Sports Law Blog
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Thursday, April 16, 2015
 
Statutory Interpretation Rules May be Key to NJ Sports Betting Victory

As we await the impending decision in the New Jersey sports betting case (figure early-to-mid May), no clear consensus has emerged as to which side will win. Those of us who were in attendance for the Third Circuit oral argument are divided. While some seasoned observers, such as Alan Milstein, believe that New Jersey will prevail (and he may be right), others (such as myself) have a hard time wrapping their arms around the prospect of a federal appeals court actually blessing New Jersey's plan to legalize sports betting through a "partial repeal" that primarily benefits state-licensed casinos and racetracks. But my skepticism is not based on the law, but, rather, my sense that the Third Circuit may be reluctant to open the floodgates for nationwide deregulated legal sports betting (the "inevitable" consequence of any New Jersey victory) at casinos and racetracks. Putting my cynicism aside, I believe that New Jersey may hold the upper hand based on what unfolded at the oral argument. In contrast to the district court, which was concerned with the far-reaching implications of other states following New Jersey's blueprint (and thereby potentially weakening PASPA), the Third Circuit signaled strongly that principles of statutory interpretation would dictate the outcome. And this bodes well for New Jersey.

Natural Meaning of the Word "Authorize"

The question asked repeatedly at oral argument was "what does 'authorize' mean"?  It was asked no fewer than six times. Why is this one word so critically important? The answer lies in the plain language of the statute. Pursuant to PASPA, states may not "authorize" sports wagering schemes (and also may not sponsor, operate, advertise, promote, or license such activities). The sports leagues take the position that New Jersey's partial repeal law is tantamount to an "authorization" of sports gambling because it allows such activity to take place only at state-licensed and state-regulated casinos and racetracks (and at former racetrack sites). New Jersey, on the other hand, maintains that the word "authorize" connotes some type of "affirmative" state sanctioning of the activity, i.e., placing the state's "imprimatur" on sports betting. The Third Circuit zeroed in on this difference, with one panelist pointedly asking whether "authorize" means "to permit" or "to allow" (as the leagues maintain) or whether it must rise to the level of a state sanctioning or approval of the activity (as New Jersey argues).

Principles of statutory interpretation would appear to support New Jersey's interpretation. The statutory term "authorize" is not defined by PASPA. When a statute itself does not define a term, courts will often construe the term in accordance with its ordinary or natural meaning. This exercise is highly favorable to New Jersey. According to Black's Law Dictionary, the word "authorize" means "to give legal authority; to empower; or to formally approve; to sanction." Similarly, according to the American Heritage Dictionary, to "authorize" means "to grant authority or power to. To give permission for; sanction." The American Heritage Dictionary supplements the above definition of "authorize" with the following example of its usage: "city agency that authorizes construction projects." Likewise, Webster's Third New International Dictionary defines "authorize" as meaning "to endorse, empower, or permit by or as if by some recognized or proper authority; to endow with effective legal power."

These definitions suggest that the term "authorize" does not merely mean "to permit" or "to allow," as the leagues contend. Rather, according to the natural meaning of the word "authorize," there must be an affirmative granting of approval to engage in the conduct in question. One of the Third Circuit judges, Marjorie Rendell, appeared to embrace this construction when she remarked that "to authorize" means "to give power of official meaning, that the state is involved in the process." And Judge Julio M. Fuentes (who authored the majority opinion in Christie I) pointedly stated during an exchange with Paul Clement (the sports leagues' attorney) that "[a] repealer is a removal of the restrictions and of all criminal laws, but it doesn't mean that the government is saying go ahead and engage in that activity."

But the panel was also concerned about the "selective" nature of the partial repeal, suggesting that by restricting sports gambling to specific locations (e.g., casinos and racetracks) which are licensed and heavily regulated by the state, New Jersey may be "authorizing" that activity. One panelist found it "curious" that sports betting "is now being allowed only in places that have gambling licenses." And another panelist suggested that New Jersey's partial repeal law does more than just simply remove existing prohibitions: it "affirmatively permits" sports gambling at racetracks, casinos and former racetrack sites.

The "Associated Words Canon"

But other interpretative tools may strengthen New Jersey's hand. The most pivotal moment of the oral argument occurred when Judge Marjorie Rendell invoked the "associated words canon" during her questioning of Paul Clement, the leagues' counsel:
THE COURT: . . . here we have the words "sponsor, operate, advertise, promote, license, authorize, you know there is a canon, associated words canon, and all of these words anticipate something more, something, something affirmative. 
Should we not read "authorize" to mean something more than merely "permit"? Should we read it to say authorized by, you know, empowering, giving the state imprimatur, if you will. I get back to the issue of how do we read "authorize"? And doesn't the context in PASPA make it seem like the state has to do something by law that is a scheme as compared to just saying okay, you can do it at these places?
The "associated words canon" (also known as noscitur a sociis) is a tool of statutory construction which provides that when a string of words are grouped together in a statute, they should bear on one another's meaning. Or, as the Supreme Court has put it, "'[a] word is known by the company it keeps-' a rule that is often wisely applied when a word is capable of many meanings in order to avoid the giving of unintended breadth to the Acts of Congress." Thus, an otherwise ambiguous statutory term may be given a more precise meaning by reference to the neighboring words with which it is associated.

