Jett Elad, a Rutgers University football player, challenged two NCAA bylaws. These bylaws count years spent at Junior Colleges (“JUCOs”) towards the NCAA’s limit of participation in four seasons of NCAA football over a five-year period (the “JUCO Rule”). Elad argued that the JUCO Rule unreasonably restrains the college-football-athlete labor market in violation of Section 1 of the Sherman Act. The District Court granted Elad a preliminary injunction, and the NCAA appealed that ruling.
The NCAA argued that the District Court erred in granting the preliminary injunction because Elad failed to show a likelihood of success on the merits. The NCAA also challenged the elements of irreparable harm and balance of the equities, but the Third Circuit did not reach those issues. The Third Circuit focused on two of the NCAA’s arguments relating to the likelihood of success on the merits: (1) whether the JUCO Rule is commercial such that the Sherman Act applies; and (2) whether the District Court failed to adequately define the relevant market for its rule-of-reason analysis.
Relying on the Third Circuit’s holding in Smith v. NCAA, the NCAA first argued that the JUCO Rule, an eligibility rule, is not “commercial” and therefore is not covered by the Sherman Act. The Third Circuit stated the District Court did not err in holding that the JUCO Rule is commercial because it interferes with Elad’s desire to compete in NCAA Division I athletics and profit from that participation. Elad alleged that the JUCO Rule limits his participation in a labor market. The Third Circuit stated the United States Supreme Court has long recognized that restraints on labor through association rulemaking that “unduly interfere with the free exercise of the[] rights by those engaged, or who wish to engage, in trade and commerce” are subject to the Sherman Act. Ultimately, the Third Circuit concluded that the JUCO Rule is commercial in nature.
The NCAA next contended that the District Court’s rule-of-reason analysis fails at its inception because the District Court did not adequately define the relevant market; and, to the extent the District Court intended to adopt Elad’s expert’s definition of the market, it further erred because that expert submitted no economic evidence to support his conclusions.
The Third Circuit stated the District Court’s opinion failed to define the relevant market altogether; it never made any factual findings regarding the market. Instead, it simply recited Elad’s expert’s, Dr. Joel Maxcy, identified market—“the labor market for college football athletes in general and NCAA Division I football specifically.” This failure alone constitutes a legal error because the District Court did not engage in a fact-specific analysis of the relevant market despite the parties’ differing opinions on the topic.
Even if we assume the District Court intended to rest its relevant market finding on Dr. Maxcy’s factual findings, the Third Circuit concluded that the District Court clearly erred. Dr. Maxcy exclusively relies on Alston to define the relevant market; evidence or economic data. On its own terms, this reliance fails: Dr. Maxcy’s opinion concerns all college-football players—including NCAA Division I and JUCO players—but Alston concerned only a specific subset of NCAA Division I football and basketball athletes. More fundamentally, Dr. Maxcy predicated his market findings solely on static markets, unsupported by evidence, that predated the shifts in the college-football market after Alston. The Third Circuit stated reliance on a previously accepted market, without inspection of current market realities, is antithetical to antitrust legal principles.
Because Dr. Maxcy failed to provide any economic analysis or data to support his market definition, the District Court erred to the extent it relied on Dr. Maxcy’s report and testimony to find a likelihood of success on the merits. And because there is no demonstrated likelihood of success on the merits, the Third Circuit found that the District Court abused its discretion in granting a preliminary injunction. The Third Circuit vacated the District Court’s preliminary injunction and remanded for further proceedings. Following the Third Circuit’s ruling, the District Court granted a temporary restraining order permitting Elad to compete in the final regular season contest.
If you have any questions, feel free to contact Christian Dennie at cdennie@denniefirm.com.
