NCAA Fight Over Athlete Compensation Is Toss-Up

college and mean greater compensation for student athletes. The n C Double A is trying to shield its rules from antitrust scrutiny and asking the jostice Is to overturn a ruling that would let member schools offer their athletes more in the way of education related compensation. Many of the jostices seemed sympathetic to the students here at johnstice Is

Brett Kavanaugh, Clarence Thomas, and Samuel Alito. I mean you said earlier, Uh, this would allow the player is to receive six thousand dollars a year, as if that were some exorbitant amount when the TV contracts are in the billions. Well, it just strikes me as odd that the coaches salaries have ballooned and they're in the amateur ranks as are the players. So the argument is they are recruited, they're used up, and then they're cast aside without even a

college degree. So they say, how can this be defended in the name of amateurism? But the Justice is also seemed worry of undermining the world of college sports as justice is Sonya Soto Mayor and Stephen Bryer expressed, how do we know that we're not just destroying the game as it exists? I worry a lot about judges getting into the business of deciding how amateur sports should be run. Joining me is Audrey Anderson, head of the higher education

practice at Bassbar and Sims. Tell us about the issue here, Audrey, the issue before the Court is an antitrust ruling that the Ninth Circuit entered against the m C Double A that found some of the limits that the m C double A puts on the compensation that can be received by student athletes to be unlawful under the anti trust laws, and the n C double A is asking the Supreme Court to overrule that and find that the m C double A is allowed under the anti trust laws to

limit all forms of compensation to student athletes. What kinds of compensation did the Ninth Circuit say, We're Okay, I mean we're not talking about actually paying salaries to student athletes, are we know what the Districcord and the Ninth Circuit held was that the m C double A could not limit educationally related benefit to be provided to student athletes

that were non cash. They also ruled that the double A had to allow student athletes to receive up to fifty nine hundred dollars a year in cash or cash equivalent payments that were education or academic related. So there's a lot of talking about in the argument, and what's the N double as argument about this? The N double aise argument is that under the antitrust laws, they are

what you would call a joint venture. The participants in their entity have to agree on things like the rules of the game, like how many players will be out there out on the field in order for them to provide their products college sports at all. And they say, one of the rules we have to have for us to provide the product of college sports is that the athletes will be amateurs. And for us that means that the students won't be paid anything. We get to define

what amateurism is. What the m C double A really wants to get from this case is a change in the anti trust laws. They say it's not a change, but they want a clarification that under the anti trust laws, court should give very deferential review to any rule that the m C double A says is related to amateurism. Did most of the justices seem very sympathetic to the athletes position, some pointing out that college sports is a multibillion dollar business and the amount of money the coaches get.

Absolutely there was a lot of sympathy for the athletes and a lot of statements showing that the court thinks that college athletics has changed a lot since the last time the Court considered an antitrust case about the m C double A, which is in the mid nineteen and many members of the court noting that the large amounts of money that's in college athletics now and that the to be benefiting everybody except the student athletes is an important difference for how they view the case under the

antitrust law. But some of the galstices did seem to be buying into the n C double as position that these payments would change the amateur nature of college sports. Again, though they're talking about only six thousand dollars right. I heard that concern to June, and I think that part of it is that nobody really knows what will happen. Part of it is will six thousand dollars a year to student athletes who participate on some of these what

change the game? I think part of it is are there some schools or conferences that will set up internships that have large amounts of money attached to them. I think part of it, though, two, is there's a lot of concern about what will the next cases be If this is okay and when say that this is a legal rubric for reviewing rules around amateurism, well, what will that allow the next set of wine is to challenge

and challenge successfully? And will that ruin college sports? And we just don't know what will happen because you don't know how the market will respond. And you know, those conferences are still allowed to put in place whatever kind of limit they would like to put in place, just the m C double A can't put them in place. And any individual school makes the decision about what they are going to offer. It's not like this injunction required

any school to provide any particular benefit to its students. Athletes. Can you read where the court might come out in this case? I thought that there was a fair amount of sympathy to the athletes situations, But I also heard a fair amount of sympathy to some of the m C double as practical arguments. I came out of this June not really knowing exactly where the court was going

to come out. I did not hear much sympathy for the m C double A home run argument of give the m C double a very deferential review for anything it determines to be amateurism related. I did, however, hear the Court having a lot of concerns about putting in place or approving any kind of rule that would allow courts to be micromanaging the rules of the m C double A or allowing student athletes to be bringing the m C double A into court for endless rounds of litigation.

