SBJ/June 23-29, 2014/In Depth

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  • Antitrust cases have college sports on edge

    Efforts by Northwestern University football players to unionize may have garnered the most national media attention, but sports law experts say that antitrust litigation before a federal court in Oakland has the potential to bring the most change to the NCAA’s model of college sports.

    Athletic directors at major colleges around the country say they are more fearful of the antitrust lawsuits, including one brought by prominent sports antitrust lawyer Jeffrey Kessler, against the NCAA than they are about Northwestern football players unionizing.

    Jack Swarbrick, the athletic director at Notre Dame and a veteran of 28 years with Indianapolis law firm Baker & Daniels, summed up the flurry of litigation in the college space. This month before a room of his peers at the NACDA convention in Orlando, Swarbrick said that five to 10 years from now, “We’ll look back on O’Bannon [player image use] and the attempts at unionization as insignificant.”

    The bigger issue, Swarbrick said, are the antitrust suits, like the one brought by Kessler, that will examine the value of a scholarship.

    “That’ll be the game-changer,” he said.

    Sports law professors, including Gary Roberts, who teaches at Indiana University and formerly worked for Covington & Burling, the NFL’s outside law firm, agreed with that assessment. “The Northwestern thing is not a threat,” Roberts said. “It’s the antitrust case that goes to the heart of the NCAA system, not this labor case.”

    Kessler, a partner at Winston & Strawn who has served as outside counsel to sports unions including the NFL Players Association and the National Basketball Players Association, filed Jenkins v. the NCAA. The lawsuit alleges that the NCAA’s rules prohibiting how much schools can offer student athletes to play college football or basketball are tantamount to price fixing.

    Essentially, the plaintiffs in the case are seeking to create a free market that would redefine the value of a scholarship. Recruiting battles could come down to factors like additional financial aid, long-term health coverage or other benefits not presently included in the scholarship.

    “Our case is designed to remove the restrictions from men’s basketball and football in Division I in all the schools so they can enjoy a free market to make their own decisions about compensation issues,” Kessler said.

    “The media is focused on O’Bannon, but cost of attendance and the value of the scholarship are the issues that will really stress the system,” Ohio State AD Gene Smith said. “People are already spending seven figures on [unlimited] meals. Health insurance is going to be a critical issue. There are simply a lot of pieces to it that the public doesn’t understand.”

    If the antitrust cases succeed and a free market is created, that could lead to other byproducts of a new model, like a more enhanced role for agents. Theoretically, high school recruits would need agents to negotiate their deals with the colleges.

    “If the courts say these kids are employees or are entitled to negotiate, as any American citizen can, and ask for their fair-market value, correspondingly they should be able to have agents to help them get their fair market value and advice on their careers,” veteran NFL player agent Peter Schaffer said.

    “If it comes to that — that a court gives a high school senior that type of ability — then I believe the high school senior should be able to hire someone experienced to negotiate their fair-market value,” Schaffer said. “Otherwise there would be tremendous inequity in the negotiating system. You would have college and university officials negotiating against an 18-year-old kid, who doesn’t have any negotiating experience.”

    Kessler’s case, originally filed in federal court in New Jersey, has been moved to federal court in Oakland where a number of other antitrust suits, including Alston v. NCAA, challenge the NCAA’s rules and restrictions on scholarships. Kessler and Jon King, counsel in the Alston case, do not agree exactly on how the cases will be tried.

    The Jenkins lawsuit seeks only an injunction to find that the NCAA’s rules governing how much a college athlete
    Photo by: Rubenstein Associates
    can be paid are illegal. The Alston case seeks the same, as well as past damages for athletes’ full cost of scholarship.
    In the next few months, U.S. District Judge Claudia Wilken in the Northern District of California will determine if the cases will be combined and if they will proceed on the same or separate tracks.

    But King said, “No matter what, the NCAA version of amateurism is at stake in all of these cases.”

    The cases are not unlike litigation that has challenged the way employers set wages for workers in other industries.

