Paying NCAA College Athletes: Inside the Legal Battle

Mark Emmert, president of the National Collegiate Athletic Association, doesn’t come across as a villain. Trim in physique with sandy-gray hair, he wears his rectangular glasses far down on his nose and peers over them. His career reflects a singular commitment to higher education. The first in his family to go to college, he went on to earn a doctorate in public administration. Prior to taking over campus sports’ governing body in 2010, Emmert, 61, was chancellor of Louisiana State University and president of the University of Washington, his alma mater. He’s also been an administrator at the University of Connecticut, Montana State, and the University of Colorado. He jokes that he’s “every parent’s nightmare: I went to college and never left.”

Emmert, accompanied by his public-relations aide, Bob Williams, was speaking in a sunny conference room at the NCAA’s modern high-ceilinged headquarters in Indianapolis—a placid refuge from the onslaught that’s lasted all summer. In June, Emmert took the stand in federal court in Oakland, Calif., in a class-action suit called O’Bannon v. NCAA alleging that he runs an exploitative price-fixing cartel. A plaintiffs’ lawyer waved an e-mail Emmert received in 2010 from a senior aide noting that many observers regard the NCAA’s guiding principle—that athletes, first and foremost, are students—as “the great hypocrisy of intercollegiate athletics.” Even as Emmert tried to defend the NCAA’s ban on college athletes’ receiving compensation for their labor—despite the billions they generate for their institutions, for television networks, and for the NCAA itself—screens in the courtroom displayed players at press conferences standing in front of walls densely decorated with corporate logos. Three weeks later, Emmert endured a verbal pummeling before the U.S. Senate Committee on Commerce, Science, and Transportation in Washington. After he explained the limits of the NCAA’s role, Senator Claire McCaskill (D-Mo.) scoffed: “If you’re just a monetary pass-through, why should you exist?”

That’s a question being asked by more and more people associated with big-ticket college sports, including the colleges themselves. In August, under the threat of mutiny by the five richest football conferences, Emmert presided over a vote at NCAA headquarters to grant the 65 top sports schools greater freedom to provide student-athletes with cash and access to professional agents. On Aug. 8, a federal judge in Oakland went further, siding with the plaintiffs in O’Bannon and ruling that major sports schools have indeed operated illegally by banning athletes from licensing their names and images. The NCAA, in other words, has started to crack under the weight of the wildly profitable system it built over the years.

Multibillion-dollar TV deals have eroded the conceit that the big-revenue sports are primarily about sound minds in sound bodies. The recent realignment of the most powerful schools into five conferences packaged for maximum capitalism has brought even more money into the picture. In current football and basketball broadcast deals alone, the NCAA and the big five conferences—the Atlantic Coast, Big 12, Big Ten, Pacific-12, and Southeastern—are guaranteed more than $31 billion over the coming years. The whiff of all that cash inevitably attracted heavyweight plaintiffs’ lawyers. Lawsuits drew media interest, and members of Congress smelled headlines. Even the United Steelworkers got into the act, backing a long-shot bid to unionize football players at Northwestern University.

It’s all so ironic, Emmert insists. He took the top job in college sports four years ago determined, he says, to bring its ideals more in line with the realities of an industry that generates $16 billion a year in broadcast, endorsement, and licensing contracts, among other remuneration. “We’re marching down this road [toward reform],” Emmert says, “and there’s a bunch of IEDs and grenades being lobbed at you. But you still have to make progress down the road.” He describes the NCAA as a bulwark against forces that threaten to wipe out the existing college sports system and replace it with something more candidly profit-driven. “It would mean,” Emmert says, “the end of college sports as we know it.”

Crusader Vaccaro at home in Rancho Mirage, Calif.Photograph by Nathanael Turner for Bloomberg BusinessweekCrusader Vaccaro at home in Rancho Mirage, Calif.

To those involved in the struggle to pay college athletes, the demise of the current system is both inevitable and long overdue. The story of how it came about involves an unlikely group of activists, former players, and lawyers who toiled in the courts for years before achieving their biggest breakthrough this month. And at the center of it all is a 75-year-old former sneaker promoter named Sonny Vaccaro, who helped transform campus sports into a pecuniary juggernaut more than three decades ago and is now leading the revolution against it. “You tell make-believe stories about a business this size for long enough, it’s going to catch up to you one day,” says Vaccaro. “Now the question is whether the NCAA is the one that still gets to say how all the money gets divided up. It looks like Emmert and those guys are losing control.”
An undistinguished athlete at Youngstown State University in the late 1950s, John Paul “Sonny” Vaccaro promoted rock concerts and worked as a sports agent before taking a $500-a-month job in 1977 with Nike (NKE). Seven years later he persuaded the sneaker maker to pile its endorsement bets on a National Basketball Association rookie named Michael Jordan. In 1988 he brokered Nike’s first universitywide deal to supply sneakers to athletes on all teams at the University of Miami. He operated corporate-sponsored summer showcases for top high school recruits. “Sure, I wrote checks,” he says. “The schools, the coaches, the NCAA—they never said, ‘No thank you.’ ” During that time, “ESPN was expanding like crazy. The college game was everywhere, all the time. Big bucks. The only ones not making any money? The players. Only a few ever go pro. Started to bother me.”

