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NFL Free-Agent Lawyer to Unlock $16 Billion in NCAA Athletes

October 02, 2013

NFL Free-Agent Lawyer to Unlock $16 Billion in NCAA Athletes

Linebacker Joe Walker #35 of the Oregon Ducks puts a hit on running back Jeffrey Coprich #30 of the California Golden Bears during the fourth quarter of the game at Autzen Stadium on September 28, 2013 in Eugene, Oregon. Photographer: Steve Dykes/Getty Images

Jeff Kessler, an attorney who helped bring free agency to the National Football League, is about to focus on the unpaid athletes who generate more than $16 billion in college sports television contracts.

New York-based Winston & Strawn LLP is starting what it describes as the first college-focused division at a major law firm to represent players, coaches, schools and conferences against what Kessler, 59, described as “the unbridled power and influence” of the National Collegiate Athletic Association.

“The NCAA should stand up and take notice that Jeff is involved,” said Bob Lanza, a former National Basketball Association players’ union general counsel who worked alongside Kessler and is now a partner in O’Neill & Lanza, a professional sports advisory firm. “I can’t think of anybody more qualified to start this type of department.”

Ed O’Bannon, a former basketball All-American at UCLA who is suing the NCAA over the use of his image in commercial ventures, reacted to the news by saying: “Wow! Jeff Kessler.”

College athletes, past and present, are taking increasingly vocal, visible and litigious steps against what they consider to be unfair rules set by the NCAA, which doesn’t permit athletes to be paid. The agency faces lawsuits by former players that could seismically alter the sports landscape and, according to Steve Berman, managing partner of the Seattle-based law firm Hagens Berman Sobol Shapiro, dissolve the 107-year-old governing body of college athletics.

‘Social Change’

“What’s at stake is a lot of money -- and their survival,” said Berman, whose firm represents former University of Nebraska quarterback Sam Keller in a class-action lawsuit against the NCAA over the use of player likenesses in video games and promotions. “Sometimes it takes litigation to make social change.”

NCAA spokeswoman Stacey Osburn said in an e-mail that the organization wouldn’t comment on Kessler or his firm’s entry into college sports.

Last week, Electronic Arts Inc. (EA:US), the second-largest U.S. video-game publisher, agreed to settle a lawsuit brought by former college athletes, including Keller and O’Bannon, over use of their likeness in video games, leaving the NCAA as the lone defendant.

The company canceled next year’s college football product, citing unsettled litigation between the plaintiffs and the NCAA, whose chief legal officer, Donald Remy, said on Sept. 26 the organization would take the matter to the U.S. Supreme Court rather than settle, according to USA Today.

Marquette University Athletic Director Larry Williams said in a telephone interview he sided with Keller and O’Bannon.

Equal Treatment

“I do not think the NCAA should be trading on the image or likeness of any players,” he said yesterday. “If we’re requiring amateurism on one side, we should not be individually commercializing their image and likeness.”

Winston’s college group will be run by partner David Greenspan and associate Tim Nevius, who joined the firm from the NCAA, where he worked as an associate director of enforcement.

“No one has an attorney like Tim,” Greenspan said on a conference call interview last week with Kessler and Nevius.

The 33-year-old Nevius said his work at the NCAA enables him to know “what the enforcement staff is targeting in their investigations and what angle they take when looking at violations.”

Brain Injuries

The NCAA also faces a class-action lawsuit over brain injuries that alleges the organization failed to provide players with proper rules and education involving the long-term effects of head trauma. The suit is “semi-insurable,” Williams said.

“I don’t see the NCAA facing a liability that is catastrophic,” he said.

Kessler has represented the interests of athletes ranging from six-time NBA Most Valuable Player Michael Jordan to three-time Super Bowl-winning quarterback Tom Brady. He has worked for the unions of all four major North American professional leagues, including McNeil v. the NFL, the 1992 case that produced the current system of free agency for players in the most popular U.S. sport, with $9.7 billion in annual revenue. The average annual NFL salary has risen to about $2 million from about $500,000 since then, according to the NFL Players Association.

