NCAA, Power 5 approve settlement making way for players to be directly paid

By Chris Vannini, Nicole Auerbach, Seth Emerson and Justin Williams

The NCAA and its five power conferences voted to approve terms of a multibillion-dollar settlement to resolve three antitrust lawsuits, paving the way for schools to pay athletes in what would mark a seismic change to the college sports business model.

The settlement includes payments of more than $2.75 billion from the NCAA to former Division I athletes, plus a future revenue-sharing model between power-conference schools and athletes, according to Hagens Berman and Winston & Strawn LLP, the law firms representing the plaintiffs in the three cases, House v. NCAA, Hubbard v. NCAA and Carter v. NCAA.

The revenue sharing would be an optional model for power-conference programs, potentially as soon as next year, in which 22 percent of those schools’ average annual revenue — projected to be more than $20 million per school — would be distributable directly to athletes.

The damages, made available to D-I athletes dating back to 2016 as back-pay for lost name, image and likeness (NIL) earning opportunities, would be paid out over 10 years via a combination of NCAA reserve funds and reductions in future revenue distributions to conferences.

The next step will be submitting the settlement to Judge Claudia Wilken of the U.S. District Court for the Northern District of California for preliminary approval, expected to happen within 30-45 days. If finalized, a process that will take several months, the settlement would be the next and most significant overhaul to the long-standing framework of amateurism in college sports.

The NCAA Board of Governors, which is the organization’s highest governing body, voted on behalf of the NCAA. The Power 5 conferences were listed as defendants in the case, and each voted separately to approve the terms of the settlement.

“The five autonomy conferences and the NCAA agreeing to settlement terms is an important step in the continuing reform of college sports that will provide benefits to student-athletes and provide clarity in college athletics across all divisions for years to come,” said NCAA President Charlie Baker and the commissioners of the Power 5 conferences in a joint statement. “This settlement is also a road map for college sports leaders and Congress to ensure this uniquely American institution can continue to provide unmatched opportunity for millions of students.”

The settlement will also eliminate NCAA scholarship caps, the plaintiffs’ lawyers confirmed in a news release, expected to give way instead to roster limits.

If Judge Wilken grants preliminary approval, there would be a set period of several months in which those in the retroactive damages and future revenue-sharing class have an opportunity to either opt out or object to the terms of the agreement, depending on the judge’s ruling. That’s followed by a final approving hearing, at which point, if the judge approves it, the settlement officially goes into effect.

House v. NCAA was filed in 2020 in front of Judge Wilken, the same judge who notably ruled against the NCAA in the O’Bannon and Alston lawsuits. Grant House, a former Arizona State swimmer, and Sedona Prince, a former Oregon and current TCU women’s basketball player, are the two named plaintiffs, represented by lead attorneys Steve Berman and Jeffrey Kessler.

It was essentially a suit in two parts: one backward-looking, one forward-looking. The first part sought the retroactive NIL damages before the NCAA policy change in the summer of 2021, while the latter sought an injunction that would force the NCAA and power conferences to lift rules blocking revenue sharing from broadcast rights.

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In November, Wilken granted class-action certification for the damages portion of the House case, expanding it to any Division I athlete as far back as 2016, under a four-year statute of limitations. This exponentially elevated the potential cost of the damages in the case.

While the settlement, if approved, will institute significant change for the NCAA, an organization that has long resisted compensating athletes, it had motivations to avoid taking the case to trial. Were the NCAA to lose at trial, it could have been on the hook for damages as high as $20 billion, according to documents obtained by Yahoo Sports that were circulated among power conference presidents and administrators, an amount that would have had to been paid out immediately and could have forced the NCAA to file for bankruptcy.

A loss at trial would also have struck down any existing constraints on NIL and revenue sharing moving forward.

A settlement gives the NCAA more input on payment structures for the damages and revenue sharing, as well as some safeguards against other legal battles.

The NCAA and power conferences hope that settling the House, Hubbard and Carter cases would hinder any additional antitrust complaints over the next decade, according to sources briefed on the settlement negotiations. This is considered an important aspect of the settlement terms for the NCAA, which has faced an onslaught of legal challenges in recent years.

There is at least one other antitrust lawsuit worth monitoring. Fontenot v. NCAA is a separate suit filed in Colorado that is also seeking class-action certification and has asserted that rules prohibiting “pay for play” compensation violate antitrust law. These are similar to the claims asserted in Carter v. NCAA.

The NCAA requested to transfer the Fontenot case to the same Northern District of California court as the other antitrust suits in an effort to have it consolidated with Carter and resolved as part of the House settlement, but that motion was denied on Thursday. The Fontenot case will move forward in Colorado, where representatives for the plaintiffs believe their claims are broader than the Carter case.

The full impact of Fontenot moving forward in Colorado is to be determined. Resolving the Carter case as part of the House settlement could ultimately cover some of the Fontenot claims, but that will likely depend on the fine print of the House terms and whether or not Wilken approves them.

“Judge (Wilken) made it clear that if there is a settlement covering the Fontenot claims, she won’t allow those claims to be continued in Colorado on a class basis,” Berman told The Athletic. “So at best, Fontenot is short lived as a proposed class action and will not impact the (House) settlement.”

Lingering questions remain beyond the settlement over Title IX’s role in future revenue sharing, the future of third-party NIL collectives and the ongoing debate over unionizing efforts and employment status.

Required reading

(Photo: Mitchell Layton / Getty Images)