    “They are challenging the very fundamental philosophical foundations upon which the NCAA rests,” Roberts said.

    Roberts said if that litigation succeeds, it could have far more impact than the effort to unionize college players for a number of reasons, including the unconfirmed news reports that the Northwestern players voted down unionization.
    The Northwestern football team voted on whether to become a union in April, but the votes will be unsealed and counted only if the National Labor Relations Board upholds the Chicago NLRB’s decision that the players are employees.

    Matt Mitten, law professor at Marquette University and director of the National Sports Law Institute, noted that the NLRB is looking only at whether students at private universities can unionize, and there are far more public universities with big football and basketball programs.

    Of all the lawsuits and legal challenges facing the NCAA, the antitrust litigation “has the broadest potential effect,” Mitten said. “The Jenkins lawsuit is the one that has the greatest potential to change the system under which college sports can be operated under the Division I model.”

    Steve Ross, professor of sports law at Penn State, said the Northwestern unionization case is “important symbolically for this rhetorical myth that student athletes are amateurs rather than employees.”

    But he does not think the Northwestern case will fundamentally change college sports at big, public school programs.

    “If Kessler wins, a court would be saying that the fundamental distinction that the NCAA has drawn between college sports and professional sports is illegal,” Ross said.

    He and other legal experts say that could open the floodgates to universities bidding to pay the elite high school football and basketball players to play at their programs.

    “That would radically change everything,” Ross said.

    And that is what has prompted some college administrators to suggest, crazy as it might sound, that their schools might contemplate a non-scholarship model of athletics, as opposed to openly bidding for the services of high school athletes.

    “The debate draws the analogy between the student athlete and the professional athlete, not the student athlete and other students,” said Notre Dame’s Swarbrick. “But on our own campuses, that’s what we face every day. In the discussion about additional benefits for athletes, I’ve got deans coming up to me saying, ‘Are you crazy?’ Finding that balance is the challenge.”

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  • College sports' legal battleground

    With all of the legal challenges the NCAA faces, one thing is for sure: Attorneys and law firms will have a lot of work to do for years to come. As a result, law firms and the NCAA have beefed up their expertise, with the many parties now involved reading like a who’s who in sports law.

    Scott Bearby, the NCAA’s general counsel, said the number of cases facing the organization “is basically the same as it always had been.” What’s different, Bearby said on a panel at the Sports Lawyers Association in May, is that the lawsuits in play are striking at rules that have been on the NCAA’s books for decades, and at the NCAA’s contention that student athletes are not employees.

    Gene Marsh, former chair of the NCAA’s university compliance committee and a former member of its infractions committee, joined national law firm Jackson Lewis to work on college sports cases, and he agreed with that assessment.

    “There has always been a pretty regular stream of litigation,” Marsh said. “But as far as macro lawsuits, global litigations that challenge the overall NCAA model, there never has been a time like now.”

    The NCAA is being attacked on four legal fronts, said Gary Roberts, a sports law professor at Indiana University, who formerly worked at Covington & Burling, the NFL’s outside law firm. Those four areas are: antitrust law, labor law, right-of-publicity law, and legal issues pertaining to concussions and other injuries that student athletes suffer (see chart).

    The antitrust litigation, which is being heard in federal court in Oakland (see story) seeks to strike down the rules the NCAA has set governing how much student athletes can be compensated.

    The concussion litigation involves about a dozen lawsuits that were consolidated in January in federal court in Chicago and are seeking damages for college athletes who suffered head injuries while competing for their various schools.

    The right-of-publicity litigation involves whether student athletes should be paid if their likenesses are used in commercial endeavors and involves a case brought by former college and professional basketball player Ed O’Bannon.

    The labor legal issue is not before a court at this time, but before the National Labor Relations Board and involves the question of whether Northwestern University football players are employees and can form a union.

    All four areas, lawyers say, are “cases of first impression,” meaning the issues have not been determined before in a legal forum. No matter how the cases are decided, lawyers expect there will be appeals, as well as copycat litigation and follow-up litigation.