After lucrative stints with Adidas (ADS:GR) and Reebok, Vaccaro retired in 2007, he says, “to do some good.” Whatever his mix of motives—redemption, attention seeking, maybe altruism—he began delivering speeches on how the college athletes he’d turned into human billboards deserved a share of the revenue. “I didn’t get very far at first,” he says. “Make a speech, one-day story, it disappears.”

That changed after he visited Howard University in Washington in 2008 to deliver one of his stemwinders about athletic inequities. An old friend in the audience introduced Vaccaro to Kenneth Feinberg, a prominent Washington attorney who oversees mass-disaster settlements. Feinberg, in turn, connected Vaccaro to Michael Hausfeld.

A professorial plaintiffs’ lawyer based in Washington, Hausfeld wears pastel bow ties and rarely speaks above a whisper. He has successfully challenged ExxonMobil (XOM) on behalf of Native Americans and Swiss banks on behalf of the survivors of Holocaust victims. “I have to confess that at first I didn’t understand a lot of what Sonny told me,” Hausfeld says, “both because he speaks so quickly and because I’m not a sports nut.”

Vaccaro gave Hausfeld a homework assignment: Read the confessional memoir of Walter Byers, the NCAA’s executive director from 1951 to 1987 and the man known as the governing body’s master builder. Published eight years after Byers left office, Unsportsmanlike Conduct: Exploiting College Athletes became a Rosetta stone for NCAA dissidents.

“Prosecutors and the courts,” Byers wrote, “should use antitrust laws to break up the collegiate cartel—not just in athletics but possibly in other aspects of collegiate life as well.” As Byers argued, “The college player cannot sell his own feet (the coach does that) nor can he sell his own name (the college will do that). This is the plantation mentality resurrected and blessed by today’s campus executives.” To Hausfeld, the memoir amounted to an invitation wrapped in a confession.

A class-action suit requires a lead plaintiff. Working as an unpaid consultant, Vaccaro helped recruit Ed O’Bannon, a star basketball player at the University of California at Los Angeles in the mid-1990s. After a middling pro career, O’Bannon was selling Toyotas at a dealership in Las Vegas. The 6-foot-8 former power forward had been irritated to see his lanky, shiny-headed likeness used in video games from which he didn’t make a dime. He agreed to work with Hausfeld, who in 2009 filed suit against the NCAA to eliminate the organization’s ban on student-athletes profiting from the licensing of their names and images.

“We didn’t seek to destroy the NCAA,” the lawyer says during an interview in his office on K Street. “We sought to prevent it from acting as a cartel to deny rights to athletes whose labor produces all the value in a multibillion-dollar business.”

On the witness stand in June, O’Bannon sounded ambivalent about his role as the bane of the college sports business. He spoke with pride about UCLA’s national championship in 1995 and his most outstanding player honors. He lauded the school’s basketball heritage as “second to none.” His years at UCLA led to two seasons in the NBA, as well as a few more in Europe. He conceded that his UCLA experience remained valuable to him and that although he hadn’t graduated during his basketball days, he’d since gone back to complete his degree. Still, he said firmly, “with the amount of money they’re bringing in,” top college basketball and football players “should be compensated.”
As it made its way through the courts, O’Bannon became a growing source of consternation for Emmert and the NCAA, which paid millions of dollars in legal fees for scores of motions trying to have it and companion cases dismissed. Meanwhile a broader, more basic threat to the NCAA’s control over the livelihoods of student-athletes was taking shape. It traces to a bag of groceries left for a hungry young football star.

“People think college players live large, but it’s not true,” Ramogi Huma says. While O’Bannon was adding a banner to the rafters of UCLA’s Pauley Pavilion in 1995, Huma was a freshman linebacker for the Bruins football squad. A Huma teammate, the All-American Donnie Edwards, complained publicly that his scholarship covered tuition, room, and board, but not late-night pizza runs. After an anonymous benefactor dropped off $150 worth of food at Edwards’s door, UCLA suspended Edwards for a game for accepting the gift, a violation of the NCAA’s picayune player-benefit rules. “That really bothered me,” Huma recalls. He “started noticing other things,” including that his UCLA health insurance didn’t cover summer workouts that were nominally “voluntary.”

