Litigation Updates re: NCAA

Litigation Updates re: NCAA
UCLA Compliance Lucia Serrano

Table of Contents Concussions Employment-Related Issues
Arrington v. NCAA Employment-Related Issues Northwestern University Sackos v. NCAA Amateurism and Paying Players NCAA Athletic Grant-in-Aid Cap Antitrust Legislation Chamorro v. NCAA Marshall v. ESPN Name, Image and Likeness Keller v. NCAA O’Bannon v. NCAA Table of Contents

CONCUSSIONS

Arrington v. NCAA Filed: September 2011
Class: All persons who played an NCAA sanctioned sport at an NCAA member institution at any time on or prior July 29, 2014 Issue: Did the NCAA have sufficient concussion protocols in place to protect the welfare of student-athletes? Claims: Plaintiffs claim the NCAA breached its duty to protect the safety, health and welfare of its student-athletes by failing to implement standard concussion-management policies or return-to-play guidelines Plaintiffs demand medical monitoring for all current and former student-athletes as well as changes to the NCAA’s return-to-play guidelines for students who had suffered concussions or concussion symptoms Allegation - NCAA put health and safety of its SA’s at risk by failing to implement standard concussion-management policies or return-to-play guidelines. Current and former student-athletes are at short- and long-term risk from concussions and the accumulative subconcussive hits received while playing NCAA-sanctioned sports at NCAA schools. Arrington v. NCAA

Arrington v. NCAA Case History:
September 2011: Case filed by Adrian Arrington. Separately, Derek Owens filed a class action suit on the same topic. November 2011: Arrington Plaintiffs (including Owens) filed a consolidated class action complaint October 2011-June 2013: Co-Lead Counsel conducted investigation into the facts and law February 2013: Arrington Plaintiffs filed their Second Amended Class Action Complaint March 2013: NCAA submitted its answer denying all allegations July 2013: Arrington Plaintiffs filed Motion for Class Certification and Memorandum in Support August 2013: Court entered a stay between parties pending mediation July 2014: Both parties reached preliminary settlement agreement Arrington v. NCAA

Arrington v. NCAA Current Status: Terms of Preliminary Settlement:
Preliminary Settlement reached. The Preliminary Settlement is pending final approval from the US District Court for the Northern District of Illinois. Settlement Class certified on July 29, 2014 Judge John Lee expressed concerns about settlement including non-contact sports (October 2014) Terms of Preliminary Settlement: Medical Monitoring Fund and Program - $70 Million for testing and screening of brain trauma Concussion Related Research Funds - $5 Million Athletes preserve individual right to sue universities, conferences or the NCAA for personal injury damages Proposed attorney fees: $15 Million Settlement terms did not include a fund to pay damages for treatment of current and former student-athletes’ concussions. It is solely intended to cover diagnostic medical expenses. Athletes would still have to individually sue universities, conferences or the NCAA for personal injury damages Arrington v. NCAA

Arrington v. NCAA What does this mean for our institutions?
University of Michigan Incident – QB Shane Morris AD publicly apologizes and admits mistakes in treatment of QB Discuss institutional concussion protocols Who determines and manages concussion protocol? Does Compliance play any role? Impact on Academic Performance and Information Sharing WORK IN PROGRESS SLIDE Opportunity to add video around Michigan issue? Arrington v. NCAA

EMPLOYMENT-RELATED ISSUES

Northwestern University
First Step: January 2014 – Northwestern scholarship football student-athletes initiate process to join union Impacted Group: Football student-athletes on full grant-in-aid who have not yet exhausted their athletic eligibility Issue: Are football student-athletes considered ‘employees’ under the National Labor Relations Act? Relevant Law: NLRA – US Labor Law that guarantees the basic rights of employees to organize into trade unions and engage in collective bargaining NLRA: US Labor Law which guarantees the basic rights of the private sector employees to organize into trade unions, engage in collective bargaining for better terms and conditions at work, and have the right to strike. Northwestern University

Union Claims CAPA (College Athletes Players Association) claims the FB student-athletes on scholarship fit under the common law definition of ‘employees’ based on the definition ‘employee is a person who performs services for another under the contract of hire, subject to the control or right of control, and in return for payment.’ The scholarship agreement is an employment contract Scholarship is tied to the student-athletes performance evidence by the fact that scholarships can be reduced or canceled FB student-athletes on scholarship are under employers control (e.g., training camp, applying for outside employment, off-campus living arrangements) Northwestern University