Under this canon, the term "authorize" would be construed in light of the other verbs which accompany it in PASPA--"sponsor," "operate," advertise," "promote" and "license." Each of these associated words connotes some type of official involvement by the state in sports gambling. Judge Rendell hinted at this during the following exchange with Paul Clement, the former U.S Solicitor General and outside counsel for the sports leagues:
MR. CLEMENT:  . . . I mean I think that in terms of context you obviously can look at the surrounding words. I think you can also look at the legislative history. I think that's still allowed in this country. . . . 
THE COURT: But I don't think we can go beyond the language of the law and really look at that. I mean it's fair to know about it, but unless there's ambiguity in the law, you know there really isn't a need. And again I look at the other words and they require something more than - - - I mean they really require involvement of the state, "promoting, licensing, advertising," you know, putting its seal of approval, if you will. . . .
Echoing this point, renowned appellate lawyer Ted Olson (representing Governor Christie) referred to the earlier Third Circuit opinion which equated the PASPA verbiage (sponsor, operate, advertise, promote, license, and authorize) with a state "scheme":
MR. OLSON:  Well, I think that -- I read your opinion. And I read your opinion to mean that the words, and one of you referred to the fact that it's a stream of words, it has to do with the state providing the approval, a mechanism. It's almost as if you have a license to put in the window saying this is permitted here. You said -- 
THE COURT: We talk about a scheme also, a scheme.
MR. OLSON: You talked about a scheme and a regime, you talked about permit issuing, licensing, state issues license, affirmative authorization, authorization by law, state scheme, state sponsored, state sanctioned.
A look back at Christie I provides some context and insight into the Court's thinking. In Christie I, the Third Circuit stated that "[a]ll that is prohibited [under PASPA] is the issuance of gambling 'license[s]' or the affirmative 'authoriz[ation] by law' of gambling schemes." Within the same paragraph, the Court reiterated that "PASPA speaks only of 'authorizing by law' a sports gambling scheme." The use of the words "only" and "scheme" is notable here. It suggests that a partial repeal of state-law prohibitions against sports gambling would not violate PASPA so long as there is no state scheme or involvement. The interplay of this key language with the interpretative tools discussed above would appear to leave New Jersey holding a strong hand following oral argument.

But Legislative History May Cut the Other Way

Although Judge Rendell downplayed the importance of PASPA's legislative history--saying it only came into play if there was an "ambiguity" in the statutory language--the Third Circuit will likely consult PASPA's background and motivating policies as part of its analysis. If the Court believes that there is a latent ambiguity in the meaning of the term "authorize" (which seemed to be the case at oral argument), then it will undoubtedly avail itself of all pertinent tools of statutory construction, including reviewing the legislative history of PASPA in addition to employing the "associated words canon" and other interpretive aids.

The legislative history of PASPA cuts both ways. While the express legislative purpose behind PASPA was to "stop the spread of state-sponsored sports betting," Congress was also concerned with maintaining the integrity of, and public confidence, in professional and amateur sporting events, which federal officials believed would be threatened by the widespread legalization of sports gambling. But the leagues' attorney, Paul Clement, wisely refrained from playing that card during oral argument, in all likelihood because one of his clients (the National Basketball Association) has evolved in its thinking and now believes that the legalization of sports betting (through the adoption of a federal framework) would actually serve to promote the integrity of sporting events.

Instead, Mr. Clement pointed to language in Senate Report 102-48 expressing concern about the prospect of sports gambling "spreading" to racetracks and casinos, and specifically mentioning Florida as one of the states that was contemplating approving some form of sports gambling for its racetracks as part of legislation "reauthorizing" Florida's pari-mutuel wagering statute (when it was originally set to expire in the early 1990's):
MR. CLEMENT: [I]f you look at the Senate report, there are three things that it's crystal clear Congress is concerned about. They're concerned about states having state lotteries that involve sports gambling. They are concerned with racetracks that already have venues for state authorized gambling having sports gambling. If you look at the Senate Report it's very specific. 
At the time Florida is going through the process of renewing the licenses of its racetracks. And Congress is worried that they're going to get involved in sports gambling as a way -- this is 20 years ago, or 20 plus years ago, but the horse tracks were already in a little bit of financial trouble, and there was concern that they're going to try to add sports gambling as the next solution. And Congress was very concerned about that.
[Congress was also] concerned about . . . what they called in the Senate report "casino style" sports gambling, and they were specifically focused on the New Jersey situation. . . . Now, I think what that shows you is that Congress was particularly concerned with the idea that sports gambling would take place in the venues that states had selected as the being the venues for state authorized gambling.
But there are several flaws with Mr. Clement's decision to highlight only select portions of the Senate Report. For one, it makes no mention of the primary legislative intent behind PASPA: to stop the spread of state-sponsored sports betting and to maintain the integrity of sporting events. If the Third Circuit is going to consider PASPA's legislative history, then it must consider the entire Senate Report, and not just select portions thereof. Second, whatever concern that Congress may have had about casinos and racetracks offering sports gambling was solely in the context of state-sponsored gambling "schemes." Along those lines, the Senate Report noted that "[i]n the broader sports gambling area, States are considering a wide variety of State-sponsored gambling schemes," specifically mentioning both the Florida racetrack situation and "casino-style" sports gambling. But New Jersey's partial repeal law (which would entail no state oversight of sports gambling) would not seem to fit the rubric of a state-sponsored "scheme." Thus, the legislative history would not appear to be as one-sided as Mr. Clement suggests.