More bookish than many of his teammates and aware that his future didn’t include pro ball, Huma dug into NCAA history. He discovered the Byers memoir, with its reference to a “plantation mentality.” “There it is,” Huma recalls thinking. “I lived the plantation mentality.”

He didn’t connect with O’Bannon, but after earning degrees in psychology and public health, Huma turned his considerable energies to building an advocacy group now called the National College Players Association. With modest funding from the Steelworkers, he scored some low-profile victories, including an increase in the NCAA death benefit from a paltry $10,000 to $25,000. The going was slow. “The public confuses Division I sports with the NFL and the NBA, even though less than one-half of one percent of college players ever get to the pros and make any real money,” Huma says.

He came to a realization that occurred independently to Vaccaro. In Huma’s words: “We needed to get the people who really know how college sports work together with lawyers willing to really fight the system and not give up when the NCAA pushes back.”

Huma felt let down by the 2008 settlement of White v. NCAA, which sought payments to athletes beyond basic scholarships. Many football and basketball recruits from poor backgrounds can’t afford phone bills, school supplies, or trips home. The plaintiffs’ lawyers in the White case settled for $10 million paid out over four years to 12,000 student-athletes, which translated to average one-time payments of $833 apiece. “The lawyers walked away with millions in fees, but the restrictions remained in place for the future,” says Huma. “We didn’t accomplish anything meaningful.”

Huma says he backed O’Bannon but thought it didn’t go far enough. He found an attentive audience in Jeffrey Kessler.

Loud and provocative, Kessler doesn’t suffer from an excess of humility. His past representations of Michael Jordan and Tom Brady, the All-Pro quarterback of the New England Patriots, swiftly work their way into conversation. Within minutes of ushering me into his office high above Manhattan’s Grand Central Terminal, Kessler is talking about Patrick Ewing, the former New York Knicks center and Hall of Fame honoree. “Patrick said, ‘You know, Jeffrey, I don’t think you were much good on the court, but you’re very good in the court.’ ”

As a boy growing up in Brooklyn in the 1960s, Kessler explains, his athletic enthusiasm exceeded his skill. He’s made up for that as a lawyer, becoming outside counsel at various times to professional player unions in basketball, football, baseball, and hockey. He litigated McNeil v. National Football League, which in 1992 helped establish free agency in the NFL and usher in today’s megasalaries.

For years, Kessler harbored a powerful distaste for how college sports operates. Discussions with Huma, together with O’Bannon and other cases like it, persuaded Kessler it was time to join the assault. “The NCAA grossly exploits college athletes,” he says. “It’s unfair, it’s disgusting, it’s illegal, and it’s been going on for a long time. We’re going to put an end to it by bringing the free market to college sports, same as it exists in the pros.”

In March, Kessler filed his sweeping class action against the NCAA and the big five conferences, naming Clemson University defensive back Martin Jenkins as lead plaintiff. Preparing for his fourth and final year of college ball, Jenkins, 5 feet 9 and 180 pounds, has a reputation for versatility and toughness. But his tally of injuries—a serious hernia, a shoulder that periodically pops out of its socket, and arthritis inherited from his father, Lee, a standout defender at Tennessee whose career with the New York Giants was cut short by back and knee problems—underscore the brevity of many athletes’ commercial viability.

As promised, Jenkins v. NCAA seeks to carpet-bomb Indianapolis by permitting universities to bid freely for the services of athletes. Existing restrictions on paying players more than their scholarships “are pernicious, a blatant violation of antitrust laws, have no legitimate pro-competitive justification, and should now be struck down,” the suit declares. “The way I see it,” says Vaccaro, “O’Bannon softens ’em up, and then Jenkins comes in for the kill.”
Emmert recognizes that things have gotten out of whack, at least financially. As LSU’s chancellor in 1999, he hired celebrated football coach Nick Saban, who five years later took the Tigers to a national championship. Emmert made him the best-paid college coach in the country. Now at Alabama, Saban signed an eight-year deal in June paying $6.9 million annually, which once again put him at the top of the coaching-comp ladder. “There are assistant coaches now making $1.5 million,” Emmert marvels. “Everybody looks at that, and it’s kind of shocking.” He discusses the pay escalation as if it’s a force of nature, as irresistible as a hurricane. As president of the NCAA, he received total compensation of $1.7 million in 2012 and travels by private jet, neither of which he apologizes for.

Immediately upon arriving in Indianapolis, Emmert announced an agenda of incremental changes, including permitting schools to enhance athletic scholarships with $2,000 stipends. In 2013 the NCAA dropped a ban on athletes receiving a smear of cream cheese to accompany authorized between-meal bagels. This is not a joke; the NCAA has enforced a lot of dumb rules, Emmert says, and some of them remain on the books.

