JONES DAY TALKS: Game Over? Alston and the Future of Pay-for-Play in College Sports
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In what has become known as the Alston or Jenkins case, a California district judge has issued a 104-page order in In re: NCAA Grant-in-Aid Cap Antitrust Litigation. The matter focused on NCAA rules that prohibit schools from offering certain forms of compensation to student-athletes. Jones Day’s Chris Pace and Marc Weinroth talk about the Alston decision and what it could mean for college sports programs.
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Read the full transcript below:
Dave Dalton:
It's no secret that college sports have turned into big-time business, and big-time business can lead to big-time litigation and big-time decisions. Judge Claudia Wilken of the Northern District of California recently handed down a 104-page order in In Re: NCAA Grant-in-Aid Cap Antitrust Litigation or the Alston case. Alston challenged rules that prohibit schools from offering certain forms of compensation and benefits to student-athletes. We have Chris Pace and Marc Weinroth here to talk about the Alston decision and its possible repercussions. I'm Dave Dalton. You're listening to JONES DAY TALKS®.
Dave Dalton:
Chris Pace represents clients in commercial disputes, trade secrets and unfair competition cases, money laundering, and other criminal investigations and prosecutions and federal antitrust and RICO actions. He has appeared on behalf of fortune 500 companies in cases across the country, including in multi-district litigation proceedings. Marc Weinroth litigates commercial disputes and has significant sports law experience involving litigation transactions and internal investigations. Prior to joining Jones Day, Marc served as assistant general counsel for three years at the University of Miami, where he oversaw a variety of subject areas, including managing the day-to-day athletic department legal portfolio. Marc, Chris, thanks for being with us today.
Chris Pace:
Great to be here.
Dave Dalton:
In Re: NCAA Grant-in-Aid Cap Antitrust Litigation, better known, I guess, as the Alston case, Marc, give us some background for listeners not familiar. Tell us what this was all about.
Marc Weinroth:
Well, it's all about NCAA rules that prohibit schools from offering certain types of compensation and benefits to student-athletes. Essentially, the value of an athletic scholarship is not enough. The students in three sports: Division I football, men's basketball, and women's basketball brought a class-action lawsuit against the NCAA and 11 college athletic conferences, essentially arguing that those defendants fixed the price of the compensation that those student-athletes receive for playing their respective sports. The plaintiffs were seeking from the court a ruling that would strike down the NCAA rules that limit the compensation they can receive to the value of a scholarship. There were two general categories of benefits that the plaintiffs here were seeking: benefits related to education and benefits unrelated to education.
Dave Dalton:
Okay. More about that in a minute, but I can't help but wonder, football, men's basketball, and women's basketball, those are revenue sports, correct?
Marc Weinroth:
They are.
Dave Dalton:
Is that a coincidence in terms of where this started?
Chris Pace:
That's exactly why those were the groups that brought it, that they are the groups where the revenue that the school makes in many instances is far greater than the amount that's being paid for scholarships or any other benefits that they provide to the student-athletes. For many other college sports, at the end of the day, the answer is that the schools pay more in scholarships and maintaining the sports facilities than they actually bring in in revenue.
Dave Dalton:
Okay. Good enough. Chris, let's stay with you for this question. This was a 104-page order. Talk about the key takeaways. How and what did the court rule on?
Chris Pace:
The main takeaway from the court's ruling is that it struck down a series of NCAA rules that limited the benefits that you could provide to student-athletes that were education-related. For the most part, the court upheld rules that limited compensation or benefits going to students that would not be directly related to education. But when it came to benefits that were related to education, such as computers, musical instruments, a number of other situations identified by the court. The court said, "You don't need those rules in order to be able to maintain the competitiveness of college athletics."
Dave Dalton:
I see-
Marc Weinroth:
If I can add to that?
Dave Dalton:
Please.
Marc Weinroth:
In other words, the main component to me of the ruling was that the court rejected the free market or pay-for-play type system that the plaintiffs were seeking when this case was initially brought. That's what the media attention really focused on was are we now going to have free agency in college sports for athletes.