    “With cases of first impression, it’s hard to anticipate all of the additional issues as a result of the ruling,” said Hillary Hughes, a partner with law firm Garvey Schubert Barer, which represents professional athletes. But whatever the courts rule in the key cases, those decisions will likely “be scrutinized and give rise to additional litigation,” she said.

    If you look at the four issues, they all address things a worker can expect from an employer in a workplace, said Jon
    King, attorney with Hagens Berman. The law firm is involved in lawsuits against the NCAA in four cases involving antitrust law, right-of-publicity law and concussions.

    “These four issues all address the rights a worker has in a normal workplace,” King said. “You would expect a safe workplace. You would expect fair wages and that your employer is not colluding with [other employers] on what to pay you. You would expect, if someone put you in an advertisement or video game, that you’d be paid for it.”

    Mary K. Braza, co-chair of the sports industry group for law firm Foley & Lardner, which represents professional teams, owners and universities, said she views the concussion litigation as different than the other legal issues facing the NCAA.

    “It doesn’t matter if you are an amateur or a professional, if you are a ward of the university, they still have duties to protect you,” Braza said.

    “The other three I think are all attacks on amateurism,” Braza said, adding “they all flow from the increasingly enormous sums that are going to the schools as a result of broadcasting and overall popularity of collegiate sports.”

    Bringing in the big guns

    As the stakes have gone up, the NCAA has lawyered up, hiring some of the best attorneys at some of the most powerful national and international law firms.

    The NCAA announced last fall that it had hired Munger, Tolles & Olson to handle trial work in the O’Bannon case,
    The NCAA has hired some of the best attorneys at some of the most powerful national and international firms.
    Photo by: Getty Images
    and former U.S. solicitor Seth Waxman, now of WilmerHale, for future appellate work in the case. Glenn Pomerantz, the attorney who is defending the NCAA in the O’Bannon trial, has represented major television networks, record companies and film studios in copyright and antitrust cases.

    Sean Berkowitz is the NCAA’s lead attorney in the concussion litigation in Chicago.
    Berkowitz is the global chair of litigation for international law firm Latham & Watkins, and was a former assistant U.S. attorney. He also was the director of the special task force created to investigate the Enron corporate scandal.

    Skadden Arps attorney Jeffrey Mishkin is defending the NCAA in antitrust lawsuits brought against the organization that challenge its rules of how much colleges and universities can offer student athletes who will play Division I basketball and football. Mishkin has worked for all of the major leagues and was formerly executive vice president and chief legal counsel of the NBA.

    Additionally, the Pac-12 Conference, one of the defendants in the antitrust lawsuits, has hired national law firm Proskauer, which has served as outside counsel to all of the four major leagues in labor negotiations, to defend it in the litigation.

    One of the key antitrust lawsuits facing the NCAA, Jenkins v. NCAA, was brought by Jeffrey Kessler, a partner at Winston & Strawn who has served as outside counsel for the NFL Players Association and the National Basketball Players Association.

    Kessler’s firm is among those that have bolstered their collegiate expertise with new hires. Late last year, Winston & Strawn brought in Tim Nevius, an attorney and former NCAA investigator, to help start a college sports law practice. Jackson Lewis, a law firm that represents management exclusively in labor disputes, made a similar move this year when it hired Marsh to anchor its collegiate sports practice.

    King said it is telling that elite law firms and powerful attorneys with vast experience in professional sports and/or entertainment issues are being engaged.

    “It means they are deploying all these law firms to put out fires in all of these courts around the country,” he said. “I view it as a barometer of the major risks and threats that all of these cases pose to college sports.”

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  • What's on the docket?




    Jenkins v. NCAA

    Plaintiff attorney: Jeffrey Kessler, Winston & Strawn
    Defendant attorney: Jeffrey Mishkin, Skadden, Arps, Slate, Meagher & Flom
    Court: U.S. District Court in Oakland
    Case file: Antitrust attorney Jeffrey Kessler filed a class action lawsuit against the NCAA and the ACC, Big Ten, Big 12, Pac-12 and SEC conferences to eliminate the restrictions that limit athletes from being compensated. The
    Shawne Alston
    Photo by: Getty Images
    lawsuit contends that NCAA member universities are acting as a cartel by fixing the prices paid to athletes.

