What Has California Done, and Why Does It Matter?

What Has California Done, and Why Does It Matter?

By Richard G. Johnson. Mr. Johnson was plaintiff’s counsel in Oliver v. NCAA, which was the first college athlete lawsuit against the NCAA to ever get to trial, the first to win, and the first to get paid. The Oliver case provided the impetus for the O’Bannon case and its ongoing progeny. Mr. Johnson was a primary background source for Taylor Branch’s seminal article, The Shame of College Sports. Joe Nocera, in his book, Indentured, called Mr. Johnson’s Submarining Due Process:  How the NCAA Uses its Restitution Rule to Deprive College Athletes of their Right of Access to the Courts … Until Oliver v. NCAA the meanest law review article ever written. As a college athlete rights advocate and commentator, as well as a leading legal authority on the NCAA, Mr. Johnson is a member of the executive board of the College Sports Research Institute. Mr. Johnson holds his J.D., M.B.A., and B.A. from Case Western Reserve University, and he practices law in Cleveland, Ohio. Follow him on Twitter @PiranhaRGJ.

Over the last three weeks, a lot of back-slapping and hoopla has been extended over California supposed sticking it to the NCAA by legislating the “Fair Pay to Play Act,” when there is no such act at all.  California Senate Bill 206, signed into law on September 30th, does not bear that title, and it does not mandate paying the players, let alone fairly paying them.  Yet almost every media outlet repeated this misinformation, as did the Governor on national television, and now a few states are supposedly going to introduce their own similar legislation.  Fuel for the train that is college athlete rights?  Not if you actually expect the train to move.  It’s like bragging about putting diesel in your high octane sports car.

Right up front, here’s a hint as to how to evaluate any like proposals to benefit college athletes:  Any legislator who uses the NCAA propaganda term “student-athlete,” but who claims to be in favor of college athlete rights, simply has no idea what they are talking about.  Ditto for any legislator who calls an athletic grant-in-aid a scholarship, when there is no such thing as an athletic scholarship.  Word choices say a lot about what these people know or don’t know, and these are two billboards that should catch your attention.

Some legal mechanics:  When a legislature drafts a statute to cover a new area or topic, it does the following, after fact-finding and hearings:

1.  It defines the factual circumstances and the perceived problem;

2.  It announces the goal sought to be achieved by the new legislation;

3.  It defines the meaning of words that will have special or specific meaning outside of their normal meaning or which will be code words for the statute;

4.  It states what conduct is allowed or prohibited and under what circumstances, so that all possibilities are covered;

5.  It states whether the legislation will be enforced by criminal prosecution, a private right to sue, a governmental right to sue, or governmental agency regulation and enforcement;

6.  It states the penalties or remedies available for a violation of the statute;  and

7.  It states whether attorneys’ fees and expenses may be awarded to a prevailing party, and if so, under what circumstances, which is called fee-shifting.

There are entire books and classes on drafting legislation and on the rules of statutory construction that courts use, so this is just the obvious stuff.  Courts typically will not rewrite statues for a legislature, nor will they fill in the blanks.

As one can easily see below, none of these steps were taken by the California Legislature in regards to so-called protections for college athletes.

California Governor Gavin Newsom

So here’s the relevant language of the new law applicable to four-year colleges and universities in California with my comments after each subsection in italics:

SECTION 1.

(a) It is the intent of the Legislature to monitor the National Collegiate Athletic Association (NCAA) working group created in May 2019 to examine issues relating to the use of a student’s name, image, and likeness and revisit this issue to implement significant findings and recommendations of the NCAA working group in furtherance of the statutory changes proposed by this act.

So the California Legislature admits that it is going to second-guess whatever proposals the NCAA comes up with regarding college athlete NILs, which are undefined, but which explains why the statute is not effective until January 1, 2023, as it’s the Legislature’s intent to “revisit” this issue.  In other words, this is a fake law, a place-holder of sorts.  Unexplained is why this is the only aspect of college sports that is of concern to the California Legislature?

(b) It is the intent of the Legislature to continue to develop policies to ensure appropriate protections are in place to avoid exploitation of student athletes, colleges, and universities.

Many of us know who’s exploiting college athletes and how, yet the who and how remain undefined;  exactly who is exploiting colleges and universities or how such exploitation is visited upon them is unknown and undefined.  In fact, it is absurd.  Why California is using the unhyphenated derogatory term “student athlete,” as if removing the hyphen solves the problem, is unknown, and this problem is repeated below.

SEC. 2.

Section 67456 is added to the Education Code, to read:

67456.

