PLAYING FOR PEANUTS: DETERMINING FAIR COMPENSATION FOR ...

PLAYING FOR PEANUTS: DETERMINING FAIR COMPENSATION FOR NCAA STUDENT-ATHLETES

ABSTRACT

After student-athletes' athletic careers end, they walk off the playing field into the rest of their lives. For their blood, sweat, and tears, the National Collegiate Athletic Association (NCAA) provides them with year-to-year scholarships and a skill set geared more toward athletics than academics. The NCAA has constructed a commercial enterprise to suppress student-athlete compensation and increase its total revenue. To vindicate their rights, student-athletes should bring right of publicity and antitrust claims. If successful, courts will impose less restrictive alternatives to the NCAA's current compensation restrictions. This Note discusses two alternatives: multiyear scholarships and percentage-based trust funds. These alternatives reestablish the NCAA's commitment to education and allow student-athletes to control their right of publicity. Student-athletes are no longer being fairly compensated, and a change needs to occur to prevent the NCAA from continuing to exploit them.

TABLE OF CONTENTS I. Introduction ...........................................................................................256 II. How Far We Have Come: A Look at the NCAA Landscape and the

Evolution of Amateurism ....................................................................257 A. The NCAA's Creation of Terms..................................................258 B. Entitled to Something ...................................................................260 III. The Right of Publicity: The NCAA's Appropriation of Student-Athletes' NILs ........................................................................261 A. The NCAA's Use of Student-Athletes' NILs.............................262

1. First Amendment Protection..................................................262 2. The Rogers Test........................................................................263 3. The Transformative Use Test .................................................264 B. The Commercial Value of Student-Athletes' NILs ...................265 C. Appropriated for Commercial Gain............................................266 D. Lack of Consent .............................................................................267 1. Ambiguous Contract ...............................................................267 2. Unconscionable Contract........................................................268 E. Commercial Injury.........................................................................271 IV. NCAA Compensation Restrictions: Restraining Trade Under the Sherman Act....................................................................................273 A. Agreement to Restrain Trade ......................................................274

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B. Interstate Commerce.....................................................................275 C. Unreasonable Restraints of Trade...............................................275

1. The Per Se Rule .......................................................................276 2. The Rule of Reason .................................................................276

a. Adverse effects .................................................................277 b. Procompetitive justification ............................................278 c. Less restrictive means......................................................282 V. Conclusion: Dividing Up The Revenue..............................................283 A. Multiyear Scholarships ..................................................................283 B. Percentage-Based Trust Funds.....................................................287 C. Final Takeaways.............................................................................290

I. INTRODUCTION

As the National Collegiate Athletic Association (NCAA) has transformed into an organization that runs a billion dollar industry, a debate has begun about whether student-athletes should be entitled to greater compensation than a one-year renewable athletic scholarship.1 Ed O'Bannon has elevated this argument for giving student athletes greater compensation from a mere possibility to a potential reality.2 O'Bannon played college basketball at the University of California Los Angeles (UCLA).3 During the 1995 season, his senior year, he was the most valuable player of the NCAA men's basketball tournament and led UCLA to a NCAA championship.4 Thirteen years later, O'Bannon discovered he was featured in a college basketball video game manufactured by EA Sports.5

1. See Jon Solomon, O'Bannon vs. NCAA: A Cheat Sheet for NCAA's Appeal of Paying Players, (Mar. 13, 2015), football/writer/jon-solomon/25106422/obannon-vs-ncaa-a-cheat-sheet-for-ncaasappeal-of-paying-players [hereinafter Solomon, A Cheat Sheet].

2. See Steve Berkowitz, O'Bannon Plaintiffs Ask Supreme Court to Take Case, USA TODAY (Mar. 15, 2016), /2016/03/15/obannon-plaintiffs-ask-supreme-court-antitrust-case/81803668/ (discussing O'Bannon's lawsuit on antitrust laws and student-athletes' compensation).

