October 17th, 2013
EA Out Of Antitrust Suit But NCAA Won’t Budge An Inch
Law360, New York (October 03, 2013, 7:12 PM ET) — EA Sports and the Collegiate Licensing Co. both reached settlements last week to escape a high-profile antitrust class action seeking payment for college athletes, but experts say the NCAA likely has too much at stake to reach a similar compromise any time soon.
Under the settlement, EA and CLC reportedly agreed to pay $40 million to thousands of current and former NCAA student-athletes, over antitrust claims based on the use of their names and likenesses in commercial exploitations like EA’s yearly college football video game. That leaves the NCAA alone to defend against a claim that more or less directly challenges decades of NCAA status quo: that the student-athletes deserve a cut of the revenue big college sports programs bring in, including the hundreds of millions in yearly money from television deals.
But the NCAA has said it won’t back down from the challenge the way its co-defendants did. Donald Remy, the association’s chief legal officer, told USA Today last week that the NCAA was prepared to “take this all the way to the Supreme Court if we have to,” adding that the organization is “not prepared to compromise on the case.”
That’s partly because the NCAA has far more to lose in compromising than a company like EA Sports ever did. The video game giant was using the players’ likenesses to sell millions of games, but the college football game was just one among a big stable of consistent cash cows like the Madden football and FIFA soccer series.
“EA is just a company. It’s a business decision — it’s that simple,” said Bryan M. Sullivan, a partner at Early Sullivan Wright Gizer & McRae LLP. “The NCAA has other issues. If they pay off a settlement, it may have an effect going forward. What policy changes are they going to have to make in the future? Do they have to pay players now?”
The NCAA’s member schools sell broadcasting rights to college football games that bring in hundreds of millions a year. For example, the Big Ten and the Pac-12 — the NCAA’s highest-grossing conferences — each made $250 million on television deals last year, according to Forbes.
With EA gone, the suit is now going to focus on the bigger issue of whether the age-old system of college amateurism needs to change in order to share a slice of that revenue pie with the players. So for the NCAA, the case is putting at risk more than just one video game, meaning there’s a strong disincentive to reach a similar settlement.
“[If the] principle becomes that student athletes are going to get paid for their skills, for playing football or basketball, then the whole house of cards that the NCAA is built on crumbles,” said Gregory Herbert, a shareholder with Greenberg Traurig LLP.
And while the tide of public opinion might be turning toward a system that eventually does pay some of the college game’s biggest stars, the actual legal case at hand is no slam dunk for the plaintiffs that would immediately force NCAA to cut its losses and settle. After all, it’s already more than four years old.
“There are a lot of folks out there who seem to think there’s a lot of pressure on the NCAA to settle now. I don’t think so,” Herbert said. “They can have all the sympathy in the world behind them, and it might be pretty tough for a jury to find in favor of [the NCAA], but it might not get that far.”
The first reason, and perhaps most obvious, is that the U.S. Supreme Court has already technically said bans on student pay are legal. In its 1984 ruling in NCAA v. Board of Regents of the University of Oklahoma, an antitrust case over television deals that the NCAA actually lost, Justice John Paul Stevens wrote one key line: “[A]thletes must not be paid, must be required to attend class, and the like.”
The sentence wasn’t directly tied to the central issue of that case, and the players in the current case clearly dispute that it applies to their claims, but it’s a strong piece of case law they’ll have to overcome, attorneys say.
Another issue is class certification. The Supreme Court has been none-too-friendly to class actions in the last few years, and college athletes pose a unique problem for class status: Does Heisman winner Johnny Manziel deserve the same cut of damages as a second-string punter?
“Legally speaking, the claims have a number of hurdles to clear,” Herbert said.
Aside from monetary incentives and strong legal routes, the NCAA is also seemingly willing to fight until the end. With deals like the 14-year, nearly $11 billion contract the association signed with CBS and Turner Sports in 2010 for the annual NCAA tournament, it has plenty of money to do so.
“They certainly have the war chest to fight this for a while,” Sullivan said.
The student-athletes are represented by The Lanier Law Firm and Hagens Berman Sobol Shapiro LLP, among others.
The case is In re: Student-Athlete Name & Likeness Licensing Litigation, case number 4:09-cv-01967, in the U.S. District Court for the Northern District of California.
–Editing by Elizabeth Bowen and Edrienne Su.