$46 Million Fee Award Sparks Secondary Dispute in O’Bannon v. NCAA

Photo credit: https://www.flickr.com/photos/vsellis/

by Joshua Calo*

On July 13, 2015, in the highly publicized case of O’Bannon v. NCAA, Federal Magistrate Judge Nathanael M. Cousins ordered the National Collegiate Athletic Association (NCAA) to pay attorneys’ fees and costs totaling $45,968,726.62.[1]  Most notably, Judge Cousins ruled that, pursuant to the Clayton Antitrust Act’s fee shifting provision,[2] the NCAA is responsible for paying costs incurred by a class of student-athletes in litigating claims that were ultimately unsuccessful on the merits.[3]

This decision from the Northern District of California comes as the NCAA’s appeal of the District Court’s decision on the merits – holding that NCAA rules restricting student athletes from receiving compensation for the use of their names, images, and likenesses violate federal antitrust law – is pending appeal before the Ninth Circuit Court of Appeals.[4]  On July 27, 2015, the NCAA filed pending objections to the fee award, which are subject to de novo review by U.S. District Judge Claudia Wilken.[5]  Although the Ninth Circuit’s decision may directly impact or preempt the plaintiffs’ award, the substantial costs associated with this litigation will likely serve as an independent basis for additional appeals.

BACKGROUND: THE O’BANNON DECISION

In 2009, a group of current, former, and prospective NCAA Division I athletes brought an antitrust class action against the NCAA.[6]  The class of plaintiffs – ultimately limited to current and prospective athletes – alleged that the NCAA’s “amateurism” rules, which restrict compensation for Division I student-athletes, violate Section 1 of the Sherman Antitrust Act[7] by operating as an “unreasonable restraint of trade.”[8]

On August 8, 2014, following a fifteen day bench trial before Judge Wilken, the District Court ruled in favor of the plaintiffs.[9]  Specifically, the court held that NCAA rules which, for example, bar compensation “for the use of [athletes’] names, images, and likenesses” in videogames and telecasts, “unreasonably restrain trade in violation of § 1 of the Sherman Act.”[10]  As a remedy, the court enjoined the NCAA from prohibiting compensation for the use of student athletes’ names, images, and likenesses.[11]  In effect, the injunction would permit student-athletes to earn up to $5,000 per year in deferred compensation.[12]

ATTORNEYS’ FEES AND COSTS

Despite the NCAA’s imminent appeal, within fourteen days of the District Court’s decision, the O’Bannon plaintiffs moved the District Court to award attorneys’ fees and costs in amounts of $46,856,319.46 and $5,555,739.07, respectively.[13]  The plaintiffs’ final amended motion sought attorneys’ fees of $45,573,985.45 and costs and expenses of $5,295,062.20.[14]

The NCAA raised a number of arguments in opposition to the amounts requested.[15]  Its most significant challenge, to which Magistrate Judge Cousins devoted significant analysis, was that the plaintiffs “could not recover fees for time spent on ultimately unsuccessful claims, whether or not they are related or unrelated to plaintiffs’ successful claims.”[16]  Judge Cousins rejected the NCAA’s core arguments, although he reduced the plaintiffs’ requested costs and expenses by $5,900,321.03 – specifically, denying reimbursement for expert fees, pro hac vice application fees, local travel expenses,  “purely clerical or secretarial work,” and other miscellaneous expenses.[17]

Fee-Shifting in Antitrust Lawsuits

Section 1 of the Sherman Act “generally proscribes any contract, combination or conspiracy that unreasonably restrains the nation’s domestic or foreign trade or commerce.”[18]  Correspondingly, Section 16 of the Clayton Act authorizes private parties to bring civil actions to enjoin violations of federal antitrust law.[19]

The controversy surrounding the $46 million award in O’Bannon concerns Section 16’s “fee-shifting” provision.  This section provides that a plaintiff who “substantially prevails” in an action for injunctive relief is entitled to recover “the cost of suit, including a reasonable attorney’s fees.”[20]

Unsuccessful Claims

The parties’ core dispute turns on the meaning of “substantially prevails” under Section 16.  Specifically, the parties disagree whether the plaintiffs are entitled to recover (1) all costs and fees associated with the litigation, or (2) only costs and fees associated with litigating claims and theories that ultimately succeeded on the merits.