3. Nabeel Gadit, Note, An End to the NCAA's Exploitation of Former StudentAthletes: How O'Bannon v. NCAA Highlights the Need for an Inalienable Reversionary Interest in the Right of Publicity for Former Student-Athletes, 30 CARDOZO ARTS & ENT. L.J. 347, 351 (2012).

4. Id. 5. Id. at 352; Lee Romney & David Wharton, Ex-UCLA Star Ed O'Bannon Takes Stand in Antitrust Suit Against NCAA, L.A. TIMES (June 9, 2014),

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The avatar in the game replicated O'Bannon's physical characteristics, wore his collegiate jersey number, and mimicked his left-handed shot.6 O'Bannon could not believe this was legal, let alone rationalize why he was not being paid for his appearance in the video game.7 In 2009, O'Bannon brought suit against the NCAA and Collegiate Licensing Company.8 He alleged the NCAA's amateurism rules unlawfully prevented him from being compensated--during and after his collegiate career--for the sale of his name, image, and likeness (NIL).9 After evaluating O'Bannon's case, O'Bannon v. NCAA, the United States Court of Appeals for the Ninth Circuit held that the NCAA's amateurism rules unreasonably restrained the opportunities offered by Division I schools in the college education market.10 This ruling could change the landscape of college athletics and provide an opportunity for student-athletes to receive greater compensation.11

This Note explores the evolution of college athletics and amateurism from a legal perspective.12 It focuses on the student-athletes' right of publicity13 and the anticompetitive effects of the current NCAA system.14 Lastly, it discusses the Ninth Circuit's holding in O'Bannon and offers better alternative forms of compensation for student-athletes.15

II. HOW FAR WE HAVE COME: A LOOK AT THE NCAA LANDSCAPE AND THE EVOLUTION OF AMATEURISM

College athletics were first implemented into academic institutions by the elite schools of Great Britain.16 This model of education made its way

. 6. Gadit, supra note 3, at 352; Steve Fainaru & Tom Farrey, Game Changer, ESPN

NEWS (July 27, 2014), .

7. Matthew J. Gustin, The O'Bannon Court Got It Wrong: The Case Against Paying NCAA Student-Athletes, 42 W. ST. L. REV. 137, 152 (2015).

8. See O'Bannon v. NCAA, 802 F.3d 1049, 1055 (9th Cir. 2015). 9. Id. 10. See id. at 1070?71. 11. See id. at 1053 (noting that the district court opinion is the first decision by a federal court to hold that the NCAA violated antitrust laws). 12. See infra Part II. 13. See infra Part III. 14. See infra Part IV. 15. See infra Part V. 16. Laura Freedman, Note, Pay or Play? The Jeremy Bloom Decision and NCAA Amateurism Rules, 13 FORDHAM INTELL. PROP. MEDIA & ENT. L.J. 673, 676 (2003).

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across the Atlantic and took root in U.S. universities around 1869.17 Soon after, universities realized their reputations were tied to the success of their athletic programs18 and that winning programs increased the university's visibility and prestige.19 At the turn of the twentieth century, the public was growing concerned about the numerous injuries occurring in college sports.20 For this reason, 62 universities decided to form a governing body of college athletics.21 It was originally named the Intercollegiate Athletic Association before changing its name to the NCAA.22 The universities received membership to the NCAA and determined the NCAA's primary purposes would be to: (1) develop standardized rules to improve student-athlete safety23 and (2) ensure only amateurs participate in college athletics.24

A. The NCAA's Creation of Terms

The NCAA created the term student-athlete to further its concept of amateurism.25 Former NCAA executive director Walter Byers said he constructed the term student-athlete to be deliberately ambiguous; his goal was for the NCAA not to be required to provide students workers' compensation benefits, as they were not employees, or to pay them directly as athletes because they were not professionals.26 After the careful creation of the term student-athlete, the NCAA fashioned its own definition of amateurism.27 The historic definition of "amateurism" is "[a]ny gentleman who has never competed in an open competition nor for public payment nor

