JONES DAY TALKS®: Alston, the NCAA, and the Future of College Sports
The U.S. Supreme Court has ruled 9-0 in National Collegiate Athletic Association v. Alston that the NCAA violated antitrust law by prohibiting member colleges from providing athletes with certain educational benefits. Specifically, the case dealt with the NCAA's restrictions on providing athletes with non-cash, academic-related compensation, such as computers and internships.
Jones Day's Chris Pace and Marc Weinroth discuss the Alston decision and its possible long-term implications for college sports.
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Dave Dalton:
The United States Supreme Court has ruled 9-0 in National Collegiate Athletic Association v. Alston that the NCAA violated antitrust law by prohibiting member colleges from providing athletes with certain educational benefits, specifically the case that dealt with NCAA restrictions that prevented schools from providing athletes with benefits, such as computers, internships, tutoring expenses, and academic and graduation cash awards. Jones Day's Chris Pace and Marc Weinroth have followed Alston since almost the beginning. They're here to talk about the decision and its possible long-term implications for college sports. I'm Dave Dalton. You're listening to JONES DAY TALKS®.
Dave Dalton:
Jones Day partner, Chris Pace has prevailed in more than 20 trials and he has orally argued and prevailed more than 25 appeals. He represents clients and commercial disputes, antitrust and unfair competition cases, RICO actions and false claims act matters. Chris has appeared on behalf of fortune 500 companies in cases across the country, including a multi-district litigation proceedings. Prior to joining Jones Day, Chris served as an assistant US attorney for the Southern District of Florida as a law clerk to US Supreme Court, Justice Anthony M. Kennedy.
Dave Dalton:
And Marc Weinroth litigates commercial disputes, helping clients navigate complex issues from both legal and business perspectives. Marc has significant sports law experience involving litigation, transactions and internal investigations. Marc's recent sports related matters include representing more than a dozen universities in regard to NCAA student athlete, concussion injury litigation, a federal multi-district litigation consolidate more than 500 putative class actions, defending a major university in two state court football concussion lawsuits, and representing a university in four lawsuits involving student athlete health and safety issues.
Dave Dalton:
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 areas, including the day-to-day athletic department legal portfolio. Go Hurricanes. Chris, Marc. Thanks for being with us today.
Chris Pace:
Thanks Dave. Great to be here.
Marc Weinroth:
Thanks Dave.
Dave Dalton:
All right. Finally. Finally, the Supreme Court has weighed in on Alston. Just remind us all Marc, talk about what this case was about and what NCAA rules were the student athletes challenging.
Marc Weinroth:
So you may recall from our prior podcasts that this case dates back all the way to 2014, and it was an antitrust lawsuit that challenged all NCAA rules that prevented or limited student athletes from receiving compensation in exchange for their athletic services. And the attorneys at the time who brought this case on behalf of the plaintiffs were pretty vocal that what they were seeking was essentially a free agency environment and that schools should be able to compete for the services of the best high school recruits.
Marc Weinroth:
So if you had the number one quarterback in the country, coming into school, universities should be able to offer a $500,000 stipend for that athlete services. The NCAA, however, their rules cap the amounts that schools are able to provide to student athletes. And that's limited to the value of a grant and aid scholarship at the time, which is tuition, room, board. So the gist of the lawsuit was that the NCAA was fixing the price that universities were able to pay to student athletes for their services. And without those restraints, there'd be more competition among schools to offer whatever they thought the fair market value of a particular student athlete was.
Dave Dalton:
Okay. So as this case moved along? What did the District Court and Court of Appeals for the Ninth Circuit Rule?
Marc Weinroth:
So it really starts with what the NCAA's argument was for why there was a pro competitive purpose for its rules. And what they pointed to was the fact that in their opinion, not paying players is what makes college sports unique from professional sports. And that view is consumer demand. People... There's something special or unique about college sports and the courts assessed this argument by sort of dividing the NCAA restrictions into two buckets.
