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O'Bannon v. National Collegiate Athletic Association

United States District Court, N.D. California

August 8, 2014

EDWARD O'BANNON, et al., Plaintiffs,
v.
NATIONAL COLLEGIATE ATHLETIC ASSOCIATION; ELECTRONIC ARTS INC.; and COLLEGIATE LICENSING COMPANY, Defendants

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For Edward C. O'Bannon, Jr., on behalf of himself & all others similarly situated, Plaintiff: Christopher L. Lebsock, LEAD ATTORNEY, Arthur Nash Bailey, Jr., Bruce J. Wecker, Hausfeld LLP, San Francisco, CA; Jon T. King, LEAD ATTORNEY, Hagens Berman Sobol Shapiro LLP, Berkeley, CA; Allan Steyer, Donald Scott Macrae, Steyer Lowenthal Boodrookas Alvarez & Smith LLP, San Francisco, CA; Amanda Heather Kent, Girardi and Keese, Los Angeles, CA; Bonny E. Sweeney, Robbins Geller Rudman & Dowd LLP, San Diego, CA; Brendan Patrick Glackin, Lieff, Cabraser, Heimann & Bernstein LLP, San Francisco, CA; Brian L Schwalb, Venable LLP, Washington, DC; Bruce L. Simon, Bruce Lee Simon, Pearson, Simon & Warshaw, LLP, San Francisco, CA; Carl A. Taylor Lopez, PRO HAC VICE, Lopez & Fantel, Seattle, WA; Carmen Anthony Medici, Robbins Geller Rudman Dowd LLP, San Diego, CA; Catherine Rosato Reilly, Cozen O'Connor, Washington, DC; Christopher Theo Hellums, Pittman Dutton and Hellums, P.C., Birmingham, AL; Daniel Cohen, PRO HAC VICE, Cuneo Gilbert & LaDuca, LLP, Washington, DC; Daniel Simon Mason, Attorney at Law, San Francisco, CA; Derek G. Howard, Minami Tamaki LLP, San Francisco, CA; Dianne M. Nast, NastLaw LLC, Philadelphia, PA; Douglas A. Millen, PRO HAC VICE, Freed Kanner London & Millen LLC, Bannockburn, IL; Edgar Dean Gankendorff, PRO HAC VICE, New Orleans, New Orleans, La; Ellen Meriwether, Cafferty Faucher LLP, Philadelphia, PA; Eugene A. Spector, PRO HAC VICE, Spector Roseman Kodroff & Willis, PC, Philadelphia, PA; Gabriel Dash Zeldin, Steyer Lowenthal Boodrookas Alvarez Smith LLP, San Francisco, CA; Hilary Kathleen Scherrer, Hausfeld, LLP, Washington, DC; Jack Simms, PRO HAC VICE, Boies Schiller & Flexner LLP, Washington, DC; Jay S. Cohen, PRO HAC VICE, Spector, Roseman Kodroff & Willis, P.C., Philadelphia, PA; Jay L. Himes, PRO HAC VICE, Labaton Sucharow LLP, New York, NY; Jeffrey J. Corrigan, PRO HAC VICE, Spector Roseman Kodroff & Willis, PC, Philadelphia, PA; Jeffrey Lawrence Spector, PRO HAC VICE, Spector Roseman Kodroff & Willis P.C., Philadelphia, PA; Jessica L. Grant, Coblentz Patch Duffy & Bass LLP, San Francisco, CA; Jiangxiao Athena Hou, Zelle Hofmann Voelbel & Mason LLP, San Francisco, CA; Joel Cary Meredith, Meredith & Associates, Philadelphia, PA; Jonathan W. Cuneo, Cuneo Gilbert and LaDuca, LLP, Washington, DC; Joseph R. Saveri, Joseph Saveri Law Firm, Inc., San Francisco, CA; Kimberly Ann Kralowec, The Kralowec Law Group, San Francisco, CA; Lin Yee Chan, Lieff Cabraser Heimann & Bernstein, LLP, San Francisco, CA; Melissa Helen Maxman, PRO HAC VICE, Cozen OConnor, Washington, DC; Michael D. Hausfeld, PRO HAC VICE, Hausfeld LLP, Washington, DC; Michael Paul Lehmann, Hausfeld LLP, San Francisco, CA; Mitchell J. Rapp, PRO HAC VICE, Zelle Hofmann Voelbel & Mason LLP, Minneapolis, MN; Morissa R. Falk, PRO HAC VICE, Labaton Sucharow LLP, New York, NY; Renae Diane Steiner, Heins Mills & Olson, P.L.C., Minneapolis, MN; Robert G. Eisler, Grant & Eisenhofer P.A., Wilmington, DE; Robert William Finnerty, Girardi Keese, Los Angeles, CA; Robert J. Wozniak, PRO HAC VICE, Freed Kanner London & Millen, LLC, Bannockburn, IL; Ronald J. Aranoff, PRO HAC VICE, Bernstein Liebhard LLP., New York, NY; Sathya S Gosselin, Hausfeld LLP, Washington, DC; Seth Rosenthal, Venable LLP, Washington, DC; Shawn D. Stuckey, PRO HAC VICE, Zelle Hoffmann Voelbel & Mason LLP, Minneapolis, MN; Stanley M. Chesley, Waite Schneider Bayless & Chesley, Cincinnati, OH; Steven J. Greenfogel, Lite DePalma Greenburg, LLC, Philadelphia, PA; Swathi Bojedla, Hausfeld LLP, Washington, DC; Thomas V. Girardi, Girardi & Keese, Los Angeles, CA; Vincent J. Esades, PRO HAC VICE, Heins Mills & Olson, P.L.C., Minneapolis, MN; Wilbert Benjamin Markovits, Markovits, Stock & DeMarco LLC, Cincinnati, OH; William G. Caldes, PRO HAC VICE, Spector, Roseman, Kodroff & Willis, P.C., Philadelphia, PA; William A. Isaacson, Boies Schiller & Flexner, Washington, DC.