17. O'Bannon v. NCAA, 802 F.3d 1049, 1053 (9th Cir. 2015). 18. Rodney K. Smith, A Brief History of the National Collegiate Athletic Association's Role in Regulating Intercollegiate Athletics, 11 MARQ. SPORTS L. REV. 9, 16 (2000). 19. Robert John Givens, Comment, "Capitamateuralism": An Examination of the Economic Exploitation of Student-Athletes by the National Collegiate Athletic Association, 82 UMKC L. REV. 205, 207?08 (2013). 20. Smith, supra note 18, at 12. 21. O'Bannon, 802 F.3d at 1053. 22. Id. 23. Ryan Vanderford, Note, Pay-for-Play: An Age-Old Struggle for Appropriate Reform in a Changing Landscape Between Employer and Employee, 24 S. CAL. INTERDISC. L.J. 805, 807 (2015). 24. Id. 25. Id. at 808; Taylor Branch, The Shame of College Sports, ATLANTIC (Oct. 2011), . 26. Vanderford, supra note 23, at 808. 27. See id. at 809.

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admission money . . . ."28 Evidently, when the NCAA decided to allow student-athletes to receive athletic scholarships based on their athletic abilities, it contradicted the historic meaning of amateurism.29 The NCAA manipulated "amateurism" to mean a student-athlete who does not receive compensation in excess of an athletic scholarship.30 If a student-athlete violates the NCAA's definition of amateurism, he or she will be deemed ineligible to participate in NCAA collegiate athletic events.31 Thus, the formation of amateurism was designed to protect the NCAA's profits generated from its student-athletes.32

The majority of the scholarships student-athletes receive are one-year renewable scholarships.33 If student-athletes are injured, unsuccessful, or do not fit the coach's scheme, they can lose their anticipated free education, regardless of how they perform in the classroom.34 In 2012, the NCAA began allowing universities to offer multiyear scholarships to student-athletes.35 However, 62.12 percent of the 330 NCAA schools were opposed to this change, and only five universities provided multiyear scholarships to 10 percent or more of their student-athletes during the 2013?2014 season.36 Coaches prefer one-year renewable scholarships because it allows them the flexibility to cancel or reduce student-athletes' scholarships at their discretion.37 In addition to being able to be revoked at will, athletic

28. John Anderson, The Amateur Status, in 15 THE GOLFING ANNUAL 10, 13 (David Scott Duncan ed., 1902).

29. See Andrew Zimbalist, The Cost of Paying Athletes Would Be Far Too High, U.S. NEWS (Apr. 1, 2013), .

30. O'Bannon v. NCAA, 802 F.3d 1049, 1054 (9th Cir. 2015); see Amateurism, NCAA, (last visited Sept. 10, 2016).

31. O'Bannon, 802 F.3d at 1054.

32. See Branch, supra note 25. 33. Jon Solomon, Schools Can Give Out 4-Year Athletic Scholarships, but Many Don't, (Sept. 16, 2014), /writer/jon-solomon/24711067/schools-can-give-out-4-year-scholarships-to-athletes-butmany-dont [hereinafter Solomon, 4-Year Athletic Scholarships]. 34. See Brian Frederick, Fans Must Understand That College Sports Is Big Business, U.S. NEWS (Apr. 1, 2013), ; Solomon, 4-Year Athletic Scholarships, supra note 33. During the 2008?2009 season, 22 percent of student-athlete basketball players' scholarships were not renewed. Branch, supra note 25. 35. Solomon, 4-Year Athletic Scholarships, supra note 33. 36. Id.

