Privilege Issues in the Media Firestorm

February 2, 2016

By Howard M. Miller

The situation has become all too familiar: an incident of prurient interest -- whether actual or falsely alleged -- goes viral on social media before university officials can even ascertain the names of the parties involved.  Before anyone can take a breath, news vans have encircled the campus, hauling reporters who possess a keen eye for rash judgments and scapegoating, irrespective of that increasingly elusive concept known as truth. One of the most well-known of such incidents was, of course, “Duke lacrosse.”  What may be less known is the eloquence with which Duke’s President, Richard H. Brodhead, gave a most instructive post-mortem about the lessons learned:

I’ll end with the deepest lesson this case taught me.  When I think back through the whole complex history of this episode, the scariest thing to me, is that actual human lives were at the mercy of so much instant moral certainty, before the facts had been established.  If there’s one lesson the world should take from the Duke lacrosse case, it’s the danger of prejudgment and our need to defend against it at every turn.  Given the power of this impulse and the forces that play to it in our culture, achieving this goal will not be easy.  But it’s a fight where we all need do our part.[1]

The siege on Duke could have easily happened to any higher education institution and has, in fact, happened many times since.  Universities earnest in their desire to avoid “instant moral certainty” when faced with the hot lights of the media whirlwind have developed processes and procedures -- “media kits” if you will -- to proactively prepare for such incidents.  This preparedness often, and quite wisely, includes a public relations firm that can be on-call when needed. For those institutions with public relations firms on retainer, unintended privilege issues may arise in subsequent litigation.  These situations typically play out as follows.  The story hits the media.  Institutional officials, legal counsel and the public relations firm enter a virtual bunker to plan a cogent strategy.  The institution wants the outside world to know of its diligence, legal counsel wants to ensure compliance with investigative legal requirements, and the public relations firm wants to quell the storm while portraying the institution in its best possible light. Intertwined in the bunker discussions are both legal considerations and the compelling public relations considerations.  We are, after all, part of the same team, and strict legal compliance makes for good public relations.  The problem though is that once legal brings public relations into the fray, communications between the two may lose the cloak of attorney-client privilege. This recently played out in the case of Waters v. Drake, 2015 U.S. Dist. LEXIS 164179 (S.D.N.Y. 2015).  In Waters, Ohio State University terminated the Director of its marching band after it had conducted an investigation resulting in a report outlining a “sexualized” culture with the marching band.  Litigation ensued, and the plaintiff sought discovery of communications between university counsel and the public relations firm hired by the university to advise it.   The university argued that such documents fell within the attorney-client privilege and were therefore immune from discovery.  The court flatly rejected this argument, holding:

If … legal counsel[] involved the public relations firms not as part of his effort to provide legal advice to the University, but as part of an effort to craft announcements which would be more palatable to the media or the public, he was not using the consultants in order to help him as a lawyer, but to help the University as a public institution anticipating a public relations campaign. Under that scenario, sharing otherwise privileged documents with the consultant is a waiver of the attorney-client privilege, and communications directly with the consultant are not privileged at all.

Waters, 2015 U.S. Dist. LEXIS 164179 at **6-7. Although the court eventually denied discovery based on relevance, it reiterated a quote from other cases: “case law makes clear that a media campaign is not a litigation strategy.” Waters, 2015 U.S. Dist. LEXIS 164179 at *6 (internal citations and quotations omitted).           Waters is not binding on other jurisdictions, and may be distinguishable on its facts such that the privilege may still apply.  What constitutes a “media campaign” may not fit easily into a one size fits all definition.  Nonetheless, the holding in Waters is of sufficient concern that it ought to be considered on the front end of a crisis. Moreover, Waters and the cases it cites do not eviscerate the value and importance of public relations firms.  Indeed, such firms have a critical role to play in making sure an institution exercises due caution in undertaking a thoughtful investigation in the face of the media and the public at large demanding instantaneous conclusions and punishment.   Legal counsel, however, ought to be careful not to discuss legal strategies with their outside public relations advisors that may be relevant to a subsequent lawsuit.  Such discussions may well lose the cloak of privilege and thereby find themselves in front of the eager eyes of a plaintiff’s attorney envisioning a hefty payday. [1] See Duke President Shares Lessons Learned, Regrets About Lacrosse Case, Duke Today, September 29, 2007, available at hhtps://today.duke.edu/2007/09/rhb_lawconf.html  

NCAA Settlement Could Promote Concussion Prevention and Treatment, but Leaves Member Institutions on the Hook for Future Lawsuits