For Oscar P. Robertson, Plaintiff: Arthur Nash Bailey, Jr., LEAD ATTORNEY, Michael Paul Lehmann, Hausfeld LLP, San Francisco, CA; Hilary Kathleen Scherrer, Michael D. Hausfeld, PRO HAC VICE, Hausfeld, LLP, Washington, DC; Stanley M. Chesley, PRO HAC VICE, Waite Schneider Bayless & Chesley, Cincinnati, OH; Terence Richard Coates, Wilbert Benjamin Markovits, Markovits, Stock & DeMarco, LLC, Cincinnati, OH.

For William F. Russell, Plaintiff: Arthur Nash Bailey, Jr., LEAD ATTORNEY, Hausfeld LLP, San Francisco, CA; Michael D. Hausfeld, PRO HAC VICE, Hausfeld LLP, Washington, DC.

For Harry Fluornoy, Plaintiff: Michael Paul Lehmann, LEAD ATTORNEY, Arthur Nash Bailey, Jr., Hausfeld LLP, San Francisco, CA; Hilary Kathleen Scherrer, Sathya S Gosselin, Hausfeld, LLP, Washington, DC; Leonard W Aragon, PRO HAC VICE, Robert B. Carey, Hagens Berman Sobol Shapiro LLP, Phoenix, AZ; Michael D. Hausfeld, Hausfeld LLP, Washington, DC; Steve W. Berman, PRO HAC VICE, Hagens Berman Sobol Shapiro LLP, Seattle, WA.

For Alex Gilbert, Plaintiff: Arthur Nash Bailey, Jr., Michael Paul Lehmann, Hausfeld LLP, San Francisco, CA; Hilary K. Scherrer, Michael D. Hausfeld, PRO HAC VICE, Hausfeld LLP, Washington, DC; Hilary Kathleen Scherrer, Hausfeld, LLP, Washington, DC; Leonard W Aragon, PRO HAC VICE, Robert B. Carey, Hagens Berman Sobol Shapiro LLP, Phoenix, AZ; Robert B. Carey, Hagens Berman Sobol Shapiro LLP, Phoenix, AZ; Sathya S Gosselin, Hausfeld LLP, Washington, DC; Steve W. Berman, PRO HAC VICE, Hagens Berman Sobol Shapiro LLP, Seattle, WA.