Dave Dalton:
Sure.
Chris Pace:
And have athletes who could be paid sums, maybe not the equivalent of professionals, but more in line with professionals. You'd have college athletes paid hundreds of thousands of dollars to attend a particular university.
Dave Dalton:
Okay. So this was potentially an antitrust issue? I mean, the plaintiffs hoped it was. Why don't these rules preventing pay-for-play violate antitrust laws, Marc?
Marc Weinroth:
Well, the NCAA was able to establish, at this 10-day bench trial, that there was a pro-competitive reason. There was a justification for its rules. The court concluded that these rules are anti-competitive. But in an antitrust analysis, you weigh that anti-competitive effect against whether there's a pro-competitive justification. That justification here was that there is consumer demand for college sports and that college sports are a distinct product from professional sports. If student-athletes are paid a professional level cash payment as a salary for competing in college sports, that may result in decreased viewership, decreased attendance at games. At that distinction between college sports and pro sports would be destroyed if universities were able to pay student-athletes.
Dave Dalton:
You understand where they're coming from, even a casual fan sees that difference, I think, between the NFL and NCAA Division I football just as an obvious example. Still, though, this wasn't an all-out victory for the NCAA. Is that correct, Chris?
Chris Pace:
That's true. There are a lot of various NCAA rules and impact the benefits that students can receive. What the court really drew a distinction between was those rules that limit benefits that can go to students that are at least education-related versus those that are, once they become unrelated to education, are really just a form of general compensation. Cash payments is the easiest example to say that's not related to the education. But certain things like computers and musical instruments and money related to cost of attending college, those things are all education-related. That was an important distinction for the court to draw.
Dave Dalton:
Education-related benefits: matching computers, science equipment. I heard something about post-eligibility scholarships. That's a new one to me. What's that all about?
Marc Weinroth:
There were essentially eight categories of benefits that judge Wilken specifically identified in her order. You hit on a couple of those that Chris talked about. The one at issue here, the post-eligibility scholarships, is, in fact, a new wrinkle. You would have schools such as the University of Florida able to offer a three-year law school degree post-eligibility at UF for somebody to go to Harvard to complete a law degree. That is a category of benefit that is new, and one that I think the plaintiffs have pointed to for the notion that they've achieved a victory in this case.
Chris Pace:
Can I just add also, David, that it's one of the examples that shows the difficulty of trying to draw a line here. We can all identify the easy extremes, somebody who needs a computer in order to do their coursework versus somebody who would be paid $200,000 just to attend the university and play in the football team.
Chris Pace:
But when you start to try to figure out where's the exact dividing line, it becomes very difficult because people could say post-eligibility scholarships. Another category the judge covered was vocational school scholarships. Well, wait a second. That's no longer while the student is the actual student-athlete. That's post that time period. How is that not some form of compensation? So there's a lot of difficult line drawing. My guess is that this is the beginning and not the end of trying to litigate these issues.
Marc Weinroth:
Now on that point, I think Judge Wilken recognized that this was a slippery slope. Her order specifically states that the NCAA is going to retain the right to define, in good faith, what is a benefit that relates to education, and what's not a benefit that relates to education. Another far-out example would be an automobile.
Marc Weinroth:
You can imagine that a student needs to get to and from off-campus housing or even on-campus housing to their classes by using the card. Does that mean that every school is now able to offer an incoming student-athlete, as part of their scholarship package, when they're freshmen, a brand new car? I think judge Wilken would side on the line of no, that's not what my injunction means. The NCAA, to the extent it's going to pass follow-up rules to this order, would almost assuredly make sure that something like that would be carved out of a related to education benefit.
Dave Dalton:
Well, that's the old stereotype. The stud athlete shows up to big school U, and suddenly who's driving around in a new Corvette. I mean, we make jokes about things like that, although I know it actually happens. It's interesting that now we've come so far that that's actually maybe not a concern, but something people are looking at in terms of the realm of possibility. Interesting stuff. How did the NCAA take the ruling, at least the education-related benefits part? I imagine they weren't really happy.
