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Appeals Court Puts Kibosh on Deferred-Compensation Plan for NCAA Athletes

Collegiate athletes' chances of eventually receiving deferred payment for their athletic services took a blow Wednesday, as a three-judge panel from the 9th U.S. Circuit Court of Appeals ruled against a proposed plan that would have paid certain student-athletes as much as $5,000 annually in deferred compensation.

The panel upheld part of U.S. District Court Judge Claudia Wilken's original ruling, agreeing that the National Collegiate Athletic Association is violating the Sherman Antitrust Act by prohibiting student-athletes from receiving compensation for the use of their names, images, and likenesses. However, in a split decision, the panel ruled against the deferred-compensation plan, dubbing it "erroneous."

"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," wrote Chief Judge Jay S. Bybee, author of the majority opinion. "Once that line is crossed, we see no basis for returning to a rule of amateurism and no defined stopping point; we have little doubt that plaintiffs will continue to challenge the arbitrary limit imposed by the district court until they have captured the full value of their [names, images, and likenesses]."

Because the judges saw the deferred-compensation plan as a direct threat to the NCAA's overarching principle of amateurism, they vacated that portion of Wilken's decision. However, the judges unanimously upheld the crux of the original lawsuit from former student-athlete Ed O'Bannon, concluding, "The NCAA's rules have been more restrictive than necessary to maintain its tradition of amateurism in support of the college sports market."

The court thus ruled that the NCAA must allow its member schools to provide scholarships covering up to the cost of attendance to their student-athletes—a move the association's "Power Five" schools enacted in January. Beyond that, however, the court decided the NCAA was under no obligation to offer student-athletes any additional compensation.

Chief Judge Sidney R. Thomas, who dissented from the majority on the compensation plan, believed "there was sufficient evidence in the record to support the award." Based on the original testimony of four expert witnesses and "no evidence to the contrary," Judge Thomas believed there was no evidence that the deferred-compensation plan would "significantly reduce consumer demand for college sports."

Following the ruling, members of the NCAA expressed satisfaction about the court's decision to overrule the deferred-compensation plan.

"We are pleased that the 9th Circuit determined that the district court's ruling that would allow NCAA member institutions to provide compensation above the full cost of attendance was struck down," said Donald Remy, NCAA chief legal officer, in a statement.

What's the next step in this case? Either side has until Oct. 14 to ask the full 9th Circuit Court of Appeals to review the decision; otherwise, either side could ask the U.S. Supreme Court to take up the case within 90 days of the decision, too.

Michael Hausfeld, the attorney for O'Bannon, told ESPN.com's Mark Schlabach that the court's decision to throw out the deferred-compensation plan doesn't necessarily eliminate the possibility of paying student-athletes beyond the cost of attendance. Instead, he suggested the court acknowledged collegiate athletes have a right to the group licensing market and the billions of dollars paid for the rights to televise games.

"We're going to go after that," Hausfeld told Schlabach. "The athletes as a whole have a right to participate in the broadcast licensing market." 

If Hausfeld's rhetoric is any indication, the appeals court's ruling is not the end of this ongoing saga.

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