(a) (1) A postsecondary educational institution shall not uphold any rule, requirement, standard, or other limitation that prevents a student of that institution participating in intercollegiate athletics from earning compensation as a result of the use of the student’s name, image, or likeness.  Earning compensation from the use of a student’s name, image, or likeness shall not affect the student’s scholarship eligibility.

Since the president or the chancellor of a college or university has the ultimate decision as to each college athlete’s eligibility, the California Legislature conflates the president’s or chancellor’s discretion with the NCAA’s bylaws.  Why not just invalidate those bylaws that it finds offensive to its residents’ civil rights?  It also misunderstands what a grant-in-aid is, since there are no athletics scholarships to which eligibility determinations could apply, which makes the second clause meaningless.  And as discussed below, what California giveth, it taketh away, to benefit college and universities.

Instead of forcing a showdown with the NCAA, the California Legislature could have simply said, “Every temporary or permanent resident of California has an exclusive and fundamental right to utilize his or her own NIL in any way that person sees fit, which may not be interfered with in any manner by anyone within this State.”  Just like non-competes are unenforceable in California, while they are enforceable in most other states, it could have constitutionally elevated protections for its residents’ NILs.

(2) An athletic association, conference, or other group or organization with authority over intercollegiate athletics, including, but not limited to, the National Collegiate Athletic Association, shall not prevent a student of a postsecondary educational institution participating in intercollegiate athletics from earning compensation as a result of the use of the student’s name, image, or likeness.

Since only a college or university through its president or chancellor can suspend the eligibility of a college athlete, this subsection is meaningless.

(3) An athletic association, conference, or other group or organization with authority over intercollegiate athletics, including, but not limited to, the National Collegiate Athletic Association, shall not prevent a postsecondary educational institution from participating in intercollegiate athletics as a result of the compensation of a student athlete for the use of the student’s name, image, or likeness.

The NCAA does not control participation by colleges and universities, but the athletic conferences may.  Instead, for any college or university that plays an ineligible player according to the NCAA, it will bring major infraction charges against that college or university, and it will vacate wins and titles as part of that process or pursuant to the NCAA’s restitution bylaw.  Nowhere does this subsection attempt to enjoin the punishment for violating the NCAA’s bylaws.  To do so, the California Legislature would have to make those bylaws application to California colleges and universities illegal, which it has not done.

(b) A postsecondary educational institution, athletic association, conference, or other group or organization with authority over intercollegiate athletics shall not provide a prospective student athlete with compensation in relation to the athlete’s name, image, or likeness.

Recognizing the continued abuse of certain disfavored terms, what is a “prospective” college athlete?  It is not defined.  If it is anyone who has at least one day of athletic eligibility left, then California colleges and universities are prohibited from paying their college athletes any share of the revenue generated by their NILs, which is pretty much all of the football and men’s basketball revenue primarily earned in the Power Five Conferences, when you look at the economics of college sports.  This would be better than an antitrust exemption for the NCAA and its members, which is what they’ve been pining for.

If not, it means that they can pay whatever amount they wish to these athletes.

If this term means high school athletes, then this subsection is meaningless, since those athletes do not earn any money for the colleges and universities, so whatever market might develop for such players to attend California colleges and universities, any signing bonuses, etc., would not be the product of their NILs, but rather the NILs of college athletes, so such payments would not be prohibited.

Since the only entities who would ever conceivably want to pay athletes are the colleges and universities, it is unknown why the NCAA and the athletic conferences are prohibited from paying anyone, since they never would in any case, if they are to be taken at their word?

(c) (1) A postsecondary educational institution, athletic association, conference, or other group or organization with authority over intercollegiate athletics shall not prevent a California student participating in intercollegiate athletics from obtaining professional representation in relation to contracts or legal matters, including, but not limited to, representation provided by athlete agents or legal representation provided by attorneys.

What is a California student?  Temporary or full resident?

Again, there seems to be a basic misunderstanding of how eligibility and sanctions work.  None of these entities prohibit agent/attorney representation, instead, through the no-agent rule, they punish the college or university for playing an ineligible player, as discussed above.  Much like everyone else, the California Legislature doesn’t understand that college athletes are not members of the NCAA and are not directly regulated by it—instead, they are regulated by their own colleges or universities.  If they violate the no-agent rule, which is in flux now, they would be ineligible, and if played, the college or university risks a major infraction charge as described above.

(2) Professional representation obtained by student athletes shall be from persons licensed by the state.  Professional representation provided by athlete agents shall be by persons licensed pursuant to Chapter 2.5 (commencing with Section 18895) of Division 8 of the Business and Professions Code. Legal representation of student athletes shall be by attorneys licensed pursuant to Article 1 (commencing with Section 6000) of Chapter 4 of Division 3 of the Business and Professions Code.

