Legally Speaking: Are college athletes now able to get paid? Yes and no

The debate over whether college athletes should get paid may not be over in the court of public opinion, but it appears to be over in the 9th Circuit and for Ed O’Bannon.

On Wednesday, a three-judge panel of the 9th Circuit Court of Appeals ruled that college athletes can get their “full cost of attendance” from their school and the NCAA, but cannot get any cash over that amount. The panel decided if the athletes were to receive even $1 more than that, it would destroy the “amateur” status of the athletes and be counterproductive to the NCAA’s goals and values.

Back in July 2009, O’Bannon, a former UCLA and pro basketball player, filed a lawsuit against the NCAA, Electronic Arts (EA) and the Collegiate Licensing Company (CLC) alleging anti-trust violations. Basically, the lawsuit focused on NCAA rules that would not allow college athletes to get paid for the NCAA and EA using their names, images and likeness in video games and broadcasts and was thus an illegal “restraint of trade.”

Although EA and the CLC ended up settling with the plaintiffs for around $40 million, the lawsuit continued between plaintiffs and the NCAA.

After hearing the trial, Federal District Court Judge Wilken issued her ruling in August 2014. She ruled colleges should be entitled to pay athletes the “full cost of attendance,” which included living expenses. At the time of her decision, NCAA rules did not allow schools to do this.

In addition, she ruled that for each athletic year of eligibility, colleges could put up to $5,000 in a trust account (deferred compensation) for that athlete to access after graduation. In other words, schools could pay athletes for more than the “full cost of attendance.” The NCAA disagreed with her ruling, mainly because it destroyed the concept of amateur and, to be frank, it would cause schools and the NCAA to fork over money.

In its 70-plus page decision, the panel both agreed and disagreed with Wilken’s ruling. The decision is long with references to history, theory, the Rule of Reason and the state of the college athletic market and is not an easy read, so I have broken it down to the most important things that you need to know:

• First, and very importantly, it agreed the NCAA is subject to the same anti-trust rules as other companies. Additionally, absent the NCAA rules prohibiting it, video game makers would likely pay athletes for the right to use their names, images and likeness.

 

• Second, the panel acknowledged the concept of amateurism is extremely important to the NCAA and college athletics. It then explained that raising the scholarship cap to the full cost of attendance would have no effect on amateurism and consumers would still want to watch college sports. In my opinion, this is a win-win. Athletes can now be offered more money to pay for their full cost of attendance and the NCAA can retain the amateur status of its athletes and satisfy its customers.

 

• Third, it held that allowing schools to offer deferred compensation to the athletes above the full cost of attendance is unacceptable. Allowing athletes to receive this pure cash compensation, which would be unrelated to their education expenses, is precisely what would make them professionals and not amateurs. Considering the amateurism is what is so important to the NCAA and its customers, that must be preserved.

In conclusion, the court explained “the difference between offering student-athletes education-related compensation and offering them cash sums untethered to educational expenses is not minor; it is a quantum leap.  Once that line is crossed we see no basis for returning to a rule of amateurism and no defined stopping point; we have little doubt that plaintiffs will continue to challenge the arbitrary limit imposed by the district court [$5,000] until they have captured the full value of the NIL [name, image, likeness].  At that point the NCAA will have surrendered its amateurism principles entirely and transitioned from its ‘particular brand of football’ to minor league status.”

The 9th Circuit Court of Appeals decision makes it clear that what makes college sports so desirable to customers is that it is made up of amateurs. Again, this decision is a win-win in my mind; athletes can be offered more money than before and the NCAA gets to keep the amateur status.

The public will continue to debate whether student athletes should be paid more but, for now, the call has been made.

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