January 31, 2016

By Philip J. Zaccheo

On January 26, U.S. District Judge John Lee of the United States District Court for the Northern District of Illinois granted preliminary approval of a new settlement of consolidated class action litigation involving the NCAA and former NCAA student athletes, in which the NCAA agreed to provide $70 million towards concussion research, testing and diagnosis. This settlement is largely a restatement of an earlier proposed settlement that had been rejected by the Court. As part of the original settlement, the NCAA agreed to invest in concussion research and education, and to fund physical examinations, neurological measurements, and neurocognitive assessments of individuals who in the past 50 years competed in contact sports for NCAA member institutions. All of these things were restated in the new settlement, with the addition of a greater emphasis on strengthening game time concussion protocols (“return-to-play” rules) and instruction to begin to notify those former student athletes eligible for neurological testing and assessment. Notably, neither the prior proposed settlement nor the approved settlement shields NCAA member institutions or the NCAA itself from current or future concussion lawsuits. Unlike the NFL concussion settlements in which the NFL directly compensated injured plaintiffs, the money paid by the NCAA goes straight to funding the research, education, prevention and testing discussed above. As a result, student athletes retain the ability to sue the NCAA or their institutions on grounds relating to concussion diagnosis and/or treatment, or lack thereof. In fact, the awareness initiatives funded by the settlement may increase the likelihood of claims, at least in the short run. Relatedly, about one week prior to the announcement of the approved settlement, the “Power Five” NCAA conferences proactively voted to give team trainers and physicians the “unchallengeable” authority to decide whether and when a student athlete should return to competition. This action, while not literally required by the settlement, certainly was a move toward alignment with developing best practices, and offers the potential for prospective liability protection.

Emergency Action Taken to Extend STEM OPT Program Rule Through May 10, 2016 - Higher Education Law Report

January 26, 2016

By Joanna L. Silver

As reported in our November 2, 2015 blog post, the present STEM OPT rule which allows F-1 students with U.S. degrees in science, technology, engineering or mathematics (STEM) to extend their optional practical training (OPT) by 17 months was to expire on February 12, 2016 unless the U.S. Department of Homeland Security (DHS) could publish and promulgate a new rule.  The present STEM OPT extension rule had been vacated by the U.S. District Court for the District of Columbia in August 2015 for procedural deficiencies in its promulgation, but the court’s ruling was stayed until February 12, 2016 so DHS could publish a new rule for public comment and prevent hardship to the thousands of F-1 students employed in the U.S. on STEM OPT and the companies that employ those individuals. Our November 2, 2015 blog post detailed some of the highlights of DHS’ proposed STEM OPT extension rule which was published for comment in the Federal Register on October 19, 2015. The DHS received an overwhelming 50,000 plus comments to the proposed rule and, a few days before the Christmas holiday, asked the court for a 90-day extension of the existing STEM OPT rule so it could address the comments and begin to train DHS officers on the intended changes to the STEM OPT program.  Following additional pleadings by DHS and Washington Alliance of Technology Workers (WashTech) -- the plaintiff in the case that was before the U.S. District Court for the District of Columbia -- the court, last Saturday, delayed its order terminating the STEM OPT rule as of February 12, 2016 and granted the DHS an additional 90 days to revise its proposed STEM OPT rule.  The court extended the sunset date of the STEM OPT extension rule to May 10, 2016 and warned DHS that no further extensions would be granted. As a result of this determination, those F-1 student employees with STEM OPT remain authorized to work in the U.S., at least through May 10, 2016. However, WashTech’s counsel has indicated that an appeal of the decision to extend the sunset date by 90 days would be filed with the D.C. Circuit immediately. We will continue to keep you informed of further developments in this matter so you and your employees can plan accordingly.

“Cat’s Paw” Liability in Faculty Decision-Making

January 7, 2016

By Howard M. Miller

monkey-catThe Fable Children’s fables are often an overlooked source of wisdom.   Take for example Aesop’s 17th century fable “The Monkey and the Cat.”  As the story goes, a cat and monkey lived in the same house as pets.  The monkey, desiring to eat the chestnuts roasting on the family hearth, dupes the cat into retrieving them by flattering the cat’s greater skill in such matters. The problem for the cat, however, was that as soon as she retrieved the nuts, the monkey would gobble them up, leaving an unfortunate ending:

Now the master came in, and away scampered the rascals, Mistress Cat with a burnt paw and no chestnuts.