The "Rule of Lenity"

Although not raised during oral argument or in the parties' written submissions, there is yet another canon of statutory interpretation that could tip the scales in favor of New Jersey--the "rule of lenity." The rule of lenity holds that "where there is ambiguity in a criminal statute, doubts are resolved in favor of the defendant." This is the judicial equivalent of the baseball maxim "the tie goes to the runner." Courts will apply the rule of lenity when, after all the tools of interpretation have been applied, a reasonable doubt as to statutory interpretation persists. The rule of lenity is premised on two ideas. First, a fair warning should be given to the world in language that the common world will understand, of what the law intends to do if a certain line is crossed. A second goal of the rule of lenity is to minimize the risk of selective or arbitrary enforcement, and to maintain the proper balance between Congress, prosecutors, and the courts. Or, as the Supreme Court put it, "legislatures and not courts should define criminal activity."

But the rule of lenity is not automatically applied merely because there is some ambiguity in the statute under review. In order for the rule to apply, there must be a “grievous ambiguity or uncertainty in the language and structure of the statute." Lenity is reserved for those situations in which reasonable doubt persists about a statute's intended scope "even after resort to the language, structure, legislative history, and motivating policies of the statute in question." It will be invoked only if, after seizing everything from which aid can be derived, the court can make no more than a "guess" as to what Congress intended. In other words, the rule of lenity is an interpretive tool of "last resort."

The "rule of lenity" could come into play here as the Third Circuit wrestles with the critical question of just how far a repeal must go in order to not violate PASPA. There are no clear answers. And oral argument only added to the confusion, with the leagues retreating from their earlier position and conceding that something less than a "complete repeal" might be allowed under PASPA. But both the leagues and the DOJ struggled to pinpoint the line of demarcation. When asked by Judge Fuentes how far a repeal must go, Mr. Clement vaguely answered "pretty far," suggesting that "the dividing line is maybe around 50 percent." Determining whether a partial repeal of a criminal law constitutes an "authorization" of the activity and then pinpointing the dividing line is no easy task, even after employing canons of statutory construction and reviewing the legislative history of the statute. The Third Circuit may well conclude that this is an area of "grievous ambiguity or uncertainty," and invoke the rule of lenity in favor of New Jersey. I do not expect this to happen, particularly since it was not raised by the parties or by the Court. But it remains a possibility.