For Samuel Jacobson, Plaintiff: Bruce Lee Simon, Pearson, Simon & Warshaw, LLP, San Francisco, CA; Dianne M. Nast, NastLaw LLC, Philadelphia, PA; Garrett D. Blanchfield, Jr., Reinhardt Wendorf & Blanchfield, St. Paul, MN; Joe Sibley, Camara & Sibley LLP, Houston, TX; Kiwi Alejandro Danao Camara, Camara & Sibley LLP, Houston, TX.

For Thad Jaracz, Plaintiff: Michael Paul Lehmann, LEAD ATTORNEY, Arthur Nash Bailey, Jr., Hausfeld LLP, San Francisco, CA; Hilary K. Scherrer, PRO HAC VICE, Hilary Kathleen Scherrer, Hausfeld LLP, Washington, DC; Leonard W Aragon, PRO HAC VICE, Hagens Berman Sobol Shapiro LLP, Phoenix, AZ; Michael D. Hausfeld, Hausfeld LLP, Washington, DC; Robert B. Carey, Hagens Berman Sobol Shapiro LLP, Phoenix, AZ; Sathya S Gosselin, Hausfeld LLP, Washington, DC; Steve W. Berman, PRO HAC VICE, Hagens Berman Sobol Shapiro LLP, Seattle, WA.

For David Lattin, Patrick Maynor, Tyrone Prothro, Eric Riley, Jake Fischer, Jake Smith, Darius Robinson, Moses Alipate, Chase Garnham, Victor Keise, Plaintiffs: Arthur Nash Bailey, Jr., Hausfeld LLP, San Francisco, CA; Hilary Kathleen Scherrer, Hausfeld, LLP, Washington, DC; Leonard W Aragon, PRO HAC VICE, Hagens Berman Sobol Shapiro LLP, Phoenix, AZ; Michael D. Hausfeld, PRO HAC VICE, Hausfeld LLP, Washington, DC; Michael Paul Lehmann, Hausfeld LLP, San Francisco, CA; Robert B. Carey, Hagens Berman Sobol Shapiro LLP, Phoenix, AZ; Sathya S Gosselin, Hausfeld LLP, Washington, DC; Steve W. Berman, PRO HAC VICE, Hagens Berman Sobol Shapiro LLP, Seattle, WA.

For Damien Rhodes, Plaintiff: Dianne M. Nast, NastLaw LLC, Philadelphia, PA; Eric L. Cramer, Berger & Montague, P.C., Philadelphia, PA; Eric B. Fastiff, Lieff Cabraser Heimann & Bernstein LLP, San Francisco, CA; Joseph R. Saveri, Joseph Saveri Law Firm, Inc., San Francisco, CA; Joshua P. Davis, University of San Francisco School of Law, San Francisco, CA; Kelly M. Dermody, Leiff Cabraser Heimann & Bernstein LLP, San Francisco, CA; Kendall S. Zylstra, PRO HAC VICE, Faruqi and Faruqi, LLP, Jenkintown, PA; Stephen E. Connolly, Faruqi & Faruqi, LLP, Jenkintown, PA.

For Bob Tallent, Plaintiff: Arthur Nash Bailey, Jr., Hausfeld LLP, San Francisco, CA; Hilary K. Scherrer, PRO HAC VICE, Hausfeld LLP, Washington, DC; Leonard W Aragon, PRO HAC VICE, Hagens Berman Sobol Shapiro LLP, Phoenix, AZ; Michael D. Hausfeld, PRO HAC VICE, Hausfeld LLP, Washington, DC; Michael Paul Lehmann, Hausfeld LLP, San Francisco, CA; Robert B. Carey, Hagens Berman Sobol Shapiro LLP, Phoenix, AZ; Sathya S Gosselin, Hausfeld LLP, Washington, DC; Steve W. Berman, PRO HAC VICE, Hagens Berman Sobol Shapiro LLP, Seattle, WA.

