Manziel’s Precedent: can current NCAA players collect damages from the EA Sports settlement without risking eligibility?

Last Thursday, EA Sports and College Licensing Company reached a preliminary settlement in the "Ed O’Bannon" class action lawsuit over the use of college athletes' names, images, and likenesses.  The terms of the settlement have not been disclosed, but reports suggest that the figure could be upwards of $50 million.  Not surprisingly, EA Sports announced that it will no longer produce its popular “NCAA Football” franchise beginning in 2014.  If the settlement is approved, more than 100,000 former and current student-athletes may be eligible for varying amounts of compensation depending on the specifics of each class member’s claim, including the prevalence of the individual in the game.  

It is well known that NCAA rules prohibit student-athletes from profiting off their name while in school and violators of this rule risk the loss of NCAA eligibility (for student-athletes) and potential sanctions (for member institutions), but now, some current student-athletes are in a position to receive a damages award stemming from the commercial use of their image, even though they are still enrolled in school.  The NCAA has thus far declined to comment on whether current student-athletes will be entitled to collect damages without risking their eligibility until after the terms of the settlement are revealed.  However, last year, Texas A&M quarterback Johnny Manziel likely set a precedent that will allow these current NCAA student-athletes to recover damages without jeopardizing their eligibility. 

In the Fall of 2012 after a series of breakout performances, Manziel trademarked his nickname “Johnny Football.”  Later that same season, a vendor began selling t-shirts with the phrase “Keep Calm and Johnny Football.”  Manziel’s company, JMAN2 Enterprises LLC, filed a suit for damages as well as an injunction calling for the vendor to stop producing the t-shirts.  The suit posed the question of whether a current NCAA player could be entitled to collect legal damages for the misappropriation of likeness and retain eligibility.  The NCAA ruled that Manziel would be entitled to retain his eligibility and recover damages provided the trademark violation was not an intentional violation aimed at funneling money to the player.  While the O'Bannon/EA Sports case is not a trademark case, the NCAA test established in the Manziel ruling should apply because both cases center on the misappropriation of a student athlete’s proprietary interest.  Whereas Manziel can be awarded damages for the misappropriation of his intellectual property, current students would be entitled to compensation for the misappropriation of their names, images, and likeness.  The NCAA has refused to comment on the ability of current student-athletes to receive settlement money, but the precedent of the Manziel ruling will make it difficult for the Association to deny student-athletes’ recovery.  As a result, current NCAA student-athletes may be able to receive compensation from the O'Bannon/EA Sports settlement without risking their eligibility, even though they would not have otherwise been able to do so under NCAA Bylaws. 

Lewis & Clark: Success & Failure in Professional Sports

This Friday, Lewis & Clark Law School will host a forum that will explore a variety of issues at the intersection of sports and business.  Through four distinct panel sessions, panelists will discuss: 1) managing and operating a professional sports team; 2) the reasons why sports team file for bankruptcy; 3) collective bargaining between leagues and players; and 4) the financial difficulties professional athletes face after retirement.  The forum offers attendees the ability to gain a unique perspective on a number of complex sports law issues from those with unparalleled first-hand knowledge and experience.

Several of your favorite Sports Law Bloggers will be presenting including:

Marc Edelman

Gabe Feldman

Nathaniel Grow

Warren Zola

To see the topics, panels, and copy of the brochure, go here.

Why Congressional Regulation Should Be Embraced by the NCAA

In a letter to Mark A. Emmert, Ph.D., President of the NCAA, dated October 29, 2011, I asked the following question:

I believe that given the current circumstances of the NCAA, its sustainability is questionable, and I believe that the only hope that it has for survival is to seek regulatory approval and supervision by the Congress. Given the paradox of its genesis juxtaposed with what it has become, this is something the NCAA would cringe at, but in terms of crisis management, what other choice do you really have, if you impartially consider the factors now impinging upon your organization? I am very interested to learn if you actually appreciate the severity of the current situation, and I am fascinated by crisis management or the lack thereof in such circumstances. 

In Dr. Emmert’s letter back to me, dated November 18, 2011, he chose to ignore answering this question.

So is the NCAA on its slow decline into oblivion?

Certainly, the current onslaught of major lawsuits threatens the NCAA's very existence, and the recent settlement by EA and CLC leaves the NCAA left holding the bag it created.  At the end of the day, in regards to the broadcast rights, which is the vast bulk of the money, nobody can explain how the NCAA or its members have the right to be paid for recording or televising college athletes at play, since they do not receive releases from any of them for this.  Essentially, the networks just assume that they can contract with the NCAA and its members without ever having considered why that would be so.  Video games and t-shirts won’t sink the business model, but a redistribution of this broadcast money will sink the NCAA and the major conferences like an iceberg at sea.

As the outgoing Princeton A.D., Gary Walters, said recently, the current tension is between the NCAA and its Division 1-A members and the major conferences on one side, who make the vast majority of the men’s football and basketball revenue, and everyone else in the NCAA, who do not run for-profit football and basketball programs.  These are irreconcilable.  When the NCAA gets hit for the recording and television revenue in one of these pending lawsuits, the major conferences will pick-up and go, if they haven’t by then already left, and those conferences will then negotiate a business deal with their players rather than kill the golden goose.  As they say, that will be that.  Whether the NCAA continues to exist to serve the interests of its unprofitable members, who knows, because there’s not much benefit for the remainder of Division 1 to be allied with Division II or Division III, and vice versa.