Besides the NBA and NFL unions, Kessler has worked with the National Hockey League Players Association and the Major League Baseball Players Association.

“We’re the traditional go-to law firm for people adverse to leagues and associations,” Kessler said on the conference call. “We represent the players, the cities and municipalities, the sponsors and owners who are fighting with their leagues. We’re not the firm that represents the powers.”

‘Huge’ Addition

Kessler’s addition to the college scene is “huge,” O’Bannon, now selling cars in Las Vegas, said in a telephone interview.

“If players coming out of high school had some type of representation, or if somebody like Jeff initially made sure the players are represented in the right fashion, where both parties are happy with the deal, then a lot of this stuff wouldn’t even happen,” he said.

The plaintiffs in the likeness case say a victory over the NCAA could reduce the $6.4 billion in annual revenue universities earn from athletics by as much as 50 percent. Moody’s Investor Service said in June that it may downgrade $40 million of NCAA debt because of pending litigation and concern that the amateur business model will be changed in some unknown way.

“Even a casual observer of college sports senses a growing pressure on the NCAA and its policies,” Dennis Gephardt, lead analyst of the public finance group at Moody’s, said in a telephone interview.

Broader Effect

Any drop in revenue from football or basketball could have a cascading effect that might prompt the elimination of other, less-visible sports, Gephardt said.

In the 2011-12 fiscal year, 23 of the 120 athletic departments with Football Bowl Subdivision programs, the sport’s premier level, reported a profit, according to NCAA figures. Median revenue rose by 4.6 percent, while median expenses jumped by 10.8 percent. About 20 percent of FBS athletic budgets on average are subsidized by their overall colleges and universities, according to the NCAA. Only football and men’s basketball usually turn a profit, it said.

NCAA Revenue

The NCAA had $841 million in revenue in fiscal 2011-12. About 84 percent comes from its 14-year, $10.8 billion men’s basketball tournament television contract with Time Warner Inc.’s Turner Sports and CBS Corp. Walt Disney Co.’s ESPN agreed to pay more than $5.5 billion over 12 years for the right to broadcast college football’s playoff, which begins after the 2014 season. The Dallas Cowboys’ AT&T Stadium in Arlington, Texas, will host the inaugural championship game, and eight cities and regions from San Francisco to South Florida entered bidding two days ago to stage the following two title contests in a process akin to cities wanting the Super Bowl to visit.

Football makes more money than any other college sport, generating median revenue of $18.6 million, about three times that of basketball, according to NCAA statistics. The sport was at the center of two years of conference shuffling, with schools leaving traditional geographic alignments to form leagues sometimes reaching from coast to coast. The realignment isn’t over, said Williams, the Marquette athletic director.

“My sense is the biggest change will center on how universities affiliate based on their ability to fund their programs,” he said. “Some programs rise and some fall.”

Campus Greed

Joe Bailey, the final commissioner of what was the Big East before its football schools formed the American Athletic Conference, said universities can get greedy.

“When you get a lot of money involved, you have a lot of people that try and take advantage,” Bailey said in a telephone interview. “It ends up not being particularly pretty.”

The University of Texas, the owner and operator of the Longhorn Network in conjunction with ESPN, generated the most revenue in 2011-12, $163.3 million. University of Alabama football coach Nick Saban, whose team is vying for its third consecutive national championship, was paid a base salary of $5.9 million last season and received another $400,000 for winning the title.

Meantime, Heisman Trophy-winning quarterback Johnny Manziel was investigated by the NCAA for allegedly taking what ESPN said was at least $10,000 from a memorabilia dealer for signing merchandise. NCAA rules prohibit Manziel from cashing in on his “Johnny Football” nickname, which he has trademarked.

