Johnson v. Nat'l Collegiate Athletic Ass'n

Docket Number22-1223
Decision Date11 July 2024
Citation108 F.4th 163
PartiesRalph Trey JOHNSON; Claudia Ruiz; Jacob Willebeek-Lemair; Nicholas Labella; Alexa Cooke, Stephanie Kerkeles; Rhesa Foster; Esteban Suarez; Zachary Harris; Laura Hamilton; Matthew Schmidt; Liam Walsh; Gina Snyder; Tamara Schoen, Individually and on Behalf of All Persons Similarly Situated v. NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, also known as the NCAA, and the Following NCAA Division I Member Schools as Representatives of a Defendant Class of All Private and Semi-Public NCAA Division I Member Schedules; Drexel University; Lafayette College; Villanova University; University of Pennsylvania; Cornell University; Sacred Heart University; Fordham University; University of Oregon; Tulane University; University of Arizona; Purdue University; Duke University; Marist College National Collegiate Athletic Association; Cornell University; Fordham University; Lafayette College; Sacred Heart University; Villanova University, Appellants
CourtU.S. Court of Appeals — Third Circuit

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2-19-cv-05230), District Judge: Honorable John R. Padova

Steven B. Katz [ARGUED], Constangy Brooks Smith & Prophete, 2029 Century Park East, Ste. 1100, Los Angeles, CA 90067, John E. MacDonald, Constangy Brooks Smith & Prophete, 3120 Princeton Pike, Ste. 301, Lawrenceville, NJ 08648, Donald S. Prophete, Constangy Brooks Smith & Prophete, 2600 Grand Boulevard, Ste. 750, Kansas City, MO 64108, Counsel for Appellants

Allan Bloom, Adam L. Deming, Mark D. Harris, Adam Lupion, Paul Salvatore, Proskauer Rose, 11 Times Square, 17th Floor, New York, NY 10036, John E. Roberts, Proskauer Rose, One International Place, Boston, MA 02110, Counsel for Amicus Appellants Southeastern Conference; American Council on Education; American Association of Community Colleges; American Association of State Colleges and Universities; Association of American Universities; Association of Catholic Colleges and Universities; Association of Governing Boards of Universities and Colleges; Association of Jesuit Colleges and Universities; Association of Public and Land-Grant Universities; College and University Professional Association for Human Resources; Council for Christian Colleges and Universities; National Association of College and University Business Officers; National Association of Independent Colleges and Universities; and Southern Association of Colleges and Schools Commission on Colleges

Erik R. Zimmerman, Robinson Bradshaw & Hinson, 1450 Raleigh Road, Ste. 100, Chapel Hill, NC 27517, Counsel for Amicus Appellant Southeastern Conference

Benjamin F. Johns, Shub & Johns, 200 Barr Harbor Drive, Four Tower Bridge, Ste. 400, West Conshohocken, PA 19428, Counsel for Amicus Appellant Professor Michael H. LeRoy

Renan Varghese, Michael J. Willemin [ARGUED], Wigdor, 85 Fifth Avenue, 5th Floor, New York, NY 10003, Paul L. McDonald, 1800 John F. Kennedy Boulevard, Ste. 300, Philadelphia, PA 19103, Counsel for Appellees

Before: RESTREPO, PORTER, and McKEE, Circuit Judges

OPINION OF THE COURT

RESTREPO, Circuit Judge.

Do efforts that provide tangible benefits to identifiable institutions deserve compensation? In most instances, they do. And yet athletes at our most competitive colleges and universities are told that their "amateur" status renders them ineligible for payment. The issue raised by this interlocutory appeal is not whether the athletes before us are actually owed the protections of the Fair Labor Standards Act (FLSA), but rather, whether college athletes, by nature of their so-called amateur status, are precluded from ever bringing an FLSA claim. Our answer to this question is no.

This case originated in 2019 when athletes at several National Collegiate Athletic Association (NCAA) Division I (D-I) member schools filed a complaint asserting violations of the FLSA and various state wage laws. The plaintiffs argued that they were entitled to federal minimum wage compensation for the time they spent representing their schools. The NCAA and member schools moved to dismiss pursuant to Federal Rule of Civil Procedure Rule 12(b)(6), asserting that the athletes—as "amateurs"—are not, and historically have never been, considered employees of their respective schools or the NCAA. The District Court determined that the athletes had sufficiently pleaded facts that, under a multifactor balancing test, might allow them to be classified as employees under the FLSA and denied the motion to dismiss. The NCAA and member schools appealed.

