Current and Former Athletes Settle with EA, Lawsuit with NCAA Remains

On the heels of the National Labor Relations Board ruling that Northwestern University football players are university employees with the right to unionize, the end of May provided another major event in what is becoming a watershed year for the multi-billion dollar industry of major university athletics.  On May 31, 2014, three plaintiff classes of former National Collegiate Athletic Association ("NCAA") basketball and football players led by former college athletes Shawne Alston, Ryan Hart, Sam Keller, and Ed O'Bannon ("O'Bannon") reached a settlement with Electronic Arts, Inc. ("EA") and the Collegiate Licensing Corporation ("CLC") in In re Student-Athlete Name & Likeness Licensing Litig. (Case No. 4:09-cv-1967-CW (N.D. Cal. 2009)).  Under the terms of the settlement, still to be approved by Chief Judge Claudia Wilken, EA and CLC would pay the class members approximately $40 million as compensation for using the players' names, images, and likenesses ("NIL") in EA's popular college football and basketball video games since 2003.  EA announced last year that it would cease producing a college football game after the NCAA refused to renew its license.

The settlement marks the end of one chapter of the five-year antitrust battle between current and former university athletes, led by O'Bannon, on the one hand and EA, CLC, and the NCAA on the other.  Plaintiffs claim that the NCAA conspired with EA and CLC to "restrain competition in the market for the commercial use of their names, images, and likenesses" in violation of the Sherman Antitrust Act.  In re Student-Athlete Name & Likeness Licensing Litig., 2014 U.S. Dist. LEXIS 50693, at *12 (N.D. Cal. Apr. 11, 2014), citing 15 U.S.C. §§ 1 et seq. Plaintiffs subsequently expanded their restraint of trade claims, which initially only pertained to video games, to allege that "the NCAA engaged in anti-competitive conduct by conspiring to sell or license the names, images, and likenesses of Division I men’s football and basketball players, without their consent, for use in live television broadcasts [and] archival game footage."  Id. at *13.  In denying the NCAA's motion for summary judgment, Judge Wilken rejected the claims of the NCAA and broadcasters that, as a matter of law, their use of athletes' NIL without their consent was protected by the First Amendment (and thus shielded from a right of publicity claim by plaintiffs).  Id. at *38-39.  For summary judgment purposes, Judge Wilken found that Plaintiffs had presented enough evidence to support an inference that the NCAA prohibiting member schools from compensating athletes from the revenues generated from licensing the players' NIL to broadcasters has an anticompetitive effect on the "college education" model.  Id. at *25 (quote in original).  Judge Wilken also left the NCAA's argument that amateurism serves a pro-competitive purpose as an issue for trial.  Id. at *54-56.

Plaintiffs' inclusion of live television broadcasts in their complaint was significant, as it implicated the NCAA's contracts with broadcast and cable networks for major college football and men's basketball.  The NCAA receives an annual average of approximately $770 million for the right to televise the men's basketball tournament and approximately $470 million for the new College Football Playoff.  If Plaintiffs prevail at trial on the issue licensing their NIL to broadcasters, NCAA member schools almost certainly would be permitted to offer compensation to players that is derived from the television contracts.  Moreover, any attempts at collusion to avoid offering compensation, through the NCAA or otherwise, could subject the schools to treble damages.  15 U.S.C. § 15(a).

The bench trial between plaintiffs and the NCAA began on June 9, 2014, and is expected to last three weeks.

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Jim Smerbeck |