For Danny Wimprine, Plaintiff: Tracy Tien, LEAD ATTORNEY, Finkelstein Thompson LLP, San Francisco, CA; Bryan L. Clobes, Cafferty Clobes Meriwether & Sprengel LLP, Philadelphia, PA; Dianne M. Nast, NastLaw LLC, Philadelphia, PA; Ellen Meriwether, Cafferty Faucher LLP, Philadelphia, PA; Lee Albert, Glancy Binkow & Goldberg LLP, New York, NY; Rosemary M. Rivas, Finkelstein Thompson LLP, San Francisco, CA.

For Ray Ellis, Plaintiff: Arthur Nash Bailey, Jr., Hausfeld LLP, San Francisco, CA; Douglas A. Millen, PRO HAC VICE, Freed Kanner London & Millen LLC, Bannockburn, IL; Hilary K. Scherrer, PRO HAC VICE, Hausfeld LLP, Washington, DC; Michael D. Hausfeld, PRO HAC VICE, Hausfeld LLP, Washington, DC; Michael Paul Lehmann, Hausfeld LLP, San Francisco, CA; Stanley M. Chesley, PRO HAC VICE, Waite Schneider Bayless & Chesley, Cincinnati, OH; Wilbert Benjamin Markovits, Markovits, Stock & DeMarco LLC, Cincinnati, OH.

For National Collegiate Athletic Association, also known as The " NCAA", Defendant: Glenn Douglas Pomerantz, LEAD ATTORNEY, Munger Tolles & Olson, Los Angeles, CA; Robert James Wierenga, LEAD ATTORNEY, Schiff Hardin LLP, Ann Arbor, MI; Atleen Kaur, Miller Canfield Paddock and Stone PLC, Ann Arbor, MI; Carolyn Hoecker Luedtke, Munger, Tolles Olson LLP, San Francisco, CA; David P. Borovsky, Long & Levitt LLP, San Francisco, CA; Glen Robert Olson, Long & Levit LLP, San Francisco, CA; Gregory L. Curtner, Schiff Hardin LLP, Ann Arbor, MI; Jason Alex Geller, Meckler Bulger Tilson Marick & Pearson LLP, San Francisco, CA; Jeslyn A Miller, Munger Tolles Olson, SF, CA; Justin Paul Raphael, Munger Tolles and Olson, San Francisco, CA; Kelly Max Klaus, Munger Tolles & Olson LLP, San Francisco, CA; Kimberly K. Kefalas, Schiff Hardin LLP, Ann Arbor, MI; Luis Li, Munger Tolles and Olson LLP, Los Angeles, CA; Rohit K. Singla, Munger Tolles & Olson, San Francisco, CA; Suzanne Wahl, Schiff Hardin LLP, Ann Arbor, MI; Thane Rehn, Munger, Tolles and Olson, San Francisco, CA.

For Collegiate Licensing Company, also known as " CLC", Defendant: Gennaro August Filice, LEAD ATTORNEY, Filice Brown Eassa & McLeod LLP, Oakland, CA; Amber Melia Trincado, King & Spalding LLP, San Francisco, CA; Cindy Dawn Hanson, PRO HAC VICE, Kilpatrick Stockton LLP, Atlanta, GA; Constance K. Robinson, Kilpatrick Stockton LLP, Washington, DC; Peter M. Boyle, Kilpatrick Stockton LP, Washington, DC; Svetlana S. Gans, Kilpatrick Stockon LLP, Washington, DC.

For Electronic Arts Inc., Defendant: Robert James Slaughter, LEAD ATTORNEY, Keker & Van Nest LLP, San Francisco, CA; Matan Shacham, Keker & Van Nest LLP, SF, CA; Robert Adam Lauridsen, Keker & Van Nest LLP, San Francisco, CA; Robert Addy Van Nest, Keker & Van Nest LLP, San Francisco, CA; Steven A. Hirsch, Keker & Van Nest, LLP, San Francisco, CA.