37. Erin Cronk, Note, Unlawful Encroachment: Why the NCAA Must Compensate

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scholarships are not required to cover the cost of attendance.38 If a studentathlete receives a scholarship for the cost of tuition, rather than a cost-ofattendance scholarship, the scholarship amount does not account for additional college expenses like school supplies, transportation, and housing.39 Therefore, even if student-athletes' scholarships are renewed, they can still be left several thousand dollars short of the cost of attendance.40

B. Entitled to Something

In 1984--in NCAA v. Board of Regents of the University of Oklahoma--the U.S. Supreme Court upheld the NCAA's compensation restraints to preserve the NCAA's definition of amateurism and to protect student-athletes from commercial exploitation.41 However, the industry of college athletics has substantially changed in the past 30 years.42 The NCAA has increased Division I membership to include approximately 350 universities43 and has a yearly revenue just shy of $1 billion.44 Universities generate $8 billion per year from their athletic programs.45 Forty-nine million fans attend NCAA athletic events every year, and three-quarters of a billion more watch on television from the comforts of their own homes.46 These same fans show their support by purchasing collegiate merchandise, which has resulted in the college licensing market growing into a $4.6 billion industry.47 Today it seems everyone involved in college sports is able to profit

Student-Athletes for the Use of Their Names, Images, and Likenesses, 34 U. LA VERNE L. REV. 135, 140?41 (2013).

38. See Cost of Attendance Q&A, NCAA, article/2015-09-03/cost-attendance-qa (last updated Sept. 3, 2015); Jon Solomon, Cost of Attendance Results: The Chase to Pay College Players, (Aug. 20, 2015), [hereinafter Solomon, Cost of Attendance].

39. See Cost of Attendance Q&A, supra note 38; Solomon, Cost of Attendance, supra note 38.

40. Gustin, supra note 7, at 147. 41. See NCAA v. Bd. of Regents of the Univ. of Okla., 468 U.S. 85, 101, 120 (1984); see also Gadit, supra note 3. 42. Solomon, A Cheat Sheet, supra note 1. Compare Bd. of Regents, 468 U.S. at 120, with O'Bannon v. NCAA, 802 F.3d 1049, 1053 (9th Cir. 2015). 43. O'Bannon, 802 F.3d at 1053. 44. Solomon, A Cheat Sheet, supra note 1. 45. Gustin, supra note 7, at 144. 46. Cronk, supra note 37, at 148 (discussing data taken from 2010). 47. See John A. Maghamez, Comment, An All-Encompassing Primer on StudentAthlete Name, Image, and Likeness Rights and How O'Bannon v. NCAA and Keller v.

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from college athletics except the student-athlete.48

"[T]he NCAA [has] erected a `nationwide money-laundering scheme' that enriches conferences, schools, coaches and TV networks on the backs of unpaid athletes."49 When the NCAA enacted its rules, the "economic disparity between the value of a [year-to-year] scholarship and the amount of money generated by student-athletes did not exist."50 Although the NCAA argues its amateurism principles have not been hurt, college sports' growth into a multibillion dollar industry indicates otherwise.51 The NCAA was designed to be an educational nonprofit organization, not a commercially driven enterprise.52 When Board of Regents was decided, amateurism was a reality; however, today it is nothing more than an ideal.53 The NCAA should no longer be able to continue to oppress student-athlete compensation for its own benefit; therefore, a change to the current system is necessary.54

III. THE RIGHT OF PUBLICITY: THE NCAA'S APPROPRIATION OF STUDENT-ATHLETES' NILS

Student-athletes can attack the NCAA's compensation restrictions through right of publicity claims.55 Haelan Laboratories, Inc. v. Topps Chewing Gum, Inc. was the first case to distinguish the right of publicity from the right of privacy.56 A right of publicity is a property interest in one's name, image, and likeness (NIL),57 acquired through labor and effort, which society

NCAA Forever Changed College Athletics, 9 LIBERTY U. L. REV. 313, 316 (2015) (citing About CLC, COLLEGIATE LICENSING CO., (last visited Dec. 20, 2014)).

