House v. NCAA settlement changes NIL language in new filing

New documents relating to the House v. NCAA settlement were filed Thursday, in response to questions asked by Judge Claudia Wilken during a preliminary confirmation hearing on September 5.

Lawyers for the proposed House settlement, which would also resolve Hubbard and Carter’s antitrust lawsuits against the NCAA, filed a revised version of the settlement, along with a brief description of how Wilken’s earlier concerns were addressed. Most of the amendments are intended to clarify the language of the original proposal regarding restrictions on third-party name, image and likeness (NIL) payments to college athletes and to better define the term “enhancer” and what constitutes a pay-for-play incentive. The NCAA seeks to elimination.

No decisions or next steps regarding preclearance are expected from Judge Wilken this week.

The settlement, which would have historically impacted the financial structure of college athletics, hit a snag in the approval process during a preliminary hearing earlier this month. Wilken, who presided over the case in the Northern District of California, sent the parties “back to the drawing board,” with most of the attention going to the outside of the NIL.

“The parties have amended… to clarify these provisions to make it clear that the Agreement only authorizes the continuation of existing NCAA regulations that already prohibit so-called ‘false’ NIL payments in narrower and more objectively defined circumstances,” the briefing reads. he stated.

The settlement, agreed in principle in May, would have huge implications for college sports if approved, including allowing current and future athletes to be paid directly by schools, breaking with the NCAA’s century-old system of amateurism. This revenue-sharing model would include an annual pool capped at $20 million per school, which would be distributed to athletes starting next season. However, one aspect of the settlement that is critical from the NCAA’s perspective is re-enforcing rules limiting NIL payments to a “compelling business purpose” and eliminating unsustainable pay-for-play payments that have become common among NIL collectives targeted for support.

According to the revised settlement proposal, “enforcement authority over NIL contracts entered into with third parties would no longer extend to all third parties… or the broad term ‘legal highs'” and would instead focus on “a narrower group of entities and individuals closely associated with schools.” ” The briefing identified these individuals as individuals affiliated with the NIL Collective or involved in player recruitment, or individuals/families/affiliates who have contributed more than $50,000 to the university’s athletics department during their lifetime.

Wilken signaled general support for settlement efforts during his initial confirmation hearing, but expressed specific issues and confusion when the discussion turned to proposed restrictions on third-party NIL payments. She asked whether the restrictions would limit the earning potential of some athletes and questioned the distinction between boosters and other “legitimate” companies or entities that might want to broker NIL transactions with athletes.

“I’ve found that taking things away from people is usually not very popular,” Wilken said during the hearing.

The NCAA currently has rules in place to protect against pay-to-play and other recruiting incentives related to NIL, but these rules have been largely unenforced, especially since the federal ruling in Tennessee earlier this year. Wilken alluded to this reality during the hearing.

The House settlement seeks to reform this. Under the proposed terms, the NCAA and power conferences could create a “designated enforcement agency” that would determine whether NIL contracts with third parties qualify as “true NIL” and provide fair market value. All college athletes will be required to report NIL third-party contracts valued at $600 or more through a newly created clearinghouse database. Contracts deemed to be pay-to-play incentives will be rejected or forced to change as part of the settlement, and penalties will be imposed if the athlete ignores these directives.

During a Sept. 5 hearing, NCAA attorney Rakesh Kilaru emphasized that this is an “essential part of the agreement” for the NCAA and something that both sides have tried to clarify and clarify in the latest amendments.

“For the first time in the NCAA’s long history of enforcement, neutral arbitration will be available to challenge the NCAA’s enforcement of such rules against athletes or their schools,” the briefing said. “The NCAA will no longer be the prosecutor, judge or jury responsible for these restrictions.”

Time will tell whether Thursday’s revisions will be enough to assuage Wilken’s concerns. The letters also addressed other issues raised during the preliminary confirmation hearing, including whether plaintiff’s attorneys negotiating both the revenue-sharing order and retroactive damages portions of the settlement create a conflict of interest. Wilken previously expressed few, if any, concerns with the proposed formula for dividing the $2.8 billion in back wages or the future revenue sharing pool.

Wilken will likely take a week or two to review the amended documents, after which she can schedule another preclearance hearing or simply issue a ruling based on the amendments. It is more likely that the judge will schedule another hearing, which may include a briefing period for additional answers and/or objections.

If tentative approval is ultimately granted, the parties to the settlement can begin notifying class members, which include former athletes eligible for compensation and current athletes eligible for optional revenue sharing. A final confirmation hearing will likely be scheduled for early next year; if such consent is granted, the settlement will take effect immediately and revenue sharing will be implemented in July next year.

If consent cannot be obtained at any stage of the process, the original antitrust cases will likely go to trial.

The approved settlement will not resolve all of the NCAA’s legal disputes, and the organization will continue to seek exemptions from congressional antitrust laws and federal NIL legislation. The House settlement would not necessarily supersede the federal ruling in Tennessee and, to be most effective, would require member institutions to abide by the terms of the settlement. It also would not protect against possible Title IX complaints, employment status and collective bargaining, or other antitrust disputes.

The NCAA believes the House’s settlement will help prevent situations like the one involving UNLV quarterback Matthew Sluka, who announced this week that he will sit out the rest of the season as a redshirt before entering the transfer portal amid a NIL dispute. Sluka and his agent claim that the assistant coach “verbally promised” the quarterback a contract of at least NIL $100,000, but Sluka only received a $3,000 relocation stipend. UNLV and its affiliated NIL collective maintain that a formal NIL was never issued.

“The NCAA fully supports college athletes benefiting from NIL, but unfortunately there is little oversight and accountability in the NIL space, and promises made to student-athletes are far too often broken,” Tim Buckley, NCAA senior vice president of external affairs, said this week statement. “Positive changes are underway in the NCAA to provide more benefits to student-athletes, but without clear legal authority from the courts or Congress, the NCAA, conferences and schools have limited authority to regulate third parties involved in NIL transactions.”

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