NCAA Board of Governors approves landmark settlement in House antitrust case

The NCAA Board of Governors voted Wednesday to accept the settlement with plaintiffs in the high-stakes House v. NCAA antitrust case, a history-making development that is expected to usher in a new college sports financial model.

ACC, Big 10 and Big 12 conference leaders have already approved the settlement, while SEC and Pac-12 leaders are also expected to approve settlement terms with votes in the next 24 hours. ESPN was the first to report the news and it was confirmed by On3. Yahoo Sports’ Ross Dellenger reported the vote was not unanimous.

The NCAA and all 32 Division I conferences are expected to pay thousands of athletes $2.8 billion in retroactive NIL pay and broadcast revenue over a 10-year period. More significantly, the settlement opens the door to a new day in which schools can opt-in to share as much as $22 million per year with athletes.

If the agreement is certified, this marks the dawning of the revenue-sharing age in college athletics, a new paradigm that could take hold as soon as next year. In the coming months, U.S. District Judge Claudia Wilken will need to certify the settlement agreement, and represented athletes in the case will have the opportunity to opt-out.

AFTER SETTLEMENT, HERE ARE IMPORTANT REMAINING QUESTIONS

The settlement was widely anticipated before the case was scheduled to go to trial in January because it enables the defendants – the NCAA and power conferences – to avoid potentially paying a $4 billion-plus damages bill that could have financially crippled the association.

Although significant questions remain, the agreement marks a seminal moment in the industry, which has been slowly yet steadily inching toward a new financial model despite resistance from many stakeholders in the administrative class. With the NCAA unwilling to usher in a true revenue-sharing model on its own, litigation proved necessary to force the move to a new financial model.

This settlement will end at least three consequential cases confronting the NCAA: House, Carter and Hubbard. But some pushback has existed among stakeholders, in part, because they do not see a clear way the settlement protects the NCAA from further lawsuits filed by future college athletes.

The agreement is expected to include an annual mechanism that would allow future college athletes to opt-out from or object to settlement terms. That element won’t necessarily protect the NCAA from future litigation. But it could make it more difficult for larger (and far more costly) class-action suits to take hold.

So, what’s next?

The NCAA will continue to lobby Congress for its long-sought antitrust protection to stave off further litigation. Schools will amplify internal discussions related to making budgetary adjustments in a new revenue-sharing world. Several players’ associations will continue jockeying for positions if and when athletes can negotiate compensation and benefits.

And most significantly, the National Labor Relations Board will weigh two high-profile cases – one involving Dartmouth’s men’s basketball players, the other USC’s football and men’s and women’s basketball players. Those cases could ultimately usher in an employment model, opening the door to unionization and collective bargaining.

If NCAA lost $4 billion judgment, ‘They are done’

Legal experts viewed the House case as an existential threat to the NCAA because of the sheer dollars potentially in play absent a settlement. The NCAA and power conferences were on the hook for as much as $4.2 billion in retroactive NIL pay and shares of broadcast revenue that could have been owed to thousands of athletes.

For perspective, the 2020 COVID-driven cancellation of the NCAA Tournament devastated college sports financially. The loss of some $600 million prompted one high-ranking college sports official to tell On3, “We literally cannot afford to go through anything like that again. It can’t happen.”

To that point, if the NCAA went to trial and lost a $4 billion judgment, ESPN’s Jay Bilas told On3, “They’re done.”

NCAA President Charlie Baker said during the 11th NIL-related Congressional hearing that all college sports – not only the named defendants – would likely need to absorb the damages bill if the NCAA lost the case.

He was not bluffing.

But over the past week, several leaders within the Football Bowl Subdivision ranks balked at having to foot what they viewed as an excessive portion of the damages bill even though they are not named defendants in the case.

Why class-action ruling was monumental

Wilken, the U.S. District judge who has presided over the case, is the same judge who ruled against the NCAA in O’Bannon and Alston at the trial court level. Clearly, she was not averse to ruling that NCAA compensation rules violate antitrust law. She also had the U.S. Supreme Court precedent to rely on and adhere to as well – see the Alston decision.

In the House case, Wilken‘s class-action ruling in November was consequential because potential damages wouldn’t only be in play for three plaintiffs: former Arizona State swimmer Grant House, former Illinois football player Tymir Oliver and TCU basketball player Sedona Prince. 

