Alston v. Nat'l Collegiate Athletic Ass'n (In re Nat'l Collegiate Athletic Ass'n Athletic Grant-In-Aid Cap Antitrust Litig.)

958 F.3d 1239

IN RE NATIONAL COLLEGIATE ATHLETIC ASSOCIATION ATHLETIC GRANT-IN-AID CAP ANTITRUST LITIGATION,

Shawne Alston; Martin Jenkins; Johnathan Moore; Kevin Perry; William Tyndall; Alex Lauricella; Sharrif Floyd; Kyle Theret; Duane Bennett ; Chris Stone; John Bohannon; Ashley Holliday; Chris Davenport; Nicholas Kindler; Kendall Gregory-McGhee; India Chaney; Michel’le Thomas; Don Banks, "DJ"; Kendall Timmons; Dax Dellenbach; Nigel Hayes; Anfornee Stewart; Kenyata Johnson; Barry Brunetti; Dalenta Jameral Stephens, "D.J."; Justine Hartman; Afure Jemerigbe; Alec James, Plaintiffs-Appellees,

v.National Collegiate Athletic Association, The NCAA; Pacific 12 Conference; Conference USA; The Big Ten Conference, Inc.; Mid-American Conference; Southeastern Conference ; Atlantic Coast Conference; Mountain West Conference; The Big Twelve Conference, Inc.; Sun Belt Conference; Western Athletic Conference ; American Athletic Conference, Defendants-Appellants,American Broadcasting Companies, Inc.; CBS Broadcasting, Inc.; ESPN Enterprises, Inc. ; ESPN, Inc.; Fox Broadcasting Company, LLC.; Fox Sports Holdings, LLC.; Turner Broadcasting System, Inc., Intervenors.

In re National Collegiate Athletic Association Athletic Grant-in-Aid Cap Antitrust Litigation,

John Bohannon; Justine Hartman, as representatives of the classes, Plaintiffs-Appellants,

v.National Collegiate Athletic Association, The NCAA; Pacific 12 Conference; Conference USA; The Big Ten Conference, Inc.; Mid-American Conference; Southeastern Conference ; Atlantic Coast Conference; Mountain West Conference; The Big Twelve Conference, Inc.; Sun Belt Conference; Western Athletic Conference ; American Athletic Conference, Defendants-Appellees,American Broadcasting Companies, Inc.; CBS Broadcasting, Inc.; ESPN Enterprises, Inc. ; ESPN, Inc.; Fox Broadcasting Company, LLC.; Fox Sports Holdings, LLC.; Turner Broadcasting System, Inc., Intervenors.

No. 19-15566

No. 19-15662

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 9, 2020 San Francisco, California

Filed May 18, 2020

THOMAS, Chief Judge:

We consider an appeal and cross-appeal from an order enjoining the National Collegiate Athletic Association (the "NCAA") from enforcing rules that restrict the education-related benefits that its member institutions may offer students who play Football Bowl Subdivision ("FBS") football and Division I ("D1") basketball (collectively, "Student-Athletes"). See In re NCAA Athletic Grant-In-Aid Cap Antitrust Litig. (Alston ), 375 F. Supp. 3d 1058 (N.D. Cal. 2019). We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

We conclude that the district court properly applied the Rule of Reason in determining that the enjoined rules are unlawful restraints of trade under section 1 of the Sherman Act, 15 U.S.C. § 1. We further conclude that the record supports the factual findings underlying the injunction and that the district court’s antitrust analysis is faithful to our decision in O’Bannon v. NCAA (O’Bannon II ), 802 F.3d 1049 (9th Cir. 2015).

I

A. The NCAA and its Compensation Rules

Founded in 1905, the NCAA regulates intercollegiate sports. Id. at 1053. Its mission statement is to "maintain intercollegiate athletics as an integral part of the educational program and the athlete as an integral part of the student body and, by so doing, retain a clear line of demarcation between intercollegiate athletics and professional sports." NCAA regulations govern, among other things, the payments that student-athletes may receive in exchange for and incidental to their athletic participation as well as in connection with their academic pursuits.

The NCAA divides its member schools into three competitive divisions. D1 schools—some 350 of the NCAA’s approximately 1,100 member schools—sponsor the largest athletic programs and offer the most financial aid. D1 football has two subdivisions, one of which is the FBS.

In August 2014, the NCAA amended its D1 bylaws (the "Bylaws") to grant the so-called "Power Five" conferences—the FBS conferences that generate the most revenue—autonomy to adopt collectively legislation in certain areas, including limits on athletic scholarships known as "grants-in-aid."¹ In January 2015, the Power Five voted to increase the grant-in-aid limit to the cost of attendance ("COA") at each school. Since August 2015, the Bylaws have provided that a "full grant-in-aid" encompasses "tuition and fees, room and board, books and other expenses related to attendance at the institution up to the [COA]," as calculated by each institution’s financial aid office under federal law. See 20 U.S.C. §§ 1087kk, ll . The Bylaws also contain an "Amateurism Rule," which strips student-athletes of eligibility for intercollegiate competition if they "[u]se[ ] [their] athletics skill (directly or indirectly) for pay in any form in [their] sport." "[P]ay" is defined as the "receipt of funds, awards or benefits not permitted by governing legislation."