(a) NCAA Focuses on Plaintiffs’ “Limited” Success and Failed Theories

The NCAA’s central argument – both before Magistrate Judge Cousins, and in its pending Motion for de novo review – is that the plaintiffs may not recover fees and costs incurred on unsuccessful claims and theories.  As such, the NCAA contends that the $46 million award must be reduced by more than $40 million.[21]

The NCAA highlighted the following, for example:

Relying on the United States Supreme Court’s decision in Hensley v. Eckhart,[25] the NCAA argues, “Plaintiffs may only recover fees related to their successful claim,” and may not recover fees related to claims “that are both unsuccessful and unrelated to successful claims.”[26]  The NCAA reasons that under Hensley, a plaintiff must achieve an overall “excellent result” to recover all attorneys’ fees and costs.[27]  In turn, the NCAA contends that the plaintiffs’ “limited [overall] success” does not entitle them to recover costs and fees associated with unsuccessful claims and theories.[28]

As applied, the NCAA focuses on three points:

(b) Magistrate Judge Cousins Highlights Underlying Relatedness of Plaintiffs’ Theories, and “Common Core of Facts”

In awarding the Plaintiffs more than $46 million, Judge Cousins rejected each of the NCAA’s arguments on essentially the same grounds.  His opinion cited Ninth Circuit precedent interpreting Henley, which applies in cases where “the successful and unsuccessful claims are related.”[32]  On that basis, Judge Cousins analyzed (1) whether the “relief sought on the unsuccessful claim is intended to remedy a course of conduct entirely distinct and separate” from that giving rise “to the injury on which the relief granted is premised,”[33] and (2) whether the plaintiff “obtained ‘excellent results’” overall.[34]  Importantly, with regard to the first prong, Judge Cousins emphasized that “[c]laims may be related if either the facts or the legal theories are the same.”[35]

Applying the first prong, Judge Cousins concluded that the same underlying facts formed the basis of both the successful and unsuccessful claims.  He reasoned, “a common core of facts underlay all of the claims plaintiffs brought against the NCAA during the five years of litigation: the claims are all premised upon defendants’ exploitative use of plaintiffs’ names, image, and likeness to generate revenue for defendants.”[36]  He further concluded that “the claims against EA and CLC involve a common core of facts with the claims brought against the NCAA,” and therefore, declined to withhold attorneys’ fees incurred while specifically litigating against those defendants.[37]

Applying the second prong, Judge Cousins concluded that the plaintiffs obtained “excellent results” warranting a full recovery of full attorneys’ fees and costs.  In so doing, he incorporated a Game of Thrones analogy – describing a story “where individuals with seemingly long odds overcome unthinkable challenges but suffer stark losses along the path to victory.”[38]  In conclusion, Judge Cousins described the plaintiffs’ victory at trial as an “adventurous, risky suit, while more than a mere game, is nothing less than a win that warrants attorneys’ fees for work spent on all claims—successful or unsuccessful.”[39]

(c) NCAA Renews Arguments Before Judge Wilken

As noted above, Magistrate Judge Cousins’ decision is subject to de novo review by District Judge Wilken.  In other words, the NCAA is entitled to a second bite at the apple without having to appeal beyond the District Court.

In its July 27 “Motion for De Novo Determination,” the NCAA raised the same arguments and asked Judge Wilken to reduce the award by nearly 90%.  Once Judge Wilkin issues her final ruling on attorneys’ fees and costs, either party may appeal her decision to the Ninth Circuit Court of Appeals.

CAN PLAINTIFFS’ $46 MILLION AWARD WITHSTAND TWO LINES OF APPELLATE REVIEW?

Just as the impact of Judge Wilken’s decision on the merits cannot be known until the Ninth Circuit rules on the NCAA’s appeal, whether the NCAA will ultimately be responsible for paying $46 million is far from certain.