Northwestern Response: Should apply economic vs. primarily educational relationship test instead of the common law definition of ‘employee’ as the FB players maintain an educational relationship with NU Football program and other sports are part of the University's education mission All student-athletes in the NU football program, not just SAs who receive grant-in-aid scholarships, are subject to the same rules and regulations The majority of the rules in the football team handbook mirror rules that are applied to all students at NU Scholarship FB student-athletes are not ‘hired’ to perform services; they are admitted as full-time students after the University determines the PSA has the ability to succeed academically Tax implications if SA are considered ‘employees’ Northwestern University

Case History: January 2014: Initial meeting of players and discussion of unionization March 2014: NLRB Chicago Regional Director decided that Northwestern University football players on full grant-in-aid and who have not exhausted their athletic eligibility are employees and can unionize April 2014: NLRB decides to review Regional NLRB decision April 2014: NU football players voted as to whether to certify the first union in college sports – College Athlete Players Association (CAPA) July 2014: NCAA and 6 members of Congress filed an amicus brief July 2014: Northwestern University submitted an appeal to the NLRB to overturn the NLRB Chicago Regional Director’s decision Current Status: Appeal rests before the NLRB Northwestern University

What does this mean for our institutions? Who will this decision directly impact? This decision to unionize currently only applies to 17 private institutions in FBS and not public institutions If the decision is upheld, will state legislatures follow suit? If SAs are deemed to be employees does this mean that the IRS will consider scholarships as income and therefore become taxable? How will SAs pay this income tax? If allowed to unionize, will every institution be subject to their respective state labor laws? Ohio: passed a state law classifying student-athletes as non-employees Michigan: introduced a Bill that would require all student-athletes be classified as ‘students’ Would this create an uneven playing field? How are institutions educating their staffs? Ohio: Ohio legislative bill that defines student-athletes as not being employees (april 2014) Michigan: House Bill 6074 introduced would require that all student-athletes be defined/classified as ‘students.’ Therefore, they cannot unionize because they cannot be considered ‘employees.’ (December 1, 2014) Northwestern University

Filed: October 20, 2014 against the NCAA and all Division I institutions
Class: All NCAA Division I student athletes participating in women’s and men’s sports Issue: Did the NCAA violate the wage and hour provisions of the Fair Labor Standards Act (FLSA) by failing to treat SAs as temporary employees and not paying them minimum wage? Relevant law: FLSA – establishes minimum wage, overtime pay, for employees in the private sector and in the Federal, State and local governments Didn’t know where exactly to fit in the definition of FLSA Sackos v. NCAA

Claims: Sackos, a former soccer SA at the University of Houston, claims that student-athletes are temporary employees under the FLSA Scholarships that student-athletes receive do not constitute compensation for non-academic work Student-athletes should be compensated at least at the rate of the federal minimum wage Wants to use work-study as a measuring stick Like students on work-study, student-athletes perform non-academic functions for no academic credit They are supervised by FT college staff They confer benefits to the institution Sackos v. NCAA

Sackos v. NCAA Case History: Current Status:
Filed in federal court in Indianapolis on October 14, 2014 Current Status: The suit was recently filed and there are no developments to date What does this mean for our institutions? Who will be deemed as the employer? NCAA? Member institution? Athletics department? Do the court have jurisdiction over every school named in the suit? Sackos v. NCAA

Scholarship equal compensation
Treat as Employees? SA want to Unionize? Who could be affected? Compensation Northwestern Yes Private institutions Negotiated through union representation Sackos No Temporary Employees All D1 institutions Federal minimum wage Contrast in Issues