    Alston v. NCAA
    Plaintiff attorney: Jon King, Hagens Berman
    Defendant attorney: Jeffrey Mishkin, Skadden, Arps, Slate, Meagher & Flom
    Court: U.S. District Court in Oakland
    Case file: Former West Virginia University football player Shawne Alston is suing the NCAA and the five largest conferences claiming they cap the value of scholarships to less than the actual cost of attending college. The class action lawsuit represents all scholarship football players from 2010 to the present.






    Arrington v. NCAA
    Adrian Arrington discusses the concussion lawsuit as attorney Joe Siprut looks on.
    Photo by: Getty Images

    Plaintiff attorney: Joe Siprut, Siprut PC
    Defendant attorney: Sean Berkowitz, Latham & Watkins
    Court: U.S. District Court in Chicago
    Case file: In 2011, former Eastern Illinois University football player Adrian Arrington filed a class action lawsuit against the NCAA, claiming it didn’t do enough to diagnose, monitor or treat concussions. The case is now consolidated into similar cases against the NCAA.







    Northwestern University/College Athletes Players Association
    Northwestern football players go to cast their union ballots.
    Photo by: AP Images

    Attorney for association: Jeremiah Collins, Bredhoff & Kaiser
    Attorney for Northwestern: Alex Barbour, Meckler Bulger Tilson Marick & Pearson
    Review board: National Labor Relations Board, Washington, D.C.
    Case file: In January, a group of Northwestern University football players took actions to begin the process of being recognized as employees and asking to be represented by a labor union. The National Labor Relations Board regional office in Chicago ruled in favor of the College Athletes Players Association, allowing the student athletes to be seen as employees. In April, the players held a vote on whether to unionize but the results have been sealed pending review by the NLRB in Washington, D.C. In reviewing the case, the NLRB now has a June 26 deadline for briefs to be filed.







    O’Bannon v. NCAA
    Ed O'Bannon
    Photo by: AP Images

    Plaintiff attorney: Michael Hausfeld, Hausfeld LLP
    Defendant attorney: Glenn Pomerantz, Munger, Tolles & Olson
    Court: U.S. District Court in Oakland
    Case file: In July 2009, former UCLA basketball player Ed O’Bannon filed suit against the NCAA, Electronic Arts and Collegiate Licensing Co. over former players’ rights to compensation for use of their likenesses. EA and CLC agreed to a $40 million settlement in the class action lawsuits brought against them. O’Bannon and the NCAA are currently undergoing trial proceedings.

    Source: SportsBusiness Journal research

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  • Athletic directors talk openly about greater role for agents

    For as long as anyone can remember, agents have been considered part of the problem in college athletics. Soon, they might be considered part of the solution.

    NCAA rules have long prohibited any type of written or oral agreements between agents and student athletes. Several high-profile cases of improper agent relationships have led to harsh penalties and loss of eligibility.

    Alabama linebacker Adrian Hubbard was among 38 players who went undrafted this year after leaving school early.
    Photo by: Getty Images
    Now, in a stark reversal, athletic directors are talking openly about ways in which more permissive rules could enable athletes to have greater interaction with agents.

    “This is a big step,” Oregon AD Rob Mullens said. “Our athletes need to have the best possible information available to them about turning pro before they make their decisions.”

    The idea of granting agents more access on campus, administrators say, is a sign of the times as the NCAA and its member schools move toward a new governance structure. At the heart of that new structure, which will be voted on in August by NCAA leaders, is a desire to put more resources and more flexible rules in place to benefit the athletes.

    Restrictions on meals have already been removed, so schools can feed their athletes any amount at any time. Other proposals include a cost-of-attendance stipend, which could amount to another $2,000 to $4,000 a year in the pockets of scholarship athletes, and longer post-eligibility health care.

