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Court Strikes Down Possible Cash Payments to College Athletes

NCAA rules prohibiting compensation to college athletes are “more restrictive than necessary” and subject to antitrust laws, but the athletic conference can still limit payments to the full cost of attendance, a three-judge appellate panel ruled on Wednesday.

The decision from the 9th Circuit Court of Appeals comes as amateur athletes have been challenging NCAA rules, pointing to the bonanza of broadcast and cable contracts and licensing of their image and likeness for such things as videogames. Although the appellate decision was a mixed ruling, it found fault with the idea of providing athletes with cash payments for the use of their name, image and likeness.

The plaintiff in the case, Ed O’Bannon, a former basketball player for UCLA, filed suit after discovering his avatar was being used in an Electronic Arts videogame, but NCAA rules prevented him from being compensated. His claim was consolidated with that of another athlete, Samuel Keller, a former quarterback for Arizona State University and the University of Nebraska. Last year, a district court judge ruled that NCAA’s prohibition on compensation to athletes for the use of their name, image and likeness violated antitrust rules. A remedy was to pay NCAA members scholarships up to the full cost of attendance, and cash compensation of up to $5,000 per year.

“Applying the Rule of Reason, we conclude that the district court correctly identified one proper alternative to the current NCAA compensation rules — i.e. allowing NCAA members to give scholarships up to the full cost of attendance — but that the district court’s other remedy, allowing students to be paid cash compensation of up to $5,000 per year, was erroneous,” the appellate panel ruled.

The judges ruled that “a compensation cap set at student athletes’ full cost of attendance is a substantially less restrictive alternative means of accomplishing the NCAA’s legitimate pro-competitive purposes.”

Yet they saw a big difference between providing compensation for attendance costs and giving them cash payments for the use of their image and likeness.

“The difference between offering student-athletes education related compensation and offering them cash sums untethered to educational expenses is not minor; it is a quantum leap,” the judges wrote. “Once that line is crossed, we see no basis for returning to a rule of amateurism and no defined stopping point; we have little doubt that plaintiffs will continue to challenge the arbitrary limit imposed by the district court until they have captured the full value of their” name, image and likeness. “At that point, the NCAA will have surrendered its amateurism principles entirely and transitioned from its ‘particular brand of football’ to minor league status.”

Judge Sidney Thomas concurred with the opinion but wrote that there was “sufficient evidence in the record” to also support the award of a $5,000 cash payment for the use of name, image and likeness.

Earlier this year, a federal judge in Tennessee threw out a class action lawsuit filed by 10 former athletes against ESPN and other broadcasters, ruling that telecasts were exempt from right of publicity claims.

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