Entertainment and Sports Law – Outline
Spring 2009 – Professor Berry
I. Anti-Trust Primer
A. Section One of the Sherman Act provides:
1. “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”
B. In Standard Oil v. US, the Supreme Court interpreted §1 to apply to all contracts that UNREASONABLY restrain trade.
C. Generally, restraints that promote competition are reasonable and restraints that restrict competition are unreasonable.
D. To determine if a restraint is UNREASONABLE, the court applies one of two levels of review:
1. Per se
2. Rule of reason
E. Per se: Activities are condemned, without inquiry into their reasonableness because of their likelihood of being anticompetitive. E.G. Price fixing, group boycotts.
F. Rule of reason: (Chicago Bd of Trade v. US)
1. Courts evaluate the effect of the behavior on the competitiveness of the market.
2. Plaintiff must show that the restraint creates anti-competitive effects.
3. Defendant must show that the anti-competitive effects create pro-competitive benefits
4. Plaintiff must show that the restraint is not necessary to accomplish the stated goal; the same pro-competitive end could be achieved through less competitive means
G. There a two basic types of restraints:
1. VERTICAL: Restraints that injure competitors AT DIFFERENT levels of competition (usually Rule of Reason)
2. HORIZONTAL: Restraints that injure competitors AT THE SAME LEVEL of production (usually PER SE)
H. Does the Sherman Act Apply to College Football?
1. NCAA v. Board of Regents asked whether §1 of the Sherman Act applies to non-profit organizations, including institutions of higher learning.
i “There is no doubt that the sweeping language of §1 applies to non-profit entities.”
2. Because the NCAA is an industry where horizontal restraints on competition are “essential if the product is to be available at all,” “we have decided that it would be inappropriate to apply a per se rule to this case.”
i Holding: NCAA television plan unreasonably restrains trade.
I. Rule of Reason Analysis
1. Can plaintiff show that the BCS is an anti-competitive restraint of trade?
2. Can the BCS show that its restraint has pro-competitive benefits?
3. Can plaintiff show that the BCS’s restraint can be achieved by less restrictive means?
II. The Student-Athlete and University Relationship
A. Contractual Aspects
1. Taylor v. Wake Forest – Take Away The relationship between the student-athlete and the university is a contractual one, with the express contract requiring participation by the athlete as a condition to the institution’s obligation to provide aid
2. An Express Contract
i Arising out of:
a The Statement of Financial Assistance
b National Letter of Intent (NIL)
c University Publications and Bulletins
3. The Statement of Financial Assistance
i Pursuant to the Statement of Financial Assistance, the college agrees to extend financial aid to student-athletes to the extent of:
ii Stated purpose: to assist and enable student-athletes to pursue a program of study and to participate in the educational process of the institution
iii NCAA Bylaw, Article 15
a One-year limit: Financial aid can be awarded just for 1 year.
b Reduction or cancellation during year:
– Cannot be based on athletic ability
– Only if:
1. Ineligible (i.e. academics)
2. Serious misconduct
3. Voluntarily withdraws
– on or before July 1 prior to the academic year
– Hearing before Financial Aid committee (not AD or FAC)
4. The National Letter of Intent (NLI)
i High school students (recruits) may sign a letter of intent agreeing to attend the institution for one year in exchange for the institution’s promise, in writing, to provide you athletics financial aid for the entire academic year, provided that:
a 1. You are admitted to the institution AND
b 2. You are eligible for athletics aid under NCAA rules.
ii A signed letter of intent also means that the student can no longer be recruited by any other National Letter of Intent school.
iii Details of NLI
a No requirement to sign NLI
b Penalty: May not participate for two years
c Can be released by Athletics Director (not coach) signing a Qualified Release Agreement.
d Still bound if coach leaves institution.
e No additions or deletions allowed to NLI.
f No contact with Coach/Institution at signing.
g 14-day signing deadline
5. Ross v. Creighton
i No tort of educational malpractice because:
a Difficulty of establishing uniform std. of care
b Causation issues inherently problematic
c Potential for flood of litigation
ii No tort of negligent admission because:
a No way to determine workable duty of care
b Unduly interferes with admissions
c If tort liability, only admit those students certain to succeed
iii “To state a claim for breach of contract, plaintiff must do more than simply allege that the education was not good enough. Instead, he must point to an identifiable contractual promise that the defendant failed to honor.”
iv “We read Mr. Ross’ complaint to allege more than a failure of the University to provide him with an education of a certain quality. Rather, he alleges that the University knew that he was not qualified academically to participate in its curriculum. Nevertheless, it made a specific promise that he would be able to participate in a meaningful way in the program because it would provide certain specific services to him.”
v “To adjudicate the claim, the court would not be required to determine whether Creighton had breached its contract … by providing deficient academic services. Rather, its inquiry would be limited to whether the University had provided any real access to its academic curriculum at all.”
vi Take Away – The contract between the athlete and the university requires legitimate access to the institution’s academic curriculum (Ross).
6. Jackson v. Drake
i “The court concludes that the financial aid agreements do not implicitly contain a right to play basketball.”
ii “A prerequisite for establishing a claim of negligence is the existence of a duty … Not every claim of negligence creates a civil cause of action.”
iii “The court finds that the policy considerations discussed previously do not weigh as heavily in favor of precluding the claims for negligent misrepresentation and fraud as in the claim for negligence.”
iv Take Away – Courts are generally unwilling to read in implicit terms (such as the right to play basketball) into the contractual relationship between student-athlete and university (Jackson).
