October 17, 2021

Volume XI, Number 290

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An In-Depth Summary and Analysis of the Important Alston Decision

On June 21, 2021, the United States Supreme Court (“SCOTUS”) released its highly anticipated opinion in NCAA v. Alston. SCOTUS unanimously upheld the rulings by the United States District Court for the Northern District of California (“district court”) and the United States Court of Appeals for the Ninth Circuit (“9th Circuit”), which stated that while the NCAA could restrict benefits unrelated to education, the NCAA could not limit any benefits related to education, and were enjoined from doing so.  SCOTUS stated the district court’s decision was in conformity with anti‑trust principles.  Justice Neil Gorsuch delivered the opinion of SCOTUS. 

It is important to note the distinction between educational and non‑educational compensation in the district court’s decision. The district court agreed that the NCAA must have ample latitude to run its enterprise and should not be unnecessarily hampered by anti-trust principles. To that end, the district court rejected the student‑athletes’ challenge to NCAA rules that limit athletic scholarship to the full cost of attendance and that restrict compensation and benefits unrelated to education.  The district court found that these compensation restrictions would appropriately differentiate collegiate athletics from professional sports.  However, the district court stated that education related benefits – such as scholarships for graduate or vocational school, payments for academic tutoring, or paid post eligibility internships – could not be confused with a professional athlete’s salary.  Therefore, the NCAA was enjoined from limiting education related compensation or benefits that conferences and schools may provide to student‑athletes playing Division I football and basketball.  Further, the NCAA could continue to limit cash awards for academic achievement – but only so long as those limits were not lower than the cash awards allowed for athletic achievement.

Both sides appealed the district court’s decision. The student-athletes contended the district court should have enjoined all of the NCAA’s compensation limits.  Alternatively, the NCAA contended the district court went too far in limiting its restraints on education related expenses.  The 9th Circuit stated that the district court achieved the right balance “in crafting a remedy that both prevents anticompetitive harm to student‑athletes, while serving the procompetitive purpose of preserving the popularity of college sports.”  In terms of SCOTUS’ scope of review, the NCAA petitioned for a reversal of the lower courts’ decisions, while the student‑athletes did not renew their challenge to all of the NCAA’s compensation limits.

The NCAA contends that the lower courts did not properly apply the “rule of reason” anti-trust analysis. The “rule of reason” analysis is a robust test that focuses on the state of competition within a well-defined relevant agreement and requires a full-blown analysis of the relevant market.  Rather, the NCAA maintains they should have been given an extremely deferential standard, and not subject to such a robust analysis, as it is a joint venture among members who must collaborate to offer consumers the unique product of college athletics.  Gorsuch stated that even if the NCAA is a joint venture, it enjoys monopoly power in the relevant market and its restraints were properly analyzed under the fact-specific guidance of a “rule of reason” analysis.  The NCAA also attempted to argue that the “rule of reason” analysis was improper as member schools are not “commercial enterprises.”  Gorsuch rejected this argument based on prior anti‑trust cases involving the NCAA. 

Furthermore, the NCAA contends the historic SCOTUS 1984 decision, Board of Regents, allows the NCAA to limit student athlete compensation.  The Board of Regents case held that the NCAA’s restraints on televising games were essential to the product and were a lawful restraint of trade.  In that decision, SCOTUS commented that “the NCAA plays a critical role in the maintenance of a revered tradition of amateurism in college sports.”  Gorsuch stated that this sort of “passing comment” is not binding nor dispositive of limiting student‑athletes compensation.  Gorsuch states “[SCOTUS] simply did not have occasion to declare – nor did it declare – the NCAA’s compensation restriction procompetitive both in 1984 and forevermore.”  Furthermore, Gorsuch explains that the business of college sports has changed dramatically since 1984.  By way of example, Gorsuch explains that March Madness television rights have increased from $16 million to $1.1 billion from the period of 1984 to 2016.  This is a significant holding by SCOTUS, as Board of Regents has long been held up as important decision promoting the NCAA’s amateurism model. 

The NCAA also argued that the district court’s decision lacked merit, contending: (1) the district court erroneously required it to provide its rules are the least restrictive means of achieving a procompetitive purpose; (2) the district court should have deferred to the NCAA’s conception of amateurism instead of “redefining” its product; and (3) the district court’s injunction will micromanage the NCAA’s business. Gorsuch rejected these arguments responding: (1) the district court did not require the NCAA to show its rules met that standard, rather, the NCAA’s restraints relating to educational expenses are patently and inexplicably stricter than necessary; (2) the NCAA has not maintained a consistent definition of amateurism; and (3) the district court only enjoined certain restraints and gives the NCAA much leeway in deciding what constitutes an education related benefit.

