Newsletter, Image, Likeness Vol. 91: The Good, Bad, And Ugly Of The House V. NCAA Settlement

The Weekly Longer NIL Thought.

I'll begin by noting that there is still no enforceable settlement ending the House, Hubbard, and Carter antitrust lawsuits against the NCAA until/unless Judge Wilken approves the long-form settlement agreement. That said, we finally have a very lengthy document to review and it is worthwhile to look at it in case it receives approval and withstands any potential appeal.

The Good

• A lot of money will potentially flow to athletes, who played college sports from 2016 to now, in the form of "damages." This is a known amount -- roughly $2.78 billion -- which is in part based on athletes having been denied compensation for the use of their names, images, and likenesses in television broadcasts, video games, and other lost opportunities before July 1, 2021. While this is a lot of money (albeit it is to be paid over 10 years), and thus under "The Good" bucket, some argue that this could have and should have been a lot more money and perhaps would have been if the cases were fought through at least summary judgment arguments.

• Athletes will have the chance to opt out of the settlement agreement if/when it is confirmed by Judge Wilken. If a certain threshold number of opt-outs is met (that number is redacted from the settlement agreement filed with the court), then the NCAA can terminate the settlement in its entirety.

The Bad

• Athletes will be able to receive money directly from schools, but it is up to schools to decide what the floor is (it could theoretically be $0 if a school so chooses) and it is also capped as a percentage (22%) of the average revenue of Power 5 conference schools (and Notre Dame). The cap is, in my mind, bad. This is particularly true with no floor. Furthermore, this was not something that was collectively bargained for, which would otherwise make it fine as my friend Jim Cavale has said many times as an advocate for collective bargaining in the college sports space.
• The settlement agreement allows schools to procure real (i.e. not NIL collective) NIL opportunities for athletes. Basically, the settlement agreement seeks to allow schools to act as sports agencies for their athletes and find NIL deals for them. Alternatively, schools can align with traditional, experienced agencies to serve in this role. I view this as "bad" because I think this type of activity should be left to agents who have no association with the school to avoid actual and perceived conflicts of interest. Furthermore, I don't believe this should serve as a justification for any cap on revenue sharing whatsoever. Anyhow, my friend Kristi Dosh says that she asked a few Power 5 athletic directors if they would be interested in this kind of agency-styled arrangement and she "got some very fast no answers." If that's the case, then it shouldn't be in the agreement at all.

The Ugly

• The settlement agreement intends to place some lofty restrictions on athletes entering into agreements with NIL collectives and boosters. To be clear, this only gives the NCAA and conferences the right to adopt these rules but, assuming they do, quite a lot of power will be provided to an individual or group of people who are empowered to make the highly subjective determination of whether a license/payment is "for a valid business purpose" and is fair market value.

• The agreement also seeks to subject third-party agreements "to review to ensure they are legitimate, fair market value agreements and not used for pay-for-play" and calls for "the establishment of a robust and effective enforcement and oversight program to ensure the new NIL model achieves its objectives" with a "clearinghouse for NIL payments over $600 would give institutions access to information about external NIL activities, providing a level of transparency that does not currently exist to allow for better management of third-party influence and better assurance of legitimate NIL activity." My colleague Rick Karcher asks some very important questions such as: "What is legitimate NIL activity? And why can schools engage in so called 'pay-for-play' but third parties can't? What does this proposed settlement mean in relation to eligibility determinations and the NCAA's student-athlete reinstatement process? What happens when schools 'back load' compensation under a four-year agreement and the compensation isn't subject to collective bargaining agreement provisions that would make it guaranteed or require another school to assume the compensation obligations on transfer?"
• Then there's this section that allows the NCAA and conference to "adopt rules that prohibit any transaction, payment, or agreement designed to defeat or circumvent, and with the effect of defeating or circumventing, the intention of the Parties as reflected in the terms of this Injunctive Relief Settlement." It seems super vague and overbroad and puts the power in the Court to appoint a special master if and only if Class Counsel objects to such rules, keeping a significant amount of control within plaintiffs' counsel's hands (as well as a huge economic incentive for those lawyers . . . see below).