The ruling meant thousands of athletes who fall into the following classes were now in play to receive damages: The classes include one for Division I football and men’s basketball players who have competed collegiately since June 15, 2016. One for women’s basketball players from the same date and an additional sports class – including all other sports – from the same date are also in play.

In addition, the injunctive relief class encompasses all Division I athletes who competed from June 15, 2020 – when the complaint was filed – through the case’s judgment. The goal of this particular class is to change current NIL rules.

Considering the enormous cost of potential damages, Mit Winter, a college sports attorney with Kennyhertz Perry, told On3 that class certification in the case “put a ton of pressure” on the NCAA and other defendants to at least settle with the damages classes and potentially the injunctive class as well.

In a nearly two-hour hearing in October, NCAA lead attorney Rakesh Kilaru did not oppose class certification for the injunctive class. Wilken granted class-action status for that class the following day, which was not surprising.

Kilaru said athletes possibly covered in the suit could receive as much as $400,000 apiece in broadcast revenue alone during their college careers. 

The NCAA contended the case should not be granted class-action status because of “substantial differences” in athletes’ NIL worth. Its brief read in part: “NIL value varies tremendously over time depending upon individual and team performance, market demand, and innumerable other factors.”

NCAA reform proposal ‘certainly does not resolve this’

Baker – much to the surprise of many conference commissioners and leading stakeholders – unveiled a bold reform proposal in December that would for the first time permit schools to directly pay players. The problem, several sources told On3, was that the plan didn’t go nearly far enough in the NCAA’s attempt to stave off further legal threats.

Jeffrey Kessler is the lead attorney for the plaintiffs in the House case. Kessler said in an interview on Tulane sports law program director Gabe Feldman’s podcast that the NCAA’s December proposal was tantamount to a surrender.

“It is a wonderful admission by the president of the NCAA that these bans on paying for NIL rights directly are antitrust violations,” Kessler said, “since he now believes he can get rid of those bans without doing damage to college sports – which is what we’ve argued all along – that is going to be fatal under the rule of reason. 

“In some ways, I view this proposal as throwing in the towel on antitrust liability. But what they offered is not what we would settle for. It moves the ball in the right direction but it certainly does not resolve this.”

In April, plaintiffs’ lawyers seized on the opportunity to use Baker’s reform proposal to bolster their arguments in the case.

In court documents, plaintiffs’ lawyers wrote that defendants cannot dispute that Baker’s proposal to permit direct NIL payments and allow schools to pay athletes “would be a less restrictive alternative that President Baker himself has declared would be good for college sports and improve competitive balance.

“This pronouncement by President Baker is an admission by the NCAA that, by itself, establishes the existence of less restrictive alternatives.”

Further seismic change looms on horizon

The settlement comes against the backdrop of mounting threats to the NCAA – including another one filed by Kessler that loomed as a potentially costly legal challenge: Carter v. NCAA.

Filed in early December, it alleged that rules prohibiting schools from paying athletes violate antitrust laws. The plaintiffs – former Duke football player Dewayne Carter, Stanford soccer player Nya Harrison and Prince – who filed the complaint in the U.S. Northern District of California Federal Court were represented by Kessler and Steve Berman. 

But the settlement in the House case will also put the Carter case – as well as the Hubbard case (which dealt with retroactive Alston payments) – in the NCAA’s rearview mirror.

The Kessler-Berman legal duo has long been a thorn in the side of the NCAA, having successfully sued the NCAA in the consequential Alston case and having represented plaintiffs in the House case.

“This long battle to bring down the NCAA cartel is coming to a head,” Kessler said. “One way or another, whether it is through us taking all these cases through trial and verdict or settling them in advance, I foresee increasingly likely a day when a fair system can be put in place for the athletes.”

Further seismic change likely looms on the horizon.

A Boston-based NLRB regional director has concluded that Dartmouth’s men’s basketball players are employees of the college. In March, the athletes voted to unionize. The proceedings are now immersed in what could be a lengthy review process, one that may ultimately land in the U.S. Supreme Court.

An administrative law judge is weighing the NLRB complaint against USC, the Pac-12 Conference and the NCAA, which alleges respondents unlawfully misclassify football and men’s and women’s basketball players as student-athletes. Plus, in Pennsylvania, plaintiffs in Johnson v. NCAA, former Villanova football player Trey Johnson and other Division I athletes are asking that athletes be deemed employees subject to the Fair Labor Standards Act.