So I think the court's very concerned about that. Is there any middle ground for the court here? The Court is definitely trying to find some kind of middle ground, And I don't know how much of middle ground there is in terms of this particular injunction, right, But you heard Brier trying to get at that when he was asking Seth Waxman, you know, now, tell me just what is it about this injunction and tell me the line and words in the injunction that you don't like. He

was trying to find a middle ground. I think the middle ground that the court is trying to look for is how can we come up with some method of reviewing the double A rule that make sure that the double A can't exploit the athletes while not making the courts the micromanager of the double A and what happened

the last time? Just explain what happened the ruling? Then, Well, in four UM, the court said that you had to apply the Well, the court said that the um different that the n C Double A couldn't set rules about how much money the different conferences could get for selling for selling the TV rights to their broadcast. And then the answerable said that that it would be horrible if the different conferences and schools were competing for selling TV rights. Well,

they all do that now. And as they were talking about in the court today, you know, now there used to be a rule that coaches or assistant coaches could only be paid a certain amount. That was an n double A rule. That was struck damity any trust laws. There's a push in Congress, and there are laws in some states like Florida that that are pushing the double A. Perhaps Yeah, the there's a law that's going to go

into effect in Florida and California's past. The law that says that UM, nobody the n C double A and no school can limit the right of a student athlete to sell the rights to their name, image and likeness. So UM that means that UH, students athletes have to be able to UM get UH deals, to sponsor products, to sell advertising rights to a YouTube channel, UM, things like that. So that that and that's going to change, um the extent to which some student athletes can get money.

Now those moneys are from third parties, not from the schools themselves. UM. And so the MT double are going to change its rules about allowing student athletes to get those kind of moneys. Right now they're not allowed to. So that the m C double as that they were going to change their rules, and then they stopped that process because the Department of Justice sent them a letter saying, the new rules that you think you're going to put

into place, They may have some antitrust problems. It seems like it's a matter of time if you have laws like this in californ Orny, in Florida, that it's a matter of time. You know, little by little professionalism is going to creep into college sports. Well, the m C double A has other legal arrows in its quiver, so it has said UM in other court proceedings that um, if those state laws go into effect, they plan to challenge those laws under a different under the Commerce Clause

of the Constitution. So they may try to get quick injunctions against some of those laws and tie them up in litigation for a matter of time. But that's why it's so important for the MT double A to be doing um lobbying at the federal level to get the US Congress to pass some kind of a law that

would settle all of this. Thanks Audrey, that's Audrey Anderson of Bassparian Sims, Bullman SAX was at the Subreme Court and it was billed as a case that could deal a sweeping blow to class action securities fraud lawsuits, but the case kind of fizzled out in oral arguments. A decade ago, investors filed a class action lawsuit a legend. They were deceived to the tune of as much as thirteen billion dollars by Goldman's repeated public assurances that it

was being vigilant about avoiding conflicts of interest. But Goldman said those assurances were so generic they couldn't possibly have been responsible for propping up the stock price. Many of the getice is said the issues had narrowed as the case bounced up and down the court system, and that both sides now seemed to agree on the legal standard. Here are justice is Amy Coney Barrett and Stephen Bryer.

So now we are left, you know, in this position where you've both moved more closely together, and now we have to decide what to do about the Second Circuit's opinion. This seems like an area that the more that I read about it, the less that we write, the better. Joining me is Mark Rifkin, a partner at wolf Holland's Seen. Mark explained the issue over these statements, which included promises that Goldman had extensive procedures and controls designed to identify

and address conflicts of interest. So the plaintiffs say that those statements, which the parties characterized as generalized statements. But to me, they're actually pretty specific. They're not related to any direct line of business of Goldman Sacks, but they're more generalized, and so in that sense, their generic statements.