As a threshold matter, if the Ninth Circuit overturns the NCAA’s underlying antitrust violation, the issue of fees and costs will be moot, pending the plaintiffs’ potential appeal to the Supreme Court.  Furthermore, although the NCAA’s board chairman recently stated that he does not want O’Bannon appealed to the Supreme Court, it remains to be seen whether the NCAA would accept an adverse ruling from the Ninth Circuit.[40]  Thus, for the award to stand, Judge Wilken’s decision on the merits, itself, may have to withstand two rounds of appellate scrutiny.

Furthermore, regardless of the underlying violation, both parties could have compelling reasons to independently appeal Judge Wilken’s final fees and costs award.

On the one hand, Magistrate Judge Cousins’ inclusion of costs for claims on behalf of former student-athletes, and litigation against other defendants, appears subject to attack.  In its opposition brief, the NCAA cited multiple authorities that seemingly support its position on these issues.[41]  Moreover, underlying Supreme Court precedent from Henley emphasizes that “congressional intent to limit awards to prevailing parties requires that . . . unrelated claims be treated as if they had been raised in separate lawsuits.” [42]  Indeed, much of the Supreme Court’s language regarding “the overall relief obtained by the plaintiff” arose in the context of attorneys’ fees in Civil Rights lawsuits, rather than the Clayton Act’s fee shifting provision.[43]

Conversely, there is little existing caselaw specifically addressing the meaning of Section 16’s “substantially prevails” requirement in similar contexts – where the plaintiff seeks to recover fees and costs for both successful and unsuccessful claims.[44]  Thus, either party would be well advised to appeal an unfavorable final award by Judge Wilken.

Ultimately, with regard to attorneys’ fees and costs, the NCAA has the superior position.  First, because it is subject to De Novo review, Judge Wilken may completely disregard Judge Cousins’ award and reach a wholly independent conclusion.  Second, the $46 million award is vulnerable on two separate appellate grounds.  Not only would a reversal of the underlying decision render the award irrelevant, but the NCAA seems to have stronger arguments regarding costs associated with the plaintiffs’ unsuccessful claims and theories.

Taken together, these various factors indicate that, more likely than not, the NCAA will ultimately pay far less than $46 million to attorneys for the O’Bannon plaintiffs.

* Executive Editor, Jeffrey S. Moorad Sports Law Journal; J.D. Candidate, May 2016, Villanova University School of Law.

[1] See O’Bannon v. NCAA, No. 09-cv-03329-CW (NC), — F. Supp. 3d —, 2015 WL 4274370 (N.D. Cal. July 13, 2015); see also O’Bannon v. NCAA, 7 F. Supp. 3d 955 (N.D. Cal. 2014) (decision on the merits).

[2] 15 U.S.C. § 26 (2012).

[3] See O’Bannon, 2015 WL 4274370, at *3-4 (describing NCAA’s arguments).

[4] See O’Bannon v. NCAA, No. 14-17068 (9th Cir. filed Oct. 21, 2014).

[5] See Defendant National Collegiate Athletic Association’s Motion for De Novo Determination of Dispositive Matter Referred to Magistrate Judge, O’Bannon v. NCAA, No. 4:09-cv-03329-CW (N.D. Cal. filed July 27, 2015), ECF No. 415.  Both parties agree that “[a] motion for attorney’s fees is ‘dispositive of a claim of a party,” and therefore, the Magistrate’s determination is subject to de novo review by the District Judge.  See Plaintiffs’ Opposition to Defendant National Collegiate Athletic Association’s Motion for De Novo Determination of Dispositive Matter Referred to Magistrate Judge at 3, O’Bannon v. NCAA, No. 4:09-cv-03329-CW (N.D. Cal. filed Aug. 10, 2015) [hereinafter Plaintiffs’ Opposition] (citing Estate of Connors by Meredith v. O’Connor, 6 F.3d 656, 659 n.2 (9th Cir. 1983)), ECF No. 421.

