By Vince Nicastro*

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On September 30th, the U.S. Court of Appeals for the Ninth Circuit ruled in the ongoing O’Bannon v. NCAA case.  The outcome has both sides claiming at least a modicum of victory.  O’Bannon’s camp is trumpeting the fact that the court reinforced the basic premise of their case (and related cases – we will get to that later) – that the NCAA is clearly subject to federal antitrust laws and the association’s amateurism rules are in violation.  The NCAA is claiming a win, albeit a short term victory in my opinion, to the extent that the court essentially struck down the $5,000 annual deferred payment for the use of student-athletes’ “name, image, and likeness” (NIL payments) that was granted by Judge Claudia Wilken in the lower court in the summer of 2014.  The ruling wasn’t entirely surprising, as the specific amount of $5,000 seemed to be quite arbitrary from the outset.  The appellate court also articulated some degree of appreciation for the principle of amateurism in college athletics, thus supporting the NCAA position on that core issue.

On balance, I would characterize the ruling as a mixed bag. The short term effect of this most recent ruling, coupled with the NLRB decision earlier this summer which effectively thwarted the Northwestern unionization effort, has temporarily buoyed the position of the NCAA and its members.  The cumulative impact of these rulings have, in part, provided some temporary relief for Division I members, who have been seemingly under constant siege on these issues for the past couple of years.  However, the O’Bannon appellate ruling does go a long way toward fortifying the overall antitrust argument, which is clearly the more impactful, strategic issue moving forward.

From an athletic director’s perspective, there was likely a collective sigh of relief on many campuses across the country on the removal of the $5,000 NIL payment.  Although most athletic departments have been anticipating these payments to start as early as the 2015-16 academic year, there were still a significant number of complications in the actual implementation.  First and foremost, despite the perception that athletic departments all over the country are flush with cash, the budgetary impact would have been significant. For FBS programs with 85 football and 13 men’s basketball scholarships, the tab would run approximately $500,000 annually.  This is real money even for the programs at the top of the food chain.

Athletic department leaders have also been discussing how they would manage the technical issues related to the deferred payments – types of accounts, potential tax implications, compliance and reporting requirements.  These are issues that are likely unfamiliar territory for athletic department financial administrators.

Another issue that has been troubling from an implementation perspective, was the working assumption that every student-athlete eligible for the NIL payment would have presumably received the same annual amount.  Certainly, if the basis for the payment is the actual use of one’s name, image, and likeness, wouldn’t the star player’s services be more valuable than the reserve’s at the end of the bench?  A great philosophical argument – but, another bureaucratic crisis averted.

It was also a bit puzzling that Judge Wilken limited her decision to FBS football and Division I men’s basketball student-athletes.  It’s entirely possible to make a case that in many situations in FBS football and DI men’s basketball that there is little or no value in a student-athlete’s NIL (think second team offensive guard at a Group of 5 program).  Remember, not every FBS program resides in Tuscaloosa, Columbus, or South Bend.  One could also make a reasonable argument that in certain situations, student-athletes in sports outside of football and basketball have substantial commercial appeal.  As a result, those students could make a claim that they, too, should be eligible for the NIL payment.  UConn women’s basketball and some SEC baseball programs come to mind.

Another complication that would have to be resolved is how institutions would handle situations where student-athletes depart from their school of initial enrollment.  The fact is, a fairly high percentage of student-athletes leave their initial institution prior to graduation (for all sorts of reasons – transfer, academics, conduct, professional opportunities).  Presumably, students who departs early in good standing would make a strong a case that they are entitled to the NIL payment they earned up to the time of their departure (with interest, of course).  Conversely, some schools would consider withholding payments to those students who leave due to academic and/or conduct issues. These days, even seemingly simple transfer requests have become complicated.  Throw ten-grand into the equation and see how that increases the intensity of those situations.

Again, there simply is a lot of devil in these details.  The most recent ruling continues to leave ADs with many more questions than answers about NIL, the growing movement toward student-athlete compensation, and how to manage it from a practical standpoint.

Aside from the “boots on the ground” implementation concerns, the bigger picture, in my opinion, remains how the various on-going litigations impact the case everyone should be watching closely – Jenkins v. NCAA.  The formidable Jeffrey Kessler is leading the charge on the antitrust front.  Technicalities and bureaucracy aside, the recent O’Bannon appellate ruling seems to solidify the antitrust argument in a substantive way.  And, as important and impactful as the O’Bannon case may be, the long-term focus for leaders in college athletics should continue to be on Kessler’s case and the potential for that to fundamentally change the intercollegiate model.


*Vince Nicastro is the former Athletic Director for Villanova University and currently serves as Associate Director for the Jeffrey S. Moorad Center for the Study of Sports Law


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