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From Antitrust Law Daily, November 11, 2013

Injunctive relief class, not damages class, certified in NCAA student-athlete licensing litigation

By Tobias J. Gillett, J.D., LL.M.

The federal district court in Oakland, California has certified a class of current and former college athletes seeking injunctive relief against the National Collegiate Athletic Association (NCAA) regarding its rules that allegedly restrained competition in the market for the licensing of the athletes’ names, images, and likenesses for use in game broadcasts and videogames (In re NCAA Student-Athlete Name & Likeness Licensing Litigation, November 8, 2013, Wilken, C.). However, the court declined to certify a class of players seeking damages for use of their names, likenesses, and images in videogames or game broadcasts after July 21, 2005.

The players alleged two sets of claims: (1) that the NCAA violated their common law and statutory rights of publicity by misappropriating their names, images, and likenesses and (2) that the NCAA had violated federal antitrust law by conspiring with Collegiate Licensing Company (CLC) and Electronic Arts Inc. (EA) to restrain competition in the market for the use of their names, images, and likenesses. The antitrust plaintiffs asserted that the NCAA required student-athletes to sign release forms as a condition of their eligibility to compete in which the athletes “relinquish[ed] all rights in perpetuity to the commercial use of their images.” The NCAA then sold or licensed the athletes’ names, images, and likenesses to third parties. EA used these assets in NCAA-branded video games, and CLC represented the NCAA in licensing agreements with EA and other producers of NCAA-branded merchandise.

The players alleged that the NCAA’s written and unwritten rules prohibiting student athletes from receiving compensation for the commercial use of their names, images, and likenesses restrained competition in the markets for (1) “student-athlete Division I college education” in the United States, and (2) “acquisition of group licensing rights for the use of student-athletes’ names, images, and likenesses in the broadcasts or rebroadcasts of Division I basketball and football games and in videogames featuring Division I basketball and football in the United States.” On October 25, the court held that the players’ Sherman Act claims survived the NCAA’s motion to dismiss.

The players moved to certify two classes: (1) an injunctive relief class of “[a]ll 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 in game footage or in video games licensed or sold by Defendants, their co-conspirators, or their licensees after the conclusion of the athlete’s participation in intercollegiate athletics”; and (2) a damages class of “[a]ll former student-athletes residing in the United States who 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 whose images, likenesses and/or names have been included in game footage or in videogames licensed or sold by Defendants, their co-conspirators, or their licensees from July 21, 2005 and continuing until a final judgment in this matter.” The court noted that the only difference between the proposed classes was that the damages class excluded all players “whose names, likenesses, and images were featured in videogames or game broadcasts before July 21, 2005.”

Rule 23(a)

The court found that both classes satisfied the numerosity, commonality, typicality, and adequacy requirements of Federal Rule of Civil Procedure 23(a).

Numerosity. The players satisfied Rule 23(a)’s numerosity requirement by alleging that their classes would each contain several thousand potential members, according to the court.

Commonality. The players raised several questions of law and fact common to the class, including the size of the markets identified in the complaint, whether the NCAA’s rules had harmed competition in those markets, and whether the NCAA had valid procompetitive justifications for its conduct. The fact that some purportedly common questions raised by the players might not actually be capable of common resolution did not defeat commonality because “all that Rule 23(a)(2) requires is a single significant question of law or fact.”

Typicality. Both classes also satisfied the typicality requirement. All of the plaintiffs “play or played for a Division I men’s football or basketball team; all were depicted, without their consent and without payment, in videogames or game broadcasts; and all complied with NCAA rules that allegedly barred them from selling or licensing the rights to their names, images, and likenesses.” Moreover, the NCAA did not identify any defense that applied uniquely to the named plaintiffs or any other bar to typicality.

Adequacy. Finally, the named plaintiffs would “fairly and adequately protect the interests of the class,” according to the court, despite the NCAA’s contention that the NCAA’s damages model, in providing for equal division of damages among members of football and basketball teams, “benefit[ed] lesser-known athletes at the expense of more popular athletes.” The court found the alleged conflict to be “illusory,” noting that the plaintiffs had alleged harm to competition within a group licensing market rather than an individual licensing market. Even if some class members suffered greater economic losses from their inability to license their individual publicity rights, “those losses would have no bearing on this case, where Plaintiffs seek compensation only for losses suffered in the group licensing market.”

Even if such a conflict had been created, the Ninth Circuit had held that “damages calculations alone cannot defeat certification.” The players would “still share an interest in establishing that the NCAA restrained competition in the relevant markets and that it lacked a procompetitive justification for doing so.” Any effects of the conflict would only extend to the damages class, not the injunctive relief class.

Rule 23(b)

Rule 23(b)(2). The court found certification of the injunctive relief class under Rule 23(b)(2) to be appropriate, despite the NCAA’s contention that certification was inappropriate because the “demand for damages predominates over any request for injunctive relief,” and “individualized monetary claims belong in Rule 23(b)(3).” Nothing prevented the players from seeking certification under both Rule 23(b)(2) and Rule 23(b)(3). Moreover, the injunctive relief would not be “merely ancillary” to the players’ demand for damages, because the injunctive relief would be “necessary to eliminate the restraints that the NCAA has allegedly imposed on competition in the relevant markets.” Without an injunction, current and former student-athletes could be “subject to ongoing antitrust harms resulting from the continued unauthorized use of their names, images, and likenesses.”

Rule 23(b)(3). However, the court declined to certify the damages class under Rule 23(b)(3) because the players did not identify “a feasible way to determine which member of the Damages Subclass were actually harmed by the NCAA’s allegedly anticompetitive conduct,” and therefore did not show that the class action would be manageable. The court cited the “substitution effect” identified by one of the expert witnesses, in which many of the athletes that left college early to play professionally “plausibly would have stayed in college” if they had been permitted to participate in a group licensing program, but in turn “would have displaced other student-athletes on their respective teams.” Student-athletes that would have been displaced would not have suffered injuries a members of the teams for which they played because “they would never have been able to play for those teams in the absence of challenged restraints.” The court noted that some of these athletes may even have benefitted from the restraints by receiving roster spots that would otherwise have gone to more talented athletes.

The court also noted a similar substitution effect with respect to Division I schools, in that increased competition for student-athletes and the associated increased costs of recruiting and retaining those athletes would likely have driven some schools into less competitive divisions, thus “insulating entire teams from the specific harms” alleged by the plaintiffs.

Further barriers to manageability were presented by the difficulties of determining which student-athletes appeared in videogames or game footage during the relevant period, the court observed. NCAA Football Bowl Subdivision rosters could contain 105 players, but the teams in NCAA-licensed video games only consisted of 68 players each. The plaintiffs did not offer a feasible method of determining which athletes were depicted in the videogames and which were not. Similarly, the plaintiffs did not explain how they would determine which of the student-athletes listed in team rosters actually appeared in televised games, or how they would determine which games were broadcast pursuant to licenses issued after July 21, 2005.

The case is No. C 09-1967 CW.

Attorneys: Shana E. Scarlett (Hagens Berman Sobol Shapiro LLP) for Samuel Michael Keller. Robert James Slaughter (Keker & Van Nest LLP) for Electronic Arts Inc. Juan Carlos Araneda (Meckler Bulger Tilson Marick & Pearson LLP) and Robert James Wierenga (Schiff Hardin LLP) for National Collegiate Athletic Association. Amber Melia Trincado (King & Spalding LLP) for Collegiate Licensing Co.

Companies: Electronic Arts Inc.; National Collegiate Athletic Association; Collegiate Licensing Co.

MainStory: TopStory Antitrust CaliforniaNews

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