For Samuel Michael Keller, Defendant: Robert B. Carey, LEAD ATTORNEY, Hagens Berman Sobol Shapiro LLP, Phoenix, AZ.

For Conference USA, The Big 12 Conference, Inc., Interested Parties: Leane K Capps, Polsinelli PC, Dallas, Tx.

OPINION

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CLAUDIA WILKEN, United States District Judge.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

INTRODUCTION

Competition takes many forms. Although this case raises questions about athletic competition on the football field and the basketball court, it is principally about the rules governing competition in a different arena -- namely, the marketplace.

Plaintiffs are a group of current and former college student-athletes. They brought this antitrust class action against the National Collegiate Athletic Association (NCAA) in 2009 to challenge the association's rules restricting compensation for

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elite men's football and basketball players. In particular, Plaintiffs seek to challenge the set of rules that bar student-athletes from receiving a share of the revenue that the NCAA and its member schools earn from the sale of licenses to use the student-athletes' names, images, and likenesses in videogames, live game telecasts, and other footage. Plaintiffs contend that these rules violate the Sherman Antitrust Act. The NCAA denies this charge and asserts that its restrictions on student-athlete compensation are necessary to uphold its educational mission and to protect the popularity of collegiate sports.

A non-jury trial on Plaintiffs' claims was held between June 9, 2014 and June 27, 2014. After considering all of the testimony, documentary evidence, and arguments of counsel presented during and after trial, the Court finds that the challenged NCAA rules unreasonably restrain trade in the market for certain educational and athletic opportunities offered by NCAA Division I schools. The procompetitive justifications that the NCAA offers do not justify this restraint and could be achieved through less restrictive means. The Court makes the following findings of fact and conclusions of law, and will enter as a remedy a permanent injunction prohibiting certain overly restrictive restraints.

FINDINGS OF FACT

I. Background

A. The NCAA

The NCAA was founded in 1905 by the presidents of sixty-two colleges and universities in order to create a uniform set of rules to regulate intercollegiate football. Docket No. 189, Stip. Undisputed Facts, at ¶ 6. Today, the association has roughly eleven hundred member schools and regulates intercollegiate athletic competitions in roughly two dozen sports. According to its current constitution, the association seeks to " initiate, stimulate and improve intercollegiate athletics programs for student-athletes and to promote and develop educational leadership, physical fitness, athletics excellence and athletics participation as a recreational pursuit." Ex. 2340, 2013-14 NCAA Division I Manual, at 15.[1]

To achieve these goals, the NCAA issues and enforces rules governing athletic competitions among its member schools. Id. at 4. These rules are outlined in the association's constitution and bylaws and cover a broad range of subjects. Among other things, the rules establish academic eligibility requirements for student-athletes, set forth guidelines and restrictions for recruiting high school athletes, and impose limits on the number and size of athletic scholarships that each school may provide. Id. at 3-5.

Since 1973, the NCAA's member schools have been organized into three divisions -- Divisions I, II, and III -- based on the number and quality of opportunities that they provide to participate in intercollegiate athletics. Stip. Undisputed Facts ¶ 27. Division I schools provide the greatest number and highest quality of opportunities to participate in intercollegiate athletics because they sponsor more sports teams and provide more financial aid to student-athletes than schools in Divisions II and III.[2] To qualify for membership in

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Division I, a school must sponsor a minimum of fourteen varsity sports teams, including football, and distribute a baseline amount of financial aid to its student-athletes. Trial Tr. 2043:13-:25 (Delany); Ex. 2340 at 365, 367. Roughly three-hundred and fifty of the NCAA's eleven hundred schools currently compete in Division I. Trial Tr. 1743:23 (Emmert).