Chris Pace:
Well. The NCAA has appealed the judge's ruling and has certainly stated in a press release that they believe the judge was incorrect and they believe that they will prevail on appeal. But I would have to imagine that the NCAA, looking at her ruling, is, if not happy, at least largely relieved. The main thing the plaintiffs were pushing for was, as Marc said before, this pay-to-play. You can pay our student-athletes anything you want. That the judge clearly rejected that. The judge got into some micromanaging of NCAA rules the NCAA may not like. But that's very different than if the judge had ruled you have to allow these universities to pay whatever they want to any student-athletes they want.
Marc Weinroth:
The other aspect I'm sure the NCAA was not happy with is because the plaintiffs did, in fact, prevail on a component of their case. Their attorneys are entitled to attorney's fees. There was just recently a motion filed seeking $45 million worth of attorney's fees, which is, I think, an aggressive amount for them to have sought. But one that's going to play out before Judge Wilken.
Dave Dalton:
When do schools need to start providing these new education-related benefits to their athletes?
Marc Weinroth:
They never need to. The judge's ruling is clear that the schools are allowed to but are not required to provide the benefits. But even if the schools wanted to, the judge's injunction has been stayed while it's up on appeal to the Ninth Circuit. The NCAA can keep its rules, at least while the appeal is pending. But then, after that happens, assuming that her order were affirmed, the schools would be allowed to provide those additional benefits as soon as the orders affirmed, but they wouldn't be compelled to provide those benefits. A briefing schedule was just released that the lead brief will be filed by the NCAA and the member conferences in July. The plaintiff's responsive brief will be filed in August. That's not to say that neither party will an extension of the briefing schedule. Then, it could be many months after that until oral argument and many months, if not, potentially a year or more to have a decision reached by the Ninth Circuit.
Dave Dalton:
The so this could be far from over.
Marc Weinroth:
Yes. To Chris's point earlier about the schools being free to adopt whatever rules they choose, the judge has, specifically, indicated that the conferences themselves are free to adopt their own rules that restrict these benefits. At the national level, while the NCAA may not make a rule that restricts certain education-related benefits, each of the conferences, provided that they're doing so independently of each other, may pass legislation that says, "Hey, all schools within the SEC... Our rule is that you may not offer any education-related benefits of the ILC that Judge Wilken has identified in her injunction or may adopt only some of those or place limits or caps on some of those.
Dave Dalton:
The athletic directors, in a conference, get together presumably and decide, "This is what we're going to do as a conference," and they sat down their rules for themselves?
Chris Pace:
Yeah. I think the idea there is that the conferences would be competing with each other. There's still, from an antitrust standpoint, a competitive marketplace. When the NCAA says, "No one can provide this benefit." Then, there's no competition. If the SEC says, "We don't want to have these benefits provided to our student-athletes," but the ACC does allow that. As a result, more top athletes are going to ACC schools versus SEC schools. Then maybe the SCC says, "Oh, we're going to change our rule because of this competitive environment." It sounds a little weird to say the NCAA can't do it, but the conferences can, but that's the reason. There would be this competitive marketplace for benefits.
Dave Dalton:
If this starts to happen, if schools decide to offer these additional benefits to football and basketball players, how would that impact other sports potentially?
Marc Weinroth:
Well, I think there's a number of complex issues. The one I'll throw out there as the most troublesome is compliance with Title IX. Universities cannot discriminate on the basis of sex. As a result, any increases in the benefits or compensation scholarship packages that they'd be able to provide to football and basketball men's student-athletes, they need to match those in a proportionate way for female student-athletes. Although the women's basketball teams were implicated here as well in the Alston case, the sheer number of football scholarship athletes is so large that it would encompass a variety of other women's sports in order to match that number of 85 scholarships that may be subject to these heightened education-related benefits.
