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2018 Mid-Year Legal Issues In College Athletics

By Glenn Wong - Arizona State University; Cameron Miller - Georgetown University Law Center (Student)

2018 was expected to be a momentous year for legal issues in college sports. Thus far, it’s lived up to the billing: Explosive details of the FBI and U.S. Attorney’s investigation and prosecution of recruiting practices in men’s college basketball have trickled out; the Supreme Court cleared a pathway for legalized sports gambling; and we learned much more about the contours of the upcoming antitrust trial over the NCAA’s amateurism rules. We discuss these topics and others in this mid-year legal update.

 

Jenkins Trial

 

After a series of key rulings this spring, the long-running Jenkins antitrust case is set for trial beginning on September 4. Attorneys for Jenkins (a former Clemson football player) claim the NCAA’s limits on athlete compensation violate antitrust law and seek a system where conferences determine athletes’ compensation. Alternatively, the players have asked that all rules governing benefits that are educationally-related (e.g., restrictions on school’s ability to reimburse the costs of athletes’ computers and other academic tools) be invalidated. Importantly, there is 9th Circuit precedent from the O’Bannon case that the antitrust laws do not require the NCAA to compensate athletes with “cash sums untethered to educational expenses.”

 

In pre-trial rulings, Judge Wilken found the NCAA’s compensation rules anti-competitive. So, the NCAA must prove at trial either that amateurism drives consumer appeal of college sports or that “paying student-athletes would detract from the integration of academics and athletics in the campus community.” In essence, the NCAA must establish that it is amateurism driving consumer interest in college athletics, or that athletes being compensated without restriction would harm the cohesion of a school’s educational and athletic functions. But, even if the NCAA were to prove these, the players could still prevail if they established that the NCAA’s goals of preserving the current ideal of amateurism and the integration of academics and athletics could be met through less restrictive means. Here, the players suggest giving individual conferences the authority to set compensation limits or invalidating all bylaws restricting “payments or non-cash benefits that are tethered to educational expenses, or any payments or benefits that are incidental to athletic participation.”

 

There is a little question Jenkins is the NCAA’s most important antitrust challenge to date—and may have the biggest impact on the collegiate model. Athletic directors should be prepared for a new paradigm in which schools and conferences have more (or complete) authority over how and if their athletes are compensated. For instance, it should be considered whether to allow athletes to profit from the private use of their name, image and likeness; whether conferences will permit direct cash payments to athletes that exceed cost of attendance; and how increased athlete pay will impact schools’ Title IX compliance. Though the legal process is far from over (the NCAA may appeal should it lose at trial), these are issues administrators may wish to consider.

 

FBI

 

Also headed for trial in 2018 are several defendants in the college basketball fraud cases currently being pursued by the U.S. Attorney’s Office in New York. Those actions target several former assistant basketball coaches, apparel company executives, and sports agents, and generally allege that those individuals defrauded schools by knowingly rendering then-current or prospective college basketball players ineligible by funneling to them thousands of dollars in cash to secure their attendance at a particular school or to sign with a certain agency as professionals. Over the past several months, the public has learned much more about the evidence in these cases, including names of players who were allegedly provided loans and other benefits by the ASM Agency.

 

Among the defendants set to face trial first are Jim Gatto and Merl Code, the apparel company executives who purportedly provided the cash that was ultimately transmitted to certain basketball athletes. The government must prove Gatto and Code actually defrauded the schools—instead of helping them reach their competitive goals—and intended to do so and that they made misrepresentations in the process. In February, the federal judge overseeing the case refused to dismiss the claims against Gatto, Code, and former ASM employee Christian Dawkins, leaving several issues, including whether the indicted assistant coaches were acting within the scope of their employment, for trial (scheduled to begin October 1, 2018).

 

As happened in spring 2018, it is possible that more “discovery” documents may become public during the summer and fall, potentially jeopardizing more athletes’ eligibility and program records, and widening the scope of future NCAA action. It is unclear whether the whole cache of documents and other information now held by the U.S. Attorney and the defendants’ lawyers will ever be released. Although discovery is usually not available to the public, documents that are filed with the court may be released (the NCAA could also work with the government directly to obtain relevant information). Assuming discovery is not available, proving violations and understanding the true scope of the issues could be challenging.

 

And by the time the NCAA gets its bite at the apple, it might be operating under a substantially different set of investigatory and adjudicatory procedures. The Commission on College Basketball suggested independent investigations of potential violations, enhanced obligations to cooperate with investigations (including agreeing to turn over documents and provide testimony as a condition of NCAA membership), and third party arbitration of infractions cases. ADs should be prepared for a busy fall legislative period during which those recommendations will be negotiated and perhaps approved. Establishing institutional responsibilities in an environment with an independent investigative and administrative process will likely be a focal point.

 

PASPA

 

The Supreme Court invalidated the Professional and Amateur Sports Protection Act (PASPA) in May 2018. That decision decision leaves sports betting legalization and regulation in the hands of the states, unless and until Congress passes new legislation on the issue (experts say that Congressional action on the issue is unlikely).