• This agreement is not the byproduct of an approval process involving all NCAA members, yet all Division I schools are affected by it. "The NCAA board does not have authority to approve this settlement, which could only happen by a member vote," adds my colleague Richard G. Johnson . "The court cannot 'enjoin' the parties let alone non-parties via a voluntary settlement, which is just a contract. If the contract is breached, then the court can enforce the agreement, if it retains jurisdiction to do so. Even then, nothing as brazen as this has ever been attempted to my knowledge. When challenged by non-parties, the Ninth Cicuit will vacate the settlement and remand it to a different judge, I think." Johnson also believes that the agreement "so underpays these players as to question who, exactly, class counsel think they’re representing? And absent collusion, where class counsel wants a pay day, and where the NCAA wants no more litigation going forward, no agreement like this would ever be forthcoming, IMO."
• The lawyers for the plaintiffs want roughly $500 million in attorney's fees and costs related to the back damages portion of the settlement. They want another $20 million as an "upfront injunction fee" as well as a percentage of the revenue-sharing monies that athletes will receive (this will be deducted from the payouts that otherwise go to the athletes). This is only a "good" thing for the lawyers, who appear to be highly self-interested in creating a continuing stream of revenue for themselves. Furthermore, these lawyers agree to refrain from advocating against the NCAA in front of Congress in the future, which doesn't appear to necessarily be in athletes' best interest as a blanket position.

Separate from the above, I found it comical that the concluding statement in the NCAA's press release concerning the settlement agreement was that, "If Congress does not act, the progress reached through the settlement could be significantly mitigated by state laws and continued litigation." So, the NCAA is still praying for Congressional intervention. This is wild.

Finally, the settlement agreement, if approved, includes a provision that would cause it to be terminated if college athletes are ultimately deemed employees and decide to collectively bargain with their employers.

Up Next: State Attorneys General Going After The NCAA?

Daniel Libit and Michael McCann report that the attorneys general of Montana and South Dakota are considering bringing legal action concerning the House v. NCAA settlement agreement that has been filed with the court.

An "option for the AGs would be to sue the NCAA in state court and seek a restraining order and injunction to block implementation of the settlement," say Libit and McCann. "State court would provide a number of advantages over federal court, including a more sympathetic forum through a local jury and, depending on the state, an elected judge. The NCAA has also struggled at times to remove state court filings to federal court."

Libit later offered an update that the Tennessee Attorney General is reviewing the settlement and, if necessary, he has "no hesitation taking further steps to protect the rights of Tennessee's student-athletes."

Houston Christian University Isn't Giving Up Fight To Intervene.

It filed a notice of appeal in the Ninth Circuit Court of Appeals after Judge Wilken denied its motion to intervene.

NCAA Launches "NIL Assist" Platform.

There's an option to register for the NCAA's Service Provider Registry.

Dan Murphy of ESPN provided some more background via a series of tweets:

"The public website will show broad, anonymous data about how much NIL money is flowing through college sports. The registry (not open to the public) will show athletes a list of service providers, such as marketing agents, financial advisors and tax pros. They'll be able to rate each provider on a platform designed to help athletes find trustworthy help. When asked whether the data collected through the clearinghouse will be used to determine the fair market value for policing future NIL deals, NCAA officials didn't answer directly but said it would help them make 'informed decisions' moving forward."

Alabama HS QB Has To Turn Down 7-Figure NIL Deal.

Trent Seaborn can't sign a lucrative deal with a trading card company because Alabama's high school athletic association remains one of the few in the U.S. that prohibits NIL activity.

The Collective Association Seeks To Raise Dues.

It represents 42 NIL collectives and wants to increase its annual membership fee, which currently sits at $6,000 per collective. The TCA spent $80k on Congressional lobbying in Q2 2024.

USF Announces New NIL Strategy Unit.

It will be led by Andrew Warsaw .

From the release: "[Warsaw] will lead an initial staff of four in the NIL Strategy department. Staff members will be tasked with identification of NIL opportunities, NIL marketing, fundraising, education, scheduling and execution of NIL commitments, and the growth of NIL resources among their duties serving USF's nearly 500 student-athletes across 21 sports."

Paige Beuckers Signs NIL Deal With New Women's Basketball League.

From Shams Charania : "UConn’s Paige Bueckers is signing an NIL deal with the new women’s basketball league Unrivaled that makes her the first NCAA athlete to receive ownership equity in a league. Bueckers is expected to play in Unrivaled, along with the WNBA, after her college career is over."

Final Thoughts.

That is it for Vol. 91 of Newsletter, Image, Likeness. Thanks to the more than 8,970 people who have subscribed to this newsletter thus far, and please feel free to share this free resource with others on LinkedIn or elsewhere.

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