[6] See O’Bannon v. NCAA, 7 F. Supp. 3d 955, 962-63 (N.D. Cal. 2014) (providing background of lawsuit).  Named defendants also included video game producer “Electronic Arts,” and trademark-licensing company “Collegiate Licensing Company,” Plaintiffs subsequently reached settlement agreements with those Defendants.  See id. at 965.  For a detailed discussion of the O’Bannon case, see Meghan Rose Price, Note, O’Bannon v. National Collegiate Athletic Association: A Cinderella Story, 22 Moorad Sports L.J. 179 (2015).

[7] 15 U.S.C. § 1 (2012) (prohibiting “[t]rusts, etc., in restraint of trade”).

[8] See O’Bannon, 7 F. Supp. 3d at 962-63 (discussing Plaintiff’s allegations).

[9] O’Bannon v. NCAA, 7 F. Supp. 3d 955 (N.D. Cal. 2014); see also Steve Berkowitz, Closing Briefs Are In; O’Bannon Case in Hands of Judge, USA Today (July 11, 2014, 10:21 AM EDT), http://www.usatoday.com/story/sports/college/2014/07/10/ed-obannon-antitrust-case-against-ncaa-closing-judge-claudia-wilken/12510271/ (discussing conclusion of O’Bannon trial).

[10] O’Bannon, 7 F. Supp. 3d at 1007.

[11] See id. at 1007-09 (discussing remedy).

[12] See O’Bannon v. NCAA, No. 14-17068 (9th Cir. filed Oct. 21, 2014); see also O’Bannon, 7 F. Supp. 3d at 1007-09 (discussing remedy).  On July 17, 2015, the NCAA filed a motion with the Ninth Circuit Court of Appeals, requesting a stay the injunction, which is scheduled to go into effect on August 1, pending the Ninth Circuit’s decision on the merits.  See Motion to Stay Injunction, O’Bannon v. NCAA, No. 14-17068 (9th Cir. filed July 17, 2015), ECF No. 101.

[13] See Plaintiffs’ Motion for Attorneys’ Fees and Costs and Memorandum in Support Thereof at 1, O’Bannon v. NCAA, No. 4:09-cv-3329 CW (N.D. Cal. filed Aug. 22, 2014), ECF No. 305 (requesting attorneys’ fees and costs in amounts of $46,856,319.46 and $5,555,739.07).

[14] See Plaintiffs’ Am. Motion for Attorneys’ Fees, Costs, and Expenses and Memorandum in Support Thereof at 1, O’Bannon v. NCAA, No. 4:09-cv-3329 CW (N.D. Cal. filed Nov. 19, 2014), ECF No. 341; see also O’Bannon, 2015 WL 4274370, at *2 (describing Plaintiffs’ petition for fees and costs).

[15] See O’Bannon, 2015 WL 4274370, at *3 (citing Docket Nos. 354-41, O’Bannon v. NCAA, No. 4:09-cv-3329 CW (N.D. Cal. filed Nov. 19, 2014).  As summarized in Judge Cousins’ opinion:

[T]he NCAA argues that plaintiffs (1) request fees for unrecoverable work concerning unsuccessful and unrelated claims;  (2) submitted insufficient evidence to support their fees request; (3) failed to apply necessary billing judgment as to fees for work on damages, jury trial preparation, and media outreach;  (4) seek fees for work not appropriate for fee-shifting such as time spent soliciting clients;  (5) request fees created by plaintiffs’ counsel’s own inefficiencies such as having partners perform document review; and (6) request excessive expenses such as expert fees.

Id.

[16] See id.

[17] See generally id. at 10-15 (describing reductions of plaintiffs’ requested amount).

[18] Holmes & Mangiaracina, Antitrust Law Handbook § 2:2; see 15 U.S.C. § 1 (2012).

[19] See 15 U.S.C. § 26 (2012) (“Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties, against threatened loss or damage by a violation of the antitrust laws . . . when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity, under the rules governing such proceedings, and upon the execution of proper bond against damages for an injunction improvidently granted and a showing that the danger of irreparable loss or damage is immediate, a preliminary injunction may issue.”); see also Holmes & Mangiarcina, supra note 18, at § 2:2 (explaining that in addition to government enforcement, Section 1 of the Sherman Act may be enforced by private parties through civil actions for either injunctive relief or treble damages).