Centuries later this fable has morphed into a theory of liability being deployed with increasing fervor by faculty members challenging disciplinary and tenure decisions in the context of employment discrimination cases.  The theory is known as “cat’s paw.”  What it means in essence is that the faculty member asserts that the discriminatory animus of one colleague (the monkey) should impute liability to an otherwise innocent decision-maker or the university itself (the cat).   So, how does a university protect its “paw”? The Fire The cat’s paw theory in discrimination cases slinked its way through the courts for several years with mixed results as to its applicability and scope.  In 2011, however, in Staub v. Proctor Hosp., 562 U.S. 411 (2011), the United States Supreme Court, upheld cat’s paw liability in the context of a USSERA claim. As with most things plaintiff, once that mine was opened a crack, legions of gold prospectors (plaintiff-side attorneys) jumped down the shaft digging for otherwise elusive gold.  And, some have found it. Relying on Staub, federal courts around the County have applied cat’s paw liability in discrimination cases.  The underlying rationale for such liability is that an employer should not be able to “shield itself from liability … by using a purportedly independent person or committee as the decision-maker where th[at] decision-maker merely serves as a conduit, vehicle, or rubber stamp by which another achieves his or her unlawful design.” Siani v. State University of N.Y. at Farmingdale, 7 Supp. 3d 304, 327 (E.D.N.Y. 2014) (internal quotation omitted). Although the law in this area continues to evolve, it has become clear that cat’s paw liability is a theory to be reckoned with in the world of higher education.   By way of a basic example, take a garden variety situation where a stipend for additional duties is at stake for a faculty member.   The ultimate decision whether or not to grant the stipend is made by a Dean.   The Dean bases her decision solely on the recommendation of the Department Chair.  However, unbeknownst to the Dean and the University at-large, the Department Chair’s negative recommendation arises out of her unstated belief that the faculty member is simply “too old” for any additional responsibility.  Under this scenario, the Department Chair has devolved into the fabled monkey while the Dean and University would be suffering not only from a burnt paw but also the indignity of having to part with its chestnuts in favor of the faculty member. Cat’s paw liability can also be found in disciplinary matters and tenure decision-making.  While tenure cases are complex and fact driven, often the key to avoiding liability is whether the University can break a causal connection between the recommendation made by the tainted evaluator and the ultimate decision.  For example, in Taleyarkhan v. Trs. of Purdue University, 607 Fed. Appx. 548 (7th Cir. 2015), the federal Seventh Circuit Court of Appeals rejected a faculty member’s attempt at stating a discrimination claim using the cat’s paw theory as a way to challenge research misconduct sanctions imposed by the institution, where an independent committee confirmed the suspicions of misconduct that were raised by the alleged tainted supervisor.  Similarly, in Veeramathu v. Bd. of Trustees for Conn. State Univ. Sys., 862 F. Supp. 2d 127, 161 (D. Conn 2012), a federal district court in Connecticut held that the cat’s paw theory was not available in a tenue denial case where the university president engaged in an independent review of the tenure candidate’s portfolio and considered multiple unbiased sources of information in making his determination.  In other words, the court held that there was no evidence that the colleague who gave negative evaluations of the plaintiff was the “proverbial monkey” successful in inducing a denial of tenure.  Rather, the denial was based on an untainted independent  evaluation by the President. Protecting the Paw and Keeping the Chestnuts At the risk of being a connoisseur of the obvious, the best way to defeat cat’s paw liability, particularly in a pre-trial motion, is to be able to prove that our evaluator (e.g., Department Chair, Dean) did not harbor discriminatory animus.  In Deger v. University of Cincinnati, 2015 U.S. Dist. Lexis 132756 (S.D. Ohio 2015), for example, an applicant for an assistant professor position could not win on the cat’s paw theory where the record showed that the alleged biased evaluator’s comments were nothing more than an honest evaluation and were not discriminatory at all. But let’s say we can’t prove that our would-be monkey is innocent, how do we win any way?   The case law gives us some guidance. As noted by the Fifth Circuit, “collective decision-making” is less susceptible to influence by an individual with a retaliatory motive.” Wu v. Miss. State Univ, 2015 U.S. LEXIS 17354 (5th Cir. 2015) (internal citation and quotation omitted).   In Wu, the plaintiff was an assistant professor who alleged, inter alia, that her denial to full professor was the result of race, national origin and age discrimination, as well as retaliation.  The primary argument advanced by the plaintiff was that her department chair had retaliatory motives sufficient to establish cat’s paw liability against the university.  In rejecting the plaintiff’s argument, the Fifth Circuit noted that the promotion decision involved many levels of review by multiple individuals.  At each level, multiple decision-makers for reasons independent of the department chairs’ view recommended against the promotion. Standing in contrast to Wu is Goswami v. Depaul University, 2015 U.S. Dist. LEXIS 5937 (N.D. Ill. 2015), where a faculty member was able to defeat summary judgment in a tenure denial case using the cat’s paw theory.   In Goswami, the court was presented with a “leviathan” of a record reflecting a sharply disputed recommendation to deny tenure based on an 11-7 departmental vote.  On the facts presented, the professor was able to present just enough evidence that multiple proverbial monkeys in the department influenced the non-biased ultimate decision-maker.   In reaching its conclusion, the court noted:

The record in this case proves that academics do not exist in splendid isolation, immune to the provocations and slights to which less Olympian men and women fall prey. But the record is such – perhaps just barely – that a jury must determine what truly underlay the actions and motivations of the parties.  As the discussion above and below show, some of the evidence on both sides is problematic.

In a perfect world, tenure recommendations would all be unanimous and the committees that make them would have the diversity of the United Nations.  Of course, we do not live in such a world, but that does not mean that we are doomed to try to convince juries that our university presidents were not mere instruments of discriminators in the trenches.  Cat’s paw liability can be avoided when the ultimate decision-maker either engages in his/her own independent review or when the committee process is structured in such a way that a biased individual(s) cannot be deemed to have unduly influenced the ultimate decision.  The full parameters of cat’s paw liability will be fleshed out as the law further evolves.  In the meantime, plainly, no university wants to be the named defendant in the case that stakes out the theory’s outer boundaries.  For this reason, counsel should be consulted as early as possible if there is any hint of a flaw in the faculty decision-making process.

Ninth Circuit Denies Request For Rehearing In O’Bannon

December 21, 2015

By Paul J. Avery
Last week, a three-judge panel for the United States Court of Appeals for the Ninth Circuit voted 2-1 to deny the O’Bannon plaintiffs’ petition for a rehearing en banc of the Ninth Circuit’s September 30, 2015 decision on the NCAA’s appeal of the District Court’s 2014 decision.  On appeal, the Ninth Circuit had upheld that part of the District Court’s ruling which enjoined the NCAA from enforcing its rules precluding member institutions from providing athletic scholarships up to the full cost of attendance, but disagreed with that part of the District Court’s decision which would have required the NCAA to permit member institutions to pay deferred compensation to student-athletes in an amount up to $5,000 per year for the use of their names, images and likenesses.  While the parties’ next steps in the case are presently unknown, both the O’Bannon plaintiffs and the NCAA could potentially seek U.S. Supreme Court review of the Ninth Circuit’s decision.  

Education Department Reverses Course on Prohibition Against Incentive Compensation Based on Retention and Graduation; Clears Way for Graduation Rate and APR Based Bonuses in Coaching Contracts

November 30, 2015

By Philip J. Zaccheo

On November 27, 2015, the United States Department of Education announced a reversal of its previously existing prohibition against the payment of incentive compensation based on students’ program completion or graduation rates.  The announcement follows two successive federal appeals court decisions, in 2012 and 2014, that the Department had not articulated a sufficient rationale for the prohibition. Although the announcement may impact retention and graduation based incentives on any number of fronts, it is of particular interest in the context of coaching and other athletics personnel employment contracts, where the prohibition had created significant uncertainty as to the permissibility of bonuses based on these metrics. As many will recall, on October 29, 2010, the Department adopted so-called Title IV “Program Integrity Rules.” Among other things, these new regulations eliminated previously existing regulatory safe harbors under the statutory prohibition against payment of incentive compensation for securing enrollment, and reversed a prior Department position that payments based on retention, degree completion or graduation were not considered impermissible enrollment-based compensation.   In response to a comment questioning the applicability of the prohibition to the recruitment of student-athletes, the Department explained that:

[r]ecruitment of student-athletes is not different from recruitment of other students.  Incentive compensation payments to athletic department staff are governed by the restrictions included in [the regulations].  If the payments are made based on success in securing enrollments or the award of financial aid, the payments are prohibited; however, the Department does not consider “bonus” payments made to coaching staff or other athletic department personnel to be prohibited if they are rewarding performance other than securing enrollment or awarding financial aid, such as a successful athletic season, team academic performance, or other measures of a successful team.