    Those ideas have been on the table for years, though. Only in recent months have ADs and commissioners begun to espouse for more leniency in the NCAA’s rules so that agents can provide feedback to underclassmen looking to turn pro early.

    “This whole thing is the result of us not moving our industry into the 21st century sooner,” Ohio State AD Gene Smith said. “We’ve never really — until now — said that our industry needs to change. In the ’90s, we should have started making change.”

    And in terms of enabling agents to advise athletes, “They’re already doing it,” Smith said. “It’s just not transparent right now, and that kind of under-the-table dealings is not in the best interests of the student athlete.”

    This year’s NFL draft also spurred more discourse about agents. Ninety-eight college players with eligibility remaining declared for the NFL draft this year, the most ever. Thirty-eight of them went undrafted.

    In the aftermath of the draft, SEC Commissioner Mike Slive moved the agent issue to the front burner, saying that the athletes aren’t getting the best information. Slive said during SEC meetings last month that NCAA limitations on agent contact are part of the problem. A structure that allows better and more timely communication between athletes and agents — something Slive and others favor — would benefit athletes making that decision to turn pro or stay in school.

    Slive’s comments, in addition to the ongoing antitrust litigation, has put the future role of agents front and center in the reform discussion.

    “It’s important for these athletes to have the best information about turning pro,” Arkansas AD Jeff Long said. “We
    Baseball players can seek consultation from advisers, but not agents.
    Photo by: Getty Images
    want them to progress toward a degree and if they’re able to go pro, then go, and we’ll provide as much information as possible before they go pro. But when you see the numbers going pro, and then going undrafted, that means there’s a lot of bad information out there.”

    What form this permissive legislation takes remains to be seen. At the very least, ADs say, they would like to see athletes get feedback from agents, in addition to their own coaches.

    Baseball players, as early as high school, are able to seek consultation from advisers as they determine whether to go to college or turn pro, if they’re drafted.

    But there’s currently a distinction. Those advisers cannot cross the line to become an agent, who then negotiates on behalf of the athlete. The adviser must stay in the background during those negotiations.

    “The problem with the baseball model is … everybody knows what is going on,” said veteran NFL player agent Peter Schaffer. “[Baseball agents] are not advisers, they’re agents. I don’t like the fact that agents have to hide in the shadows. You shouldn’t have to whisper in the father’s ear while he is negotiating with the general manager of a major league baseball team who has been negotiating contracts for 25 years.”

    One AD suggested that the NCAA or conferences should create advisory boards, which would include agents. Those boards would funnel draft information to the athletes.

    In football and basketball, the college coaches typically gather information from pro scouts and general managers to determine an athlete’s draft value. That method is problematic as well, because a coach advising an athlete to stay in school could be perceived as acting in his own best interests, not the athlete’s.

    “Perhaps by creating a mechanism to do it above the table, we can have better outcomes,” Kansas State AD John Currie said. “We’re having too many athletes giving up their educational opportunities and making some bad decisions. That’s a real issue. Nationally, you see student athletes falling victim to whatever they want to hear, and you have to worry about the perception of conflict of interest in these situations.”

    Throughout the NACDA convention in Orlando earlier this month, the topic of additional student benefits was omnipresent. None of the eight ADs interviewed for this story — all from schools in the five power conferences — opposed a greater role for agents. NACDA is the trade association that represents ADs.

    A survey in May of more than 90 ADs in SportsBusiness Journal showed that the majority of administrators want to find a way to give their athletes more exposure to the agents who will one day be representing them. Nearly three-quarters of ADs — 74 percent — favor athletes using advice from agents to make decisions about turning pro.
    From the comments posted in the survey, ADs believe that a more structured system could benefit the athletes.

    “There are many people in athletics who believe there should be more flexibility when it comes to agent representation,” Arizona AD Greg Byrne said at the NACDA convention. “The challenge is that schools get criticized for trying to keep a young athlete in school. At the same time, agents are most interested in trying to secure the athlete as a client. You hope that any advice will be in the best interest of the athlete.”

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