Division I itself further is divided, for the purposes of football competition, into two subdivisions: the Football Bowl Subdivision (FBS) and the Football Championship Subdivision (FCS).[3] Trial Tr. 2144:9-:11 (Petr); Ex. 2340 at 364-67. FBS schools are allowed to offer up to eighty-five full scholarships to members of their football teams. In contrast, FCS schools are permitted to offer only a smaller number of full scholarships to members of their teams. Stip. Undisputed Facts ¶ 28. Because FBS schools are able to offer more football scholarships than FCS schools, the level of football competition within FBS is generally higher than within FCS. Currently, about one hundred and twenty schools compete in FBS. Id. ¶ 45.

In addition to the two football subdivisions, Division I schools are also organized into a number of conferences, which essentially function as smaller leagues within the NCAA. The conferences -- most of which contain between eight and fifteen schools -- typically have their own membership requirements. Most conferences also organize conference-specific games and events featuring their member schools, including regular season football games, regular season basketball games, and post-season basketball tournaments. Although the conferences are considered members of the NCAA and must comply with its constitution and bylaws, they operate independently for the most part and have the authority to generate their own revenue and set their own rules, provided those rules are consistent with NCAA policy. Ex. 2340 at 22.

The rules governing participation and competition in Division I are enacted by an eighteen-member body known as the Division I Board of Directors, which typically receives proposals from the division's member schools and conferences. Trial Tr. 1744:16-1745:2 (Emmert); Ex. 2340 at 35. The Board is made up of university presidents and chancellors from eighteen different colleges or universities. Ex. 2340 at 35.

A school or conference that seeks to propose a new rule or rule change typically does so by submitting the proposal to a designated committee or task force appointed by the Board. Trial Tr. 1745:20-1746:15. That committee or task force then considers the proposal and, if it approves, may forward the proposal to a body known as the Division I Legislative Council, which is made up of athletics administrators from schools in each of the thirty-two Division I conferences. Id.; Ex. 2340 at 37. The Legislative Council may then forward the proposal to the Board of Directors, which has the ultimate authority to approve the proposal by a majority vote. Trial Tr. 1745:20-1746:15. Actions by the Board may only be repealed through an override process that involves a vote of sixty-two percent of the NCAA's member institutions. Id. 1747:6-:20. The NCAA's current president,

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Dr. Mark Emmert, does not have any voting power in this process. Id. 1746:19-:24.

B. Electronic Arts Inc. & Collegiate Licensing Company

Electronic Arts Inc. (EA) is a corporation which develops and manufactures videogames. Stip. Undisputed Facts ¶ 35. It created and sold an annual NCAA-branded college football videogame every year between 1997 and 2013. Id. ¶ 39. It also created and sold an annual NCAA-branded college basketball game every year between 1998 and 2010. Id. ¶ 40. In order to create these games, it entered into licensing agreements with the NCAA and its member schools and paid them for permission to use their intellectual property, including their marks, in the videogames. Id. ¶ ¶ 37-38; Exs. 1125, 1126. Collegiate Licensing Company (CLC) is a Georgia corporation that licenses trademarks of the NCAA and several of its member schools and conferences. Stip. Undisputed Facts ¶ ¶ 32-34. Although Plaintiffs originally brought claims against both EA and CLC in this action, they subsequently agreed to settle those claims.

C. Plaintiffs

Plaintiffs are twenty current and former student-athletes, all of whom play or played for an FBS football or Division I men's basketball team between 1956 and the present. Some, but not all, Plaintiffs went on to play professional sports after they left college. They represent the following class, which this Court certified under Federal Rule of Civil Procedure 23(b)(2) in November 2013:

All current and former student-athletes residing in the United States who compete on, or competed on, an NCAA Division I (formerly known as " University Division" before 1973) college or university men's basketball team or on an NCAA Football Bowl Subdivision (formerly known as Division I-A until 2006) men's football team and whose images, likenesses and/or names may be, or have been, included or could have been included (by virtue of their appearance in a team roster) in game footage or in videogames licensed or sold by Defendants, their co-conspirators, or their licensees.

Case No. 09-1967, Docket No. 1025, April 11, 2014 Order, at 47-48 (amending definition of ...


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