Marc Weinroth:
In the first bucket, you have rules that prevent schools from paying players or anything that really relates to athletic performance. The things we think of as pay for play, and the court said, "NCAA, you can keep those rules." Which was actually a pretty significant victory I think at that stage of the case, and essentially struck down the notion that there could be free agency for student athletes. But in the second bucket, you had NCAA rules that related to education related benefits. And the court said, "No, NCAA, you can't have a national rule that prevents schools from offering education related benefits to students."
Marc Weinroth:
This doesn't blur the line between college and professional sports. And if anything, providing educational benefits only further emphasize is that these are in fact students. So what ended up happening was the District Court entered an injunction that essentially said the NCAA couldn't enforce national rules that prevented schools from competing on the basis of these education-related benefits. And what do I mean by education related benefits, things like computers, musical instruments, study abroad, expenses, tutoring, graduate school, scholarships, internships, things that you couldn't possibly consider or confused with a professional salary.
Dave Dalton:
Mm-hmm (affirmative). Mm-hmm (affirmative). Okay. So the US Supreme Court rules on June 21st, as this matter progressed, Chris, tell us what the Supreme Court held.
Chris Pace:
Well, only the NCAA sought review from the Supreme Court. So the only issue before the Supreme Court was whether the district court enjoining the education benefit rules to be upheld. Marc's two buckets, that first bucket of the pay to play rules wasn't before the Supreme Court. As to District Court barring the NCAA from enforcing its education benefit related rules, the Supreme Court affirmed the District Court. It was a 9-O ruling. So it was a categorical ruling and the Supreme Court methodically rejected all of the NCAA's arguments in their attempts to be able to maintain any of these rules.
Dave Dalton:
Nine nothing doesn't happen very often, does it Chris?
Chris Pace:
It's certainly uncommon to have 9-O opinions from the Supreme Court, particularly in a case like this, where it's not really the Supreme Court taking a case for error correction, but a case that was expected to be pretty contentious and was very contentious in the District Court and the court of appeals.
Dave Dalton:
Okay. Okay. When you and I were exchanging notes preparing for this, this program, you were talking about Justice Kavanaugh's concurring opinion. Talk about that. I read that when the ruling came down, that was interesting to me, comment on that if you would.
Chris Pace:
Well, Justice Kavanaugh's opinion is important or significant in large part because the issue before the Supreme Court was again, fairly narrow, it really only dealt with these education-related benefit rules. And the Supreme Court says, "Well, we're not going to address these other set of rules because they're not before us. The ones that the District Court upheld." What Justice Kavanaugh addressed in his concurrence is at least his view and perhaps, many a view shared by other justices, that those rules also are going to be very hard for the NCAA to maintain because in his view, the NCAA's justification, preserving amateurism is really just like saying the difference between what the product I provide and the product somebody else provides is that I pay my people less.
Chris Pace:
And so he's saying getting together and agreeing to pay less to these student athletes as a justification for why your product is different than professional sports is a highly suspect justification.
Dave Dalton:
Well, I heard an analyst as the decision came out on Monday saying that Justice Kavanaugh was almost inviting or goating or tempting the student athletes to push for those other components of this matter. Do you agree with that?
Chris Pace:
I certainly think that there's really only one reason to write that concurring opinion because it's not deciding an issue before the court. And it's really to signal to the rest of the world. There are other sets of challenges here that could be brought and really should be brought. I don't think Justice Kavanaugh is telling you 100% what his view is going to be. He's still a Supreme Court Justice. He will decide cases based on the facts before him, the law that's existed for the time.
Chris Pace:
But I do think that he is signaling to the larger community, these rules should be challenged and when they're challenged, there's a pretty good chance they're not going to survive.
Dave Dalton:
Okay. This is going to be interesting to watch that's for certain. All right, Chris, let's stay with you for a second and unpack and run round with the court's decision. The NCAA was seeking special treatment under antitrust law. And what did the court have to say about that? You've touched on it already, but let's lay it bare. Thank you.