 

ADs in states where sports gambling is legal should review and understand their state’s law. In particular, ADs should know whether or not their state’s legislation permits gambling on collegiate events, how the taxes generated from betting are used and distributed, and whether athletic departments have any obligations under the statute(s). In states considering and/or have not yet enacted sports gambling legislation, ADs have a far better opportunity to shape law and policy. In those states, ADs should begin by contemplating which issues are most important to them (e.g., intellectual property fees, use of taxes for education/integrity programs, the ability to bet on in-state programs, etc.) and begin working with their institution’s legislative affairs office or related entity to shape the legislation in their department’s favor. In studying the issue of tapping into sports gambling as an income stream, ADs may find this effort to further commercialize college sports inconsistent with the notion of college athletics as primarily an educational endeavor. Administrators can also track how popular and/or widespread sports gambling becomes in their state and how quickly it grows to help determine their department’s posture on the issue.

 

FLSA

 

For several years, college athletes have sought to classify themselves as employees under the Fair Labor Standards Act (FLSA), which is a federal law establishing minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments.

 

Track and field athletes from the University of Pennsylvania were the first to press FLSA claims, but were turned away by the 7th Circuit Court of Appeals in December 2016 (Berger v. NCAA). Lamar Dawson, a former USC football player, sued the NCAA and Pac-12 under a similar theory, but a California federal judge found that “there is simply no legal basis for finding [college athletes] to be ‘employees’ under the FLSA” (the case is currently on appeal before the 9th Circuit). Next, a former Villanova football player sued the school, the NCAA, and other mid-Atlantic NCAA schools for alleged FLSA violations (Livers v. NCAA). His case was dismissed in May 2018, with a federal court judge ruling the player had not sufficiently established that schools he did not attend were his “joint-employers.”

 

After these various FLSA claims, college athletes’ employee status remain unchanged. However, a judge in the Berger case noted that he was “less confident…that our reasoning should extend to students who receive athletic scholarships to participate in so-called revenue sports like Division I men’s basketball and FBS football.” Should basketball and football players be successful in qualifying for employee status under the FLSA, schools would be obligated to pay them a minimum wage and possible overtime compensation; keep records on players’ personal information and pay data; and pay men and women an equal wage for work requiring the same “skill, effort, and responsibility and which are performed under similar working conditions” (this may obligate schools to pay men’s and women’s basketball players equally).

 

Athlete Misconduct Policies

 

Several conferences and institutions have introduced athlete misconduct policies in recent years. These rules vary but generally prevent athletes who have committed “serious misconduct” from receiving financial aid or competing athletically. Felony convictions or pleas or school discipline for sexual offenses are amongst the acts that constitute “serious misconduct.” Most recently, the SEC expanded its misconduct policy to include incoming athletes (previously, it only applied to transfer athletes) and the Big Sky Conference enacted a policy that applies to both prospective and current players. One impetus for these rules could be to prevent the recruitment of talented athletes despite their behavioral histories, thereby mitigating the risk of bringing those individuals onto campus.

 

But there is reason for caution. If such policies are made for athletes only and not applied to the rest of the student population or otherwise enforced unevenly, affected athletes may pursue legal action against schools and conferences. Also, if these policies are crafted solely for athletes, it may further the perception that athletes are not “normal” students—contradicting a key NCAA legal theory. Administrators should keep a watchful eye on a “breakthrough” case or dispute involving conduct policies that may provide further clarity on their effectiveness and legality.

 

Single School/Single Sport Concussion Cases

 

A major piece of under-the-radar litigation are the single school/single sport concussion cases proceeding against numerous schools and conferences. Plaintiffs, primarily former college football players, have sued over the allegedly inappropriate handling of concussions and brain injury education, diagnosis, and management. These cases are separate from the NCAA Concussion Settlement, which, when implemented, will establish a medical monitoring program for former college athletes regardless of sport. The NCAA Concussion Settlement does not provide for monetary payouts for injured athletes; the single school/single sport cases were a carve-out to allow athletes to pursue such claims.

 

Currently, the judge overseeing the single school/single sport cases (there are over 100) is allowing four “test” cases to proceed to trial to give the parties and the court the opportunity to determine whether the claims can be pursued as a class action. Those cases (involving former players Eric Weston (Weber State), Zack Langston (Pittsburgh State), Jaime Richardson (Florida) and Michael Rose/Timothy Stratton (Purdue)) are unlikely to reach trial until sometime in 2019 or beyond.

 

Nonetheless, ADs should be prepared for the potential legal and financial impact of concussion litigation, which might require their schools to compensate athletes for the injuries suffered during their collegiate playing careers. Litigating these issues on a school-by-school basis will be costly, as will implementing a claims process if the cases are settled. ADs must also understand their school’s responsibilities under NCAA bylaws to maintain and enforce concussion management protocols and be prepared to alter them if through litigation a school’s duty of care to its athletes is clarified.

 

Perhaps most telling about the role of the law in college athletics is that there are far more legal issues of concern than those mentioned here. In particular, there are major questions regarding taxes, contracts, and the legal effects of the implementation of the Commission on College Basketball’s recommendations. Now more than ever, it is critical that athletic directors and other administrators have a solid grasp on the law as it relates to college sports.

 

Glenn M. Wong is the Executive Director of the Sports Law & Business Program and Distinguished Professor of Practice – Sports Law at Arizona State University’s Sandra Day O’Connor College of Law. 

 

Cameron Miller is a 2017 graduate of ASU’s Sports Law & Business Program and is an incoming student at Georgetown University Law Center.

 

 

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