Some might say the majority opinion authored by Gorsuch – in only upholding the lower courts’ decisions limited to education related compensation – does not go far enough in breaking apart the NCAA’s amateurism model. Gorsuch states “[t]he national debate about amateurism in college sports is important” but it is not SCOTUS’ job to resolve it.  Gorsuch emphasized that SCOUTS job is to determine whether the district court properly applied principles of anti-trust law.

The more incendiary criticism of the NCAA came from the Justice’s concurring opinion. Justice Kavanaugh writes that the NCAA’s compensation restriction would be “flatly illegal” in any other industry and states: “it is highly questionable whether the NCAA and its member colleges can justify not paying student athletes a fair share of the revenues on the circular theory that the defining characteristic of college sports is that the colleges do not pay student athletes. And if that asserted justification is unavailing, it is not clear how the NCAA can legally defend its remaining compensation rules.”  The concurring opinion is clear indication to the universities and the courts that the tides are changing in the world of amateurism.

How will this ruling affect universities in the long term?  Schools should look to Kavanaugh’s opinion as indication that the NCAA’s amateurism model is cracking.  The comments by Kavanaugh should be a signal to the NCAA, universities, and other organizations that SCOTUS will be on the side of student-athletes going forward. Accordingly, universities should plan for a future where student‑athletes are able to be compensated by non-educational and educational benefits.  

How will this ruling affect universities in the short term?  It stands to reason that universities will look for creative advantages with the expanded ability to offer education benefits related to football and basketball. Schools may look to adopt scholarship programs akin to the Vanderbilt University’s “Opportunity Vanderbilt.” “Opportunity Vanderbilt” promises that any student who is admitted to the school will not be prevented from attending due to cost of tuition. The school looks at each student’s family income, how much it can reasonably provide for their child to attend Vanderbilt, and subtracts that from the regular cost.  Many have complained this has allowed Vanderbilt to circumvent the 11.7 scholarships allocated for college baseball and has led to their recent success, including reaching finals of the recent College World Series.  Given this ruling, universities might look to adopt similar programs to give themselves a competitive edge on game day. 

The most important impact will likely be universities’ bottom line and their management of costs going forward as athletic departments will look to gain a recruiting advantage in offering benefits/resources for prospective student‑athletes.  In the past, universities were able to market themselves based on the quality of their facilities and/or their respective college town.  Going forward, universities will likely have to position themselves to offer benefits that will more directly and individually impact prospective student‑athletes.

It is also important to consider the long term implications for women’s athletics as well.  Schools will need to ensure they are compliance with Title XI given the changes in allowed compensation.  Further, it stands to reason that the revenue generating sports, football and men’s basketball, will occupy the focus and the majority of expenses of universities in the near future. However, the ability of women student‑athletes to market themselves and be compensated through social media and other platforms, like TikTok and Instagram, could cause the awareness of women’s athletics to increase.  Universities will need to take note of this and it could lead to a reevaluation of the time and resources dedicated to women’s athletics.

© 2021 Winstead PC.National Law Review, Volume XI, Number 229
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Adarsh Annamaneni Corporate Litigation Attorney Winstead Houston
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Adarsh Annamaneni is a member of Winstead’s Business Litigation practice group. Adarsh manages disputes involving eminent domain and condemnation litigation, commercial litigation, and personal injury litigation. 

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Denis Braham Real Estate and Sports Attorney Winstead Law Firm
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Chairman Emeritus Denis Braham is a member of the firm's Real Estate Development & Investments and Corporate, Securities/Mergers & Acquisitions practices, and he chairs Winstead's Sports Business & Media Industry Group.  An attorney with Winstead since 1989, Denis provides counsel to professional sports clients, including the Dallas Cowboys and the Houston Texans.  As a real estate and corporate attorney, he travels extensively for developers, investors and lenders throughout the country.

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Michael Cruciani Corporate Attorney Winstead Austin, TX
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Michael is a member of Winstead’s Corporate, Securities/Mergers & Acquisitions Practice Group.  Michael’s practice focuses primarily on corporate transactions including mergers & acquisitions, venture capital financing, public and private offerings, and business restructuring. In addition, he advises his clients on issues that arise at all stages of a company’s development, ranging from entity formation and governance to general corporate counsel work.

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Mike Perrin Veteran Trial Attorney Winstead Houston, TX
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Mike Perrin is a veteran trial attorney who works closely with Winstead’s practice and industry groups as a senior advisor.

Mike advises business leaders on advancing ventures, strategic planning, complex transactions, risk management and business disputes.  He uses his experience to assemble legal teams that solve critical issues and seize opportunities for achieving client goals.

Prior to joining Winstead, Mike served as the Men’s Athletic Director for The University of Texas.  A former defensive end and linebacker for the Longhorns under Coach Darrell Royal, Mike is rooted...

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