NCAA to Pay $40 Million After Antitrust Appeal Loss

The National Collegiate Athletic Association must fork over $40.8 million in attorneys’ fees for its work in an antitrust case involving former football and basketball athletes, a federal appeals court ruled Jun. 29.

The NCAA will also $1.5 million in administrative costs.

The fee request was reasonable, the U.S. Court of Appeals for the Ninth Circuit said, given the 2014 settlement of a class suit by former student athletes who challenged the NCAA’s practice of using their images for commercial purposes.

“The district court did not abuse its discretion in determining that the plaintiffs’ success in achieving injunctive relief was an excellent result and therefore that their fee request was a reasonable basis for the award of those fees,” the opinion said.

The appeals court decision comes in the midst of a growing outcry against the NCAA practice of amateurism, where student athletes remain unpaid despite generating substantial revenue for schools. Critics contend that student athletes, who help generate revenue for universities and the NCAA, should be compensated beyond scholarship funds. Duke University, for example, brought in $34.3 million in revenue for the 2017-18 season, and netted a profit of $14.9 million after expenses, according to an analysis by John Vrooman, sports economics professor at Vanderbilt University.

“We are disappointed with the court’s ruling, given its prior opinion endorsing the NCAA’s amateur college sports model,” Donald Remy, the NCAA’s chief legal officer, told Bloomberg Law July 2. “Nevertheless, we recognize the lower court’s broad discretion related to fees and are prepared to comply with the court’s decision.”

Plantiffs in the O’Bannon v. NCAA case argued that after graduation, former students should be entitled to any proceeds generated from the use of their images or likeness. The NCAA practice of not compensating athletes is a restraint of trade and violation of antitrust laws, they said.

U.S. District Court for the Northern District of California Judge Claudia Wilken initially ruled in 2015 that the NCAA’s limits on player compensation by capping scholarship amounts was a restraint of trade and violation of antitrust law.

The Ninth Circuit reversed Judge Wilken’s decision to require the NCAA to pay deferred compensation to student athletes. The appeals court stated that compensation beyond scholarship funds would contravene the NCAA practice of not paying student athletes. But the athletes won an injunction that stopped schools from capping their scholarships at a certain amount.

Attorneys fees are mandatory in antitrust cases that achieve injunctive relief. The appeals court decision affirmed that the district court’s attorney’s fee amount was reasonable.

The lower court “simply reached a conclusion the NCAA does not like: that the award of injunctive relief against the NCAA is an antitrust action brought by private parties is an ‘excellent result,’” the appeals court said.

In December, the NCAA will face another antitrust lawsuit in the U.S. District Court for the Northern District of California. The plaintiffs in that case, Jenkins v. NCAA, argue that the caps on student scholarships for playing college sports is an unlawful restraint of trade under antitrust law.

The case is O’Bannon v. Nat’l Collegiate Athletic Ass’n, 9th Cir., No. 16-15803, 6/29/18

To contact the reporter on this story: Victoria Graham in Washington at vgraham@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com