Chris Pace:
Sure. That was definitely a key argument from the NCAA. They were trying to argue or making the argument that they should not be subject to careful scrutiny of their rules. The Supreme Court or courts in general, should really give them great deference to how they decide to implement their rules governing college athletics. There is an old 1984 Supreme Court case that has some language in there that the NCAA really focused on. And the Supreme Court said, "No, that old language and that old opinion doesn't mean what you think it means. Just because you're the NCAA, you're not subject to some special rule instead you're subject to the same antitrust analysis that we normally apply to any kind of collective venture."
Chris Pace:
And once they did that, really, it was downhill for the NCAA because it's called a rule of reason analysis. Under the rule of reason analysis, the NCAA was not able to overcome the challenges to their education-related benefit rules.
Marc Weinroth:
And to piggyback on Chris, Dave, that 1984 case NCAA vs Board of Regents, that's been a decision the NCAA has relied on for the last four decades in various lawsuits that challenged its rules on anti-trust grounds. And the court here sort of reiterated that antitrust law requires an analysis of market realities and sort of went out of its way to discuss how the times have changed since 1984, with respect to collegiate sports. And that the NCAA has become a sprawling enterprise and a massive business over the last four decades.
Marc Weinroth:
They cited to the current value of media rights deals and coaching salaries and athletic director salaries, and sort of embrace the criticism that we've heard for years now that there's lots of folks in college sports that are getting paid, but not the student athletes and wow, that completely ignores the value of athletic scholarships. And you do have some schools that are offering student athletes, scholarships and education valued at up to like $300,000 for a four year degree. Nevertheless, the court had language in its decision that emphasize the commercial reality of college sports.
Dave Dalton:
Oh, sure. Sure. And a little sideline, I read law suit journal, there are a couple of cases where a division one football program, strength and conditioning coach is making more than the university president. So yeah, I'm a big sports fan and a big college sports fan, but yeah, things have changed quite a bit since 1984, I'd say. Okay, Marc the headlines, the media attention, a nine to nothing decision by the court, but this wasn't all bad for the NCAA, was it?
Marc Weinroth:
So if there are two important points to keep in mind and the first Chris already hit on earlier, which is the only issue on appeal here was the education-related benefits. The student athletes did not appeal the District Court decision concerning the athletic related benefits and things that we consider to be paid for play. So the NCAA is still able to impose and enforce those compensation rules. In fact, even Justice Kavanaugh's concurring opinion that media accounts have cited to sort of this blistering indictment of the NCAA's amateurism model states that the case involves only a narrow subset of the NCAA's compensation rules.
Marc Weinroth:
So it's a fairly limited ruling in that regard, the majority opinion, at least. The second thing to keep in mind is the NCAA during oral argument and against briefs, express concerns that the District Court's injunction was essentially going to micromanage the NCAA and the courts shouldn't be in the business of overseeing or administering rules about college sports. And the Supreme Court rejected that and said, "Look, NCAA, you retain significant leeway about how, and to what extent education related benefits are going to be provided." And as an example, they cited to the fact that the District Court's injunction allows the NCAA to come back to the court with a reasonable definition for what it thinks an education-related benefit really means.
Dave Dalton:
Okay. Okay. Let's go back to Chris for a second. There was talk about the NCAA characterizing its rules on compensation as a product feature. In other words, not paying players is what makes college sports distinct or special or different product from professional sports. And that's why consumers watch and attend games and are ravenous fans and so forth. What the court has to say about that Chris?
Chris Pace:
Both the opinion of the court and Justice Kavanaugh, separate concurrence actually tackle that issue. The opinion of the court addresses it only briefly to say that you can't label a labor market restriction as a product characteristic and then be immune from the antitrust laws. The market restriction is still subject to the rule of reason analysis. Like the majority Justice Kavanaugh also says the rule of reason applies to the NCAA rules, but in his view, the NCAA's pro-competitive justification is circular.