Manziel Ban

Manziel was suspended for the first half of the Aggies’ first game this year. The NCAA said it couldn’t find evidence he took money, and that Manziel was disciplined for “an inadvertent violation” that wasn’t disclosed. The penalty was proposed by the school and accepted by the NCAA.

Athletic directors at the biggest college football schools closed their annual meeting last week by taking a unified stand against paying athletes.

“Pay-for-play has no part in the amateur setting,” Purdue University Athletic Director Morgan Burke, president of the Division I-A Athletic Directors Association, said in a statement. A full scholarship and support services for an athlete at the West Lafayette, Indiana-based school is worth more than $250,000, according to Burke.

The athletic directors endorse overhauling how college sports are managed. The NCAA has said it is discussing reorganization, reviewing its policies on rule enforcement and considering whether schools should have the choice to spend for items like player stipends.

‘Manage Change’

“The intersection of all these cases and issues presents the NCAA with an opportunity to decide what kind of an organization it wants to be, and how it wants to manage sports going forward,” says Joseph Siprut, managing partner of Siprut PC, which represents plaintiffs in a 2011 concussion lawsuit. “It’s about whether these players are regarded as commodities that are chewed up and spit out, or as something more than that.”

More than 20 college football players, including quarterbacks Kain Colter of Northwestern and Vad Lee of Georgia Tech, took the field the weekend of Sept. 21 wearing the letters “APU” on their uniforms. The letters stand for “All Players United,” a show of unity initiated by the National Collegiate Players Association, an organization of it says are more than 14,000 current and former Division I athletes that wants improved scholarships, graduation rates and health and safety measures.

Future Hope

“Even though we compete every Saturday, we all need to come together for a greater cause,” Colter, a senior majoring in psychology, told reporters. “I’m not going to have any individual benefit from this. I’ll be gone after this year. This is for the younger guys all around the nation.”

Ramogi Huma said he started the group in 1997 while playing football for UCLA after the NCAA suspended his All-American teammate Donnie Edwards for accepting groceries when his scholarship money ran out at the end of the month. He said in a telephone interview that judges and juries are the only forces that will spur change for college athletes.

“The NCAA isn’t going to implement reform voluntarily,” Huma said. “Courts will be primary catalysts. Change is definitely coming.”

College sports already have changed, says Gene Marsh, an attorney at Lightfoot Franklin White, the firm Texas A&M hired in the Manziel case. Marsh previously spent about a decade on the NCAA Division I Committee on Infractions, which determines when violations occur and what penalties to impose.

‘Lawyered Up’

“My first year was 1999, and you go into a room for an all-day hearing and you’d see a few lawyers,” he said in a telephone interview. “Now, it’s not uncommon that you’ve got 25 percent of the seats in the room are lawyers. Lawyers for the schools; lawyers for the head coaches; lawyers for the assistant coaches; lawyers for former coaches. This whole world of college athletics has gotten lawyered up.”

Kessler graduated from Columbia University in New York in 1975 and two years later from Columbia Law School, where he was a Kent Scholar and a member of the board of editors for the Columbia Law Review, according to his biography on the Winston & Strawn website.

Kessler isn’t just another lawyer, said Domonique Foxworth, the NFL Players Association president who is in his first year at Harvard Business School after a six-year playing career.

The NCAA was founded in 1906 to, according to its website, protect young people from the dangerous and exploitive athletics practices at the time. The mission statement drew a laugh from Foxworth, a producer of the documentary “Schooled: The Price of College Sports,” which premiers on the EPIX cable television network Oct. 16 and examines the business of college football and basketball as well as the NCAA’s treatment of athletes.

“I don’t try to vilify people, but it’s an inarguable fact that the construct of the system is flawed,” Foxworth, 30, said in a telephone interview. “You look at Jeff and you’re not very intimidated. But you should be if he’s coming after you.”

To contact the reporter on this story: Scott Soshnick in New York at ssoshnick@bloomberg.net

To contact the editor responsible for this story: Michael Sillup at msillup@bloomberg.net


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