Document reveals NCAA's urgent need to reach settlement in House v. NCAA case
As settlement talks in the landmark House v. NCAA antitrust case near a potential conclusion, heightened focus is already centering on consequential next steps for both sides once terms are agreed upon.
In the aftermath of the settlement, the NCAA could be joined by an unlikely advocate in its Congressional lobbying efforts for long-sought antitrust protection: Plaintiffs in the House case.
On3 obtained a copy of the two-page “basic settlement summary” – first reported by Yahoo Sports – shared with power conference presidents and includes that striking post-settlement curveball.
The document details an array of specific financial terms – as well as pros and cons – in the potential settlement, a historic agreement that would mark the landscape-shifting introduction of a college sports revenue-sharing model.
It lays out precisely how much the NCAA will have to pay – $2.776 billion over 10 years – in back damages to settle three high-profile cases, most notably the House case. Plus, it details that schools will be permitted to pay athletes as much as $22 million annually, raising the curtain on an entirely new financial model.
But as the document makes clear on multiple occasions – and industry sources have long stressed – the settlement marks only the first monumental step as the enterprise moves ever closer to a professionalized paradigm.
Without unlocking the door to the athlete collective bargaining era, or the NCAA receiving its long-sought antitrust protection from Congress, the industry could be long plagued by further lawsuits from future college athletes alleging the association is illegally capping athlete compensation.
Why would plaintiffs unite with NCAA?
The document illuminates one attention-grabbing element related to the aftermath of the settlement: Plaintiffs will cooperate with “lobbying activities regarding antitrust exemption consistent with settlement.”
Why plaintiffs would unite with the NCAA in its efforts to stave off further lawsuits challenging the legality of its rules and model has stirred widespread industry debate. In recent weeks, a source familiar with settlement discussions first broached with On3 that it was “on the table” that a settlement could achieve or lead to both sides agreeing to cooperate in Congressional lobbying efforts.
But why? The incentive for plaintiffs remains unclear.
One prominent source said the settlement’s financial terms are akin to “public hush money” as the NCAA looks for an assist from plaintiffs in its efforts on Capitol Hill to land an antitrust exemption that would protect the association from future lawsuits.
Another source recognized that it is “rightly” a priority for the NCAA to seek assistance with Congressional efforts that have thus far been futile.
And still, another industry leader said at least some on the plaintiffs’ side are mindful not to blow up the entire enterprise, as the settlement alone promises to radically reshape century-old parameters within college athletics.
NCAA faces May 23 hard deadline to accept deal
Defendants – the NCAA and power conferences – have a hard deadline of May 23 to agree to settlement terms, a source familiar with settlement discussions told On3.
The document details that the global settlement would settle not only the House case but also two other significant cases.
Carter v. NCAA alleges that rules prohibiting schools from paying athletes violate antitrust laws, and Hubbard v. NCAA relates to retroactive Alston payments to athletes.
With the settlement, the NCAA will pay $277 million per year over 10 years in damages. For power conference schools, that will result in a reduction of $1-2 million per year in revenue distribution, the document states.
The settlement ushers in the era of revenue sharing with permissive legislation, which means schools will have the option of taking part.
With schools able to pay athletes up to some $22 million annually, the document lays out there is the potential for up to $5 million in “offsets,” pertaining to $2.5 million for Alston payments and $2.5 million for new scholarships. The cap is 22% of the average power conference school revenues from media rights, ticket sales and sponsorships.
Where does employment model figure into future?
There will be the ability to “revisit and revise” terms if athletes are deemed employees – either by courts or voluntarily – or if there is a “new go-forward structure,” the document states.
The National Labor Relations Board is currently weighing the athlete employee question in two noteworthy cases, one related to Dartmouth’s men’s basketball players, and the other involving USC’s football and men’s and women’s basketball players.
An employee model would enable athletes to unionize and collectively bargain compensation and benefits – an outcome that would protect the NCAA against further litigation. However, the NCAA has been strident in its opposition to an employment model.
Instead, a potential element in the House settlement includes an annual process for future college athletes to opt-in or opt-out of settlement terms.
“Schools and the NCAA are still under this delusion that they can stop the employment train by giving some concessions to the athletes,” one source said. “And so they’re like, ‘Hey, if we could just give them enough to get them to have to sign and agree to something and opt-in to it, then we’ll have at least a year to get Congress to come in and protect it before this annual opt-in opt-out concept happens for new classes.'”
Donor-funded NIL collectives are not going away
On another front, legal experts are skeptical of one settlement expectation, detailed in the document, that the court will “reaffirm remaining compensation-related rules, including the prohibition on booster payments if not true NIL.”
Several college sports sources expect the role of ambitious, well-funded NIL collectives to continue in a revenue-sharing model. They say those donor-funded collectives will share additional compensation to specifically star athletes in revenue-producing sports.
More broadly, the document details what the NCAA views are advantages of the settlement:
It claims that the exposure to potentially paying some $20 billion in damages is reduced to $2.776 over 10 years. It is not stated how unfavorable outcomes in the pending cases would total $20 billion.
What is known is that if the NCAA received an unfavorable outcome in the House case, scheduled for trial in January, it would be on the hook for $4.2 billion owed to thousands of athletes in retroactive NIL pay and shares of broadcast revenue. The document states that potential damages in the Carter case could exceed that of the House case.
The document also claims a settlement would “release antitrust compensation claims from current, former and future student-athletes for 10 years.”
The settlement will also include lifting scholarship limits and implementing roster limits, the document states.
Document cites advantages of settlement terms
The settlement summary document cited the advantages of a settlement stemming from a power conference “cap” on direct payments from institutions; court approval of remaining compensation limits; and “increased chances” of securing protection from Congress.
Without antitrust protection from Congress, legal experts have told On3, a so-called compensation cap could be successfully challenged in court if athletes are not involved in collective bargaining.
The settlement would also provide the ability for college sports to adjust to an employment model with collective bargaining and allow for the enforcement of “no pay-for-play rules” related to collectives, according to the document.
It also cites several areas that the settlement will not address:
The settlement won’t prevent future antitrust lawsuits from state attorneys general, nor will it prevent state laws requiring more permissive payments.
It won’t solve the college sports employment question, which is in the hands of the NLRB, barring Congressional intervention. Plus, the document also spells out that Title IX compliance in a revenue-sharing age – a significant issue stirring debate among legal minds – remains at the campus level.
The settlement will not eliminate collectives, the document states, adding that there will be economic incentives that will require school buy-in for enforcement.
It adds that school cooperation will be required in lobbying against state laws and AGs that seek laws or relief inconsistent with the new model. And, it notes, there will be a continued risk that state laws continue to change and “unlimited direct NIL payments” be widely permissible in various states.
Long viewed as an inevitability, the settlement in the high-stakes House case is now in sight, perhaps to be agreed upon in the next week. For the NCAA and power leagues, it is widely considered the only option.
As the settlement document details, there is an alternative: Bankruptcy.