[20] 15 U.S.C. § 26 (emphasis added) (“In any action under this section in which the plaintiff substantially prevails, the court shall award the cost of suit, including a reasonable attorney’s fee, to such plaintiff.”); see also Injunction Suits; Awards of Costs and Fees Under § 16 of Clayton Act, 54 Am. Jur. 2d Monopolies and Restraints of Trade § 679 (1996) (“§ 16 of the Clayton Act, which generally authorizes suits for injunctive relief against threatened loss or damage by violations of the antitrust laws, also provides that a plaintiff who substantially prevails in such a suit must be awarded the cost of the suit, including reasonable attorney’s fees.”).  As courts have interpreted, this fee-shifting provision is mandatory, rather than permissive, and reflects Congress’s intent to encourage private enforcement of antitrust violations.  See Christiansburg Garment Co. v. E.E.O.C., 434 U.S. 412, 415 & n.5 (1978) (noting that Clayton Act makes “fee awards mandatory for prevailing plaintiffs”); Funeral Consumers Alliance, Inc. v. Service Corp. Intern’l, 695 F.3d 330, 338 (5th Cir. 2012) (attorneys’ fees and costs under Clayton Act “are mandatory, [as] Congress decided in order to encourage individuals to bring suits to enforce the antitrust laws and to discourage potential defendants from violating antitrust laws”); Costco Wholesale Corp. v. Hoen, 538 F.3d 1128, 1136 (9th Cir. 2008) ([B]ecause bee shifting under § 26 is mandatory, equity cannot influence the determination of whether fees and costs should be awarded to substantially prevailing plaintiffs under that statute.”).

[21] See Defendant National Collegiate Athletic Association’s Opposition to Plaintiffs’ Amended Motion for Attorneys’ Fees, Costs and Expenses at 25, O’Bannon v. NCAA, No. 09-cv-3329 (filed Feb. 6, 2015), ECF No. 355 (requesting that plaintiff’s request for “counsel’s fees be reduced by $36,864,238.59, and their costs and expenses be reduced by $4,916,282.68”); Defendant National Collegiate Athletic Association’s Motion for De Novo Determination of Dispositive Matter Referred to Magistrate Judge, supra note 5, at 25 (requesting that Judge Cousins’ award be reduced by “$36,864,238.59 in fees and $4,916,282.68 in costs”).

[22] See O’Bannon v. NCAA, No. 09-cv-03329-CW (NC), — F. Supp. 3d —, 2015 WL 4274370, at *3-4 (N.D. Cal. July 13, 2015).

[23] See id. at *1, 3.  In this regard, the NCAA asked Judge Cousins to “deduct 80 percent of hours between September 1, 2012, and November 8, 2013,” during which time “plaintiffs’ counsel was ‘focused almost exclusively’ on its ‘failed class damages theory.’”  Id. at *3.

[24] Id. at *8.

[25] 461 U.S. 424 (1983).

[26] See Defendant National Collegiate Athletic Association’s Opposition to Plaintiffs’ Amended Motion for Attorneys’ Fees, Costs and Expenses, supra note 21, at 8 (citing Hensley, 461 U.S. at 434-35); see also O’Bannon, 2015 WL 4274370, at *3 (summarizing NCAA’s “primary argument”);

[27] See Defendant National Collegiate Athletic Association’s Opposition to Plaintiffs’ Amended Motion for Attorneys’ Fees, Costs and Expenses, supra note 21, at 8 (citing Hensley, 461 U.S. at 434-35); see also Hensley, 461 U.S. at 434-35 ([W]ork on an unsuccessful claim cannot be deemed to have been ‘expended in pursuit of the ultimate result achieved.’  The congressional intent to prevailing parties requires that these unrelated claims be treated as if they had been raised in separate lawsuits, and therefore no fee may be awarded for services on the unsuccessful claim. . . . Where a plaintiff has obtained excellent results, his attorney should recover a full compensatory fee.”).