For the reasons stated below, we will affirm in part the District Court's decision denying Appellants' motion to dismiss. But because the District Court erred by applying the test from Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir. 2016), to determine whether college athletes can be employees under the FLSA, we will vacate and remand for application of an economic realities analysis grounded in common-law agency principles.

I. BACKGROUND

Appellees contend that they are entitled to minimum wage under the FLSA for time spent on their sport-related activities.1 Appellants are thirteen colleges and universities that are members of the NCAA. The NCAA regulates intercollegiate sports and has jurisdiction over approximately 1,100 schools and some 500,000 athletes. The NCAA has multi-year, multi-billion-dollar contracts with ESPN, CBS, and Turner Sports to broadcast athletic competitions between D-I schools, and it distributes shares of those broadcasting fees to its member institutions. In addition to shares of broadcasting fees, D-I schools receive fees from multi-year, multi-million-dollar agreements with television and radio networks that they have entered, either individually or as part of an NCAA conference, to broadcast their athletic competitions. To understand how collegiate sport generates these revenues, a brief historical survey is instructive.2

A. College Athletics in Historical Context

American intercollegiate athletics began when a group of Yale students formed a boat club in 1843; undergraduates at Harvard followed suit the next year.3 In 1852, the two clubs staged our nation's first intercollegiate athletic competition (The Race) on a lake in New Hampshire.4 From that first contest, the spectacle of college sports has grown steadily to become a multi-billion-dollar industry.5

Put simply, athletic victories have provided many colleges with the institutional visibility needed to facilitate tremendous growth.6 Indeed, although tension continues to exist between the demands of traditional education and athletics, even early college presidents came to see athletes as effective avatars for their institutions.7 By 1875, intercollegiate regattas had become feature items in nationally distributed magazines and front-page material for leading newspapers.8 Both "students and the public began to regard victory as a measure of an institution's prestige."9 One student of the era explained that the contests were "sacredly connected with the glory of Alma Mater herself."10

Such glory was especially valuable to lesser-known institutions. Take the 1871 regatta between Harvard, Brown, and the "Farmer Boys" of the Massachusetts Agricultural College of Amherst for example. An unexpected victory over widely-favored Harvard made the little-known, eight-year-old land grant college now known as UMass Amherst a nationally recognized institution overnight.11 More importantly, it inspired hope among other lesser-known colleges that they too might do the same.12

This phenomenon would later become known as the "Flutie Effect" following a 1984 football game between Boston College and the University of Miami. With six seconds on the clock and Miami up by four, Boston College's quarterback, Doug Flutie, completed an astounding forty-eight-yard Hail Mary touchdown pass to win the game. Over the next two years, applications to Boston College jumped thirty percent.13 Successful football and basketball programs have more recently driven notoriety and applications to, among other institutions, Georgetown, Northwestern, Boise State, Texas Christian University, Butler, Gonzaga, Virginia Commonwealth University, Texas A&M, Florida Gulf Coast, Lehigh, and Wichita State.14

Indeed, Professor Doug J. Chung describes athletic programs as higher education's primary form of mass media advertising. In one study, Professor Chung found that raising a football team from mediocrity to national status caused, on average, a 17.7 percent increase in the number of applications to the team's institution.15 Increased applications then contribute to a positive feedback loop producing more revenue, greater selectivity in admissions, improved alumni engagement, greater fundraising, and better faculty recruiting, all of which can catapult regional universities into national prominence in a way that would otherwise be impossible.16

Profit, after all, has always played a role in college athletics. The Race—the very first intercollegiate competition—was neither proposed nor organized by the students of Yale or Harvard, but by James Elkins, the superintendent of the Boston, Concord, and Montreal Railroad.17 Mr. Elkins had hoped that staging a regatta on Lake Winnipesaukee would increase ridership on his rail line, raise the value of his nearby real estate holdings, and bring tourists to the quiet, lakeside resort. Unsurprisingly, the teams were treated to a lavish vacation, and the winners received "a handsome pair of black, silver-tipped, walnut oars."18 Such commercialization was the norm in early athletic competitions.19

The same is true today. First and foremost, the colleges themselves stand to profit substantially from television contracts, licensing fees, and ticket, concessions, and merchandise sales that their athletic programs generate. Some estimate that college athletes generate roughly $3 billion in annual revenue for their...

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