Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: College athletes score class certification in NCAA grant-in-aid suit, (Dec 8, 2015)

By Greg Hammond, J.D.

Three classes of college athletes have been certified in multidistrict litigation claiming that the National Collegiate Athletic Association (NCAA) and certain NCAA conferences entered into a cartel to limit the compensation paid to college football and basketball athletes for their services. In granting class certification, the federal district court in Oakland, California, determined that the class met the requirements of Federal Rule of Civil Procedure 23(a) and 23(b)(2) and the inherently transitory exception to mootness was applicable to the consolidated claims (In re National Collegiate Athletic Association Athletic Grant-in-Aid Cap Antitrust Litigation, December 4, 2015, Wilken, C.).

The plaintiffs—student-athletes who played NCAA Division I Football Bowl Subdivision football and men’s and women’s basketball—claim that the NCAA and its member institutions have violated federal antitrust law by conspiring to impose the cap on the amount of compensation a school may provide a student-athlete through grant-in-aid (GIA). Without the NCAA’s cap on GIA, the student-athletes claim schools would compete in recruiting student-athletes by providing more generous GIAs. The student-athletes moved to certify three classes to seek injunctive relief against the defendants.

Mootness. The NCAA first argued that the class representatives’ claims are moot because the representatives were no longer eligible to participate in NCAA athletics. Because the claims became moot prior to class certification, the entire class action should therefore be deemed moot, the NCAA maintained. The court rejected this argument, however, finding that the inherently transitory exception to mootness allows the court to certify the class, even though the class representatives’ claims were moot. In particular, the court reasoned that the complexity, pace, and cutting edge nature of the multidistrict litigation affected the timing of the court’s class certification hearing and decision and that there would be nothing to be gained by denying certification only for class members to file a new lawsuit to be included in the litigation.

Adequacy. Although the defendants did not dispute that the plaintiffs satisfied the numerosity, commonality, and typicality requirements of Rule 23(a), the NCAA challenged the adequacy requirement, arguing that there are conflicts of interest among proposed class members based on two theories. First, a “substitution effects” theory alleged that players competing for finite school resources would result in less valued student-athlete class members losing their full GIAs. Second, an “economics of superstars” theory claimed that some players would receive a high level of compensation due to their high level of talent, but many more players would receive a much lower level of compensation, or none at all.

The court rejected the “substitution effects” theory. Although class members might prefer to leave an unlawful restraint in place because they otherwise would have to compete against one another, such preference for non-competition does not justify denying injunctive relief class certification. The “economics of superstars” theory also failed, because there was insufficient support to demonstrate that a significant percent of players would receive GIA valued at less than what they currently receive because schools would pay some student-athletes on the basis of their lower marginal revenue product. Both theories depended on an assumption that schools could not afford to spend more money compensating all student-athletes, rather than cutting payments to some. The student-athletes consequently met the requirements of Rule 23(a).

Lastly, the court concluded that the student-athletes met the requirements of Rule 23(b)(2), because they claimed that all members of the proposed classes suffered antitrust harms by being undercompensated for the services they offered and because the NCAA’s GIA cap applies generally to the class by precluding schools from paying any class member more than the cap.

The case numbers are 4:14-md-02541-CW and 4:14-cv-02758-CW.

Attorneys: James S. Richter (Winston & Strawn LLP) for Martin Jenkins. Anthony Joseph Dreyer (Skadden Arps Slate Meagher & Flom LLP) for National Collegiate Athletic Association. David Erik Albright (Smith Moore Leatherwood LLP) and Duvol Thompson (Holland and Knight LLP) for Atlantic Coast Conference. Matthew P. O’Malley (Tompkins McGuire Wachenfeld & Barry LLP) for Big 12 Conference. Michael Martinez (Mayer Brown LLP) for Big Ten Conference.

Companies: National Collegiate Athletic Association; Atlantic Coast Conference; Big 12 Conference; Big Ten Conference

Cases: Antitrust CaliforniaNews