SAN FRANCISCO (CN) — In another victory for college athletes, a Ninth Circuit panel ruled Monday that the National Collegiate Athletic Association cannot restrict their education-related benefits.
The ruling aligns with one issued in March 2019 by Senior U.S. District Judge Claudia Wilken in a class action led by former West Virginia running back Shawne Alston.
Alston represented thousands of current and former Bowl Subdivision football and men’s and women’s Division I basketball players claiming their scholarships did not cover their expenses.
In her ruling, Wilken — a Bill Clinton appointee — found the rules violated antitrust laws by restraining trade in the market for a college education combined with the market for the players’ athletic services.
Wilken issued an injunction that barred the NCAA from limiting student athletes’ compensation for anything that would contribute to their studies, such as computers, postgraduate scholarships, tutoring, study abroad expenses, or paid internships. But she stopped short of allowing compensation not related to education.
Wilken said the 11 conferences that play within the NCAA will be allowed to offer non-cash, education-related benefits as well as academic awards on top of grant-in-aid as they see fit, though the NCAA would be able to regulate how schools provide them.
On Monday, Chief U.S. Circuit Judge Sidney Thomas, joined by U.S. Circuit Judges Ronald M. Gould and Judge Milan D. Smith, wrote that Wilken had correctly found the NCAA’s limits on education-related compensation “do not play by the Sherman [Antitrust] Act’s rules.”
“In our view, the district court struck the right balance in crafting a remedy that both prevents anticompetitive harm to student-athletes while serving the pro-competitive purpose of preserving the popularity of college sports,” Thomas, also a Clinton appointee along with Gould, wrote for the unanimous panel.
The panel found Wilken properly applied the three-part “Rule of Reason” under which courts evaluate a restraint’s effect on competition. They found the NCAA’s rules had significant anticompetitive effects on the market for student-athletes’ labor and that only some of rules have pro-competitive benefits by preserving amateurism and keeping a distinction between college and professional sports that should satisfy fans. Finally, the panel upheld Wilken’s less-restrictive alternative to the NCAA’s benefits cap.
"The district court reasonably concluded that uncapping certain education-related benefits would preserve consumer demand for college athletics just as well as the challenged rules do,” Thomas wrote, noting “market competition in connection with education-related benefits will only reinforce consumers’ perception of student-athletes as students, thereby preserving demand.”
In a statement, Alston’s attorney Steve Berman saluted the panel’s finding.
"We are incredibly pleased that the appeals court has sided with the lower federal court’s previous decision and with our plaintiffs, the student-athletes who have worked so hard under the NCAA’s regulations to balance their needs with the intense demands of college sports,” Berman said. “We know that the court’s ruling in this case will have a lasting positive impact for college-athletes and look forward to seeing them reap the rewards of this injunction.”
At a hearing in March 2020, the NCAA had argued that Wilken’s injunction stood in stark contrast to the Ninth Circuit’s 2015 decision in O’Bannon v. NCAA. That panel, which included a dissenting Thomas, upheld part of Wilken’s ruling in that case finding the NCAA had violated antitrust law. But the majority ruling disagreed that schools should set aside cash payments of $5,000 per player each year for the use of their likenesses in broadcasts.
Writing for the majority in O’Bannon, U.S. Circuit Judge Jay Bybee, a George W. Bush appointee, said college players should only be compensated for the full cost of attending college.
Thomas wrote Monday that the O’Bannon decision is not preclusive because it involves different material facts centered around the limiting issue of compensating student athletes for the use of their names, images and likenesses.
In a statement, NCAA chief legal officer Donald Remy said the association disagrees with that analysis. “We hoped for a different legal conclusion by the Ninth Circuit. We argued and believe the lower court’s ruling is inconsistent with both Supreme Court precedent and the Ninth Circuit’s own decision in the O’Bannon case,” he said. “We will continue to review the opinion and determine our next steps.”
The panel’s opinion comes as the NCAA’s Board of Governors is considering changing its rules to allow student-athletes to be paid by third parties for endorsements and business ventures, while making it clear that student-athletes are not university employees.
The changes follow landmark legislation passed last year in California called the Fair Play to Pay Act, under which student-athletes can sign endorsement deals.
In an ardent concurring opinion Monday, Smith contrasted the billions of dollars the NCAA makes off of ticket sales, television deals, and merchandise, to student-athletes’ largely uncompensated labor.
“They may receive tuition for an academic experience that they cannot take full advantage of, minimal living expenses, and some lavish perks that do nothing for their present or future financial security. However, that is not because their athletic services have little value. On the contrary, the NCAA and Division 1 universities make billions of dollars from ticket sales, television contracts, merchandise, and other fruits that directly flow from the labors of student-athletes,” Smith, also a George W. Bush appointee, wrote. “A number of Division 1 head football coaches take home multimillion-dollar salaries that exceed those of many NFL coaches.”
He said he was concerned that the Rule of Reason had been expanded to allow the NCAA to justify its anticompetitive restraints with consumer demand for amateurism, even as college sports viewership has only climbed since rules on compensation have been relaxed.
“Under the Rule of Reason analysis we affirm today, so long as the NCAA cites consumer demand for college sports, we allow it to artificially suppress competition for collegiate athletes’ services by limiting their compensation,” Smith wrote. “Instead of requiring the NCAA to explain how those limits promote schools’ competition for athletes, we leave student-athletes with little recourse under the antitrust laws."
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