Amateurism and Paying Players

NCAA Athletic Grant-in-Aid Cap Antitrust Legislation
Three cases involving NCAA Athletic Grant-in-Aid Cap Antitrust Legislation were consolidated in the Northern District of California Alston v. NCAA – Seeking an injunction to enjoin the NCAA and Power 5 Conferences from maintaining and abiding by the present NCAA Bylaws limiting financial aid. Seeking award of damages for the difference between the grants-in-aid awarded and the Cost of Attendance Thompson v. NCAA – Claiming the Grant-In-Aid cap does not properly compensate student-athletes for their services. Rectify decades of unlawful, anticompetitive restrictions that have deprived athletes of fair compensation for extraordinary revenue generated on behalf of their universities, athletic conferences, and the NCAA Jenkins v. NCAA – Remove NCAA cap on student-athlete compensation and allow student-athletes to receive payment beyond their scholarship Alston v. NCAA – 1) Injunction that enjoins the NCAA and Power 5 Conferences from maintaining and abiding by the present NCAA Bylaw limiting financial aid; and 2) Award of damages for the difference between the grants-in-aid awarded and the Cost of Attendance Thompson v. NCAA - Plaintiffs claim the Grant-In-Aid cap does not properly compensate student-athletes or their services. Rectify decades of unlawful, anticompetitive restrictions that have deprived athletes of fair compensation for extraordinary revenue generated on behalf of their universities, athletic conferences, and the NCAA Jenkins v. NCAA - Remove NCAA cap on student-athlete compensation and allow student-athletes to receive payment beyond their scholarship NCAA Athletic Grant-in-Aid Cap Antitrust Legislation

Jeffrey Kessler Clients: MLBPA, NFLPA, NBAPA, NHLPA, Previous Work: McNeil v. the NFL led to free agency, Michael Vick roster bonus arbitration, ended NFL and NBA lockouts in 2011 Voted one of the Top 50 Most Influential People in Sports Business Current Status September 2014 – NCAA and 11 Conferences filed Motion to Dismiss and remain pending Discovery and class certification motions will follow decision on Motions to Dismiss if necessary Facts NCAA provides SA’s tuition and other expenses (price-fixed) FBS programs are highly competitive and profitable Full scholarship does not cover the Total Cost of Attendance NCAA Bylaws restrict remuneration a SA can receive to a full athletic scholarship NCAA Athletic Grant-in-Aid Cap Antitrust Legislation

What does this mean for our institutions? How would the recruiting process change? Would institutions start bidding on SAs? Can schools afford to provide full cost of attendance or more? Would institutions limit the amounts SAs can earn? Could the collegiate model survive? Her opinion condemns the NCAA, and knocks down some of the most common justifications for limiting compensation for athletes to the value of the scholarship. “The evidence … demonstrates that student-athletes are harmed by the price-fixing agreement among FBS football and Division 1 basketball schools,” Wilken writes. NCAA Athletic Grant-in-Aid Cap Antitrust Legislation

Date Filed: August 2014 Issue: Do NCAA rules banning multi-year scholarships and capping the number of available scholarships violate antitrust law? Class: Former and current Division I football student-athletes who were impacted by the lack of multi-year scholarships and whose athletic scholarships were reduced or not renewed and who were impacted by the yearly football scholarship caps 2012: NCAA passed legislation allowing institutions to offer multi-year scholarships Chamorro v. NCAA

Chamorro v. NCAA Claims:
Chamorro, a former Colorado State University kicker, was told that if he maintained a 2.0 GPA and did not break any rules he would receive a scholarship for 4 or 5 years Chamorro’s scholarship was not renewed and lost the appeal Chamorro argues that the NCAA cannot use the premise of amateurism or competitive balance as justification for limiting the number of scholarships Alleges damages as a result of the NCAA’s rules, as Chamarro and other athletes were forced to pay tuition because their scholarships were not renewed Chamorro v. NCAA

Chamorro v. NCAA Case History: Current Status:
August 2014 – suit filed in the Southern District of Indiana Current Status: The court has made no substantive rulings with regard to the legal issues to date What does this mean for our institutions? Do we have sufficient scholarships for each sport? What are the budget and Title IX implications? How do institutions monitor scholarship promises? Discuss impact of Pac-12 rule change re: multi-year scholarships Discuss Aid adjustment Form at UCLA – ask what other schools do? Pac 12 Multi-Year Changes: Guaranteeing four-year scholarships that can neither be reduced nor canceled provided the student-athlete remains in good standing and meets the terms of the agreement. Effective in , all financial aid agreements offered to incoming student-athletes will be multi-year agreements for no less than four academic years. Chamorro v. NCAA

Filed: October 3, 2014 in the U. S
Filed: October 3, 2014 in the U.S. District Court for the Middle District of Tennessee, Nashville Division Class: All current and former student-athletes in the Football Bowl Subdivision and Division I Men's Basketball Issue: Do the defendants violate antitrust laws and student-athlete’s rights of publicity by imposing and conspiring to impose various anti-competitive regulations? Relevant Law: Sherman Act §1 – ‘Every contract, … or conspiracy, in restraint of trade or commerce … is declared to be illegal’ Marshall v. ESPN