But the plaintiffs say that when Goldman Sacks got into trouble because of trading in securities that were adverse to the interests of their clients, they failed to disclose that

information to the public. That information eventually became public knowledge when a complaint was filed against Goldman for that and that action, that disclosure had no effect on the price of the stock, because the plaintiffs say that Goldman had issued these reassuring generalized statement which maintained the price of the stock in the marketplace, and they say that was

false inness leading. Because low and behold, when the bad news comes out and Goldman is exposed, the allegations are exposed, and the extent of the problem is exposed, the price of the stock dropped, and that stock drop on the disclosure lad the stock price to trade at the price

that the plaintiff say it should have traded at all. Along, Goldman did not admit wrongdoing, and it's five million dollars settlement with the sec but it did say it made a mistake in failing to disclose, which is unusual for a settlement. Correct, And I think you need to look at the nature of the underlying allegation is that Goldman was engaged in conduct that was inconsistent with the interests

of not its stockholders, but its clients. And that's Goldman's life blood, that they put the interests of their clients first, that what they do is of the benefit of the clients. And that's why I think that those statements, although they were general statements, are actually pretty important to Goldman customers. And if you're an investor in Goldman Sacks as a stockholder, that means they should be pretty important to you. So I think these statements turned out to be very material.

And that's the real rub of the issue is were these statements important to the market And do the plaintiffs have the right to rely on a presumption of reliance based on the importance the materiality of the statements. But if they do, can Goldman rebut that presumption by some other evidence. That's really the heart of the issue that was argued in the Supreme Court. This is an appeal of a Second Circuit decision what did the second Circuit decide?

So the Second Circuit affirmed the District Court's decision granting class certification, and this was actually the second time class certification had been in the Second Circuit. The district courts certified the class. Originally, the Second Circuit remanded that decision and directed the court to reconsider certain parts of the decision.

The District Court did that certified the class again. The case was appealed to the Second Circuit, and the Second Circuit affirmed the district courts decision granting class certification, finding that the defendants could not rebut the presumption of reliance that the plaintiffs were entitled to invoke under um under basic versus Levins, And that's the issue that then went up to the Supreme Court. What were the justices concerned about? Well,

I think the courts concerned with two issues. Number One, the way the presumption works centers around the materiality of the statements in question. Essentially, what the presumption says is that if you trade in an orderly and efficient market, and the information that the plaintiff alleges is either misrepresented

or omitted from the market, and it's important information. It's information that a reasonable shareholder would want to know, so it's material, and you don't need to rely on anything other than the integrity of the market price in order to be able to stay to claim under the securities laws. And that's the presumption of reliance that you're entitled to under the Supreme Court's Basic versus Levins and decision. But

it's just the presumption. And so the defendant then has the opportunity to come back and rebut that presumption by showing, for example, that the statements that the plaintiffs claim are actionable were not material as a matter of law, or did not have an impact on the price of the stock, or perhaps in the case of an individual pointiff, he or she would never have relied upon those statements had he or she known them, and it didn't matter to

the pointiff whether the price was efficient or inefficient. I can't imagine an individual attack like that on particular plaintiff, but a defendant is always able to try to prove that the information that was allegedly misrepresented was not material, and that's exactly what Goldman Sachs tried to do here. And Judge Croudy in the District Court concluded that Goldman's experts did not adequately rebut the presumption of reliance and so certified the class. That's the very narrow holding that

went up to the Supreme Court. Jealtic is from both sides of the ideological spectrum said that as the case evolved, the party's positions moved more towards the middle. Yes, and that's certainly the case in the district court. Goldman argued that the court was not entitled to consider those statements at all, because Goldman took the position that they were

completely immaterial as a matter of law. They were so generalized and so vague that they were meaningless to individual investors, and Goldman lost that position in the record on emotion to dismiss the court found that the statements were specific enough and related to Goldman's business in such an important way that they were material for purposes of stating a cause of action. So now roll forward, and the question is, well, okay, what can Goldman Sachs say about those statements to rebut

the presumption of reliance? And so now they have to say something different, not that you can't consider them, but that you have to consider the vagueness of them. And so the argument sort of shifted in its focus, and Goldman says, well, okay, if they may be actionable, but our experts say they were so meaningless that they didn't move the needle in the marketplace. And the pointiff said, no,

that's not true. Your experts haven't shown that the disclosures didn't have an effect on price when the real truth about Goldman's alleged misconduct came to light. And so that was the issue that was decided on class certification. And that's why the parties had to change their positions because the context changed. So what's the court's likely decision here? I think where where the court is likely to come out here is to say that there was no error

that needs to be addressed. The District Court properly followed the second Circuits mandate from the first appeal, properly evaluated not just the plaintiffs position, and the presumption of reliance that the parties concede applied to the motion for class certification.

