Lawyers handling NCAA athlete compensation antitrust cases adjust settlement proposal with judge

(This story has been updated to add new information.)

Lawyers involved in a multibillion-dollar settlement of three antitrust cases involving athlete compensation against the NCAA and Power Five conferences filed documents Thursday with small but potentially significant changes aimed at persuading a federal judge to grant preliminary approval to the settlement.

Lawyers have tried to redefine the types of entities and individuals whose name, image and likeness (NIL) contracts with athletes would be subject to special scrutiny under a new regulatory structure that the NCAA and conferences are pushing for in exchange for agreeing to an industry-changing deal.

The NCAA and conferences would fund a $2.8 billion compensation pool for current and former athletes over 10 years and allow Division I schools to begin paying athletes directly for the use of their NIL, subject to a per-school cap that would increase over time.

However, during a preliminary approval hearing three weeks ago, U.S. District Judge Claudia Wilken expressed a number of concerns about the proposed deal. Chief among these issues was the new regulatory structure, which she said was confusing and ill-formed when it came to defining school subsidies and the types of subsidy-supported NIL arrangements allowed.

Although Thursday’s motions were filed by plaintiffs’ lawyers, an NCAA official said lawyers for the association and conference were involved in negotiations over the language.

Currently, the NCAA has rules prohibiting athletes from being paid to play or entering into NIL agreements as an inducement to enroll in or remain at a particular school. However, the association has virtually failed to enforce these rules. Initially, this was driven by the growing number of school benefit collectives – groups of donors dedicated to pooling resources for NIL payments that are often, at best, only loosely based on the value of an athlete’s NIL rights or their promotional work. As of February, it was also prompted by a federal judge in Tennessee issuing a preliminary injunction in a case brought by the state’s attorney general, which states that recruits and transfers can negotiate and sign NIL agreements before enrolling at the university.

Under the original version of the settlement, athletes would have had to report NIL payments of more than $600 to a established clearinghouse. And their contracts – if they are entered into with a ‘reinforcer’ – will be subject to a review aimed at preventing pay-to-play and contracts that pay amounts above market value.

Athletes who have questions about the admissibility of their agreements will be able to seek an advisory opinion from the enforcement group. If an enforcement group wanted to sanction an athlete because of the contract, the athlete would have the option of taking the matter to a neutral arbitrator.

According to the hearing transcript from three weeks ago, Wilken said she was “very concerned” about the prospect of introducing what she called “third-party NIL restrictions” in the proposed deal, which would result in “some people receiving large sums of money” in third-party NIL , now (being) it is no longer possible to obtain them.”

In the original version of the proposed settlement, she stated: “Today’s outside donor is tomorrow’s donor… these are people who like to give money to athletes, and now (under the original terms of the settlement) they are an enhancer and… they may not do it again.”

She asked lawyers to “go back to the drawing board” and find “something better, something that is doable… something that makes sense, is understandable, doable and fair, keeping in mind that taking things away from people generally doesn’t work well.”

In the amendments tabled Thursday, the basic reporting, clearinghouse and arbitration processes would remain as originally proposed, but the current settlement would abolish the term “reinforcer” and replace it with the term “affiliate or individual.” The filing indicates that this will be a “narrower, more focused and objectively defined category that does not automatically include ‘today’s third-party donor’…”

Thursday’s filing defined an “affiliated entity or individual” based on meeting one of five criteria:

The first fits the basic description of the collective: “An entity that is or was known (or should have been known) to the employees of the athletics department…that exists in substantial part to promote or support the athletics of a particular” school’s program or athletes and/or “creating or identifying NIL opportunities exclusively for athletes from a specific” school.

The other criteria are:

▶ Anyone who “is or has been a member, employee, director, officer, owner or agent” of an entity that meets the collective description.

▶ Anyone who has directly or indirectly donated more than $50,000 to a specific school or collective during their lifetime.

▶ Any person or entity that has been asked by the department of athletics to assist in the recruitment or retention of prospective or current athletes.

▶ “Any entity owned, controlled, managed by or otherwise associated with persons or entities” described earlier, other than a publicly traded company.

The future of the pre-approval process is unclear. An NCAA official said he expected lawyers representing athlete groups opposed to the settlement to attempt to file new motions in response to Thursday’s document. If that happens, the official said, the plaintiffs and the NCAA will likely have an opportunity to respond.

The official also said Wilken could schedule another hearing or simply decide whether to grant preliminary approval based on the documents.

The Thursday filing argues that changes to the proposed settlement address Wilken’s concerns and that she should grant preliminary approval because, although it includes a level of NIL athlete activity restrictions that do not currently exist, the overall benefits to athletes make such an arrangement fair. From the plaintiffs’ perspective, this eliminates the “real risk” of further litigation, the outcome of which is “uncertain but certain to delay” new benefits for athletes.

The amendments, the lawyers wrote, make clear that the proposed settlement “only allows for the continuation of existing NCAA rules that already prohibit so-called ‘false’ NIL payments in narrow and more objectively defined circumstances.”

“But the critical question for the Court in assessing this provision of the Agreement is whether allowing this single category of NCAA NIL restrictions to continue to exist is fair and reasonable to the injunctive class where it is more than offset by dozens of billions of dollars in other benefits that the Agreement allows… The answer to this dominant question is unequivocally: “yes”.

This article originally appeared on USA TODAY: NCAA-House lawyers file papers with judge