Appeals court rules that ban on pay for college athletes is illegal

Ruling that the Supreme Court has not settled the issue, and setting the stage for the Court to do so, a federal appeals court declared on Wednesday that the main college sports organization’s total ban on any pay for students who play football or basketball at major schools is illegal under federal antitrust law. But, it also ruled by a divided vote that those athletes should not be paid even one dollar more than what it costs them to attend college while they are there. It voided a judge’s order that they get paid $5,000 for each year of play, after they have left the campus.

The U.S. Court of Appeals for the Ninth Circuit ruled in a case that applies only to so-called Division I of the National Collegiate Athletic Association — that is, the big-time programs — and only for basketball and football players at that level. But it creates a conflict with other federal appeals courts on an issue that the NCAA has long treated as vital to the very existence of college football as a game for amateurs, not professionals.

The NCAA has vigorously defended its “amateur athlete” view every time it has been challenged by student athletes who sought compensation, and it has long held the view that its rules are totally exempt from antitrust law — an exemption it traces to a 1984 Supreme Court decision dealing with television rights for college football games. The Ninth Circuit disagreed with that argument Wednesday.

The organization has strong reasons for taking the issue on to the Supreme Court, to defend a view of amateurism that it has held for perhaps ninety-four years and that it has reinforced with strict rules against athlete compensation for sixty-seven years. (The NCAA’s amateurism view gained significantly earlier this year, when the National Labor Relations Board found it had no authority to rule on a plea by Northwestern University football players that they should have a legal right under federal labor law to join a union to bargain for pay and other benefits related to their sports careers in college. That decision could not be appealed.)

It is not clear at this point whether the new Ninth Circuit decision will have a major impact on the finances of college football, if that ruling stands. The NCAA, under a policy that the Ninth Circuit said the organization would otherwise be free to change, has already allowed athletes to get football and basketball scholarships that not only cover the basics of tuition and books (so-called “grant-in-aid” packages), but at a level that would cover the entire cost of their attendance. The Ninth Circuit ruling would simply require the NCAA to continue compensation at that full level, as a legal duty.

The Ninth Circuit did not totally reject the NCAA’s view of the virtue of amateurism in college sports. Its two-to-one decision striking down a federal judge’s award of a post-college payment of $5,000 for each year on a college team was based explicitly on the impact that such a system of pay would have on the amateur character of college sports. It said the antitrust laws should not be used by courts to undermine the consumer value of amateurism, which it partially conceded.

The majority opinion quoted approvingly an NCAA expert who had said during the trial of the case that “if you’re paid for your performance, you’re not an amateur.” At the same time, the majority declared that the trial judge who had ordered the $5,000 package of compensation had paid too much attention to that expert’s offhand remark on the witness stand that he would not be troubled by a $5,000 payment, although he would be troubled by a million-dollar payout.

The majority thus restricted any financial compensation to an amount equal to the full cost of attending college — thus, at a level that confined any payment to all of their actual on-campus expenses, rather than “cash compensation.”

Even so, the NCAA did lose on its basic point that its rules aimed at preserving amateurism were necessary as well as fully legal. The Ninth Circuit was unanimous in ruling that the rules banning pay were harmful to competition among student athletes in the college education market. It noted that student athletes’ names, images, and likenesses as players have been reproduced in video games for which the NCAA had barred any compensation. The former agreement between the NCAA and the leading provider of such video entertainment has now lapsed, but the Ninth Circuit suggested that it might be renewed.

It is unclear, however, what Wednesday’s ruling might mean for student compensation if new deals were made to include them in video games. The Ninth Circuit majority said that was a complex issue that went beyond the NCAA’s legal blame for harming competition under antitrust law in the college education market.

The main opinion in the case was written by Circuit Judge Jay S. Bybee, and was joined in full by a senior federal district judge, Gordon J. Quist, who sat on the panel as a visiting judge.

The chief judge of the Ninth Circuit, Sidney R. Thomas, went along with the majority on the finding of an antitrust violation, but dissented on the after-college cash compensation question. He argued that the effect of such compensation on amateurism in college sports was an issue for the nation’s consumers, not for the courts.

The NCAA’s legal basis for taking the case on to the Supreme Court, or for seeking rehearing by the full Ninth Circuit, would appear to be the meaning of the 1984 ruling by the Justices on the NCAA’s legal status, the conflict between Wednesday’s ruling and earlier decisions by two other federal appeals courts (in the Third and Sixth Circuits), and by the question of whether the student athletes who filed the case could show that they had suffered any legal injury from the amateurism issues.

That last point, on the students’ “standing” to file their antitrust lawsuit, could be bolstered by the fact Chief Judge Thomas said in his separate opinion that he had doubts about that, but was bound to concede it on the basis of a Ninth Circuit ruling in 2013.

The challenge to the NCAA, under the federal Sherman Act, was filed originally by Ed O’Bannon, a former star basketball player at UCLA, after he had visited a friend and was shown images of himself as a player in a basketball video game produced by Electronic Arts, a software company. A separate antitrust lawsuit against the NCAA was filed by Sam Keller, a former quarterback at Arizona State University and at the University of Nebraska.

The cases were consolidated for trial, leading to a judge’s decision that the NCAA’s no-pay amateurism rules were illegal.

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