Marshall v. ESPN Claims:
Marshall played football at Vanderbilt between 2010 and 2014 This is the first class action suit in this era where television broadcasters are included as defendants Defendants include the NCAA and conferences; ESPN and other broadcasters; and IMG and other licensing corporations Plaintiffs allege that the NCAA and the named broadcasters conspired to create an anticompetitive market by prohibiting SAs from earning income outside of their scholarships and that force SAs to give up their rights of publicity The complaint relies on the Student Athlete Statement form student-athletes are required to sign in order to compete in NCAA-sanctioned sports which allows the NCAA to use the student-athletes name or picture to ‘generally promote’ NCAA Championships or other events Marshall v. ESPN

Marshall v. ESPN Claims (cont’d):
The NCAA form does not clearly define ‘generally promote’ and does not inform student-athletes as to what extent they are forfeiting their right to publicity therefore not an informed consent given by the SA The complaint also alleges that the NCAA conspired with the broadcasters to prevent SA from earning a share of the large sums of money rendered from the SA’s services What does this mean for our institutions? How does each institution and athletic department address the use of the name, image and likeness of their own student-athletes? What are the determinative factors? What are institutions doing to collect permission from student-athletes to use their NILs for institutional purposes? Discuss UCLA Roster form, is there a better idea? Are they doing something to consolidate permission for protional activities instead of getting signatures every time ….. Use ucla billboards UCLA magazine app Pac-12 cancel direct TV ad Marshall v. ESPN

Examples of UCLA Marketing

Name, Image and Likeness (NIL)

Filed: May 2009 Class: Current and former DI FBS and Men’s Basketball student-athletes and whose NIL allegedly have been included in or used in connection with NCAA-branded video games published or distributed from July 21, 2005 until Sept. 3, 2014 Issues: Whether EA modeled its avatars on the actual players on collegiate rosters Whether EA used player NIL in its NCAA themed videogames and was that usage unlawful Did the Collegiate Licensing Company (CLC) conspire with EA to use player likeness Whether EA’s conduct violates CA, IN and NJ state “Right of Publicity” laws 77,550 appearances by Football student-athletes 18,400 appearances by MBB student-athletes In NCAA Football, EA seeks to replicate each school’s entire team by sending detailed questionnaires to team equipment managers Keller v. NCAA

Keller v. NCAA Claims and Defenses:
Plaintiffs allege NCAA, EA and CLC misappropriated student-athlete NIL for use in NCAA-branded men’s basketball and football videogames Plaintiffs allege NCAA conspired with EA and CLC to sell the use of student-athlete NIL in violation of the Sherman Act EA sought to replicate each school’s entire team as accurately as possible in its football game. EA asserts it differs from reality in that EA omits the student-athlete names from the jerseys and assigns each avatar a hometown that is different from the actual student-athlete EA claims its NCAA videogames are protected by the First Amendment in as much as it contains significant transformative elements Appeals Decision Court denied appeal, holding the transformative use test was not met because Keller’s likeness was recreated in the same setting he was known to (football field) The appeals court voted 2-1 in favor of Keller. The decision stated that the Arizona State quarterback in the 2005 EA game had the "same height, weight, skin tone, hair color, hairstyle, handedness, home state, play style (pocket passer), visor preference, facial features, and school year as Keller. Keller v. NCAA

Keller v. NCAA Procedural History
May 2009: Filed by Sam Keller, former ASU and Nebraska student-athlete February 2010: EA filed a motion to strike the complaint as a strategic lawsuit against public participation under California’s anti-SLAPP statute. The district court denied EA’s motion and EA appealed. March 2010: Keller v NCAA consolidated with O’Bannon case, among others July 2013: EA filed appeal that they had a First Amendment right to use the right-of-publicity of student-athletes September 2013: Both groups of Plaintiffs notified the Court they had reached a settlement in principle with EA and CLC May 2014: The court denied the NCAA’s motion for continuance. Case should be deconsolidated for trial, with the antitrust plaintiff’s case being referred to as O’Bannon v. NCAA and the rights-of-publicity plaintiffs’ case being referred to as Keller v. NCAA May 2014: EA Sports finalized the settlement agreement with both groups of plaintiffs July 2014: Court held preliminary approval hearing September 2014: Court approves the preliminary approval of the EA Settlement Keller v. NCAA

