How To Blow Up the NCAA Without A Union: Jeffrey Kessler and the Antitrust Lawsuit

You probably haven't heard of Jeffrey Kessler. But he's arguably the most powerful person in sports you don't know exists. (Agents, after all, tend to get on ESPN every now and then.) As a partner in the white-shoe law firm of Winston & Strawn, Kessler has made a career out of representing players, coaches, and players' unions in lawsuits and related disputes against professional sports leagues.

His representative matters are like a Who's Who of the professional athletics world: representing Tom Brady in the case that ended the most recent NFL lockout; representing a group of NFL players in the case that led to the creation of free agency; representing Latrell Sprewell in an arbitration that overturned his controversial year-long suspension; representing Bill Belichik in a lawsuit against the NFL that was settled with Belichik being allowed to leave the Jets for New England. He even won a case for the city of Oakland that required the Raiders to stay in town rather than move, and goodness knows Al Davis hated to lose court cases.

And now Kessler is turning his sights on the NCAA. In a lawsuit filed on March 17 in federal court in New Jersey, Kessler - on behalf of Clemson defensive back Martin Jenkins, Rutgers basketball player J.J. Moore, UTEP tight end Kevin Perry, and Cal tight end Bill Tyndall - has advanced claims that could easily bring an end to college athletics as we know them. (You can read the full complaint here.)

Although the complaint runs forty-five pages, the gist is pretty straightforward. The plaintiff players argue as follows:

1. FBS football players and Division I men's basketball players are participants in a market for their services. They are fiercely recruited by college teams, and, in some cases, by lower-tier professional or foreign professional leagues. However, given the nature of football and basketball in America, the only realistic option for a player who wishes to compete against top talent is to restrict himself to the college world.
2. The NCAA and the so-called "Power Five" conferences (who are the named defendants) have agreed on the amount of money players will receive for playing FBS football and Division I men's basketball. Specifically, this amount is, at maximum, the cost of a full grant-in-aid scholarship, and nothing more, despite the fact that these players generate billions in revenue for their schools nationwide.
3. This agreement -- which is hardly secret, given that it's written into the NCAA and conference bylaws and publicly punished whenever there's a violation -- amounts to a conspiracy to fix the price colleges will pay for the athletic services provided by players.
4. And what's called "horizontal price-fixing" -- where all the participants in a market agree on the price they will pay for something, and refuse to budge -- is per se illegal under American antitrust law.

Now, when you think of antitrust law (which, let's face it, you probably don't; I certainly don't that often), what you probably think of is something like the proposed Comcast-Time Warner merger, where we're worried about one company controlling too much market share in a given field.

But antitrust law isn't really about monopolies. Rather, it's about competition -- and price-fixing is anticompetitive. If, for example, every widget maker agrees that their widgets will be sold for exactly ten dollars, then there's no competition on widget prices. This is a perfect situation for antitrust law to step in, because busting up the price-fixing on widgets helps competition. The same holds true when market participants agree on the price they will pay for something rather than sell something; this is the principle that ensures competition for labor.

So the argument is this: the NCAA bylaws that set player compensation as a grant-in-aid scholarship, and not a penny more, violate antitrust laws by artificially restricting the ways in which the labor market (here, colleges recruiting top football and basketball players) can compete for players' services.

And what remedy do these players (who seek to represent classes of all FBS football and Division I men's basketball players) seek? Not money, at least not directly. Rather, they want an injunction that bars the NCAA from enforcing its amateurism rules going forward. (The four players who are the named plaintiffs seek money damages for the equivalent of "back pay," but they don't seek it for the entire class of players they want to represent.)

This is an important strategic choice from a class-action perspective: rather than having a whole series of mini-trials about how much John Q. Center and Joe Linebacker should be paid for the four years the NCAA artificially restricted the market for their talent, the focus is on opening up that market in the future and letting the schools and NCAA figure out how to recruit players without price-fixing.

Like my post on the Northwestern players' union decision, here's a brief Q&A consisting of questions I thought up and answers I hope are right:

If the players win, does this mean they're employees of the schools?

Not exactly, no. Unlike the NLRB decision in the Northwestern case, there's no requirement that players be considered employees of the schools for which they play in order for there to be a "market" in college sports recruiting. In a practical sense, a win for the players here would mean that schools would have to start paying players (or at least be open to offering to do so if they think a recruit warrants payment above and beyond a scholarship), so in that sense, you could think of the players as "employees." But really, the players (and their athletic talents) here are actually more properly thought of as products, not employees, and the fight is over whether the NCAA and its member schools have illegally conspired to fix the price they're willing to pay for certain products.

Why the focus on an injunction instead of just getting money for players?