Based upon the Department’s statements that (a) incentivizing retention, degree completion or graduation is equivalent to prohibited incentivization of success in securing enrollments, and (b) athletic recruitment is no different than recruitment of other students, it appeared as though athletic department bonuses tied to student-athlete retention or program completion (e.g., graduation rate bonuses and/or Academic Progress Rate (APR)-based bonuses) would violate the new regulations. On March 17, 2011, however, the Department issued a “Dear Colleague” letter for the stated purpose of clarifying a number of new Title IV regulatory requirements, including the revised incentive compensation restrictions.  Among other things, the “Dear Colleague” letter noted that:

 [t]he preamble [to the new regulations] noted that bonuses for athletic personnel to reward performance other than securing enrollment or awarding financial aid, such as a successful athletic season, team academic performance, or other measures of a successful team, are permitted. . . .  This statement merely reflects the fact that the payment of bonuses to athletic personnel is a common practice and is not typically viewed as incentive compensation based on recruitment of individuals as students, but at most may indirectly reward success in recruiting that small subset of individuals whose enrollment would benefit the institution’s athletic program.

 Unfortunately, this “clarification” created more ambiguity than it resolved.  For example, one could adopt a narrow reading of this explanation as standing for the proposition that payments based on successful on-field/on-court performance reward only indirectly success in recruiting, and that such bonuses (but not bonuses based on retention or academic progress) are therefore permissible.  Alternatively, one could read the explanation more broadly as stating that athletic personnel may be paid bonuses based on retention or academic progress because they are not recruiting individuals for the purpose of increasing general student enrollment, but are instead recruiting individuals for the limited benefit of the institution’s athletics program.   Under this broader reading, the incentive compensation prohibitions would not apply to athletic department staff insofar as they related solely to the recruitment of student-athletes. In the wake of the Dear Colleague letter, institutions adopted varying practices with respect to retention- or graduation-based incentive compensation in coaching and other athletics employment agreements.  Some institutions proceeded cautiously, and restructured academic performance bonuses to be based on GPA or other clearly permissible metrics.  Others, believing strongly in the merit of compensating personnel for keeping student-athletes in school and questioning whether the Department truly intended to prohibit this practice, retained graduation rate and APR-based bonus structures.  Thankfully, the Department’s November 27 announcement removes any remaining uncertainty in this regard, and clearly supports the use of such bonus structures, as well as retention- or graduation-based compensation in other contexts. The Department’s announcement does not change other aspects of the continuing prohibition on paying commissions, bonuses or other forms of incentive compensation based directly or indirectly on securing enrollments or financial aid.  Among other things, the Department expressly refused to alter its prohibition on compensation tied to minority enrollments, which had also been questioned in the court decisions referenced above, stating that the Program Integrity Rules bar compensation based on the number of students enrolled, “irrespective of the student’s minority or other status and irrespective of whether the goal of the recruiters is to increase diversity.”

New Department of Homeland Security Regulation Aims to Preserve and Enhance STEM OPT Program for Nonimmigrant Students and U.S. Employers - November 2015

November 1, 2015

By Joanna L. Silver

On October 19, 2015, the U.S. Department of Homeland Security (DHS) published a notice of proposed rulemaking in the Federal Register regarding optional practical training (OPT) extensions for F-1 students with U.S. degrees in science, technology, engineering or mathematics (STEM). The proposed rule is essentially a response to an August 2015 decision of the U.S. District Court for the District of Columbia to vacate the present STEM OPT extension regulation for procedural deficiencies in its promulgation, effective February 12, 2016.  Under the proposed rule, the length of STEM OPT extension would be increased from 17 months to 24 months.  In addition, the rule requires employers to develop and implement mentoring and training programs to bolster students’ learning through practical experience and provides safeguards for U.S. workers seeking employment in related fields.  DHS is accepting comments on the proposed rule through November 18, 2015 and is making every effort to have the final rule take effective prior to the February 12, 2016 sunset of the present STEM OPT extension regulation. STEM OPT Extensions.  Under the proposed rule, the length of STEM OPT extensions would increase from 17 months to 24 months and F-1 students would be limited to two 24-month STEM OPT extensions (for example, one after earning U.S. master’s STEM degree and another after earning U.S. doctoral STEM degree).  The proposed rule extends the maximum period of unemployment for F-1 students to 150 days – 90 days during the initial 12-month period of post-completion OPT and 60 days during the 24-month STEM OPT extension.  If the DHS rule is implemented as proposed, the STEM OPT extension will be a benefit to F-1 students and U.S. employers alike, as students will be able to work in the U.S. for three full years before additional work authorization (e.g., H-1B, O-1, etc.) would be necessary, and employers will have a generous amount of time in which to assess F-1 employees’ performance before undertaking sponsorship for additional work authorization.  As with the present STEM OPT extension regulation, under the proposed rule, STEM OPT extensions are only available if the employer participates in the U.S. Citizenship and Immigration Services’ E-Verify employment eligibility verification program. New Employer ResponsibilitiesThe proposed rule establishes a couple of new responsibilities for employers seeking to employ F-1 nonimmigrants on the STEM OPT extension.  First, employers would be required to implement formal mentoring and training programs for STEM OPT students to enhance their practical skills.  The student would be required to prepare a Mentoring and Training Plan – including the training goals and a description of how those goals will be met -- with the employer and to submit the plan to the student’s designated school official (DSO) at his/her institution before the DSO could recommend and authorize a STEM OPT extension for the student.  Second, employers would be required to attest and provide assurances on a number of items including that they will not terminate, layoff or furlough a U.S. worker as a result of hiring an F-1 student on STEM OPT and that the duties, hours and compensation for the F-1 student employee are commensurate with similarly situated U.S. workers.  If an employer fails to comply with the new requirements, DSOs will be prohibited from recommending students for a STEM OPT extension. We will continue to monitor this proposed rule as the February 12, 2016 deadline approaches and provide updates so F-1 student employees and their employers can plan accordingly