Absence of Word "Regulate" from PASPA May Help New Jersey's Chances

During last month's oral argument, Judge Fuentes (the author of the Third Circuit's majority opinion in Christie I) expressed concern that New Jersey's partial repeal law would have the effect of allowing completely unregulated sports betting to take place at state gambling venues. He suggested that this would be anathema to PASPA's goal of preserving the integrity of sporting events. Judge Fuentes' concerns go to the very heart of why I believe New Jersey may be on the losing side (yet again) despite having what I consider to be the better of the legal arguments under a pure statutory interpretation analysis. The following exchange between Judge Fuentes and Mr. Olson demonstrates this tension:
THE COURT: I'm really impressed in how this whole thing is going to unfold, because I was very impressed, in reading your brief, with the number of regulations that the state is repealing, including oversight by the state and Casino Control Commission, the Division of Gaming Enforcement. They will all, according to the state, have no role whatsoever in sports betting.
MR. OLSON:  Correct. And that's -- 
THE COURT:  Well, I'm a little concerned about that, because the function of those [regulatory bodies] is to preserve integrity in the process and now the state is saying they're out of this. So this is essentially a laissez-faire. Sports betting is going to take place in the casino with no oversight whatsoever.
MR. OLSON: That's right. As I said, like a ping-pong table game or a debate tournament.
THE COURT: I guess it's not for us to say that's good or bad. . . If it were, I would have a response to that.
But then Judge Rendell (who was not of the Christie I panel) weighed in and suggested that it might still be possible to read PASPA as not prohibiting the states from "regulating" sports betting. She noted that PASPA is "so specific" and that there are six verbs contained within PASPA identifying the activities states may not engage in (e.g., sponsor, operate, advertise, promote, license, or authorize), and noting that "regulate" is not one of them. She then posited that "some modicum" of state regulation could be "appropriate." Consider the following exchange:
THE COURT: Do you read PASPA as saying that, assuming the law were repealed in toto and operations came up all across the state, of sports gambling, do you read PASPA to prohibit the state from regulating, imposing any kind of regulations on the sports gaming?
MR. OLSON: Well, that's what our opponents are essentially saying now.
THE COURT: But I'm asking you, is that how you read it? . . .
MR. OLSON: . . . If the state is engaged, to address your exact question, in regulating the activity, that might involve the imprimatur of . . . regulation and control.
THE COURT: But which verb under PASPA would regulation fall under? It's not sponsoring, it's not operating, its not advertising; promoting; licensing; or authorizing. It's regulating. Would that be permissible? . . . 
MR. OLSON: Well, I think it is a different question . . . 
THE COURT: PASPA is so specific. There are six specific activities that you cannot engage in, but regulating is not part of that.
MR. OLSON: That's right.
THE COURT: So I'm just wondering, maybe thinking out loud, that maybe some modicum of regulation is appropriate if you were right in the first instance.
This could be a real "game-changer" for New Jersey. If, as Judge Rendell suggested, states could repeal sports betting prohibitions but still be allowed to "regulate" the activity (so long as they do not sponsor, operate, advertise, promote, license, or authorize it), this might be the type of compromise that avoids the "wild-west" scenario feared by Judge Fuentes. It would allow the Third Circuit to interpret PASPA in a manner that is favorable to New Jersey (and in accordance with the above-described canons of statutory construction) without having to worry about the negative consequences associated with unregulated sports betting. At the very least, this reveals Judge Rendell to be an "outside the box" thinker. As noted earlier, Judge Rendell was also the panelist who invoked the "associated words canon" during oral argument. Her comments from the bench strongly suggest that she might be inclined to rule in favor of New Jersey (or is at least looking for a reason to do so). But she will need at least one more judge to join her (there are three judges on the panel), and her statement concerning the ability of states to "regulate" sports gambling without violating PASPA may be just the vehicle to accomplish that.

Wednesday, April 15, 2015
 
Aaron Hernandez is guilty of First Degree Murder

The verdict is in. Here's my Sports Illustrated legal analysis on the verdict and next steps.

Thursday, April 09, 2015
 
Study Sports Law and Entertainment Law at UNH Law this summer!

As part of the Sports and Entertainment Law Institute at the University of New Hampshire School of Law, we will be offering sports law and entertainment law courses from May 26 to June 19 in our Intellectual Property Summer Institute. You can take up to 4 credits, and most of the courses are 1 credit and occur over 1 week. You could be part of the program for all 4 weeks or visit UNH Law for as short as 1 week.

The courses include:

Sports Law and Investigative Reporting
This course will be co-taught by Sports Illustrated executive editor B.J. Schecter and me. This 1-credit course will meet from Monday, June 1 to Friday, June 5 from 8:30 a.m. to 11:30 a.m each day. B.J. and I will also have some very distinguished guest speakers who have covered legal matters in sports. If you are a journalist or an aspiring journalist who covers legal issues, this class is made for you. It is also an excellent class for sports lawyers and students interested in sports law. It is a similarly useful class for attorneys whose practices include higher-profile clients and who encounter media management issues.

NCAA Division 1 Legislation and Compliance
This course will be taught by Kathy Sulentic, the associate director of enforcement on the NCAA enforcement staff and chair of the NCAA's academic integrity unit. This 2-credit course will meet from Tuesday, May 26 to Friday June 5 from 12:00 pm to 3:15 pm each day (other than on Saturday and Sunday). This is an excellent class, particularly if you currently work in college sports administration or compliance or if you are a student with an interest in pursuing that field.

It should be a great time in the Granite State. New Hampshire is a beautiful, scenic state and the summers are amazing here. Our law school is in the state's capital, Concord, and we're only about 70 minutes from Fenway Park. You'll also be sure to see presidential candidates walking around the neighborhood or at local pubs (the New Hampshire Presidential Primary is only 10 months away).

I hope to see you this summer at our school. If you would like more information, check out the additional details below and also visit our summer program registration page. Please also don't hesitate to contact me at michael.mccann[at]law.unh.edu.

Here is the complete sports and entertainment law course listing for our summer program:
Sports and entertainment law courses
•  Internet Law
Here is more on our intended audience:

Studies in sports and entertainment law for:
  • Lawyers
  • Law students
  • University athletic department compliance officers
  • Athletic conference compliance officers
  • Journalists who write about legal issues in sports and entertainment
  • Broadcasters
  • Authors
  • Actors
  • League and team attorneys
  • Players association attorneys
  • Sports agents and entertainment agents
  • Marketing executives
  • Advertising executives
Training is offered in three key areas of sports law: NCAA rules and regulations; dispute resolution and sports law journalism. Training is also offered in four key areas of entertainment law: advertising law; Internet law; film and TV law and publishing law. Courses are small and are taught by leading attorneys and executives associated with the NCAA, Sports Illustrated and other premier entities in the sports and entertainment industries.

