In April 1977, Jimmy Carter was just starting his fourth month as President of the United States. Elvis Presley died at age 42. The first Apple II computers went on sale, the World Trade Center in New York City was completed, and Americans were flocking to movie theaters to see the first "Star Wars." It was in this environment that the first issue of Athletic Purchasing and Facilities — the precursor to Athletic Business — was published.
Fast-forward 40 years, and while "Stars Wars" may still be a top draw at the box office, things in the sport, fitness and recreation industry have changed dramatically — often through legal action. Here is my list of the most important legal cases involving sports, fitness and recreation over the past 40 years.
1. National Collegiate Athletic Association v. Board of Regents of the University of Oklahoma, 468 U.S. 85 (1984)
Not many cases — never mind sports law cases — make it to the United States Supreme Court. Therefore, it is easy to see why NCAA v. Board of Regents is one of the most significant cases involving college sports.
In the early 1980s, the NCAA controlled the number of times a school's football games could be televised nationally and regionally, as well as the revenue the school received for each broadcast. Specifically, no NCAA member institution was eligible to appear on television more than a total of six times — and no more than four times nationally — over a two-year period.
The NCAA claimed that the goal of the plan was to reduce the adverse effects of live television upon football game attendance. Unhappy about the limitation, universities belonging to the College Football Association (CFA) negotiated a separate television contract with NBC that would have allowed a more liberal number of TV appearances for each school and would have increased the revenues realized by CFA members. In response, the NCAA announced that it would take disciplinary action against any CFA member that complied with the CFA-NBC contract.
The schools sued the NCAA in federal court, claiming that the controls exercised by the NCAA over the televising of college football games violated Section 1 of the Sherman Antitrust Act. In ruling that the NCAA's television plan constituted a restraint upon the operation of a free market in violation of the Sherman Act, the United States Supreme Court stripped the NCAA of a major funding source and returned it to the schools and conferences.
As a result of the ruling, the free market took hold in college football, and schools such as Notre Dame and Texas were able to enter into their own television contracts, while conferences such as the Big Ten, SEC, ACC and Pac-12 were able to create their own networks.
2. O'Bannon v. NCAA, 802 F.3d 1049 (9th Cir. 2015)
A case that makes the list not because of the legal precedent that it sets, but because of the legal impact it has had — and continues to have — on college sports is O'Bannon v. NCAA. What started out as a simple image-rights case, which the NCAA and the other parties eventually settled for $60 million, morphed into a class-action antitrust challenge of the entire NCAA amateur model.
In claiming that the NCAA placed a salary cap on student-athletes in the form of a scholarship, former UCLA basketball player Ed O'Bannon and the other members of the class sued the NCAA for violating the Sherman Antitrust Act. The Ninth Circuit Court concluded that while it agreed with the Supreme Court in NCAA v. Board of Regents that many of the NCAA's amateurism rules are likely to be pro-competitive, it held that those rules are not exempt from antitrust scrutiny. Applying the Rule of Reason, the court concluded that the NCAA was in violation of the antitrust law and must provide athletes with scholarships up to the full cost of attendance beyond tuition, room and board, and books.
In an unusual move, both O'Bannon and the NCAA appealed the decision to the United States Supreme Court. However, the court refused to hear the case in 2016. The O'Bannon case is special in that it has forced the NCAA and its member schools to reconsider how they compensate athletes. As a result of the case, the NCAA has allowed schools to increase the benefits they provide student-athletes.
3. NCAA v. Tarkanian, 488 U.S. 179 (1988)
In a case that is still reverberating today, the United States Supreme Court in NCAA v. Tarkanian was asked to determine whether the NCAA, an unincorporated association consisting of public and private universities and colleges, was a state actor for constitutional law purposes. The case started when the NCAA's Committee on Infractions, after a lengthy investigation of allegedly improper recruiting practices by the University of Nevada, Las Vegas (UNLV), found 38 violations, including 10 by head men's basketball coach Jerry Tarkanian.
The committee imposed a number of sanctions upon UNLV and requested it to show cause as to why additional penalties should not be imposed if it failed to suspend Tarkanian. Facing demotion and a drastic cut in pay, Tarkanian brought suit in Nevada state court, alleging that he had been deprived of his due process rights. The Nevada Supreme Court agreed and ruled that the NCAA's conduct constituted state action for jurisdictional and constitutional purposes.
On appeal to the United States Supreme Court, the court held that the NCAA's participation in the events that led to Tarkanian's suspension did not constitute "state action." In particular, the court held that although it must be assumed that UNLV, as an NCAA member and a participant in the promulgation of the association's rules, had some minor impact on the NCAA's policy determinations, the source of the rules adopted by the NCAA is not Nevada, but the collective NCAA membership, the vast majority of which was located in other states. Moreover, UNLV's decision to adopt the NCAA's rules did not transform them into state rules and the NCAA into a state actor, since UNLV retained plenary power to withdraw from the NCAA and to establish its own standards.
Up until this case, the NCAA was considered a state actor and had to provide members and athletes all the protections — such as due process and reasonable search and seizure — under the constitution.
4. Brentwood Academy v. Tennessee Secondary School Athletic Association, 531 U.S. 288 (2001)
The Tarkanian decision is all the more important after the United States Supreme Court in Brentwood Academy v. Tennessee Secondary School Athletic Association ruled that state high school athletic associations could be considered state actors for constitutional purposes when applying their rules against a member school. Using the same state action analysis that was used in Tarkanian, the court held that the association's regulatory activity may and should be treated as state action.
