I am watching with a mixture of delight and uncertainty as the NCAA gets taken to school. On the eve of our most truly national holiday, March Madness, a heretofore little-noticed lawsuit took a dramatic turn when a magistrate judge in California denied the NCAA’s motion to bar current college athletes from joining their ex-comrades-in-shorts in a class action seeking a share of television and licensing revenues from college sports.
Although this ruling is merely a preliminary step, the lawsuit itself has the potential to sound the death knell for the current economic structure of major college sports — and I don’t know whether to cheer or cry.
First, a little background: In 2009, former UCLA men’s basketball star Ed O’Bannon, who helped lead the Bruins to the 1995 title, sued the NCAA, the Collegiate Licensing Company (CLC) and others, for the use of his likeness in video games and related products. Most college athletes sign waivers in exchange for their scholarships, which permit the commercial use of their likeness by the NCAA — and, while in school, the athletes have a strong disincentive to bite the hand that feeds them. Former athletes like O’Bannon, however, had little to lose by bringing suit and some prominent figures soon signed on as co-plaintiffs (most notably, former college hoops and National Basketball Association legends Bill Russell and Oscar Robertson).
To circumvent the fact that they had signed waivers, the plaintiffs advanced a novel argument: They brought suit under the Sherman Antitrust Act and alleged that the NCAA, the CLC and video game manufacturer EA Sports illegally had conspired to restrain trade by forcing athletes to sign contracts of adhesion (i.e., the waivers) in exchange for their scholarships. In so doing, the plaintiffs surrendered their right to profit from the commercial use of their images and the defendants were able to profit off of those images at no cost. Query whether the necessary premise for the plaintiffs’ legal theory — that there was a free market in which they could have sold their images to some other licensor or videogame company — is true; but, of course, that’s an issue that only a trial can resolve.
When it was just a few former players asking for a slice of the pie, the O’Bannon lawsuit attracted little attention and posed little danger to the multi-billion dollar business of the NCAA, CLC and EA Sports. Last summer, however, the plaintiffs sought to add current college athletes to the class bringing suit. In January, the District Court denied the defendants’ motion to bar certification of current players. (The defendants claimed that the change in legal strategy — the brainchild of lead plaintiffs’ attorney Michael Hausfield, a class action guru who has represented Holocaust victims who sued private Swiss banks to recover assets stolen by the Nazis and Native Americans affected by the Exxon Valdez oil spill — was "unfair." The magistrate judge, predictably, was unmoved by the NCAA’s lamentations.)
And suddenly, the new mascot for major college sports was Chicken Little. Faced with the potential prospect of having to share television and licensing revenues with the athletes who help to create them, coaches and collegiate conference administrators warned of dire consequences: athletic department budgets slashed to the bone, teams eliminated, scholarships reduced, a whole parade of horribles. Indeed, Big Ten commissioner Jim Delany, went so far as to suggest that some schools might follow the Division III model of awarding no athletic scholarships at all. (None of these Cassandras, of course, suggested saving money by trimming a little fat from the multi-million dollar salaries of coaches, athletic directors and commissioners.)
Doomsday scenarios aside, the suit itself leaves me conflicted. On the one hand, justice and basic fairness demand some form of profit-sharing between the NCAA and college athletes. For all that it bloviates about its educational mission and the importance of amateurism, the NCAA is a multi-billion dollar business. And the folks who generate those billions of dollars, i.e., the athletes, get table scraps in return. To be sure, they get scholarships – hardly chump change, given the cost of college these days. But, at least for the star athletes who populate games like EA Sports’ "NCAA Basketball" and "NCAA Football," a scholarship is hardly fair market value when compared to the profits created from their four years’ of sweat.
On the other hand, the current economic model of college sports — flawed though it may be — has an upside. At many schools, profits from major sports help fund minor sports that generate no revenue. And, as we in Connecticut know quite well, there are less quantifiable benefits to having a major sports program; the construction boom on the UConn campus over the last decade would not have happened without the prestige attendant on the success of our basketball program.
Whether doom is around the corner will be answered, in large part, in June when the District Court decides if the purported class of plaintiffs satisfies the commonality requirements of the federal rules governing class actions. But this is, perhaps, a golden opportunity for the NCAA to reexamine how it does business and how best to share the fruits of its athletes’ labors.•