So only California licensed agents or attorneys may represent college athletes, which, as written, would apply to non-resident athletes as well as visiting team athletes from other states.  This is not legal whatsoever.  And how would it be enforced in the first place?  Was the State Bar consulted?

(3) Athlete agents representing student athletes shall comply with the federal Sports Agent Responsibility and Trust Act, established in Chapter 104 (commencing with Section 7801) of Title 15 of the United States Code, in their relationships with student athletes.

Seriously, a state law telling someone to follow federal law, that they would have to follow anyway, to the extent that it is applicable?  This is just a cop-out from understanding and adopting or rejecting the Uniform Athlete Agent Act, which a college athlete advocate would reject, because it seeks to give the NCAA’s bylaws the force of law, and because it interferes with the college athlete’s right to representation.

(d) A scholarship from the postsecondary educational institution in which a student is enrolled that provides the student with the cost of attendance at that institution is not compensation for purposes of this section, and a scholarship shall not be revoked as a result of earning compensation or obtaining legal representation pursuant to this section.

Well, again, there are no athletic scholarships to begin with, so this subsection is meaningless.

But when read in conjunction with subsection (b) above, it would support the view that colleges and universities are prohibited from paying current college athletes, because if they weren’t precluded from paying them, there would be no need or reason to define a grant-in-aid and cost of attendance as not being compensation.

This is called statutory construction, and this is what a court will do in trying to ferret out what these subsections mean.  Courts strive to give meaning over no meaning, so if the paragraph cannot apply to high school athletes, then it must prohibit all payments to current college athletes from proceeds of their NILs with the exception of their grants-in-aid and cost of attendance, because that is the only way to reconcile these two subsections.  If the Legislature meant otherwise, it was incumbent for it to say so.

(e) (1) A student athlete shall not enter into a contract providing compensation to the athlete for use of the athlete’s name, image, or likeness if a provision of the contract is in conflict with a provision of the athlete’s team contract.

Okay, so what does this mean, and who decides?  This is the exception that eats the rule discussed at the beginning.  There is nothing that a college athlete could license that could not be said to interfere with a team’s contract with whomever, as college teams have myriad advertisers, endorsements, licenses, etc., covering the universe of corporate and consumer markets.

(2) A student athlete who enters into a contract providing compensation to the athlete for use of the athlete’s name, image, or likeness shall disclose the contract to an official of the institution, to be designated by the institution.

So a college athlete’s personal business and trade secrets are now required to be disclosed to his or her college or university, yet the reciprocal right does not exist, as the college or university will certainly take the position that their contracts are trade secrets.

(3) An institution asserting a conflict described in paragraph (1) shall disclose to the athlete or the athlete’s legal representation the relevant contractual provisions that are in conflict.

What does this mean?  May a college or university just highlight the athlete’s contract where it interferes with its contract(s).  It doesn’t say differently, so the college athlete will be left to take the word of the college or university, which will necessarily be vague.  Once the vague description is received, the college or university has all of the power, so in conflict or not is in the eye of the beholder.  What is the athlete to do, if he or she disagrees?  The statute does not say.

(f) A team contract of a postsecondary educational institution’s athletic program shall not prevent a student athlete from using the athlete’s name, image, or likeness for a commercial purpose when the athlete is not engaged in official team activities.  It is the intent of the Legislature that this prohibition shall apply only to contracts entered into, modified, or renewed on or after the enactment of this section.

What does this mean?  Does it mean per day or per season?  Off-season training?  Elite college athletes train all year long, whether prohibited or not, under the guise of “voluntary” work-outs.

(g) For purposes of this section, “postsecondary educational institution” means any campus of the University of California or the California State University, an independent institution of higher education, as defined in Section 66010, or a private postsecondary educational institution, as defined in Section 94858.

This means that this is applicable to both public and private colleges and universities in the State of California.  While California has the world’s seventh largest economy, it only has four Power Five Conference universities, so it is not important as compared to the other sixty-one members of those conferences.

(h) This section shall become operative on January 1, 2023.

This three-year-plus delay means that the law isn’t the law until that date, and between now and then it can, and likely will, be changed or “revisited,” as set out in Section 1, above.  It is not ripe for judicial review until it’s effective, because it can be amended or repealed any time before it becomes effective.

Having examined the statute, let’s look at how helpful this legislation might be to a current California college athlete:  None, because of its delayed effective date.

Then let’s look at how helpful this legislation might be to a future California college athlete, which means, how does an athlete actually take advantage of the statute, if and when it becomes effective?