In support of its decision, the court found that the nominally private character of the association is overborne by the pervasive entwinement of public institutions and public officials in its composition and workings. In addition, the court noted that there would be no recognizable association, legal or tangible, without the public school officials who do not merely control but overwhelmingly perform all but the purely ministerial acts by which the association exists and functions in practical terms.
5. Cohen v. Brown University, 101 F.3d 155 (1st. Cir. 1996)
Although written to prevent discrimination based on gender in educational institutions, Title IX — perhaps more than any other law — has changed the face of the sport and recreation industries. While it is difficult to point to one particular case and hold it up as the definitive Title IX case since most of them open new ground, Cohen v. Brown University is a good illustration of the law's impact on female athletes and universities.
After Brown University downgraded two women's teams (gymnastics and volleyball) and two men's teams (water polo and golf) from university-funded varsity status to donor-funded varsity status, a group of female athletes charged Brown University with violating Title IX of the Education Amendments of 1972.
In upholding the district court's finding that Brown's interscholastic athletics program discriminated against women in violation of Title IX, the circuit court applied the law's three-prong test and held that: 1) participation opportunities were not provided in substantial proportion to enrollment; 2) that the university did not show a practice of program expansion for the underrepresented gender; or 3) that the university did not make full and effective accommodation of the interests and abilities of its women students.
The case is important for two main reasons. First, it illustrates how the courts intended to interpret Title IX's three-prong test. In particular, how close did a school have to get before it could show that participation opportunities were substantially proportional to enrollment? Second, the case illustrated that while cutting men's programs to reduce costs was fine, because of past discrimination against women, cutting women's programs in an effort to reduce expenses was not an option unless a school could satisfy one of the other prongs of the test.
6. Fraser v. Major League Soccer, 97 F. Supp. 130 (2000)
One of the reasons why most of the cases on this list do not address professional sports is because player unions have played an intervening role since the early 1970s. As players organized, the collective bargaining process became a major battleground with the National Labor Relations Board. That is not to say that none of the labor disputes ended up in court; the NFL Players Association in particular had a number of important court cases. But none of those cases had a bigger impact on a professional sports league then Fraser v. Major League Soccer.
In that case, a group of players sued the new league claiming that by imposing a salary cap on players and teams, and by contracting for player services centrally through MLS — effectively eliminating the competition for those services that would take place if each MLS team were free to bid for and sign players directly — the league was attempting to restrain the trade of the players in violation of Section 1 of the Sherman Antitrust Act. In particular, the players argued that the "single entity" defense and the organizational form offered by MLS were really just a sham to circumvent the law.
In finding that MLS was a true limited liability company (LLC), separate and distinct from its members, the court ruled that MLS was a single entity and therefore it could not conspire or combine with its investors in violation of antitrust laws. In addition, the court noted that MLS created both a new company and simultaneously a new market, in effect increasing the number of competitors from zero to one. As a result, it increased competition by creating a market. This decision allowed MLS to grow and develop without fear of bidding wars over players, which could have killed the league before it could firmly establish itself.
7. Armstrong v. Tygart and United States Anti-Doping Agency, 886 F. Supp. 2d 572 (2012)
This case makes the list for both the legal precedent it sets and because of the impact it had on a major sports figure. The United States Anti-Doping Agency charged cyclist Lance Armstrong with violating various anti-doping rules and gave him the option of either contesting the charges through arbitration or accepting sanctions, potentially including lifetime ineligibility from certain athletic competitions and forfeiture of any competitive results obtained on or after the date of his first alleged violation.
In his suit against the USADA, Armstrong challenged the organization's authority to bring such charges against him. In particular, he argued that the agreement to arbitrate such matters with the USADA violated his constitutional due process rights. In rejecting Armstrong's claims, the court found that Armstrong had agreed to submit any challenges to arbitration and that, like the Supreme Court, the court declined to assume that either the pool of potential arbitrators, or the ultimate arbitral panel itself, would be unwilling or unable to render a conscientious decision based on the evidence before it.
In addition, the court agreed with the reasoning of previous federal court decisions that the courts should not interfere with an amateur sports organization's disciplinary procedures unless the organization shows wanton disregard for its rules, to the immediate and irreparable harm of a plaintiff, where the plaintiff has no other available remedy. To hold otherwise would be to turn federal judges into referees for a game in which they have no place, and about which they know little.
Finally, the court held that Armstrong's arbitration agreement with the USADA entrusts resolution of his non-due-process claims to the arbitrators themselves, and thus precludes presentation of those claims to this court.
Admittedly, this is only one person's list of the key cases that have changed the sports, fitness and recreation industries over the past 40 years, and depending on your role in the industry, you may disagree with the cases listed. If so, let me know. I'd love to see your list.
Attorney John Wolohan is a professor of sports law in the David B. Falk College for Sport and Human Dynamics at Syracuse University. Gao Fei is a Ph.D. student in the Sport Management program at the University of South Carolina.
This article originally appeared in the April 2017 issue of Athletic Business with the title "Seven since ’77: The cases that shaped our industry." Athletic Business is a free magazine for professionals in the athletic, fitness and recreation industry. Click here to subscribe.