It has to do with the way class actions work. In order for a class action lawsuit to be "certified" -- that is, allowed to proceed as a class action, rather than just be a case brought only on behalf of the named plaintiffs -- common issues have to predominate over individual ones. One place where issues unique to individual class members might "take over" the whole process is in the relief phase of a class action. If what we're talking about is Samsung making a cell phone that doesn't work, and people suing to get their money back as a class, then it's pretty easy for the common issues to carry the day: a court might, for example, order Samsung to cut every member of the class a check for the average price of the phone, because all the phones are the same.

But think about what seeking monetary relief for every current FBS football and Division I men's basketball player would mean here: for each player who sought "back pay," we'd have to have a mini-trial on how highly a player was recruited out of high school, what his value to the team is, etc. Those questions would easily swamp the common question of whether the NCAA is illegally restricting competition in recruiting. (Also, they'd result in some weird outcomes: Khalil Mack only had one FBS offer coming out of high school, but he might be the first pick in the NFL draft. Is his "back pay" based on what we thought of him as a 17-year-old, or what we think of him now?)

The injunction sidesteps all that because there are no individualized questions to answer. The court would essentially (there's more to it, but bear with me) issue an order directing the NCAA to stop enforcing its bylaws that prevent payment of players. Going forward, it would be up to the various schools to determine how much they're willing to pay in a competitive talent market.

Can the players actually get an injunction here? Aren't money damages sufficient to satisfy their claimed injuries?

Well! Someone paid attention in contracts class during his first year of law school! It's certainly generally true in American law that when money damages (like "back pay" here) are considered adequate relief, equitable relief like an injunction is unavailable. But there are two things that point toward an injunction being the preferred method of relief in this case.

First, "back pay" for current athletes would only operate in the past. It would do nothing to help student-athletes going forward who would continue to suffer from an anti-competitive market if the NCAA keeps enforcing its amateurism rules. An injunction gets around that problem by barring enforcement. Second, although it's usually the case that equitable relief is unavailable when money damages are enough to fix a claimed injury, antitrust law specifically departs from the norm. The relevant statute (Section 16 of the Clayton Act, for those of you playing the home game) specifically allows an antitrust plaintiff to seek injunctive relief for anti-competitive behavior, and it imposes a lower hurdle for getting that relief than you'd have in a run-of-the-mill breach of contract case.

What about non-revenue sports? If the players win, will we have to offer $10,000 to an all-state high hurdler?

Not directly, no. The proposed class of players impacted here consists only of FBS football players and Division I men's basketball players (that is, the only two sports at most schools that are revenue drivers). If the players win, the only direct effect would be barring enforcement of the NCAA's amateurism rules in those two sports.

Of course, the logic behind a ruling in the players' favor could work in favor of paying athletes in other sports, but the very fact that there's no revenue to speak of in track or wrestling or what have you indicates that schools would be well within their rights sticking with whatever scholarship practices they have now. (There may be exceptions for individual athletes -- the fastest sprinter in the country could certainly see some offers for cash stipends in addition to a scholarship -- but they'd be the exception rather than the rule. Also, certain sports that are "niche" revenue drivers, like men's ice hockey, baseball, or women's basketball, might see some payment start to happen.)

This Kessler guy just seems like an ambulance chaser out to make some money from the NCAA and its members.

Kessler doesn't need the money. The average full partner at Winston & Strawn made $1,490,000 in 2012, and Kessler is the kind of guy whose national reputation and rainmaking ability justifies a take much higher than the average. He's not some ambulance chaser; quite the contrary, the guy is a True Believer (TM) in free markets in labor. With the exception of the Seitz decision in MLB, every major legal decision or settlement agreement creating a free agency market in American sports has had Kessler's involvement in one way or another. The move to extend this to the NCAA isn't some cynical ploy on his part; he honestly thinks it's the right thing to do.

Would a win for the players have any effect on the service academies or the Ivy League?

The service academies and the Ivy League are a different breed from the rest of the NCAA when it comes to scholarships. In both cases, the NCAA's scholarship rules do not apply -- the service academies because everyone gets a full-cost-of-attendance scholarship under federal law; the Ivies because they have opted out of athletic scholarships altogether. (If the coach at Navy starts paying players under the table, he's possibly going to federal prison, not getting a show-cause order. Now there's an incentive to keep it clean.) In any event, because of the special nature of the academies and the Ivies (relating largely to admissions standards in both cases), they aren't considered part of the relevant "labor market" as the plaintiffs define it in their complaint. So this lawsuit wouldn't have an effect on either.

What does this mean for the MAC if the players win?

If the money exists to dole out to recruits, it gives the MAC a way to compete for top players that it didn't have before. We already know the MAC is televised enough that NFL scouts have no problem putting our guys near the top of their draft lists; if Akron suddenly has the cash to make an offer to a Johnny Manziel, then who knows -- they might land him. But there is a flip side here. If the NCAA's scholarship rules are done away with, that means that the NCAA's 85-scholarship limit goes away as well, and that could hurt the chances for MAC schools hoping to land three-star recruits that get their offers from bigtime schools pulled because too many other prospects have already committed.

What are some defenses available to the NCAA and the other defendants?