First, the statute cannot be challenged until it becomes effective in 2023, and then the NCAA  will sue to enjoin it, because under the controlling Ninth Circuit case of NCAA v. Miller, California cannot regulate the NCAA in the manner that it has.  A California-based federal district court, which is part of the Ninth Circuit, will be required to grant an injunction, the appellate panel will be required to uphold the injunction, and unless the Ninth Circuit reconsiders the case en banc, then the statute goes up in flames.  By this time, it’s now the year 2025–2027, depending upon whether recourse is taken to the U.S. Supreme Court.  During this time, all current NCAA bylaws will be enforced, and college athletes will have no new rights that they may invoke.

Second, if the Ninth Circuit en banc or the U.S. Supreme Court vacates the injunction, then the statute becomes effective maybe by 2027–2028 and college athletes can then try to market their own NILs, but given all of the contextual problems with the statute, what happens when an athlete wants to market his or her NIL, and the college or university says no?  Is the athlete to hire his or her own lawyer to litigate whether signing autographs for a hundred bucks a night, for instance, is okay or not?  What stops the teams from just sitting the players, who don’t play ball so-to-speak?  The reality is that there are no effective penalties or procedures that would extend real economic rights to these athletes.  Just the cost of legal representation alone will make the statute illusory to most athletes, since the statute has no fee-shifting provision, which is necessary for any civil rights statute, which this portends to be.

The exception would be the few superstar athletes who would have the resources to litigate such claims, but even then, their values depend upon playing, and coaches can choose not to play athletes for a variety of non-reviewable reasons.  Let’s say a coach makes such a decision, but keeps the player on the team?  There is no violation of the statute in this situation.  The reality is that even for players with clout, it will be almost impossible for them to assert these illusory rights, since the more clout they have, the more important it will be that they play, so that they can be scouted in order to be drafted.  Colleges and universities know this, and it is foreseeable that this is the easy way to neutralize the statute.  No state is going to pass a law telling college coaches if/when they must play a player.

I have written previously about why Congress should legislate college athlete rights, and why it should care, but when one looks at where this Country is today, how likely is it that this issue ever makes it to even the top twenty-five national priorities?  And if it does, both the congressman and senator talking about this issue use the NCAA propaganda term, so what can we expect of them in terms of real reform?

I have also written that this pay issue is a race issue, Power Five FB and MBB are primarily black, and that’s where the majority of the money is.  Sixty-five universities disenfranchise the black players from their earnings, while by and large not graduating them.  Not the Group of Five, not all of Division I, and certainly not Divisions II or III, just the Power Five.  Only when Congress is serious about recognizing racial equity will real pay for real athletes who earn huge dollars materialize.

California had a lot to work with in regards to NIL’s, because in the O’Bannon v. NCAA case, the court held as follows regarding the players NILs (at page 72):

The first set of potential buyers—the television networks—already compete freely against one another for the rights to use student-athletes’ names, images, and likenesses in live game telecasts.  Although they may not be able to purchase these rights directly from the student-athletes, they nevertheless compete to acquire these rights from other sources, such as schools and conferences.  The fact that the networks do not compete to purchase these rights directly from the student-athletes is due to the assurances by the schools, conferences, and NCAA that they have the authority to grant these rights.  Such assurances might constitute conversion by the schools of the student-athletes’ rights, or otherwise be unlawful, but they are not anticompetitive because they do not inhibit any form of competition that would otherwise exist.

However, the O’Bannon court further explained (at page 72, footnote 12) that since the “Plaintiffs [had] voluntarily dismissed all of their claims against the NCAA for ‘individual damages, disgorgement of profits, and an accounting.’ … [And since] [t]hey [had] also dismissed their claims for unjust enrichment … the Court [did] not consider these claims ….”

So California could have fixed what the O’Bannon court would not by just legislating that such conversions and thefts would be illegal civilly and criminally (which they are anyway), and California could have statutorily required these property rights to be refunded to the players by anyone who had received a financial benefit, which would be the colleges and universities, the conferences, the networks, and probably a whole string of middlemen.  But it didn’t.  And this is not terribly hard to understand.  If California wanted “pay to play,” here it was on a silver platter.

As such, it’s hard to know what to say generally about the Californian Legislation, since the people behind this legislation ostensibly had good intentions, but apparently no legal or legislative drafting experience, and apparently no understanding of college sports or the NCAA.  How to explain running around the country and going on television to essentially misrepresent that the legislation would actually help college athletes, when it is hard to imagine how it ever could from the get-go, since only Congress can regulate the NCAA under its interstate commerce powers?  If you’re going to take on the NCAA, you’d better know what you’re doing, but these people didn’t even know the name of their own statute, for which I have no patience.

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