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Judge Rules that NCAA Rules Restricting Football and Basketball Players’ Compensation Violate Antitrust Law

2005_NCAA_North_Carolina_v_Michigan_State.JPGA federal judge in Oakland, California ruled in favor of a class of college athletes in a lawsuit against the National Collegiate Athletic Association (NCAA), finding that certain NCAA rules limiting compensation paid to players violated federal antitrust laws. O’Bannon, et al v. NCAA, No. 4:09-cv-03329, FFCL (N.D. Cal., Aug. 8, 2014). The dispute centered around the use of players’ likenesses by the NCAA and the Collegiate Licensing Company (CLC), which handles trademark licensing and marketing for the NCAA, without obtaining players’ permission or compensating them. The NCAA has faced multiple recent disputes with players involving issues of both commercial and employment law, which have generally gone in the players’ favor.

The NCAA and CLC use players’ names and likenesses in video games, photos sold in various forms, action figures, jerseys and other apparel, DVDs, rebroadcasts of games, and other media. The video game company Electronic Arts (EA) releases NCAA-branded video games through its label EA Sports on an annual basis. It sells more than one million units of its NCAA football games per year, according to the plaintiffs.

The original plaintiff in the present case, Ed O’Bannon, was the Final Four Most Outstanding Player for UCLA’s 1995 national championship basketball team. He reportedly agreed to be the lead plaintiff when he learned that a video game had used his likeness from the 1995 college basketball season, including his physical features, his jersey number, and his left-handed shot, without his permission.

The plaintiffs’ complaint asserted four causes of action under the Sherman Act, 15 U.S.C. § 1 et seq., and common law. O’Bannon, complaint (Jul. 21, 2009). It alleged that the NCAA, CLC, and others engaged in unreasonable restraint of trade, and that they were unjustly enriched. The plaintiffs also demanded an accounting of the defendants’ licensing revenues “wrongfully diverted to themselves and other entities.” Id. at 68. They reached a settlement with CLC and EA for $40 million in May 2014. The case against the NCAA proceeded to trial in June.

After a three-week trial, the judge ruled in favor of the plaintiffs, finding that the NCAA had violated antitrust law through rules that “restrain [member schools’] ability to compensate Division I men’s basketball and FBS football players any more than the current association rules allow.” O’Bannon, FFCL at 98. It entered an injunction preventing further enforcement of those rules. The ruling does not guarantee that players will receive compensation for any or all uses of their names or likenesses, but it prevents the NCAA from withholding all compensation.

While this case addresses compensation of players, another case currently in the news addresses their labor rights. The National Labor Relations Board (NLRB) ruled earlier this year that football players at Northwestern University are “employees” under federal labor law and may hold a vote on whether to unionize. The case is now under review and awaiting a new hearing at the university’s request. While the NCAA is not directly involved in this case, it undoubtedly has an interest in the outcome.

If you have a dispute over a business matter, you should consult with a knowledgeable business and commercial attorney. James G. Schwartz has represented Bay Area businesses since 1976. To schedule a free and confidential consultation to discuss your case, please contact us today online or at (925) 463-1073.

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Photo credit: Haaron755 at the English language Wikipedia [GFDL or CC-BY-SA-3.0], from Wikimedia Commons.