However, governing legislation permits a wide range of above-COA payments—both related and unrelated to education. Without losing their eligibility, student-athletes may receive, for instance: (i) awards valued at several hundred dollars for athletic performance ("athletic participation awards"),² which may take the form of Visa gift cards; (ii) disbursements—sometimes thousands of dollars—from the NCAA’s Student Assistance Fund ("SAF") and Academic Enhancement Fund ("AEF") for a variety of purposes, such as academic achievement or graduation awards, school supplies, tutoring, study-abroad expenses, post-eligibility financial aid, health and safety expenses, clothing, travel, "personal or family expenses," loss-of-value insurance policies, car repair, personal legal services, parking tickets, and magazine subscriptions;³ (iii) cash stipends of several thousands of dollars calculated to cover costs of attendance beyond the fixed costs of tuition, room and board, and books, but used wholly at the student-athlete’s discretion;⁴ (iv) mandatory medical care (available for at least two years after the athlete graduates) for an athletics-related injury; (v) unlimited meals and snacks; (vi) reimbursements for expenses incurred by student-athletes’ significant others and children to attend certain athletic competitions; and (vii) a $30 per diem for "unitemized incidental expenses during travel and practice" for championship events.

The NCAA has carved out many of these exceptions in the past five years. For example, before 2015, athletic participation awards did not take the form of cash-like Visa gift cards. And once the NCAA permitted grants-in-aid for the full COA, effective August 2015, many more student-athletes began to receive above-COA payments, such as cash stipends, Pell Grants, and AEF as well as SAF distributions.

This expansion of above-COA compensation has coincided with rising revenue from D1 basketball and FBS football for the NCAA and its members. In the 2015–16 academic year, these programs generated $4.3 billion in revenue (a $300 million increase from the previous year) for the Power Five. And in 2016, the NCAA negotiated an eight-year extension (until 2032) of its multimedia contract for the broadcasting rights to March Madness, the annual D1 men’s basketball tournament. Under that agreement, the NCAA will receive $1.1 billion per year (an annual increase of over $325 million).

B. The O’Bannon Litigation

The NCAA is no stranger to antitrust litigation arising from its compensation rules. In 2009, Ed O’Bannon, a former UCLA basketball player, sued the NCAA after learning that a college basketball video game featured an avatar that resembled him and sported his jersey number. O’Bannon II , 802 F.3d at 1055. "The gravamen of [his] complaint" was that the NCAA illegally restrained trade, in violation of section 1, by preventing FBS football and D1 men’s basketball players from receiving compensation for the use of their names, images, and likenesses ("NILs").⁵ Id .

After a bench trial, the district court agreed under the Rule of Reason and entered relief for the plaintiffs. See O’Bannon v. NCAA (O’Bannon I ), 7 F. Supp. 3d 955, 962–63 (N.D. Cal. 2014), aff’d in part, rev’d in part , O’Bannon II , 802 F.3d at 1079. The district court acknowledged the NCAA’s evidence that college athletics’ "amateur tradition" helps maintain their popularity as a product distinct from professional sports. Id. at 999. It nevertheless concluded that this procompetitive benefit did not justify the NCAA’s "sweeping prohibition" on NIL compensation. Id. Based on evidence that "school loyalty and geography" primarily drive consumer demand and a lack of proof that small payments to student-athletes would diminish college sports’ popularity, the district court determined that the NCAA could justify, at most, restrictions on large payments. Id. at 1000–01.

After identifying two less restrictive alternatives ("LRAs") to the challenged rules, id. at 1004–07, the district court implemented those LRAs through an injunction that required the NCAA to permit its schools to (i) "use the licensing revenue generated from the use of their student-athletes’ [NILs] to fund stipends covering the [COA]"; and (ii) to make deferred, post-eligibility cash payments in NIL revenue, not to exceed $5,000, to student-athletes. Id. at 1007–08 ; see also id. at 1008 (finding no evidence that "such a modest payment" would "undermine[ ]" NCAA’s "legitimate procompetitive goals"). The NCAA appealed.

A majority of a Ninth Circuit panel concluded that the district court’s decision, the first of its kind, was "largely correct." O’Bannon II , 802 F.3d at 1053 ; id. at 1079 (Thomas, C.J., concurring in part and dissenting in part). The panel unanimously affirmed the injunction insofar as it required the NCAA to permit athletic scholarships for the full COA, but a panel majority reversed and vacated the injunction’s requirement that the NCAA allow deferred NIL payments. Id . at 1053.

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