon and his fellow former student-athletes do not receive any of that money.

He is hoping to change that. As the lead plaintiff in In re NCAA Student-Athlete Name & Likeness Licensing Litigation (In re NCAA), a lawsuit on behalf of current and former student-athletes filed in the U.S. District Court for the Northern District of California, O'Bannon and other similarly situated plaintiffs successfully challenged the NCAA bylaws that limit the amount of compensation student-Athletes can receive.3 On August 8, 2014, in O'Bannon v. National Collegiate Athletic Association, Judge Claudia Wilken ruled that the NCAA violates the Sherman Act by "agreeing with its member schools to restrain their ability to compensate . . . men's basketball and [Football Bowl Subdivision] football players" more than the amount of those players' scholarships.4 Judge Wilken granted an injunction enjoining the NCAA from enforcing its rules that prohibit member institutions from "offering their FBS football or Division I basketball recruits a limited share of the revenues generated from the use of their names, images, and likenesses."5 The order further enjoined the NCAA from prohibiting schools from depositing a share of licensing revenue in trust for football and basketball players that would be payable upon leaving school,[6]and also prevented them from capping the total amount that would be available at less than $5,000.7

The NCAA appealed Judge Wilken's decision to a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit. On September 30, 2015, the Ninth Circuit upheld Judge Wilken's decision by declaring that the NCAA's ban on student-athletes receiving compensation violates federal antitrust law.8 The panel also voided the district court's injunction with respect to the $5,000 cap, reasoning that Judge Wilken relied too much on an expert witness's "off-hand" comment in support of that number.9

The NCAA's amateurism policies have long been a target of criticism and extensive litigation, but up to this point they have withstood the vast majority of legal challenges, which makes the plaintiffs' success in In re NCAA a significant development. Of particular significance is the Ninth Circuit's ruling that the NCAA's amateurism rules violate antitrust law, a departure from past cases that opens up the NCAA to more antitrust litigation.[10]

Summary of the Case

In re NCAA was a consolidation of two separate actions, O'Bannon v. NCAA11 and Keller v. Electronic Arts.12 At the time of Judge Wilken's decision, the NCAA was the sole remaining defendant in the case. The other two original defendants, Central Licensing Company (CLC), a division of the global marketing agency IMG and the NCAA's licensing affiliate, and Electronic Arts (EA), which manufactures video games featuring college athletes, settled in September 2013. The court approved the $60 million combined settlement for the plaintiffs in July 2015.13 The settlement addresses the plaintiffs' claims related to the use of their names, images, and likenesses in video games licensed among the NCAA, CLC, and EA.

Plaintiffs

The plaintiffs in this case were separated into an antitrust class and a right of publicity class of current and former college basketball and football players from different eras. Bill Russell and Oscar Robertson are legendary basketball players who had stellar college careers in the '50s and '60s and went on to become NBA Hall of Famers. Others, like O'Bannon, had only brief careers as professional athletes and, as the NCAA slogan goes, became professionals in something other than sports. Nevertheless, their likenesses and personas from their college days have remained sufficiently valuable that the NCAA continues to find new ways to make commercial use of them to its exclusive benefit and that of its business partners. Alex Gilbert, Eric Riley, and Harry Flournoy, for example, were each vital role players on historic college basketball teams. Samuel Keller, Tyrone Prothro, Sam Jacobson, and Lamar Watkins are also not immediately recognizable to most fans, but all of them experienced individual and team success as college athletes. These plaintiffs and others like them were successful enough as student-athletes for the NCAA and its business partners to use their likenesses in merchandise and marketing after they had left college.

In July 2013, a group of six current student-athletes joined the lawsuit to represent the interests of their peers, a move that significantly increased the potential damages award and, as the NCAA stated in its opposition to the plaintiffs' motion for class certification, "mounts a frontal assault on the NCAA's amateurism rules."14 Judge Wilken denied class certification for claims seeking monetary damages but granted class certification for claims seeking to enjoin enforcement of the NCAA's rules prohibiting compensation.15

Defendants

The NCAA is a "voluntary association of over 1,000 institutions, conferences and organizations," and describes itself as "the organization through which the colleges and universities of the nation speak and act on athletic matters at the national level."[16]Founded in 1906 in response to President Theodore Roosevelt's calls to reform college sports and "protect young people from the dangerous and exploitative athletic practices of the time,"17 the NCAA has evolved into the preeminent governing body of college athletics. Its primary function in this capacity is enforcing its own constitution and bylaws—most importantly those bylaws requiring that student-athletes remain amateurs while enrolled at their member institutions. Courts have interpreted the bylaws as constituting a binding contract between the institutions that have voluntarily become NCAA members and the student-athletes as third-party beneficiaries.18

CLC is a division of the global marketing agency IMG and, as the NCAA's official "licensing representative," is responsible for managing the organization's interests in the collegiate merchandise market, worth about $4 billion annually.19 The video game industry represents a substantial portion of that market. Thus, one of CLC's primary obligations is to negotiate licenses with EA for its popular video game, NCAA Football. EA is the leading producer of sports video games, with $4.1 billion in net revenues in 2012,20 but its dominance appears to be in jeopardy. EA recently reached a settlement in an antitrust case in which it agreed to relinquish its exclusive licensing rights for NCAA Football after its contract ends in 2014, and pay out up to $27 million in damages to consumers.21

Background

To better understand this case, it is helpful to consider how the concept of "student-athlete" has developed. Two Colorado Supreme Court decisions handed down in the 1950s forced the NCAA to confront what its former executive director from 1951 to 1988, the late Walter Byers, called "the dreaded notion that NCAA athletes could be identified as...

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