 
Hub Page for Aaron Hernandez Trial Coverage and Legal Analysis


Over the last nine weeks I have reported on the trial of Aaron Hernandez for the murder of Odin Lloyd. I have spent time at the trial in Fall River, Massachusetts and become very familiar with this case. As of this writing, the jury is deliberating a verdict. I've written 38 articles for Sports Illustrated on the Hernandez trial over the last nine weeks, and SI has put together a Hernandez Trial Hub Page for these pieces if you're interested in them.

Wednesday, April 08, 2015
 
Boston Marathon bomber sentenced: will he receive the death penalty?

A jury today convicted Boston Marathon bomber Dzhokhar Tsarnaev on 30 of 30 charges, 17 of which carry the possibility of the death penalty. The sentencing phase will now begin. I have a preview of it for Sports Illustrated.

This is a story that I covered back in 2013 from Boston for SI and was one of the most difficult stories I've reported on. For many of the victims and their families I know they have waited for this day for a long time.

 
Calling All Students Interested in Sports Law

The 2015 Oregon Law Summer Sports Institute brings together the best and brightest sports industry professionals and legal scholars to provide you with a full roster of engaging and educational coursework, guest lectures, and out of the classroom experiences for an unparalleled sports law educational opportunity.

This intensive 5-week, 6-credit program runs from July 6th through August 7th and is designed to provide law students with a comprehensive introduction to the legal topics of sports regulation and management.  Registration information and more details can be found here: http://sports-law.uoregon.edu 
Among many others, our speakers and visitors this year will include:

· Mike Hausfeld and the Ed O’Bannon legal team
· A federal bankruptcy judge who became an expert on stadium finance (along with some stadium finance attorneys)
· The general counsels from as many as six or seven NFL, NBA, and MLB teams
· Key inside lawyers from Nike and adidas
· Some big-name agents from LA and Seattle 
· Various NCAA compliance honchos
· Law faculty from Tulane, Wake Forest, Pepperdine, San Francisco, American, and elsewhere

And, of course, we’ll take a rafting trip, catch a Portland Timbers game, tour the headquarters of Nike and adidas, go wine tasting, and much more.

There are limited spots available, and we will give strong preference for applications we receive on or before April 20.

For more information, please contact Rob Illig at rillig@uoregon.edu

Sunday, April 05, 2015
 
UNH Law Sports and Advertising Law Symposium this Friday, April 10

If you are interested in the intersection between sports law and advertising law (and entertainment law and advertising law), we hope you consider attending our symposium titled And Now a Word from our Sponsors to be held this Friday from 12:30 to 4:15 pm with a networking reception to follow. More details below.

Directions to the University of New Hampshire School of Law are available at this link.


Advertising Law in the Sports & Entertainment Industries

And Now a Word from Our Sponsors

A symposium on advertising law in the sports and entertainment industries
This symposium will feature leading lawyers and other experts working at the intersections of advertising and sports or entertainment. They will discuss contemporary applications of advertising law, challenges facing advertisers, and issues relevant to consumers and fans.
The conversation will touch on such topics as brand protection, ambush marketing, clean zones, data mining and privacy, celebrity endorsements, product placement, a la carte programming, and more, with plenty of opportunities for audience participation and questions.
This event is open to the public and lunch will be served. RSVP to Mary O’Malley atmary.omalley@law.unh.edu by April 8, 2015.  

Agenda


12:30-1:30
Lunch in the IP Center rotunda, featuring the keynote address by Douglas J. Wood
1:30-2:45
Panel 1: Advertising Law & Entertainment
2:45-3:00
Break
3:00-4:15
Panel 2: Advertising Law & Sports
4:15-5:15
Networking reception

Participants include:


Luke Bonner, Brand & Marketing Executive, GYK Antler

Erica Han, Senior Attorney, Ropes & Gray

Michael Kuh, Counsel at Latham & Watkins LLP
McCann, Michael

Michael McCann, Professor of Law, Director, Sports and Entertainment Law Institute

Dalia Topelson Ritvo, Assistant Director of Cyberlaw Clinic, Harvard Law School's Berkman Center for Internet & Society
Roberts, Alexandra

Alexandra J. Roberts, Assistant Professor of Intellectual Property; Executive Director, Franklin Pierce Center for Intellectual Property

Christine Santariga, Senior Privacy Counsel, Warner Bros. Entertainment Inc.

