NCAA revenue-sharing settlement faces legal challenge

Written opposition to a proposed multibillion-dollar settlement in three antitrust cases over athlete pay against the NCAA and the Power Five conferences that is pending before a federal judge in California intensified Friday.

Two separate groups of lawyers filed motions asking U.S. District Judge Claudia Wilken to deny preliminary approval of the proposed settlement. Together, the arguments raise myriad questions about the agreement, including whether it undervalues claims, discriminates against female athletes, creates another illegal cap on compensation and money that would go to plaintiffs’ lawyers.

On Thursday, lawyers for plaintiffs in a separate lawsuit over Ivy League colleges’ denial of athletic scholarships filed an objection to a proposed settlement that would exclude their claims.

Meanwhile, also on Thursday, the 9th U.S. Circuit Court of Appeals set a tentative hearing schedule for Houston Christian University in its appeal of Wilken’s bid to become a dissenting party and reject the proposed settlement. Houston Christian, a member of the Southland Conference Football Championship Subdivision, argues that it would oppose the proposed settlement and that neither it nor its conference had any influence over the agreement.

The 9th District Court’s meeting schedule includes meetings in late October and November.

Wilken has scheduled a preliminary consent hearing for Sept. 5, and lawyers for plaintiffs involved in the proposed settlement have until Aug. 16 — next Friday — to respond to the new objections.

Who filed the objection on Friday?

Attorneys representing plaintiffs in another athlete compensation lawsuit against the NCAA and the Power Five, which has been cleared to proceed in federal court in Colorado, have presented one set of arguments

The second case was filed by lawyers representing six current or former female rowers.

What would happen under the proposed solution

To put it simply:

▶There would be a $2.8 billion compensation pool that would be funded over 10 years by the NCAA and its Division I schools and conferences. A heavier financial burden would be placed on Power Five schools, but the impact would be felt by all schools.

▶Division I schools will be allowed to pay athletes directly for use of their name, image and likeness (NIL), subject to a per-school limit that will increase over time and will be based on a percentage of certain athletic revenues.

▶NCAA leaders would like to introduce changes to the rules that would eliminate long-standing scholarship limits for individual sports and replace them with new limits on team size.

▶While athletes will still be able to enter into NIL agreements with entities other than their schools, the settlement will allow the NCAA to introduce rules designed to give the association more oversight over enforcing those arrangements.

▶The damages pool would include money that would go to plaintiffs’ lawyers for their fees and costs. According to documents filed with the settlement proposal, they will ask a judge to approve up to $495.2 million in fees, just under 18% of the total, plus “out-of-pocket expenses.”

Arguments raised against the proposed solution

▶Compensation pool understates claim value: Lawyers involved in the Colorado case say that while the proposed settlement values the claims they are seeking at just over $1.8 billion, they “obtained an independent, preliminary estimate from a respected economist” that puts the value of the claims at $24.3 billion. That economist’s conclusion was included in their filings.

Attorneys handling the Colorado case first filed the proposed class action lawsuit on November 20, 2023, on behalf of former Colorado football player Alex Fontenot.

In their complaint, they wrote that their case “asks for the full share of television and other revenues that would be available in a truly open market,” not that available under NCAA rules.

They are seeking an injunction that would prohibit any NCAA rule that prevents such an open market — essentially creating a formalized pay-for-play system in which athletes could be paid by their schools for their athletic services. They want to represent all athletes who played for an NCAA Division I team in any sport from about 2020 until the time of the verdict in this case. And they are seeking damages that would include the money that all of those athletes allegedly would have received — more than the $24 billion they mentioned Friday.

On Dec. 7, 2023, plaintiffs’ lawyers who are handling two earlier cases covered by the proposed three-case settlement that is pending before Wilken filed a similar case in California on behalf of three athletes, including former Duke football player DeWayne Carter. They sought an injunction against the NCAA’s athlete compensation rules and a narrower set of damages: one that would cover athletes in football, men’s basketball and women’s basketball who played for schools in the Power Five leagues — including the 12-school version of the Pac-12 — or Notre Dame.

As part of the legal maneuvering surrounding the proposed settlement, Carter’s case was consolidated with one of two earlier cases, a complaint filed on behalf of plaintiffs led by former Arizona State swimmer Grant House. The new, amended complaint broadened the circle of athletes who would be eligible for compensation, so it is now similar to the one filed in Colorado’s Fontenot case.

However, attorneys for the plaintiffs in the Colorado case filed another lawsuit against the NCAA this week. This one involves athletes who received partial scholarships under the NCAA’s sport-specific scholarship rules. For most sports, the scholarship limit is a pool of money that can be awarded to multiple team members.

The new lawsuit claims that if it weren’t for the scholarship caps — which would be lifted under the proposed settlement — athletes would have received more scholarship money. As a result, affected athletes should be compensated. On Friday, lawyers involved in the case estimated that figure at perhaps $300 million — and they want those claims excluded from the proposed settlement.

▶Limit on future NIL payments to school is illegal: Both sets of lawyers who filed papers Friday weighed in on the issue. Those involved in the Colorado cases argued that the proposed settlement “trades one arbitrary cap for another arbitrary cap. … In addition, the plan unfairly excludes several important types of revenue … that should be included. … Settlements are the product of compromise, but prospective athletes should not be subject to an artificial new cap unless it is negotiated collectively.”

Lawyers representing the rowers wrote that, “Courts have repeatedly held that the NCAA violated (antitrust law) in setting the salaries that student-athletes can earn…Undeterred, the NCAA has sought to continue to set and lower the prices for college sports” through the settlement.

▶The settlement discriminates against female athletes:The economic modeling for the $2.8 billion settlement is based largely — though not entirely — on an analysis of the value of athletes’ NIL in live television broadcasts and the value of television contracts for various sports. The result is a proposed settlement under which football and basketball players would receive a large percentage of the settlement.

The rowers’ lawyers argued that “the NCAA’s failure to promote women’s sports has for decades devalued the NIL for female athletes…and yet, instead of compensating for that…the Settlement perpetuates the very inequalities it is supposed to correct…By reinforcing unjust gender inequalities rather than correcting them, the Settlement is a grave setback in efforts to achieve gender equity in college sports.”

▶Fee arrangements for attorneys representing the plaintiff: The rowers’ attorneys argue that “the extreme preferential treatment given to football and basketball players in the settlement suggests that the group’s attorneys were looking out for the interests of those groups to the near exclusion of the interests of other” athletes.

“The settlement fee agreement,” they added, “reinforces these concerns.” Specifically, they cited what they said was a proposed settlement that included “$20 million in ‘upfront injunctive relief and costs compensation,’” which the NCAA and conferences agreed not to oppose. The agreement, they wrote, “raises the issue of what Class Counsel agreed to in order to obtain it.”