On more serious fronts, he hit resistance from elements of the NCAA’s vast 1,200-school membership. Schools with smaller sports budgets galvanized an override in 2012 of Emmert’s stipend proposal. This irritated members of the big five conferences, which threatened they would break away—and take their TV contracts with them—if they couldn’t offer more benefits to their athletic recruits. Emmert was thwarted by the organization’s baffling latticework of committees and complex procedures, he says. “We have a process that makes Congress look functional.”

Blunt comments like that underscored his reputation for impatience. In 2012 he antagonized some skeptics when he moved decisively to fine Pennsylvania State University $60 million as punishment for a child sex-abuse scandal tied to the school’s storied football program. Detractors said that by crippling the team, Emmert effectively penalized innocent student-athletes, rather than the criminally convicted former assistant coach and more senior university officials. A mishandled NCAA staff investigation at the University of Miami led to more criticism and a minor meltdown at a press conference during the 2013 Final Four basketball tournament in Atlanta. “I know you’re disappointed,” Emmert said to a journalist, “but I’m still here.”

The loss of composure was temporary, although resentment clearly lingers. “When I responded to the [Division I] board that said they wanted a new face for the NCAA, I didn’t know that meant putting a bull’s-eye on that face,” Emmert tells me. “But that’s what I signed up for, so OK.”

Emmert’s performance in O’Bannon hasn’t helped. On the stand in Oakland in June, he testified loftily about sports providing “social cohesion” on campus, but only if administered according to the NCAA’s “core values” of amateurism and education. These principles provide “that the participants in college athletics have to be full-time students at their universities participating in sport and, second, that they be amateurs, that they not be professionals.” If student-athletes receive compensation, fans would stay away in droves, he warned. “To convert college sports into professional sports would be tantamount to converting it into minor-league sports,” he continued, “and we know that in the U.S. minor-league sports aren’t very successful, either for fan support or for the fan experience.”

Evidently his arguments were unconvincing. On Aug. 8, U.S. District Court Judge Claudia Wilken issued a 99-page ruling in which she concluded that the NCAA’s nebulous notion of amateurism didn’t justify fixing the price for athletic skill at the value of a scholarship. She described the NCAA’s history as a narrative of equivocation on the financial incentives athletes may receive; even today, exceptions to amateurism allow NCAA tennis players to keep professional tournament prize money earned as teenagers and European transplants to retain certain payments from soccer or basketball clubs in their home countries. In short, Wilken found that amateurism is whatever the NCAA says it is—a situational principle too convenient by half.

In a direct rebuke to Emmert’s argument that fans would desert college football and basketball if athletes received licensing profits, she scoffed at the NCAA’s consumer surveys, saying they’d been marred by leading questions and ambiguous results. Some of the NCAA’s own witnesses undercut Emmert, the judge said. An athletic department official from the University of Texas testified that UT sports would remain popular as long as they had “anything in our world to do with the University of Texas.” Wilken gave equally short shrift to Emmert’s claim that denying athletes any compensation somehow improved their education. She rejected the NCAA’s pretense that its member schools recruit jocks like O’Bannon primarily—or even in significant part—to make sure they hit the books.

The judge ordered the NCAA to drop its ban on player-licensing payments, allowing athletes to receive up to $5,000 each per year if they can negotiate such deals with broadcasters or game marketers. Schools may hold the money in trust until after students leave college. Wilken rejected Hausfeld’s request that student-athletes be allowed to sell endorsements, leaving that proposal, as well as demands for competitive salaries, for Jenkins and others sure to follow.

Hausfeld, whose clients didn’t seek money damages for themselves, hopes the NCAA will take O’Bannon to heart and, rather than appeal, move aggressively to institute changes far beyond those ordered by Wilken. These could include, he suggests, holding freshmen out of athletic competition so they have a chance to get up to speed academically, limiting practice schedules to cut down on injuries and missed classes, and requiring more generous insurance coverage. “Unfortunately, [the NCAA’s] tendency is to react to adversity with paralysis and self-interest, rather than compliance,” Hausfeld says. “So I’m not necessarily optimistic we’re anywhere close to the end of the story.”

Vaccaro sounds gleeful. He doubts the NCAA will ever push through meaningful reforms on its own. Without brute pressure, he says, “the NCAA and the big conferences would protect the money and prestige, and to hell with everyone else.” After O’Bannon, though, “no one is afraid of the Big Bad Wolf anymore. We opened the door to more lawsuits, and ‘amateurism’ is dead, gone.”

Emmert’s equanimity could reflect a deep inner certainty or an increasingly bizarre obliviousness—or both. “We will appeal,” he says, and amateurism remains alive and well. “I rather like our legal position,” he adds. “I’m very optimistic.”

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21 August 2014 | 9:57 am – Source:

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