Amanda Schreyer, Of Counsel at Price Lobel Tye LLP

Christopher Sloan, Assistant Vice President & Senior Corporate Counsel at Liberty Mutual Insurance
Wood, Douglas

Douglas J. Wood, JD '76, Partner, Reed Smith, UNH Law Adjunct Professor, Advertising LawIP Summer Institutes (IPSI)


Thursday, April 02, 2015
 
Are Conference-Level Student-Athlete Scholarship Limits Safe from Antitrust Scrutiny? (Guest Post)

This is a follow-up Guest Post by Professor Sherman Clark of the University of Michigan:
Are Conference-Level Student-Athlete Scholarship Limits Safe from Antitrust Scrutiny?
Sherman J. Clark
Following up my recent post about the line-drawing difficulties faced by courts dealing with antitrust challenges to NCAA amateurism requirements, I address here one potential solution—conference-level scholarship limits.
It is sometimes suggested that the invalidation of current NCAA amateurism rules would not lead to a full free market for players’ services. Instead, it is suggested that: 1) conference-level limits on scholarships or other payments to players would be legal under the Sherman Act; and 2) major conferences would adopt limits far short of a full free market. Neither of those assumptions, however, is warranted. 
I am not taking a position here as to whether or to what extent a full free market for the services of college football and basketball players would be good idea, or would alter or undercut the nature or appeal of college sports. My point here is simply that the slope to such a free market is more slippery than many seem to recognize, and that conference-level scholarship limits might not provide a safe stopping point.
Begin with the legal issue—assuming, for the moment, that conferences would in fact maintain scholarship limits. It is suggested that such limits would not present antitrust problems because conferences lack market power. That misunderstands the law.  A threshold showing of market power is requisite in Section 2 claims, and in many Section 1 claims.  But Section 1 claims involving proven price-fixing or wage-fixing do not, properly understood, require a separate showing of market power.  The extent of market power can be relevant as part of the rule of reason inquiry—although courts create confusion when they frame it that way; but proof of wage-fixing alone, which is itself proof of market power, can support a Section 1 claim without additional evidence of market power.
In particular, as litigation involving Ivy League schools two decades ago demonstrated, colleges are potentially liable under Section 1 of the Sherman Act for conference-level agreements fixing or limiting scholarships and financial aid. A purported lack of market power does not automatically shield them from such liability. And it is perhaps helpful to understand why this makes sense.
Antitrust law requires a showing of market power in many types of cases because it is often not clear whether a challenged practice will cause the kind of harm that antitrust law seeks to avoid.  In product market cases, that harm is the raising of prices and the reduction of output, which signals an inefficient allocation of resources and thus dead-weight loss. In labor market cases, the harm we are worried about is precisely analogous—lowering of wages, which leads to a misallocation of labor resources.  So, in some labor market cases, courts need to determine whether there is sufficient market power to cause the harm we are worried about—a lowering of wages. But if the case involves direct wage-fixing, there is no need for separate proof of market power.
Perhaps the better way to put it is this: the ability to fix wages is itself proof of sufficient market power. If conspirators have enough market power to fix wages, they by definition have enough market power to be potentially liable for it.
In evaluating conference-level limits on payments to players, therefore, courts would need to do at least some rule of reason analysis. And that in turn would hinge on nature of the particular limit. If major conferences were to impose only modest restrictions on the market, avoid depress wages more than necessary, and can show legitimate pro-competitive benefits, conference-level scholarship restrictions of some sort might survive Section 1 scrutiny.  But if conference rules are highly restrictive and attempt to retain something like the current scholarship-only regime, those rules might very well not survive that scrutiny. Keep in mind that the pro-competitive benefits to which conferences would point would be essentially the same as those that courts seem unwilling to accept in current cases involving the NCAA.
And yes, this does mean that even current athletic scholarship prohibitions or limits agreed upon by schools in conferences such as the Ivy League, and by Division III schools, are not necessarily immune to antitrust challenges.  Such challenges are unlikely, given that players in those leagues generally would have very little value in a competitive market.  And for the same reason, collusive restrictions in such leagues would likely survive rule of reason scrutiny if challenged—given the minimal negative effect on competition. But strict restrictions imposed by major conferences that do employ players with potential market value would be at risk of being found illegal.
Of course, the major conferences might not be eager or able to maintain strict restrictive limits, even if they could withstand a Section 1 challenge—at least not if they hope to remain major conferences. The logic behind the belief that such rules might survive antitrust scrutiny is that inter-conference competition will offset the intra-conference anti-competitive effect. Setting aside the legal merits and sufficiency of that argument, which are questionable, it does reveal something critical—the assumption that conferences would in fact compete.
If so, it is not clear that major conferences could or would maintain substantial limits on payments to players. The race for the bottom would be difficult to resist. In a world where teams in the SEC are paying players, would the Big Ten really concede the top talent by sticking to a scholarship-only policy—even assuming it were legal?  Many schools have great deal invested and at stake in being part of big time college football and basketball. It would take real fortitude to hold out.
I cannot predict how conferences would react if required or permitted to set their own athletic scholarship rules. No one can. It might take decades of realignment and readjustment to sort out. My point here is simply that both the forces of competition and the desire to avoid antitrust liability would tend to drive major conference scholarship rules in the direction of a full free market.
Again, it is a separate question whether a full free market for the services of college athletes would be a good thing—whether it would alter or undercut the nature or appeal of college sports and kill the goose that lays the golden eggs. But if we are at all concerned about the implications or consequences of heading in that direction, we should not assume that conference-level limits will provide a safe haven on the road from here to there.
Sherman J. Clark is the Kirkland & Ellis Professor of Law at the University of Michigan Law School.