A couple spring to mind.

First, the NCAA could argue that there is no such thing as a market in the services of college athletes, presumably on the grounds that their services can't be bought and sold. But this is belied by two things: first, the fierce competition between schools for recruits, and second (and more importantly), the fact that football and basketball players are, in fact, paid for their services -- just in the form the NCAA says is okay, rather than how the athletes might like to be paid.

Second, the NCAA could argue that the agreement to set the price of college athlete services at a grant-in-aid scholarship is, in fact, pro-competitive. (Sometimes, courts find restrictions of trade to be pro-competitive. Perhaps the most famous example was a case about stock trades from the 1940s, when courts ruled that the Chicago Board of Trade's rules preventing after-hours trading actually helped competition because only trades made during regular hours would have their prices publicly listed, and having publicly available trade prices facilitated a more accurate stock trading market.)

But in terms of the NCAA, the notion that keeping money out of things makes for a more competitively balanced college sports arena is a load of hooey. As the complaint points out, Kansas has won the last ten Big 12 basketball regular season titles; exactly ten BCS bowl game bids (of 144) have gone to non-BCS schools; and approximately half of the Final Four teams in the seventy-plus years of the NCAA tournament have come from just thirteen schools. Really, the only "pro-competition" defense open to the NCAA is "well sure, things aren't at all competitive now, but without these rules, they'd be even more uncompetitive," which isn't likely to persuade a judge.

Finally, the NCAA could try to argue that it's not really engaged in interstate commerce, meaning antitrust laws don't apply to it. (This is the case for Major League Baseball and the NFL, both of which have what's called an "antitrust exemption." In both cases, that exemption is a complete legal fiction divorced from reality, and in baseball's case, it's a fiction derived from a Supreme Court opinion from the 1920s that literally no one except MLB's lawyers thinks was correctly decided.)

Unfortunately for the NCAA, this wouldn't fly: the NCAA has already been held to participate in interstate commerce, and a 1984 Supreme Court case held that the NCAA's rules about televising college football games (which, at the time, placed strict limits on the number of times a school could be on television in one season) violated antitrust laws. If the NCAA is to succeed on this defense, it would have to get the relevant precedent overruled, which simply won't happen.

So what's likely to happen here?

If the NCAA is smart, they will craft some kind of settlement that allows for small stipends to be paid to players. Horizontal price-fixing (i.e., what the NCAA and its member schools are doing here, when they agree to cap the price of labor) is per se illegal, meaning it's quite literally almost impossible to convince a court that there's a legal reason for it. That said, if the plaintiffs are sufficiently dedicated to their cause (and, given that Jeffrey Kessler is representing them, I don't doubt that they are), they'll resist any such settlement offer and insist on what amounts to free agency for NCAA recruits. I admittedly don't practice antitrust law, but I don't see this one turning out well for the NCAA.

And now for my final thoughts...

In my opinion, this case, much more than the players' union at Northwestern or the O'Bannon case about likeness rights, is what will eventually bring down college athletics as we know them. The union demands at Northwestern are really about holding the NCAA to what it claims to stand for, that is, the welfare of student-athletes. That's why you see negotiating points like restricting weeknight football games and having independent physicians evaluate players for concussions.

And while the O'Bannon case could end up costing schools a lot of money, player likeness rights are pretty small potatoes in the grand scheme of the notion of amateurism. This case, on the other hand, has the potential to blow up the notion of amateurism (at least in big-money revenue sports) and replace it with players being paid.

And from a moral standpoint, I have no sympathy for the NCAA's arguments at all. Keep in mind, this is an organization that invented the notion of "student-athlete" (rather than "person providing a service to the university in exchange for compensation in the form of a scholarship") in the 1950s for the sole and specific purpose of avoiding having to pay worker's compensation claims when players were injured on the field.

The NCAA has never been about what's good and pure in athletics; it has always been about getting money for member schools at any cost. (That's why the NCAA originally barred athletic scholarships: schools that refused to offer them were worried they'd lose money if they had to compete with schools that were interested in offering them.) There's nothing wrong with making money, of course, but I have no tolerance for an institution that rakes and distributes billions on the backs of unpaid labor while claiming it's really all about the pristine values of amateurism.

And finally, I don't hold the NFL or NBA blameless in this at all. In fact, I think they're every bit as culpable. Unlike MLB or the NHL, which have robust minor-league systems and take kids right out of high school, professional football and basketball rely on colleges to give them minor leagues for free, at no cost to the big-league clubs beyond scouts, and with no regard for the actual purpose of college.

What this means is that athletes who are no-miss pro prospects in baseball can cash in right away or go to college for free as they choose, but no-miss prospects in football have no such choice. The NFL and NBA should offer players that choice and create minor leagues that can pay players straight out of high school. This would do away with players majoring in eligibility while still allowing those who wish to pursue a college education to do so.

Anyway, as before, I'll try to answer any questions in the comments.