O’Bannon v. NCAA – A Split Decision by the Ninth Circuit

October 9, 2015

By Paul J. Avery
The United States Court of Appeals for the Ninth Circuit issued its highly anticipated decision in the O’Bannon case on September 30, 2015. This case was an appeal of the United States District Court for the Northern District of California’s decision finding that certain NCAA rules were an unlawful restraint of trade in violation of federal antitrust law. Specifically, the District Court issued a permanent injunction prohibiting the NCAA from enforcing rules regarding scholarship caps, and requiring the NCAA to allow member schools to pay deferred compensation to certain student-athletes of up to $5,000 per year of eligibility to compensate them for revenues generated from the use of their names, images and likenesses. The Court of Appeals affirmed the portion of the District Court’s decision regarding scholarship caps and vacated the portion pertaining to deferred compensation. In reaching its decision, the Court of Appeals found that while the NCAA rules in question were procompetitive, they were not exempt from antitrust scrutiny, and were subject to antitrust law’s “Rule of Reason” test. Using this test, the Court of Appeals agreed with the District Court that the plaintiffs had demonstrated that the NCAA’s amateurism rules had an anticompetitive effect on the college education market. The analysis then turned to the procompetitive justifications for the amateurism rules posited by the NCAA. The Court of Appeals accepted two of the NCAA’s four proffered justifications as identified by the District Court: “integrating academics with athletics” and “preserving the popularity of the NCAA’s product by promoting its current understanding of amateurism.” The Court of Appeals next observed that not all of the NCAA’s compensation rules that restrict the market are necessary to preserve the “character” of collegiate athletics, and moved to consideration of whether there were “substantially less restrictive alternatives” to the NCAA’s compensation rules at issue in this case. The Court of Appeals agreed with the District Court that permitting institutions to set the grant-in-aid cap at student-athletes’ full cost of attendance was a less restrictive alternative to the NCAA’s current restrictions on compensation. In so doing, the Court of Appeals observed that the NCAA’s current rule “has no relation whatsoever to the procompetitive purposes of the NCAA: by the NCAA’s own standards, student-athletes remain amateurs as long as any money paid to them goes to cover legitimate educational expenses.” However, the Court of Appeals disagreed with the District Court regarding the payment of compensation to student-athletes for the use of their names, images and likenesses. According to the Court of Appeals, when the District Court found “that paying student-athletes would promote amateurism as effectively as not paying them,” the District Court “ignored that not paying student-athletes is precisely what makes them amateurs.” (Emphasis in original). The Court of Appeals continued:

The difference between offering student-athletes education-related compensation and offering them cash sums untethered to educational expenses is not minor; it is a quantum leap. Once that line is crossed, we see no basis for returning to a rule of amateurism and no defined stopping point…

To summarize, the Court of Appeals’ decision permits the offering of grants-in-aid up to the full cost of attendance (which, notably, had already been approved by the so-called “autonomy conferences” and was scheduled to take effect on August 1, 2015), but continues to permit the NCAA to enforce its rules prohibiting (among other things) the payment of deferred compensation to student-athletes in the form contemplated by the District Court. At this point, either party could seek review of the decision by the full Court of Appeals (as this decision was rendered by a three judge panel) or seek to appeal to the U.S. Supreme Court. The Court of Appeals’ decision is important in that it makes clear that the NCAA’s rules are not exempt from scrutiny under antitrust law, and specifically a “Rule of Reason” analysis. However, the decision regarding deferred compensation signifies a potentially important victory for the NCAA’s tradition and principles of amateurism, and may prove beneficial to the NCAA in its defense of Jenkins v. NCAA and other similar lawsuits. Elizabeth D’Agostino, a 2015 graduate of Albany Law School who is awaiting admission to the New York State bar, contributed to this blog post.

