Details Matter: NCAA Settling House and Carter Won’t End Legal Woes

The NCAA has reportedly made substantial progress in settlement talks with Jeffrey Kessler and Steve Berman, the lead attorneys for the athletes suing the NCAA as part of In Re College Athlete NIL Litigation (also known as House v. NCAA) and Carter v. NCAA. The possible settlements would set the table for tectonic changes in college sports, but they wouldn’t extinguish all the NCAA’s legal controversies.

In fact, they might spark new ones.

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The players in House, which is set for trial next January, accuse the NCAA and Power Five conferences of violating antitrust law by preventing conferences from sharing broadcasting revenue with players, denying revenue opportunities for college sports video games and barring NIL prior to 2021. The case was a certified class action last year on behalf of more than 14,500 college athletes. They seek monetary damages and an injunction that would force the NCAA to lift rules blocking conferences from sharing revenue. A settlement would presumably permit such sharing and pay money to players for lost telecast, video game and NIL opportunities.

Carter was filed last year. The case accuses the NCAA and Power Five of violating antitrust law by preventing individual schools from offering more than the grant-in-aid, which includes tuition, books, room and board and related expenses. Carter essentially asks how much money schools would pay top recruits if not barred by the grant-in-aid cap. Presumably some recruits would earn much more, and, analogous to free agents in pro sports, gain the benefit of wealthy colleges bidding for them in a competitive market. The players seek to represent all DI athletes who played from Dec. 7, 2023, to judgment in the case and, in regard to monetary damages, all current and former Power Five basketball and soccer players who played at any time from Dec. 7, 2019, to judgment.

A settlement in Carter would likely involve payments for past economic harms and new NCAA rules allowing schools to directly pay athletes more than the grant-in-aid. NCAA president Charlie Baker proposed such a direct-play plan last year.

The NCAA settling House and Carter would follow its decisive losses in O’Bannon v. NCAA and NCAA v. Alston, cases where the NCAA lost the legal deference it previously enjoyed.

In Alston, the U.S. Supreme Court made clear NCAA rules are subject to ordinary antitrust scrutiny—a problematic standard for rules borne through competing businesses (member colleges) joining hands to limit what they can pay athletes. In part because of Alston, the NCAA has recently suffered setbacks in antitrust cases involving restrictions on the transfer portal (Ohio v. NCAA) and NIL collectives (Tennessee & Virginia v. NCAA).

Should the NCAA and Power Five lose House, they could be ordered to pay damages that exceed $4 billion. Given the precedent in Alston, the NCAA and Power Five might also struggle to raise viable appellate arguments to the U.S. Court of Appeals for the Ninth Circuit and potentially the Supreme Court. In other words, a loss in House at the trial court could be lights out.

A settlement in House would also not prove surprising since U.S. District Judge Claudia Wilken is the judge. She sided against the NCAA in the motion to dismiss and class certification stages while sharply rebuking NCAA legal arguments. Although a jury could see the case differently, the early returns are not promising for the NCAA. Wilken was also the trial judge in O’Bannon and Alston and sided against the NCAA in both cases.

Still, there are crucial points of caution to weigh when contemplating a potential settlement and why the NCAA getting to the finish line could prove difficult.

First, details really matter with a class action settlement. Settlements are not thematic, big-picture concepts and they don’t punt on specifics. They require exhaustive arrangements—especially for complex ideas like revenue sharing that could spawn their own litigation in a world where college athletes are not employees and not unionized.

Second, the defendants are the NCAA and the Power Five conferences. One of those conferences, the Pac-12, is losing 10 of its 12 member schools and has an uncertain future. These facts invite numerous questions, for example:

·      Will the NCAA and conferences themselves pay, or will their member schools have to foot part of the bill? The membership contracts binding a school to a conference or to the NCAA would likely prove key, but any ambiguity in the language could trigger lawsuits.

·      Will former member schools have to pay, and will their new conference absorb any of their liability? The departing Pac-12 schools are joining new conferences (which are also defendants). It’s not clear how settlement terms and accompanying liability might travel with a school.

·      Will insurance companies be on the hook? The NCAA, conferences and member schools all have insurance policies that can cover civil judgments and litigation settlements. The applicability of insurance policies can spark disagreement and lawsuits. That happened with college sports and COVID-19 related closures.

Moreover, House involves more than 14,500 men and women D-I athletes who played football, basketball and other sports at points as far back as 2016 and going until the case ends. That invites distribution questions.

·      How would the settlement determine which players are paid, and how much? These players suffered varying levels of economic harms. Some could have been in multiple video games while others played sports where there’s no history of college video games. Some would have appeared regularly on national TV broadcasts, while others would have never been on TV. Some might have landed lucrative NIL deals, but others lacked marketability and would have seen no NIL money.

·      When will payments be made? Settlements are usually reported in the aggregate figure. For example, the NFL reached a $1 billion settlement with former players over concussions. What received less attention, but has proven impactful, is the timing of payments. The billion-dollar settlement contemplates payments over 65 years, long after some players have passed away. It’s unclear whether a settlement in House will be in installments and if so, for how long.

The answers to these and other detail-oriented questions could have profound impacts. They could also spark sizable debate—even separate legal challenges—that impede the completion of a settlement.

Wilken would also need to approve any settlement. That won’t be a layup, especially in a case that could restructure the legal relationship between athletes and their colleges. She will inquire whether the settlement is fair, reasonable and adequate to class members. Wilken will also review any objections raised by athletes or schools that cast a different light.

To that end, expect Wilken to ask how revenue sharing would work in a setting where college athletes in the Power Five are not (yet) deemed employees and are thus ineligible to join a union. Any revenue sharing plan not borne through collective bargaining would be at risk to antitrust litigation, since it would set a cap on how much athletes can get.

That point connects to the non-statutory labor exemption, which reflects Supreme Court decisions that held management and union agreements over wages, hours and other working conditions are exempt from antitrust scrutiny. The applicability of the exemption requires a union, which under labor law requires employees joining hands. College athletes joining a trade association or an advocacy group wouldn’t constitute joining a union and wouldn’t make them employees.

There are secondary impacts, too. For sharing of team sports’ broadcast revenues to work, group licensing is likely essential. The group licensing would dictate how much the players get. It would be impractical to expect a TV network to negotiate with every player on every team who could appear on a telecast. A trade association could help, but it would not be a union and thus not be antitrust exempt.

A settlement also only extinguishes the claims in House and/or Carter. It wouldn’t address claims in other antitrust cases against the NCAA or cases involving labor, employment or intellectual property laws. Most crucially, it wouldn’t address whether the players are employees, some of whom can unionize and some could be owed money for unpaid wages. Those matters are central in Johnson v. NCAA and NLRB charges regarding Dartmouth men’s basketball and USC football and men’s and women’s basketball. The NCAA can’t resolve those controversies, which involve different attorneys and law firms—all of whom want to be paid—by striking a deal with Kessler and Berman.

There are also Title IX implications to a settlement, and they’d become more complicated if the athletes are employees. They would then become protected by Title VII of the Civil Rights Act of 1964. Title VII prohibits employment-related litigation on the basis of sex. A revenue-sharing model that is perceived as unfair and inequitable to women athletes could bring Title IX and Title VII claims.

None of this is to say NCAA president Charlie Baker can’t forge a path forward. Settling big, threatening cases would be sensible. Perhaps Congress, which to date hasn’t advanced college sports-related legislation, might be more inclined to consider legal reforms if the NCAA is willing to deal. But the road to a world where college sports is functional and fairly treats the athletes is a long one.

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