7. Summary – The Student Athlete Relationship
i The relationship between the student-athlete and the university is a contractual one, with the express contract requiring participation by the athlete as a condition to the institution’s obligation to provide aid (Taylor).
ii One year term according to conditions of Statement of Financial aid and National Letter of Intent (if signed).
iii The contract requires legitimate access to the institution’s academic curriculum (Ross).
iv Courts are generally unwilling to read in implicit terms (such as the right to play basketball) into the contractual relationship between student-athlete and university (Jackson).
B. Do Student Athletes Posses Liberty or Property Interests?
1. Hysaw v. Washburn University of Topeka
a Violation of 42 U.S.C. § 1981
b Violation of 42 U.S.C. § 1983
c Property interests
d Liberty interests
e First Amendment interests
f Breach of contract
ii 42 U.S.C. § 1981: Equal Rights under the Law
a (a) Statement of equal rights – All persons … shall have the same right … to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.
b Court – “They claim … white players with equal or less ability were given greater opportunities to make more beneficial scholarship contracts and were allowed greater opportunities to participate in the Washburn football program.”
iii 42 U.S.C. § 1983: Civil Action for deprivation of rights
a “Every person who, under color of any statute, ordinance, regulation, custom, or usage … subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress …”
b Court “Property rights ‘are created and their dimensions are defined by existing rules that stem from an independent source such as state law.’ Only after a protectable property interest has been established do we then determine whether due process was afforded.”
iv Fourteenth Amendment
a “No State shall … deprive any person of life, liberty, or property, without due process of law…”
b For the student-athlete, what constitutes ‘property’? What constitutes ‘liberty’?
c Where do such rights come from? What is their source?
d Court – “Property rights ‘are created and their dimensions are defined by existing rules or understandings that
scipline Tarkanian or any other state university employee.”
ix “But even if we assume that a private monopolist can impose its will on a state agency by a threatened refusal to deal with it, it does not follow that the private party is therefore acting under color of state law.”
a “On the facts of the present case, the NCAA acted jointly with UNLV in suspending Tarkanian.”
xi Take Away – The NCAA is not a state actor for purposes of the Fourteenth Amendment in its regulation of its member institutions
2. Brentwood Academy v. TSSA
i “Thus, we say that state action may be found if, though only if, there is such a ‘close nexus between the State and the challenged action’ that seemingly private behavior ‘may be fairly treated as that of the State itself.”
ii “The nominally private character of the Association is overborne by the pervasive entwinement of public institutions and public officials in its composition and workings, and there is no substantial reason to claim unfairness in applying constitutional standards to it.”
iii The TSSAA’s regulatory activity “may and should be treated as state action owing to a pervasive entwinement of state school officials in the structure of the association, there being no offsetting reason to see the association’s act in any other way.”
iv Take Away – Interscholastic athletic association is a state actor for purposes of the Fourteenth Amendment in its regulation of high school athletics within the state
3. NCAA v. Smith
i Title IX proscribes sex discrimination in “any education program or activity receiving Federal financial assistance.”
ii The Postbaccalaureate Bylaw – “allows a postgraduate student to participate in intercollegiate athletics only at the institution that awarded her undergraduate degree…”
iii “The … conclusion that the NCAA would be subject to the requirements of Title IX if it received dues from federally funded members is inconsistent with … precedent. [T]here is no allegation that NCAA members paid their dues with federal funds earmarked for that purpose. At most, the Association’s receipt of dues demonstrates that it indirectly benefits from the federal assistance afforded its members. This showing, without more, is insufficient to trigger Title IX coverage.”
iv Take Away – Because it does not receive “federal financial assistance,” the NCAA cannot be sued under Title IX
4. NCAA v Bloom
i “Courts are reluctant to intervene, except on the most limited grounds, in the internal affairs of voluntary associations.”
ii Here, “Bloom is not a member of the NCAA, and he does not have a constitutional right to engage in amateur intercollegiate athletics at CU.”
iii “However, to the extent that Bloom’s claim of arbitrary and capricious action asserts a violation of the duty of good faith and fair dealing that is implied in the contractual relationship between the NCAA and its members, his position as a third-party beneficiary of that contractual relationship affords him standing to pursue this claim.”
iv “[A]s a third party beneficiary, Bloom has rights no greater than those of the parties to the contract itself, here, the NCAA and its member institutions.”
v NCAA Bylaw 12.1.2, 220.127.116.11
a 12.1.2: “[a] professional athlete in one sport may represent a member institution in a different sport.”
b 18.104.22.168: “Subsequent to becoming a student-athlete, an individual shall not be eligible for participation in intercollegiate athletics if the individual: (a) Accepts any remuneration for … the use of his picture to advertise … or (2) Receives remuneration for endorsing a commercial product …”
vi “The clear import of the bylaws is that … [athletes] do not have the right to simultaneously engage in endorsement or paid media activity and maintain their eligibility to participate in amateur competition.”
vii The NCAA is the “guardian of amateurism”