In the wake of Thursday’s contentious hearing before U.S. District Judge Claudia Wilken—who objected to key features of a multibillion-dollar settlement to resolve the House, Carter and Hubbard antitrust litigations—attorneys for the players, NCAA and power conferences need a new game plan.
There’s now a real possibility the settlement could collapse, which would lead Wilken to lift the stays on the three cases and return them to the docket on a potential track to the U.S. Supreme Court.
The NCAA might figure it’s time to make a game-breaking gamble by trying to win House.
Wilken urged the attorneys to revise language regarding restrictions on name, image and likeness. She was especially troubled by the settlement’s plan to launch an NCAA-backed entity that would (1) oversee NIL, (2) supposedly distinguish “real NIL” deals from those that cloak pay-for-play arrangements, (3) impose a so-called fair market value analysis, (4) require athlete and school disclosures on NIL deals that exceed $600 and establish a (5) court-like dispute resolution framework. Wilken worried this framework would chill the NIL marketplace and deprive athletes of commercial opportunities.
Attorneys for both sides suggested Wilken’s concerns were misplaced, but she was adamant and identified several apparent defects in their logic. While they claimed the new framework would only target bad actors, like collectives and boosters that disguise pay-for-play arrangements as NIL, Wilken observed the settlement doesn’t actually say that and, in fact, doesn’t even mention the word “collective.”
Wilken also pointed out textual conflicts between the settlement’s approach to NIL and NCAA policy statements. Further, Wilken observed, it seems peculiar to ban pay-for-play when the settlement contemplates colleges paying athletes for media rights, ticket sales sponsorships and NIL. She also mentioned the NCAA hasn’t meaningfully enforced prohibitions on NIL deals that cloak pay-for-pay arrangements and cautioned that trying to parse real NIL deals from pay-for-play ones might cause more harm than good. In March the NCAA suspended NIL enforcement in the wake of U.S. District Judge Clifton Corker barring the NCAA from enforcing rules that prohibit college athletes and recruits from negotiating compensation for NIL with collectives and boosters. But the NCAA insists those rules are still in place.
The million (or multibillion) dollar question now is whether the attorneys can revise the settlement in ways that would mollify Wilken’s concerns and extinguish her objections.
NCAA attorney Rakesh Kilaru implied his client will not budge, which signals the NCAA may believe it has gone as far as it is willing to go. The NCAA might reason that relinquishing any remaining suasion over NIL would unwittingly spawn a hyper-commercialized college sports environment within which collectives and boosters act without restraint or deterrent.
Keep in mind, the NCAA has already gone far in this settlement. It has accepted an arrangement that demolishes its longstanding fidelity to amateurism, converts the upper echelon of college sports into a pro sports model, and obligates the association and member schools to pay about $2.8 billion over a 10-year period as compensation for depriving athletes of NIL, video game and broadcast opportunities in recent years. In return the NCAA would obtain a $22 million annual cap for member schools (as opposed to a free market where schools pay as much as they wish) and avoid a “worst-case” scenario of losing antitrust trials, being ordered to pay many billions of dollars in damages and potentially having to seek federal bankruptcy protection.
It stands to reason that NCAA president Charlie Baker—especially if swayed by conference commissioners, prominent university presidents and influential athletic directors—could decide enough is enough. Don’t be shocked if he declares he’s willing to take his chances in court.
In a letter to NCAA membership obtained by the Associated Press, Baker acknowledged Thursday’s hearing “did not go as we hoped.” As governor of Massachusetts, Baker was known as pragmatic, data driven and non-ideological. Revising the settlement to conform to Wilken’s wishes, Baker might reason, would be a net negative for his organization.
In a scenario where the parties tell Wilken they cannot move forward on a settlement, Wilken would schedule a new trial date for House, which until the settlement had been scheduled to go to trial in January 2025. It would likely get a new trial date in 2025 or 2026 while Carter and Hubbard are further away from trials.
In House rulings, especially her denial of the NCAA’s motion to dismiss and her certification of the athlete classes, Wilken signaled support for the overarching theory of the case: The NCAA, power conferences and member schools (which are all competing businesses) violated antitrust law by conspiring to limiting athlete opportunities for NIL, video game and broadcast monies. Before a trial Wilken could grant the plaintiffs’ motion for summary judgment, though she could instead allow the case to be heard by a jury.