Dave Dalton:
This potentially could get very expensive. I would think. I'm just wondering Judge Wilken commented on this. There's been this criticism, I guess, in recent years, and the far beyond this case we're talking about today. But there's a sentiment out there that, you know what, the TV networks are making a lot of money. The schools are making a lot of money, merchandising, lots of money, concessions. Everybody's doing great except for the kids down in the field, the people actually providing the entertainment, coaches are getting big money. We're building big facilities. Did judge Wilken weigh in on that at all?
Chris Pace:
Judge Wilken recognized that there is a great disparity between what the schools bring in revenue and what benefits are provided to the student-athletes and, in fact, rejected any argument that these athletes are, in fact, amateurs in light of not only how much money is being brought in but how some of the benefits that the athletes are being provided. At the end of the day, though, what really drove her decision was not how much money the schools make but whether there was a basis to distinguish between college versus professional athletes based on how those athletes are treated. Notwithstanding that schools may make a lot of money out of these activities, there was evidence that the judge credited that if the students were paid akin to professional athletes, that that would, or at least could, destroy the distinction between professional and college athletics to the detriment of college athletics.
Marc Weinroth:
There's even a line in Judge Wilken's order where she, essentially, hopes that gradual change will be instructive and that the NCAA may test allowing gradual increases to compensation payable to the student-athletes and see whether that will, in fact, be demand reducing. I think there's an aspect of that that the NCAA certainly wouldn't be happy with. There are other aspects of the decision, I think, that are also troubling to the NCAA, which is why it's not surprising that they've decided to appeal this order.
Dave Dalton:
You just mentioned other troubling passages in the order. Can you give us some examples? What were they?
Marc Weinroth:
Well, Chris already touched on one in terms of rejecting the definition of amateurism that the NCAA has used as its defense in so many cases. Judge Wilken concluded that the fact that student-athletes can receive things, such as gift cards or gifts for participating in football bowl games, isn't really consistent with the definition of amateurism and non-payment to student-athletes. But I think the bigger one is an argument that we've seen a number of times in antitrust cases from the NCAA, which is that we do not pay our student-athletes because it would create some wedge between student-athletes and other students at universities, essentially, that there's some benefit to the rules prohibiting compensation that lies in the integration of student and others in the academic communities. The court rejected that in this case and said that, if anything, the fact that student-athletes are not paid serves to increase separation among students because schools spend their substantial resources on athlete-only facilities instead of paying the student-athletes directly.
Marc Weinroth:
You have this arms race, where student-athletes are maybe eating in student-athlete-only dining halls or are working out in as student-athlete-only athletic facilities in gyms and have these other perks of being student-athletes at schools, and that that actually does create a wedge between student-athletes and their regular student counterparts at schools.
Chris Pace:
Well, and conversely that, because in a number of instances they may not have as much free cash and much spending money, they can't participate in some of the other activities that students engage in. It's, one, you're separated because you eat in a separate dining hall and work out at a separate athletic facility. And, two, you can't participate in some of these events that other people can because the fact of the matter is no one will give you cash. They simply give you these in-kind benefits. In both directions, the judge found that the current rules can create a wedge between student-athletes and all their students at a school.
Marc Weinroth:
What's also pretty interesting here is that Judge Wilken also presided over the O'Bannon case a couple of years ago and accepted the integration argument in the context of that case. She's done a reverse here, a 180 on the integration argument.
Dave Dalton:
Well, how does Alston relate to O'Bannon then?
Marc Weinroth:
The O'Bannon case had to do with name, image, and likeness rights. That was a challenge by Ed O'Bannon, a former UCLA standout basketball player, who brought a class action on behalf of other student-athletes, essentially challenging an NCAA rule that prohibited the schools from offering payments for name, image, and likeness rights for student-athletes. The NCAA, at the same time, would go and license those name, image, and likeness rights in connection with video games and game footage.
Marc Weinroth:
The student-athletes thought that that was unfair, that the universities were making money off of their names and images, and they weren't receiving a single dollar. This case really did not address name, image, and likeness rights at all. It didn't implicate those rules. The plaintiff's theory was that tapping the amount of compensation that student-athletes are entitled to receive at, essentially, the value of their scholarship, the tuition, and an additional stipend that adds up to the cost of attendance at a school, was what the ceiling that needed to be obliterated in this instance.