Chris Pace:
One example he gives is, say that newspapers get together to limit what they paid journalists and they claim the reason is because we want our journalists to be publicly minded. If we pay journalists too much, they'll be doing their job for their salary, as opposed to, for the love of the public or the benefit of the public. According to Justice Kavanaugh, the antitrust laws wouldn't allow that. So why would antitrust laws allow the NCAA to say, "Well, the reason everybody loves college athletics and distinguishes it from professional sports is that we don't pay the athletes and as a result, we should be allowed to continue doing that."
Chris Pace:
That underlies a lot of NCAA rules that relate to compensation for student athletes. And that's what Justice Kavanaugh thought would be circular reasoning. Now it's important to note that's very different than other NCAA rules, such as eligibility requirements or rules on how games are played or how schedules are maintained. Those are justified on very different reasons than what is used to justify the student athlete compensation rules.
Dave Dalton:
Yeah. Let's go back to Marc for a second. Another major component of the NCAA's argument, was it allowing education related benefits could lead to a sort of a slippery slope. In other words, an internship could be disguised as a big money, pay off from a sneaker company or schools giving luxury cars to athletes to come back for their classes. Courts didn't buy the slippery slope argument. Did they?
Marc Weinroth:
They didn't. And the Supreme Court didn't either. They reiterated in this decision that the NCAA has considerable leeway, and those are the Supreme Court's words, not mine. So just taking three examples, the NCAA argued that internships could turn into these large paydays by sneaker companies or car dealerships and be thinly veiled disguises for a professional salary. And the court said, "No NCAA, you're entitled to have legislation so that only conferences in schools can provide the funding for internships. And you can remove boosters and sponsors entirely from the equation."
Marc Weinroth:
Another example, they gave, as you mentioned, was luxury cars. Can schools push the limits on what is, or is not an education related benefit and argue that giving a student athlete a car so they can come back and forth to classes is related to education. And the court said, "No, NCAA is free to define what is and isn't nominally related to education." So that only those legitimate education-related benefits can be provided. Nothing stops the NCAA from passing a, "No Lamborghini" rule. And the final concern that was expressed by the NCAA was these cash, academic or graduation awards.
Marc Weinroth:
The NCAA currently allows student athletes to receive cash awards for athletic related performance. And that goes up to about $6,000 a year for the elite student athletes that are able to win various awards for their participation in sports. So the District Court had earlier in this case, concluded that schools should be able to provide the same cash amounts for education related awards. And it would be only fair that if you're providing cash for athletic performance, you can provide cash for academic performance.
Marc Weinroth:
And the court said, "Even then the NCAA is allowed to define what is a legitimate academic award versus something that's just a disguised cash payment and the NCAA is free to reduce the value of what it permits for those athletic awards. So that instead of them being $6,000 for the Heisman winning football player, who wins all the potential awards, maybe that gets reduced to $2,000." And as a result may not be as large of a burden as the NCAA points to in terms of schools having the ability to pay cash, academic awards to students.
Chris Pace:
Yeah. Let's just be clear though, this is all under the District Court's injunction. In other words, if there's a Supreme Court is saying the District Court is allowing you this flexibility NCAA. So the issue before us, we don't have to tackle your parade of horribles. That doesn't mean that there's not going to be a later case along the lines of the theory Justice Kavanaugh was pressing that says, "No NCAA, you can't prevent a university from giving a student athlete a Lamborghini, or you can't prevent a university from providing certain benefits."
Chris Pace:
That just wasn't the issue before the Supreme Court. What was before the Supreme Court was a specific District Court injunction that still allows the NCAA a lot of flexibility in enforcing education-related benefits. Putting some parameters around education-related benefits.
Dave Dalton:
Real good. We've made that point. The decision was so narrow that the NCAA still certainly has its leeway. And some of these things may be revisited later on. But we were talking earlier about how big college sports have become in some of the issues rising out of this. NCAA rules pertain to name, image, and likeness. There has been legislation and various states that's going to take effect this summer, July 1st, I believe. What impact Marc does this court's decision have on those rules?