Ninth Circuit Rules on NCAA’s Appeal in O’Bannon

September 30, 2015

By Paul J. Avery
On September 30, 2015, the United States Court of Appeals for the Ninth Circuit issued its highly anticipated opinion on the NCAA’s appeal of the District Court’s decision in the O’Bannon case (a summary of the District Court’s decision is available here). After a lengthy discussion in which the Ninth Circuit ruled that the NCAA’s compensation rules are subject to scrutiny under antitrust laws, the Ninth Circuit affirmed in part and reversed in part the District Court’s decision. The Ninth Circuit upheld that part of the District Court’s ruling which enjoined the NCAA from enforcing its rules precluding member institutions from providing athletic scholarships up to the full cost of attendance. The Ninth Circuit reasoned that this constituted a substantially less restrictive alternative to the NCAA’s current compensation rules because this would have virtually no impact on amateurism. The Ninth Circuit disagreed, however, with that part of the District Court’s decision which would have required the NCAA to permit member institutions to pay deferred compensation to student-athletes in an amount up to $5,000 per year for the use of their names, images and likenesses. The Ninth Circuit was particularly critical of the District Court’s decision here, noting that the District Court ignored the fact that not compensating student-athletes is precisely what renders them amateurs. As a result of the Ninth Circuit’s ruling, member institutions may provide FBS football and Division I basketball recruits with grants-in-aid up to the full cost of attendance, but remain prohibited by NCAA rules from providing the $5,000 per year deferred compensation contemplated by the District Court’s decision. A more detailed summary of the Ninth Circuit’s decision will be published on Bond’s Higher Education Law Report in the coming days.

The NLRB Unanimously Shuts Down Attempt to Unionize Northwestern's Scholarship Football Players - August 2015

August 18, 2015

In a long-awaited decision issued on August 17, 2015, the five-member National Labor Relations Board (“Board”) unanimously shut down an attempt by Northwestern University’s scholarship football players to become the first group of college athletes to form a labor union.  This Board holding vacates the direction of election issued by an NLRB Regional Director in March 2014 and dismisses the representation petition filed by the College Athletes Players Association (“CAPA”), but does not address the fundamental issue of whether the players are “employees” under the National Labor Relations Act (“Act”).  Instead of deciding this issue, the Board declined to assert jurisdiction over this case based on its conclusion that it “would not promote stability in labor relations” and therefore would not effectuate the policies of the Act. The Board noted that it had never been asked to assert jurisdiction in a case involving college athletes, nor had there ever been a petition for representation of a unit of a single college team, or even a group of college teams.  The Board also pointed out that the players in this case did not “fit into any analytical framework” the Board had used in other cases involving college students (such as graduate student assistants or student janitors and cafeteria workers) because this case involved student athletes who receive scholarships to participate in what traditionally has been regarded as an extracurricular activity.  The Board also distinguished these scholarship players from professional athletes, because the scholarship players are required to be enrolled full time as students and meet various academic requirements.  The Board further observed that bargaining units in professional sports have never been limited to a single team’s players – they have always included the players of all teams in the entire league.  Therefore, the Board concluded that there was no precedent that required it to assert jurisdiction, and that it was free to exercise its discretion to decline jurisdiction over this case. In justifying its decision to decline jurisdiction, the Board explained that Northwestern is a member of the National Collegiate Athletic Association (“NCAA”), which has a “substantial degree of control over the operations of individual member teams, including many of the terms and conditions under which the scholarship players (as well as walk-on players) practice and play the game.”  Under these circumstances, the Board determined that its assertion of jurisdiction over only Northwestern and its scholarship football players would not promote stability in labor relations across the NCAA.  The Board further explained that Northwestern competes in the NCAA Football Bowl Subdivision (“FBS”), where 108 of the 125 member schools are public institutions that are not covered by the Act.  As a result, the Board does not have jurisdiction over the vast majority of the FBS teams.  In fact, the Board pointed out that because Northwestern is the only private school in the 14-member Big Ten Conference, it “cannot assert jurisdiction over any of Northwestern’s primary competitors.”  The Board cited this as an additional reason why its assertion of jurisdiction over only Northwestern and its scholarship football players would not promote stability and uniformity in labor relations. Although the Board’s exercise in restraint in this decision comes as somewhat of a surprise given this Board’s activism in expanding the reach of the Act, the Board made clear that its decision does not “preclude a reconsideration of this issue in the future,” and should be interpreted narrowly.  In fact, the Board seemingly opened the door for consideration of a broader proposed bargaining unit than scholarship football players at one university by stating that its decision is not intended to “address what the Board’s approach might be to a petition for all FBS scholarship football players (or at least those at private colleges and universities).”  So, the landscape of collegiate athletics will remain the same for now, but this may not be the last unionizing effort of student athletes that we see.