And if I understand the record correctly, Goldman Sachs admitted that the plaintiffs had introduced enough evidence on the motion for class certification to invoke the presumption, but that they then had the opportunity to rebut it with this expert testimony, and they offered expert testimony that the District Court found did not rise to the level necessary to rebut the presumption. And I think where the Supreme Court comes out here in the easiest path is to say that it's for

the district Court to evaluate the evidence that's presented. The District Court did that. The District Court rendered a decision that the Second Circuit evaluated under the appropriate standards, and the Second Circuit affirmed the District Court's decision. There's nothing for us to look at here. And so that's where I think Justice Brier was heading when he said, the

less we write, the better we are. And that's the outcome that that says the least, which is this really is an appeal we should not be hearing or writing upon. And so there was a suggestion that one outcome would be that the court concludes that sarcery was improvidently granted, and that happens from time to time in a case like this. There was some concern going into this that this is the first time that securities class action has been heard by the Supreme Court since any of the

Trump appointees were on the court. Was there a conservative liberal split in anyway? Well, the the only interesting part to the argument from a political if you will, from a political standpoint, at least in my mind, was Justice Thomas.

Of course, any time you hear Justice Thomas speak, it's it's interesting because he asks questions so rarely, but now in in the COVID landscape, he has asked questions, And here he asked questions that suggested to me at least that he was hoping that the Court might reconsider the

presumption of reliance after Basic versus Levinson. But other than that, I think I think these are such narrow technical issues that it's hard to say that the that the political differences between the Trump appointees and the and the and the more liberal justices on the court really will make much difference. I mean, these are very narrow technical legal issues. We didn't even we haven't yet talked about the rule three oh one issue, which is who who bears the

burden of proof versus the burden of production. But it's such a hyper technical and legal issue that I don't see the political spectrum really making a difference in the outcome here. This case has been on. Since what happens next? You have they had discovery yet? Well, sure, because this is this is a class ratification, so the plaintiffs have withstood emotion to dismiss. Then they did two rounds of class ratification because there was that second appeal in the case.

If the Supreme Court affirms the Second Circuit's decision, which I'm fairly sure the Court will do, then it will go back to the second Circuit and be sent right back to the district Court for the remainder of the case. If the Court were to reverse or remand with instructions, then it would go back to the second Circuit and the Second Circuit might write again, or it might simply remand the case again to the district Court for a

third bite at the apple. But I don't think that that's going to happen because I think that the prevailing view, at least from the questions that the court asked, I think the prevailing view seemed to be that this was a matter that the district Court has some discretion to consider, that the district Court exercised its discretion, And while any one justice of the Supreme Court might might differ in

how the evidence was evaluated. I don't think that that rises to the level of a precedent sett in case that requires the Supreme Court to right a lengthy opinion, send it back and start all over again. I just don't see that happening here, because I think the record is actually a pretty pretty well developed one and a pretty good one for for the plaintiffs in this case to uh to prevail and simply proceed with their case.

Does the decision in this case have any ramifications, any impact on class actions coming up, or are the facts so narrow and so specific that it doesn't well. I think that if the Court does what I expected to do, which is to write an opinion that simply affirms the Second Circuit's decision or just withdraws the grain of sarcenari,

then it will have very little impact. If if they decide to write on rule three oh one, UM, it might have some impact in some cases, but I just don't see those issues being important enough for the Supreme Court to write on here. So I think it's likely that this case will have relatively little impact. But you never know. I'm I'm always surprised by what the Court does, or you know, frequently surprised, but I think here we're going to see uh, a fairly plain vanilla a firmans

or maybe even a decision just withdrawing the Searcherrari. Thanks Mark. That's Mark Riskin of Wolf hollen Stein. And that's it for the edition of the Bloomberg Law Show. Remember you can always at the latest legal news on our Bloomberg Lawn podcast. You can find them on Apple Podcasts, Spotify, and at www dot Bloomberg dot com slash podcast Slash Law.

I'm June Grass. Thanks so much for listening, and please tune into The Bloomberg Law Show every week now at ten pm Eastern, right here on Bloomberg Radio.