Marc Weinroth:
So this is important. The case is not about name, image and likeness rights. Again, this is limited to education related benefits. That's what Alston's about. But that being said, the majority opinion is well as the concurring opinion, suggest that the NCAA might be a bit more cautious about setting national rules, that impose restrictions or guardrails on name, image, and likeness rights activities. But we might see as a result of this case is, the NCAA taking a bit of a more hands-off approach and allowing universities at a university by university level, or perhaps at a conference level passing rules or restrictions on what a student athlete can and cannot do what their name, image, and likeness.
Dave Dalton:
Sure. Sure. Let's go back to Chris for a second. Chris, amateurism has been part of college athletics for more than 100 years. Is this the end? Is this the death now for amateurism and college sports?
Chris Pace:
You know it's hard to say this is going to be made much more difficult for the NCAA to enforce compensation limitations. Now, one thing that's clear from the opinion is the issue before the court really was limited to the NCAA. It doesn't prevent universities from putting limitations on what student athletes receive, it doesn't prevent individual conferences from putting limitations on what student athletes receive. So we don't know how that's going to be implemented. What are the universities going to do? What are the conferences going to do?
Chris Pace:
So we're really only talking to this NCAA level, but at the NCAA level, certainly Justice Kavanaugh's opinion raises real questions about the amateurism distinction and even the opinion of the court takes some shots at it, including the argument or the point that the NCAA apparently has had a very difficult time defining what exactly amateurism means. The rules that the NCAA applied, we talked about this earlier, have dramatically changed over the years. So the different kind of benefits that student athletes can get, keeps changing and largely increasing.
Chris Pace:
And so there may have been a time when student athletes, all they really got for being on football or basketball team was the payment of their tuition and their dorm room, but that's no longer the case. There's a number of different ways under the NCAA rules that student athletes get some compensation one way or the other, not necessarily at their market value, but some compensation. And that's made it increasingly difficult for the NCAA to be able to justify why it's not just simply allowing a marketplace to set the compensation for athletes.
Dave Dalton:
It's going to be interesting to watch that's for certain. Marc, let's wrap it up with this, give us the practical impact for the universities. What are your takeaways there? How's this changed life for universities in this nation?
Marc Weinroth:
So first and foremost, I think it's important to reiterate that the NCAA has this considerable leeway in how it's going to regulate these education-related benefits, now that we know that the NCAA can prohibit schools from providing those benefits. But as we discussed earlier, that includes going back to the District Court with a reasonable definition for what does it mean to be education-related. And I fully expect the NCAA is going to do that at some point within the next 90 days before the District Court's injunction takes effect.
Marc Weinroth:
Chris also mentioned in his last response, that conferences remained free to set their own rules relating to education related benefits. With the District Court's decision held and what the Supreme Court reiterated in its judgment was only that NCAA national rules can't prohibit this sort of competition by schools for the services of student athletes. You can't limit all schools across the country from offering these education related benefits. But if a particular conference comprised of 10 to 16, universities wants to impose a rule that limits education-related benefits, that student athlete could choose to play for a school in a different conference and has an alternative.
Dave Dalton:
Sure.
Marc Weinroth:
And then lastly, schools themselves. These are not obligations or requirements to provide education related benefits. The purpose of what's happening here is to encourage competition among schools for the services of student athletes. So any particular school is entitled to decide whether and which benefits they ultimately want to provide to student athletes.
Dave Dalton:
Marc, thanks. We will leave it right there. You can find complete bios and contact information for Chris and Marc at jonesday.com and be sure to visit our insights page while you're there, you'll find additional podcasts, videos, newsletters, white papers, and other valuable content. Subscribe to JONES DAY TALKS® at Apple Podcast or wherever else you get your podcasts. JONES DAY TALKS® is produced by Tom Kondilas. As always, we thank you for listening. I'm Dave Dalton. We'll talk to you next time.
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