Tuesday, March 31, 2015
 
Guest Post -- NCAA Academic Requirements: A Lesson for Antitrust Analysis of Amateurism

The following is a guest post by Sherman Clark, Kirkland & Ellis Professor of Law at the University of Michigan:

NCAA Academic Requirements: A Lesson for Antitrust Analysis of Amateurism 
Sherman J. Clark 
Here is hypothetical but I think illuminating question. If courts determine that it violates antitrust law for NCAA schools to collude in refusing to pay players, might it also violate antitrust law for schools to collude in requiring players to be full-time students? It  might seem obvious that academic eligibility and academic progress requirements do not implicate antitrust law; but it seemed equally obvious a generation ago that amateurism requirements do not implicate antitrust law.  It seemed obvious; but it was wrong.  The logic from Board of Regents to Law to O’Bannon was inexorable. And it does not stop there.

Let me be clear. Courts are not likely to hold that NCAA academic eligibility and academic progress regulations violate the Sherman Act—not any time soon, at least. Rather, my point is that such a ruling would actually make some sense—and would in some sense follow logically from a conclusion that collusive amateurism requirements are illegal. In this light, thinking about why the courts would probably not find eligibility requirements illegal can help us think about the amateurism cases.
One might be tempted to dismiss this comparison out of hand on the grounds that eligibility rules are fundamentally different from amateurism requirements; and that such rules do not amount to price fixing. But price fixing is not the only thing that violates the Sherman Act.  Any restraint of trade that has a substantial impact on competition is illegal if its anti-competitive effects outweigh its pro-competitive benefits.

So, next one might  assert that academic eligibility requirements do not have any substantial anticompetitive effect. But they do. They exclude completely from that labor market anyone is not able to be a full-time student. If all the coffee shops in the United States were to agree to hire only full-time college students, that would be anticompetitive, and thus a violation of the Sherman Act.
Here one might say that college sports are different. Exactly. Being a college student has nothing inherently to do with working as a barista, but it has everything to do with playing college sports. What makes college sports what they are is that they are played by student athletes. And that is the point. Colleges are allowed to collude in this market in a way that would be illegal in other labor markets because the nature of the labor is essential to the nature of the product in a way that is not true in other markets.  Where a restraint is necessary to define a product, it is not illegal.
But is it necessary that players be full-time students? Bear with me here. Would it really alter the nature of the product to let part-time night students play. Granted, if teams were made up of players who are not students at all, even in name, that might well alter the nature and appeal of the game. But it would probably not make a measurable difference to the character or appeal of college sports if the current academic progress requirements were relaxed a bit.

So does that make it illegal for the NCAA to refuse to relax these restraints? Of course not. Courts are not going to get in the business of drawing lines about how much relaxation of the academic progress requirements would ultimately alter the nature of the game too much. There would be no principled place to draw the line.  And besides, such regulations must be seen not in isolation, but in conjunction with other rules, which together define the endeavor—and thus the product. 
In the same way, it will probably make little difference to the nature and appeal of college basketball or football if players are paid a $3,500 stipend, or even $20,000.  But at some point it might.  And how are the courts to draw the line? Of course, courts could simply draw a line by fiat; but the line will be arbitrary and the cases unpredictable. There is no coherent stopping point short of a full free market.  In such a market, stars would be paid large amounts and most other players much less—perhaps less even than what their scholarships are now worth.  And that might well alter the nature and appeal of the game.

Or it might not.  I am trying to highlight a problem here, not solve it. The essential problem is that it will be difficult or impossible for the NCAA ever to show that any one particular thing about who plays college sports is by itself essential.  The risk, therefore, is that the courts will declare aspects of NCAA regulation—one by one—to be inessential in defining the product, and thus illegal restraints of trade.

It is helpful to remind ourselves that there is no law of nature that says people will pay billions to watch semi-pro level sports. No one watches the NBDL. There is some combination of tradition and mystique that makes college football and basketball different and appealing. We should try figure out what that is—and what if any role amateurism plays in it—before we dismantle it one seemingly-inessential element at a time.

If we continue to proceed step by step, asking whether this or that particular restraint is necessary, we may well end reminiscing about the old days when college sports were a big deal—and wondering which was the straw that broke the camel’s back.  And those who started out trying to make sure players get a piece of the pie may find that there is a much smaller pie to divide up. 
Sherman J. Clark is the Kirkland and Ellis Professor of Law at the University of Michigan Law School.

 
New Article: Navigating the Legal Risks of Daily Fantasy Sports

It's my pleasure to announce the online publication of sections 1-4 of my newest law review article "Navigating the Legal Risks of Daily Fantasy Sports: A Detailed Primer in Federal and State Gambling Law."   This article explores the legal status of "daily fantasy sports" in light of both federal and state gambling laws.  The full version of this article will be published in the January 2016 edition of University of Illinois Law Review.