This is where it gets interesting. It’s not a slam dunk the NCAA would lose a trial. Some jurors might find the commercialization of college sports problematic and off-putting. Some might regard the transformation of college sports into something akin to pro sports undesirable, especially if they believe it would reduce academic opportunities for athletes. Jurors are ordinary people. They’re not seasoned litigators who can instantly cite sports antitrust case precedent or Ivy League economists who conduct empirical analyses on fan behavior. They often go with their gut and follow their moral compass.
The trial wouldn’t be the end of the road for the House litigation. The loser would appeal to the U.S. Court of Appeals for the Ninth Circuit. On one hand, the Ninth Circuit sided with Ed O’Bannon and Shawne Alston in their historic cases and those cases are problematic precedent for the NCAA. On the other hand, those cases didn’t concern the wide scope of issues presented by House and in them judges noted that compensation to college athletes that exceed the cost of attendance must be “tethered to education.” Payments regarding broadcasting money, video game compensation and NIL are arguably not tethered to education and could pose a problem for the House plaintiffs.
Before cutting a deal, the NCAA raised other possible critiques of House that appellate judges might find convincing. For instance, NIL is highly individualized, with some college athletes landing million-dollar deals and others not receiving any NIL money. That framework is arguably ill-suited for a class action that tries to harmonize the degree of financial injury. The class vehicle is also vulnerable to critique on grounds it presumes an athlete class that would have almost certainly been different had NIL rules been different. Stated more plainly, if college athletes could have landed NIL deals before 2021, some athletes back then would have stayed in college longer before turning pro. That would have changed history, including individual opportunities for athletes to attend particular schools.
After the Ninth Circuit issues a decision, which given the deliberate pace of the appellate system would probably not happen until the late 2020s, the U.S. Supreme Court would be petitioned to hear the case. A “hot take” on how the Court would handle the petition suggests the Court would accept the petition and side for the players. After all, the NCAA lost 9-0 in Alston and Justice Brett Kavanaugh wrote an oft-cited concurring opinion that blasted the NCAA as a cartel.
Don’t fall for hot takes.
For starters, the Supreme Court only accepts about 1% to 2% of petitions. While House impacts millions of past, current and future student athletes and thousands of colleges, the Court is routinely presented with cases that have far-reaching impacts and, far more often than not, declines to hear them.
Then there’s the popular misconstruing of Alston. Contrary to what has been written and said, the case had nothing to do with NIL or paying college athletes to play sports. It concerned a relatively peripheral issue in college sports, namely NCAA rules limiting how colleges can compensate athletes for education-related expenses.
The most important consequence of Alston was the Court clarifying the NCAA is not owed a deferential standard of review on antitrust claims, which the NCAA had invoked since the U.S. Supreme Court’s ruling in NCAA v. Board of Regents (1984). The absence of deferential review bolsters the plaintiffs’ chances in House and in other antitrust cases against the NCAA.
But even when faced with ordinary antitrust review, the NCAA could win House. Although Kavanaugh’s concurring opinion suggests he is a certain vote against the NCAA, it’s notable (as Gabe Feldman and I discussed last week on Sports Wise) that no other justices signed onto Kavanaugh’s concurrence. They were more comfortable with Justice Neil Gorsuch’s cautiously worded majority opinion, which stressed the Court was only addressing education-related expenses and not compensation for athletes. It’s also important to consider that during the oral argument for Alston, several of the justices seemed troubled by the commercialization of college sports and worried about rocking the boat on long-standing traditions.
Perhaps the NCAA doesn’t want to risk it all by losing House, Carter and Hubbard and instead acquiesces to Wilken’s demands. It’s already contending with the prospect of D1 athletes, like those on the Dartmouth College men’s basketball team, being recognized as employees and unionizing. The NCAA might already have lost amateurism and is now merely grappling with the aftermath.
But perhaps Baker is willing to make a final stand for amateurism and concludes it’s worth the fight.
Either way, we’ll be watching.