Keller v. NCAA Current Status:
EA Settlement: EA Sports finalized settlement agreement with plaintiffs making right-of-publicity and antitrust claims NCAA Settlement: the NCAA reached a preliminary settlement agreement with plaintiffs making right-of-publicity claims NCAA branded videogames no longer in production NCAA basketball games discontinued in 2010 NCAA football games placed on hiatus in September 2013 The settlement agreements concluded the Keller litigation, but the O’Bannon litigation moved onto trial Current SAs who receive part of settlement won’t be at risk of violating NCAA rules Currently in process of notifying class members What does this mean for our institutions? Will institutions continue to sell jerseys with numbers connected to SAs? “Texas A&M, Northwestern and Arizona to stop selling football jerseys with numbers connected to student-athletes” – Washington Post, June 2014 Game-worn jerseys – UCLA did an auction this year – scholarship funds only What are the schools doing as an alternative? Year, coaches #, 12th man Keller v. NCAA

Keller Settlement Agreements
EA and CLC NCAA $40 Million Settlement Fund Attorney Fees – $13.2 Million $2,500 - $15,000 awarded to named plaintiffs, including Sam Keller and Edward O’Bannon Remaining settlement to be distributed to class members that appeared on videogame rosters who submit a claim EA and CLC may opt out if certain amount of class members opt-out $20 Million Settlement Fund Attorney Fees - $5.8 Million $5,000 awarded to named plaintiffs, including Sam Keller Remaining settlement to be distributed to class members that appeared on videogame rosters who submit a claim NCAA can rescind agreement if 1,000 class members opt-out No individual likeness – videogame manufacturers do not separately license individual likeness, rather they use group licenses Possible Cap on combined settlements Keller Settlement Agreements

Filed: July 2009 Class: Current and former DI men’s basketball and FBS football student-athletes Issue: Did the NCAA violate the Sherman Antitrust Act and deprive him of his right of publicity by using his NIL for commercial purposes while forcing him to sign away his rights to receive compensation for such use? O’Bannon v. NCAA

O’Bannon v. NCAA Claims:
O’Bannon asserted that the NCAA’s use of his NIL violated the Sherman Antitrust laws by establishing an unreasonable restraint on the market for the athletic services of student-athletes This restraint ‘fixed the price for the use of his image at zero’ The NCAA Statement Form forces the uninformed student athlete to sign away their rights of publicity In signing the form, the student-athletes are prevented from negotiating deals for the use of their NILs O’Bannon v. NCAA

O’Bannon v. NCAA Case History: July 2009: lawsuit filed
February 2010: U.S. District Judge Claudia Wilken denied the NCAA’s motion to dismiss and ordered the case be consolidated with a lawsuit led by former Division I football player Sam Keller November 2013: Judge Wilken partially certified the O’Bannon plaintiff’s class action suit, ruling that the plaintiffs could challenge the NCAA’s compliance with the antitrust rules but could not seek damages for past television broadcasts April 2014: Judge Wilken denied summary judgment motions made by both the plaintiffs and the NCAA June 9, 2014: Case was moved to trial June 27, 2014: Trial concluded July 10, 2014: Closing arguments August 8, 2014: Verdict reached O’Bannon v. NCAA

Current Status: Decision was rendered on August 8, 2014
Decision by the Court: The rules limiting compensation ‘unreasonably restrain trade’ in violation of antitrust laws and issued an injunction against all rules that restrain SAs from using their NILs A cap was set on the money that the NCAA must pay the student athletes for the use of their NILs at $5000 (minimum) per athlete per year of competition (FBS and Basketball) This money may be held in a trust until the student-athlete’s college career comes to an end The court ruled that the NCAA may still preclude student-athletes from getting paid for commercial endorsements as it does not want foster ‘commercial exploitation’ Judge stated that the market will determine which institutions will be able to give their athletes more money Effective fall 2016 NCAA has appealed the ruling Appeal: NCAA brief due Nov. 14 Plaintiff’s response due Jan. 21 NCAA’s optional reply due Feb. 11 O’Bannon v. NCAA

O’Bannon v. NCAA What does this mean for our institutions?
Statement from University of Texas AD Will every Power 5 school be compelled to pay $5,000 per student to compete in recruiting? Can the NCAA legislate reasonable guidelines for all schools? How will schools manage Title IX compliance? Texas athletic director: With new rules, Longhorns would pay each player $10,000 O’Bannon v. NCAA

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