Lawyers in NCAA athlete-compensation antitrust cases tweak settlement proposal

(This story was updated to add new information.)

Lawyers involved with a proposed multi-billion-dollar settlement of three athlete-compensation antitrust cases against the NCAA and the Power Five conferences filed documents on Thursday that included small, but potentially significant, changes aimed at convincing a federal judge to grant preliminary approval for the agreement.

The lawyers attempted to redefine the types of entities and individuals whose name, image and likeness (NIL) agreements with athletes would be subject to special scrutiny under a new regulatory structure that the NCAA and the conferences are insisting that they get in exchange for agreeing to the industry-changing deal.

The NCAA and the conferences would fund a $2.8 billion damages pool for current and former athletes over a span of 10 years and allow Division I schools to start paying athletes directly for 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 raised a series of concerns about the proposed deal. The greatest of those issues revolved around its new regulatory structure, which she said she found confusing and poorly framed when it came to defining school boosters and the types of booster-backed NIL deals that were allowed.

While Thursday’s filing was submitted by lawyers for the plaintiffs, an NCAA official said lawyers for the association and the conferences were involved in negotiating the language.

At present, the NCAA has rules that prohibit athletes from receiving pay for play and from having NIL deals that are used as an inducement to enroll or remained enrolled at a specific school. However, those rules have been virtually impossible for the association to enforce. That initially was due to the growing prevalence of school-specific collectives — donor groups dedicated to pooling resources earmarked for NIL payments that often are, at best, only loosely based on the value of an athlete’s NIL rights or their promotional work. Beginning in February, it also was because a federal judge in Tennessee issued a preliminary injunction in a case brought by the state’s attorney general that says recruits and transfers can negotiate and sign NIL contracts before enrolling at a university.

Under the original version of the settlement, athletes would have to report NIL payments of more than $600 to a clearinghouse that would be established. And their deals — if made with a “booster” — would be subject to review, with the goal being the prevention of pay for play and deals that pay amounts above market value.

Athletes who have questions about the permissibility of their agreements would be able to seek advisory opinion from an enforcement group. If the enforcement group sought to sanction an athlete because of a deal, the athlete would have the ability to bring the matter to a neutral arbitrator.

According to a transcript of the hearing three weeks ago, Wilken said she was “quite concerned” about the prospect of what she termed the proposed deal’s “third-party NIL restrictions” that would result in “some people who are getting large sums of money in third-party NIL right now (being) no longer be able to get them.”

Under the original version of the proposed settlement, she said: “Today’s third-party donor is tomorrow’s booster … they are people who like to give money to athletes and now (under the original settlement terms) they are a booster and … they can’t do it anymore.”

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

In the revisions filed Thursday, the basic reporting, clearinghouse and arbitration processes would remain as originally proposed, but the settlement now would do away with the term “booster” and replace it with the term “Associated Entity or Individual.” The filing said this would constitute “a narrower, more targeted, and objectively defined category that does not automatically sweep in ‘today’s third party donor’ …”

An “Associated Entity or Individual” was defined in Thursday’s filing based meeting any one of five criteria:

The first fits the basic description of a collective: “An entity that is or was known (or should have been known) to the athletics department staff … to exist, in significant part, for the purpose of promoting or supporting a particular” school’s athletics program or athletes and/or “creating or identifying NIL opportunities solely for a particular” school’s athletes.

The other criteria are:

Anyone who “is or was a member, employee, director, officer, owner, or agent of” an entity that fits the description of a collective.

Anyone who has directly or indirectly contributed more than $50,000 over their lifetime to a particular school or collective.

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

‘Any entity owned, controlled, or operated by, or otherwise affiliated with, the individuals or entities” previously described, other than a publicly traded corporation.

What comes next the preliminary-approval process is unclear. The NCAA official said they expect that attorneys representing groups of athletes opposing the settlement will attempt to make new filings in response to Thursday’s document. If that happens, the official said, the plaintiffs and the NCAA likely would be afforded an opportunity to reply.

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

Thursday filing argues that the changes to the proposed settlement satisfy Wilken’s concerns and that she should grant preliminary approval because even though it includes a level of restriction on athletes’ NIL activities that doesn’t really exist now, the overall benefits for athletes make the arrangement fair. And, from the plaintiffs’ perspective, it eliminates the ‘real risk’ of further litigation that is ‘uncertain in outcome but certain in delaying’ new benefits for athletes.

The revisions, the lawyers wrote, make explicit that the proposed settlement ‘is only allowing the continuation of existing NCAA rules which already prohibit so-called ‘faux’ NIL payments in narrow and more objectively defined circumstances.

‘But the critical inquiry for the Court in evaluating this provision of the Agreement is whether permitting this one category of NCAA NIL restrictions to continue to exist is fair and reasonable to the injunctive class where it is more than offset by the tens of billions of dollars in other benefits the Agreement allows … The answer to this controlling question is an unequivocal ‘yes.”