Ninth Circuit Orders Stay in O’Bannon Case

August 3, 2015

By Paul J. Avery
On July 31, 2015, the United States Court of Appeals for the Ninth Circuit granted the NCAA’s request to stay the injunctions ordered by the District Court in the O’Bannon v. NCAA case. In August 2014, the District Court enjoined the NCAA from enforcing its rules that prohibited member schools and conferences from offering FBS football or Division I basketball recruits a limited share of the revenues generated from the use of their names, images, and likenesses and from offering to deposit a limited share of licensing revenue in trust for such student-athletes. As a result of the stay, the NCAA’s current rules may continue to be enforced until such time as the Ninth Circuit rules on the NCAA’s appeal of the District Court’s decision.

Second Circuit Decisions in Glatt and Wang Likely Preserve Essential Internship Opportunities

July 29, 2015

By E. Katherine Hajjar

On July 2, 2015, in Glatt v. Fox Searchlight Pictures and Wang v. The Hearst Corporation, the Second Circuit Court of Appeals addressed when unpaid interns are “employees” entitled to compensation under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL). This was a question of first impression for the Second Circuit. The plaintiff interns in Glatt argued that whenever an employer receives an immediate benefit from an intern’s efforts the intern is functioning as an employee. The U.S. Department of Labor, as amicus curiae in support of the plaintiffs, asserted that its exhaustive six factor test derived from Walling v. Portland Terminal, a nearly seventy year old Supreme Court case about prospective railroad brakemen, was the appropriate standard to use to assess whether an intern is an employee. The defendant employers urged the Second Circuit to consider an approach in which an intern is only an employee when the “primary beneficiary” of the internship is the employer rather than the intern. In an amicus brief in support of neither party, but submitted on behalf of the American Council on Education and five other organizations representing the collective interests of higher education institutions, Bond attorneys argued that the Department of Labor’s rigid six factor test is inappropriate in the intern context. The amici asked the Court to recognize the role that institutions of higher education play in assessing the value of an internship experience and adopt an analysis that focused on the “primary beneficiary” of the internship. A nuanced approach would, according to the amici, both preserve essential experiential learning opportunities and identify those internships that are exploitative. Institutions of higher education have long understood that real-world experiences offered by internships, combined with classroom instruction, best prepare students to become productive members of the workforce. Many colleges and universities integrate internships into their curriculum, also recognizing that competitive job applicants are those who have not just spent four years in the bubble of academia, but can also cite real-world experience. The amici, concerned with preserving as many legitimate internship experiences as possible, further pointed out that student-interns, upon their return to campus, often share their varied experiences in the classroom to the benefit of their peers as well as the institution, which becomes a more vibrant center for learning because of the experiences of its students. In Glatt and Wang the higher education community cautioned against an outcome that would unduly pressure employers to end unpaid internship programs because of concerns about FLSA and NYLL liability. The Second Circuit ultimately rejected the Department of Labor’s rigid six factor test and instead created a multi-factored, non-exhaustive set of considerations that while consistent with the spirit of Portland Terminal focuses on the “primary beneficiary” of the intern-employer relationship. The Second Circuit’s non-exhaustive set of considerations as articulated in Glatt are:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa;
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands?on training provided by educational institution;
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern;
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The Second Circuit, in these cases, recognized the importance of preserving experiential learning opportunities. Its non-exhaustive set of factors outlined in Glatt is a compromise that will help achieve two important goals of the higher education community: protecting interns from exploitative practices and preserving essential hands-on learning opportunities. For more on Wang and Glatt see Bond’s July 7, 2015 post here.