48. Id. at 321. 49. Fainaru & Farrey, supra note 6. 50. Givens, supra note 19, at 224 (quoting Michael P. Acain, Comment, Revenue Sharing: A Simple Cure for the Exploitation of College Athletes, 18 LOY. L.A. ENT. L.J. 307, 314 (1998)). 51. See Gadit, supra note 3, at 350?51. 52. Gustin, supra note 7, at 140. 53. See O'Bannon v. NCAA, 802 F.3d 1049, 1063?64 (9th Cir. 2015). 54. See Marc Edelman, A Short Treatise on Amateurism and Antitrust Law: Why the NCAA's No-Pay Rules Violate Section 1 of the Sherman Act, 64 CASE W. RES. L. REV. 61, 63 (2013). 55. Cronk, supra note 37, at 152. 56. See Haelan Labs., Inc. v. Topps Chewing Gum, Inc., 202 F.2d 866, 868 (2d Cir. 1953). 57. J. Alexander Johnson, Identity Crisis, 77 TEX. B.J. 30, 31 (2014).

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deems to have social utility.58 Thus, third-parties cannot create products containing the individual's NIL without permission.59 A right of publicity claim is governed by the substantive law of the plaintiff's domicile.60 It is a statutory right in 19 states and a common law right in 28 others.61 To bring a successful right of publicity claim, the plaintiff must prove: (1) the defendant used the plaintiff's NIL; (2) the plaintiff's NIL had commercial value; (3) the defendant appropriated that commercial value for the purpose of trade; (4) it was done without the plaintiff's consent; and (5) as a result, the plaintiff sustained a commercial injury.62

A. The NCAA's Use of Student-Athletes' NILs

1. First Amendment Protection

The NCAA licenses student-athletes' NILs to third parties for the sale of merchandise.63 However, the NCAA will argue its use is protected by the First Amendment.64 The First Amendment encourages freedom of expression and creativity without government interference.65 Thus, works of artistic expression and newsworthy publications that use one's NIL regularly receive First Amendment protection, even if done for profit.66 For instance, in ETW Corp. v. Jireh Publishing, Inc., a collage of pictures depicting Tiger Woods's achievements was afforded First Amendment protection because it was a form of artistic expression.67 Similarly, in Montana v. San Jose Mercury

58. See In re NCAA Student-Athlete Name & Likeness Licensing Litig., 724 F.3d 1268, 1280 (9th Cir. 2013); Hart v. Elec. Arts, Inc., 717 F.3d 141, 151 (3d Cir. 2013).

59. See Rogers v. Grimaldi, 875 F.2d 994, 1003?04 (2d Cir. 1989) (citing Bi-Rite Enters., Inc. v. Button Master, 555 F. Supp. 1188, 1198?99 (S.D.N.Y. 1983)).

60. Rogers, 875 F.2d at 1002 (citing Se. Bank, N.A. v. Lawrence, 489 N.E.2d 744, 745 (N.Y. 1985) (per curiam)).

61. Cronk, supra note 37, at 152 (quoting Kendall K. Johnson, Article, Enforceable Fair and Square: The Right of Publicity, Unconscionability, and NCAA Student-Athlete Contracts, 19 SPORTS LAW. J. 1, 9 (2012)); see Johnson, supra note 57, at 32.

62. RESTATEMENT (THIRD) OF UNFAIR COMPETITION ?? 46?49 (AM. LAW INST. 1995); Cronk, supra note 37, at 151.

63. Gadit, supra note 3, at 347?48. 64. See In re NCAA Student-Athlete Name & Likeness Licensing Litig., 724 F.3d 1268, 1271 (9th Cir. 2013). 65. See U.S. CONST. amend. I. 66. Comedy III Prods., Inc. v. Gary Saderup, Inc., 21 P.3d 797, 802 (Cal. 2001) (citing Guglielmi v. Spelling-Goldberg Prods., 603 P.2d 454, 459 (Cal. 1979) (in bank) (Bird, C.J., concurring)); see Johnson, supra note 57, at 32. 67. See ETW Corp. v. Jireh Publ'g, Inc., 332 F.3d 915, 938 (6th Cir. 2003).

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