Monday, March 30, 2015
 
The NCAA Business Enterprise: Crumbling Under its Own Success?

We just enjoyed perhaps the most exciting college sports weekend of the year: the Regional Finals of the NCAA's March Madness Tournament. Four men's basketball games are played, in sold out arenas (or domes), in front of a staggering number of television viewers. The demand for this event is so large that the broadcast rights of the March Madness tournament were contracted to CBS/Turner for $10.8 billion over 14 years. And therein lies the rub: is the NCAA about to crumble under its own success?

This weekend, three articles were published that addressed this very issue. First, Mark Alesia, an outstanding reporter for the Indianapolis Star, dug into the financials of the NCAA and wrote that the NCAA is "poised to top the eye-popping mark of $1 billion in annual revenue." As the NCAA's annual revenue has increased each year since 2001, legal claims have arisen on behalf of college athletes looking to share in this economic growth.

Our own Michael McCann spoke with Alesia for this article, and aptly stated "This is a transformative era for the NCAA, and at the end, the student-athlete will have a different role. There will be changes to amateurism." But what about defining this seemingly simple concept of 'amateurism?' Allen Sack, professor at the University of New Haven, states that "amateurism is whatever the NCAA arbitrarily decides to call it."

The second article over the weekend was an opinion piece written by Smith College economist Andrew Zimbalist titled "Paying College Athletes: Take Two." While everyone tries to frame the debate as 'should we pay college athletes?', Zimbalist accurately reminds us that "college athletes have been paid since the 19th century."

Perhaps the heart of his article can be summarized in the following quote:
"If we want to preserve the educational model of intercollegiate athletics, here's a more attractive option: Take the definition of amateurism away from its current arbitrary, hypocritical and morphing state imposed by the NCAA and follow the lead of the AAU and other amateur organizations. The working definition should be simple: an amateur athlete is one who is not paid a salary for playing his or her sport."
This definition, under Zimbalist's concept, would allows institutions the ability to: 1) provide full cost of attendance; 2) year-round health insurance; 3) lifetime health insurance for athletically related injuries; 4) disability insurance and; 5) due process. YES PLEASE!

The third article demanding your attention is the wonderfully written piece "A March Madness Underdog: Free Enterprise" by Allysia Finley in the Wall Street Journal. In her article, Finley interviews none other than noted NCAA critic Jay Bilas who explains why players should be paid, and how to overhaul the 'exploitive' NCAA.

Using eloquence and humor, Bilas argues for a system that allows college athletes to be paid what the market deems them to be worth. Note the term 'allows' as he states "I'm not advocating and never have that some athletes should be paid. It might be a distinction without a difference to some, but what I'm saying is that it shouldn't be disallowed."

Last month at the MIT Sloan Sports Analytics Conference, I was lucky enough to moderate a panel titled "Amateurs or Industry: NCAA Reform." Joining me on the panel was the NCAA's Oliver Luck, Northwestern AD Jim Phillips, the NBA's Rod Thorn, and some sports lawyer named Michael McCann. MIT has just released the conversation and, while I'm biased, I think it's well worth your time to watch.


As you get ready for this coming weekend's Final Four in Indianapolis (note: that's where the NCAA is headquartered) I encourage you to read these three articles and watch this video. Think. And then debate with others. What's right and where does college athletics go from here?


Monday, March 23, 2015
 
The First Amendment and the Redskins Tradement, part I: Government speech

The following post is by Robert L. Tsai and Christine Haight Farley (both of American); it is the first several guest posts on the Washington Professional Football Team trademark case. It is cross-posted at PrawfsBlawg.

The ACLU recently filed an amicus brief in the Washington Redskins trademark case, arguing that the Patent and Trademark Office’s (PTO) cancellation of Redskins registrations constitutes viewpoint discrimination contrary to the First Amendment, and urging the federal court to strike down those portions of Section 2(a) of the Lanham Act that prohibit the registration of “immoral,” “scandalous,” or “disparage[ing]” marks.  We are deeply concerned with the ACLU’s position.  Its proposal to thrust First Amendment law into an area of commercial regulation in unprecedented ways would wreak havoc with trademark law’s careful balance of concerns for property rights, economic exchange, and consumer protection.  We believe that the ACLU’s fundamental misunderstanding of trademark law has caused it to misapply First Amendment doctrine.

In this first post, we wish to focus on the ACLU’s invocation of two First Amendment doctrines: viewpoint discrimination and unconstitutional conditions (we leave for a separate post whether the commercial speech doctrine might be appropriate).  The ACLU’s position erroneously elides the various forms of government regulation and their contexts, treating trademark law like criminal law, municipal ordinances dealing with protests, laws creating public fora, and public subsidies.  But the strongest First Amendment doctrines designed to ensure robust public debate simply don’t map on to trademark regulation without creating a major upheaval in trademark law.  First Amendment doctrine requires strict scrutiny whenever there is a direct, content-based regulation of private speech.  The federal trademark registry, however, does not operate like a direct regulation of private speech, nor does it create a forum for the expression of private speech.
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