Judge ends NCAA cap on athlete compensation ‘related to education,’ leaves other limits intact

A federal judge ruled Friday night that the NCAA cannot “limit compensation or benefits related to education” for athletes playing Division I men’s or women’s basketball or Bowl Subdivision football.

Among the items U.S. District Judge Claudia Wilken said these athletes may receive are scholarships to complete undergraduate or graduate degrees at any school.

At the same time, however, her ruling prevents athletes from receiving unlimited benefits, as the plaintiffs had hoped.

The NCAA "may continue … to limit compensation and benefits that are unrelated to education," Wilken ruled. The association also can limit "academic or graduation awards of incentives, provided in cash or cash-equivalent."

She also said that the association may adopt a definition of compensation and benefits that are “related to education.”

The outcome represents a partial victory for plaintiffs who were seeking to have the association’s limits on athletes compensation in favor of allowing conferences to determine what athletes can receive.

However, it also represents a partial victory for the NCAA, which had argued that athletes' compensation should remain basically limited to scholarships that cover the full cost of attending school.

"It's not everything we wanted, but it's an important first step," one of the plaintiffs' lead attorneys, Steve Berman, told USA TODAY on Friday night. "Schools will now have to compete — and we think they will compete — in offering student-athletes educational benefits, including grad school and other things like that. I think that's going to be great for the student-athletes."

Wilken is the same judge who handled the Ed O'Bannon lawsuit and found that the NCAA's limits on what major-college football and men's basketball players can receive for playing sports "unreasonably restrain trade" in violation of antitrust laws.

That finding was upheld by a three-judge panel of the 9th Circuit, although the panel — by a 2-1 margin — threw out Wilken's plan that would have allowed schools to provide athletes deferred compensation of as much as $5,000 per year. In overturning this remedy, the appellate panel said that while antitrust law requires that schools be allowed to provide athletes with scholarships that cover all of their costs of attending college, “it does not require more,” such as what it termed “cash sums untethered to educational expenses.” Both sides appealed to the Supreme Court, which declined to hear the case.

So the 9th Circuit’s language in the O’Bannon case became the fulcrum point for the Alston case.

In a key pre-trial ruling, Wilken wrote that while the NCAA’s rules generally limit athletes to benefits equal to the their cost of attendance, the rules also “fix the prices of numerous and varied exceptions — additional benefits that have a financial value above the cost of attendance. Some of these rules regulate payment for additional benefits that do appear to be tethered to education … ” 

For example she noted NCAA restrictions on schools' ability to reimburse athletes for computers, science equipment, musical instruments and other items "not currently included in the cost of attendance calculation but nonetheless related to the pursuit of various academic studies."

Under antitrust law, these types of restraints can exist if a defendant can show that the limits have certain benefits. But in that pre-trial ruling, Wilken said the NCAA produced “no evidence” to support six justifications it had offered, and she rejected the evidence they offered for a seventh.

That meant she basically left the association with two justifications it could attempt to back up at trial: the notion that fans are drawn to college football and basketball “in part due to their perception of amateurism” and the contention that “paying student-athletes would detract from the integration of academics and athletics in the campus community.”

However, even justified restraints can be overcome if plaintiffs can show there are less restrictive alternatives that would achieve the same outcome for the defendants without significantly increased cost.

The case began in March 2014 on behalf of former West Virginia football player Shawne Alston, and initially was being led by Seattle-based attorney Steve Berman. The case later was consolidated with other suits involving athletes in other sports. In the end, it covered Bowl Subdivision football players, Division I men’s basketball players and Division I women’s basketball. Although the NCAA and 11 conferences were named as defendants, other Division I schools and conferences were alleged to have been co-conspirators.

In addition to the injunction, the Alston case sought damages based on the difference between the value of a scholarship under the NCAA’s former rules and the value of a current, cost-of-attendance-based scholarship. The damages claims were settled in November 2017, with the NCAA agreeing to pay $209 million into fund that eventually will be distributed to more than 50,000 current and former college athletes. However, the fund is being tied up by an objection to the amount of money that the plaintiffs’ attorneys were awarded for their fees and costs. The objector’s appeal is scheduled to be heard by a panel of the 9th U.S. Circuit Court of Appeals in April.

A case similar to Alston’s was filed in New Jersey about two weeks after Alston’s. That case, which sought an injunction — but not damages — was being directed primarily by New York-based attorney Jeffrey Kessler. It was being pursued on behalf of plaintiffs led by former Clemson football player Martin Jenkins and two Wisconsin athletes: basketball player Nigel Hayes and football player Alec James. It covered football and men's basketball players in the power conferences.

The two cases were joined together for pre-trial purposes, and Berman and Kessler eventually wound up as co-counsel for the trial.

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