Chris Pace:
I agree with that. Though, I would also say that O'Bannon is the parent of the Alston case, in the sense of it, showed chinks in the armor. The original thought with O'Bannon was that it would be a flat-out loss. The plaintiffs won in O'Bannon and the district court before this judge, Judge Wilken. It got partially reversed in the Ninth Circuit, but it did change the rules in some aspects. Alston was a more frontal full-blown attack on those rules.
Chris Pace:
But O'Bannon is what showed that there was an opportunity to do that. I mean, that's why these plaintiffs brought their case in the Ninth Circuit. It's also one of the reasons why the case was assigned to Judge Wilken.
Marc Weinroth:
The strategy that plaintiffs used in this case is also driven in large part by O'Bannon. There's language in that case that discussed a difference between offering students education-related compensation and offering them cash payments that were untethered to educational expenses. It's unsurprising that we see this distinction in the Alston case where there's both a challenge to education-related benefits and non-education-related benefits.
Dave Dalton:
Let's wrap it up here, one more question for you both. Say we're out five years or so from now. Looking back, how do you think the Alston case is going to be remembered? Marc, first.
Marc Weinroth:
I think it's going to depend largely on what happens before the Ninth Circuit. This may be a bit premature, but if I could use one word, I think it's anti-climactic. I think when this case was filed, again, the media attention and the plaintiff's attorneys in their statements to the press were indicating that this was a huge game-changer. This was going to be a groundbreaking antitrust lawsuit that was going to create free agency in college sports. It was going to turn the college sports world upside down. In the end, I think what they've achieved at this point is a modest increase in educational benefits. Kids might not get a million dollars for a scholarship to play at a college, but they might get free iPads. They might get free computers, and they might get free musical instruments if they're pursuing a music degree.
Chris Pace:
I would say I have a slightly different perspective, in the sense that, I think, there are times when court rulings prompt private actors or others outside of the court context to make changes. I will not be surprised to see that the NCAA and the conferences spend some real time going back through these rules. I don't think we're talking about a pay-for-play system. I don't think we're talking about they changed the rules so that student-athletes are making a million dollars to attend a university. But I think they will loosen a lot of these rules and recognize that we've got to do something more for some of these student-athletes, particularly like David, as you noted, that the amount of revenue that comes in.
Chris Pace:
As Marc also noted, though, they're going to have to deal with some tricky issues. There's going to be more litigation arising from this. I could envision Title IX lawsuits coming when schools try to provide these benefits to some athletes but not to every athlete because a lot of athletic programs at universities are not moneymakers. You add substantial benefits on top of that. They will really be losing money, which then creates the question of, would a university maybe stop offering that sport? There'll be big ripple effects. We're not exactly sure what there'll be. But I think in five years' time, we will see them, and they will be meaningful.
Dave Dalton:
We'll see. We'll see. Well, speaking of which, let's do this again soon. I love this topic. I think there's a lot of interest out there. As this matter moves toward appeal or as other things come up, let's stay in touch and talk again maybe later on in the spring or the summer. That'd be great.
Marc Weinroth:
Fantastic. Thank you so much, David.
Dave Dalton:
Marc, Chris, thank you too.
Chris Pace:
Appreciate it David. Thank you.
Dave Dalton:
It's been terrific. We'll talk soon. For more information, including biographies and contact information for Chris Pace and Marc Weinroth, visit JonesDay.com. Subscribe to JONES DAY TALKS® on Apple Podcasts, Android, Google Play, and Stitcher, and be sure to check out some of our previous programs while you're there. As always, thanks for listening to JONES DAY TALKS®. I'm Dave Dalton. We'll talk to you next time.
Dave Dalton:
Thank you for listening to Jones Day Talk. Comments heard on JONES DAY TALKS® should not be construed as legal advice regarding any specific facts or circumstances. The opinions expressed on JONES DAY TALKS® are those of lawyers appearing on the program and do not necessarily reflect those of the firm. For more information, please visit Jones day.com.