Assuming that the money issue is resolved by paying college athletes, how does this solve all of the other problems affecting college sports, other than taking a pot of gold off the table to pay for everything else that needs to be done, from the concussion issue to the insurance issue to the student welfare issue and so on?

I previously wrote about why Congress should regulate the NCAA, but if the NCAA was smart, it would have already gotten the Department of Education on board and proposed comprehensive legislation to Congress.  The fact that it hasn't shows a complete failure in leadership in the top, not just in the executive office, but also on the executive board or whatever they call it now that actually runs the NCAA, some sixteen college and university presidents.  The time is now for the NCAA leadership to actually start thinking about controlling the NCAA’s own destiny, and this cannot be done without regulation by Congress.

Then how do you enforce rules?

I am going to take issue with Geoff on this: Penn State University as an institution was being punished. And if Penn State cannot be punished, then the entire scheme of NCAA regulations is unenforceable (and humor me for the moment and assume NCAA regs are worth enforcing). Any long-lasting institution survives its individual members; old members are replaced by new members, but the institution is understood to survive uninterrupted. And the institution bears responsibility for the conduct of its members--past, present, and future. The players and coaches who break rules are always gone by the time enforcement comes down. If that punishment is wrongful because current (rather than rule-breaking) players are in the institution at the time of enforcement, then punishment of the institution always becomes wrongful. Even in a case of lack of institutional control (as Penn State arguably was), the institution could always argue that its failure was to control previous players, but that shouldn't be taken out on current players. But then the university gets off scott-free and has no incentive to police its future members, because it always can argue against punishment falling on its current players.

Taken to its conclusion, Geoff's argument applies to any institution and institutional punishments. Germany should not be made to provide reparations or other compensation to Holocaust victims because the punishment falls on the current German government and citizens; ditto for arguments with respect to slavery. International law (which I rarely cite or discuss) recognizes the concept of successor governments. Why not for universities in the field of NCAA enforcement?

All that said, I agree with Geoff that this is an example of "punisher's remorse", a term I wish I had used in a radio interview I did last week. But the remorse is over punishing Penn State--the NCAA does not want one of its flagship institutions under such a harsh punishment.

Geoffrey Rapp: the NCAA's "Punisher's Remorse"

Geoff and I were interviewed by Mike Dawson of the Centre Daily to talk about the NCAA reducing Penn State's penalty and other challenges for the NCAA (O'Bannon case; concussions etc.).  Geoff has some powerful and smart quotes in it.  Here's a a couple of excerpts:

* * *

“I think what’s going on here is largely ... punisher’s remorse of sorts,” said Geoffrey Rapp, a sports law expert at the University of Toledo in Ohio. “As they now have lived with the sanction for a year, they realized the victims are the current players. It’s not really putting any hurt on the people that we think are really responsible.”

* * *

“All of these are examples of duplicitousness and double standards on the NCAA, which then makes them uncomfortable with the moral high horse they were riding last summer,” Rapp said, referring to the time the Penn State sanctions were handed down.

Read more here: http://www.centredaily.com/2013/09/28/3812610/ncaa-acting-on-punishers-remorse.html#storylink=cpy

To read the rest, click here.

Read more here: http://www.centredaily.com/2013/09/28/3812610/ncaa-acting-on-punishers-remorse.html#storylink=cpy

 

Electronic Arts' Settlement is a "Win" for Consumers

Electronic Arts' settlement of the O'Bannon-Keller litigation, assuming it gets approved by the court, is a big win for the consumer because it creates a new market opportunity for numerous video game producers.  These companies can now compete against each other by negotiating with college players, collectively as a group, over the payment of a licensing fee for the exclusive right to use clear images and actual names of players, which will result in a better quality game with better graphics for the consumer.  And the payment of a licensing fee to the players might not increase the price of the game for the consumer.  Case in point, EA pays a licensing fee to NFL players for the use of their names and images, yet the price of EA's Madden NFL game is the same as the price of its NCAA Football game in which a licensing fee is not paid to the players.  According to basic principles of supply and demand, price is determined by what the consumer is willing to pay.

The underlying basis for recognition of publicity rights is the prevention of unjust enrichment.  For years EA has been profiting from the free use of college players' identities, and now they must disgorge the unjust gain.  The "Principles of Amateurism" should not be used as an excuse by a video game company or anyone else, including the hundreds of people who run big-time college sports and pay themselves multi-million dollar salaries, to unjustly enrich themselves at the expense of the players whose efforts make such revenue generation even possible.

The NCAA, the conferences and the universities can continue to dig their heels in and keep fighting this battle but, even if they end up winning the legal battle, the principles of supply and demand will ultimately prevail.  Baseball won the battle in Curt Flood's antitrust lawsuit but it ultimately lost the war, and not necessarily because of the National Labor Relations Act but essentially due to principles of supply and demand.  There is a small supply of elite college football players with unique skill and talent known as Four- and Five-Star recruits who are not fungible and are in huge demand because the product of big-time college sports, and the revenue it generates for all of those who produce it, simply does not exist unless these players agree to participate.  Can big-time college football make the same money with "scab" college players?  What would happen if these players ultimately got together and simply decided not to participate unless certain conditions were met, and not necessarily the right to compete for wages (which these players would concede changes the product of "amateur sports") but rather the right to receive payment for the commercial use of their names/likenesses, the right to have an agent negotiate with professional teams, or the right to better insurance and more scholarship funds?  And they do not have to be declared employees by law nor form a labor union to do it.      

Ed O'Bannon reaches Proposed Settlement with Electronic Arts and Collegiate Licensing Company

Some major sports law news today - my take for Sports Illustrated.