[28] See Defendant National Collegiate Athletic Association’s Opposition to Plaintiffs’ Amended Motion for Attorneys’ Fees, Costs and Expenses, supra note 21, at 8 (“Achieving ‘an excellent result on one successful claim doesn’t work to resurrect the hours her lawyers spent on unsuccessful claims; under Hensley, the fee award cannot include those hours.’” (quoting Schwarz v. Sec’y of Health & Human Servs., 73 F.3d 895, 906 (9th Cir. 1995)); id. at 11 (“Plaintiffs’ recovery must also be reduced to reflect plaintiffs’ limited success.  ‘[A] reduced fee award is appropriate if the relief, however significant, is limited in comparison to the scope of the litigation as a whole.’” (quoting McCown v. City of Fontana, 565 F.3d 1097 (9th Cir. 2008)).

[29] Id. at 9.

[30] Id. at 11.

[31] Id. at 14 (emphasis added).

[32] See O’Bannon v. NCAA, No. 09-cv-03329-CW (NC), — F. Supp. 3d —, 2015 WL 4274370, at *4 (N.D. Cal. July 13, 2015) (emphasis added) (citing Thorne v. City of El Segundo, 802 F.2d 1131, 1141 (9th Cir. 1986)).

[33] See id. at *4 (citing Thorne, 802 F.2d at 1141).

[34] See id. at *5 (“If the plaintiff obtained ‘excellent results,’ full compensation may be appropriate, but if only ‘partial or limited success’ was obtained, full compensation may be excessive.” (quoting Thorne, 802 F.2d at 1141)).

[35] Id. at *4 (citing Webb v. Sloan, 330 F.3d 1158, 1169 (9th Cir. 2003).

[36] Id. at *5 (emphasis added).

[37] Se id. at *9.  Judge Cousins did conclude, however, that the plaintiffs could not “double” recover, and thereby reduced the award to the extent that the plaintiffs submitted entries for each defendant, for overlapping work.  See id. (“[T]o the extent plaintiffs submitted the same entries for work spent litigating against EA and CLC . . . they can only recover those fees once.”).

[38] See id. at *6 (concluding that Plaintiffs were entitled to full attorneys’ fees.”

[39] Id.

[40] See Jon Solomon, NCAA D-I Board Chair Doesn’t Want O’Bannon Appealed to Supreme Court, CBS Sports (May 30, 2014, 3:42 PM), http://www.cbssports.com/collegefootball/writer/jon-solomon/25200396/top-ncaa-board-member-doesnt-want-obannon-appealed-to-supreme-court-.

[41] See Defendant National Collegiate Athletic Association’s Opposition to Plaintiffs’ Amended Motion for Attorneys’ Fees, Costs and Expenses, supra note 24, at 10-11 (citing N.Y. v. Microsoft, 297 F. Supp. 2d 15, 34 (D.D.C. 2003); Wang v. Chinese Daily News, Inc., 737 F.3d 538, 545 (9th Cir. 2013); Schwartz v. Sec’y of Health & Human Servs., 73 F.3d 895, 903-04 (9th Cir. 1995)).

[42] See Hensley v. Eckerhart, 461 U.S. 424, 435-36.

[43] See id. at 435-36 Hensley, 461 U.S. at 435 (addressing Civil Rights attorneys’ fee awards under 42 U.S.C. § 1988).

[44] Presently, the leading decision appears to be from the United States District Court for the Southern District of New York in F & M Schafer Corp. v. C. Schmidt & Sons, Inc., 476 F. Supp. 203 (S.D.N.Y. 1979).  See Attorney’s fees under § 16 of the Clayton Act, 2 Attorney Fee Awards § 9:4 (3d ed.). (“Several courts have applied the Schaefer benchmarks established by the Southern District of New York in F&M Schaefer Corp v. C Schmidt & Sons.”).  There, the court held “that a determination of which party has substantially prevailed should consider the situation immediately prior to the commencement of the suit, the situation at present, and the role, if any, played by the litigation in effecting any changes between the two.”  See id.