The NCAA Board of Governors has voted to approve the terms of a settlement that would resolve several antitrust lawsuits against the NCAA and would require the organization to pay nearly $2.8 billion over a 10-year period to former Division I athletes and institute a revenue-sharing model between certain schools and athletes.  The details of the settlement are still being negotiated.  Once finalized, the agreement must be submitted for court approval.

One of the lawsuits, House v. NCAA, alleges the NCAA and its “Power 5” athletic conferences violated antitrust laws by barring athletes from receiving name, image, and likeness (NIL) compensation prior to 2021 and by prohibiting revenue-sharing from television broadcasting agreements and similar contracts with athletes.

The NCAA faces substantial risks if the House lawsuit proceeds to trial.  U.S. District Court Judge Claudia Wilken, who is presiding over the lawsuit, had ruled against the NCAA in two major NIL-related cases.  Federal antitrust law grants successful plaintiffs treble damages.  The NCAA could be liable for as much as $20 billion in damages (which some say could force the organization into bankruptcy).  A loss at trial could also result the removal of all existing constraints on NIL and revenue sharing in college athletics.  The settlement would permit the NCAA to pay a lesser amount in damages while retaining more ability to regulate athlete compensation.

The nearly $2.8 billion would be in back-pay damages to former athletes who were unable to receive NIL compensation prior to the NCAA’s decision to lift the prohibition in 2021.  Further, the settlement would create an optional revenue-sharing model through which power conference schools may distribute as much as $20 million a year to their student-athletes.

The settlement approved by the NCAA calls for payments to be financed primarily by reductions in annual revenue distributions to the NCAA’s members and from the NCAA’s reserve funds.  The settlement is also expected to involve a reaffirmation of existing NCAA rules regulating student-athlete compensation and the creation of an enforcement infrastructure for those rules. The House settlement would be a groundbreaking moment in college athletics, whose landscape has experienced significant uncertainty surrounding the transition from athletic amateurism into something resembling a professional sports model.  While the NCAA’s $2.8 billion payment has been the focus of many headlines, the House settlement’s most consequential feature may be its revenue-sharing agreement, which would be the first instance of direct profit-sharing between universities and athletes.

The arrival of name, image, and likeness (NIL) agreements has transformed college athletics, offering student-athletes unprecedented opportunities to profit from their personal brands.  Yet, the case of Jaden Rashada, a promising quarterback, is a cautionary tale.

When Rashada entered the 2023 college recruitment season, the NCAA had recently adopted rules allowing compensation to student-athletes for using their NIL.  The NIL era opened the door to forming “collectives” — groups of donors who agreed to fund NIL contracts with athletes in exchange for the athletes’ de facto commitment to a particular university.  The collectives play a huge role in recruitment and facilitating the NIL deals.  NIL hinges on the relationship between a university’s sports program and its alumni, boosters, and these collectives.

 Rashada initially committed to the University of Miami, backed by a substantial $9.5 million NIL deal.  He later changed his commitment to the University of Florida (UF), lured by an even more lucrative promise of $13.85 million.  According to a lawsuit filed by Rashada in the U.S. District Court for the Northern District of Florida, this offer was part of a fraudulent scheme orchestrated by UF head coach Billy Napier, former director of player engagement Marcus Castro-Walker, and booster Hugh Hathcock to induce him to give up his Miami deal.

 According to the complaint, Hathcock offered to pay Rashada $5.35 million, including a $500,000 signing bonus, through Hathcock’s company Velocity Automotive.  The remainder of the $13.85 million would be paid through Hathcock’s NIL collective, Gator Guard.  Rashada alleges in his Complaint that these promises were deceitful and intended to persuade him to abandon Miami and sign a$13.85 million NIL deal with the Gator Collective.  Once he committed to UF, rather than make Rashada rich as promised, the defendants allegedly changed their tune. The amount of UF-affiliated NIL money available decreased significantly when Hathcock decided to sell his business.  Thus, Rashada alleges that the defendants continued to manipulate him until he signed a letter of intent with UF that further deprived him of any other possible NIL opportunities.  Rashada contends that the defendants attempted to strong-arm him into a NIL contract worth a fraction of what they promised after inducing Rashada through false promises to forgo NIL deals from other programs — specifically, the $9.5 million from Miami.

As the complaint notes, “[U]nethical and illegal tactics like this are more and more commonplace in the Wild West that is today’s college football landscape.  As the first scholar-athlete to take a stand against such egregious behavior by adults who should know better, Jaden seeks to hold Defendants accountable for their actions and to expose the unchecked abuse of power that they shamelessly wielded.”

            Rashada’s lawsuit includes serious allegations:

  1. Fraudulent Misrepresentation and Inducement/Aiding and Abetting Fraud: Rashada claims that the defendants knowingly made false promises to lure him to UF. The key elements of this claim involve proving the defendants intentionally deceived Rashada and he relied on these misrepresentations to his detriment.
  • Civil Conspiracy to Commit Fraud: These claims assert the defendants worked together to defraud Rashada. To succeed, Rashada must demonstrate there was a coordinated effort to deceive him and the defendants had a mutual understanding to commit the fraudulent acts.
  • Negligent Misrepresentation: This claim involves the assertion that the defendants made false statements without due care for their truthfulness, leading Rashada to make decisions based on inaccurate information.
  • Tortious Interference/Aiding and Abetting Tortious Interference: Rashada contends that the defendants intentionally interfered with his contractual relationship with Miami, causing him financial harm.

The defendants will likely assert numerous defenses, primarily that there was no enforceable contract, as NIL agreements often lack formal documentation and unambiguous terms. This potential defense hinges on the nuances of contract law, particularly the requirement for mutual assent and consideration.  However, in the state of Florida, oral contracts are enforceable.

The involvement of Rashada’s agents in the negotiations could also be used to argue that Rashada was adequately represented and not misled or exploited.  The complaint portrays Rashada as an individual taken advantage of by a head coach and a collective.  However, there is an argument that sophisticated agents and attorneys represented and adequately advised him before he chose UF.

Rashada’s lawsuit highlights the broader legal and regulatory challenges in the NIL landscape.  A lack of uniform regulations and enforcement mechanisms hinders the current environment.  There is a legitimate need for more precise guidelines for NIL agreements to protect student-athletes.  As this case progresses, it has the potential to set essential precedents and potentially drive legislative and regulatory changes to ensure the integrity of NIL practices.

Please contact a Jackson Lewis attorney with any questions.

As restrictions lessen on collegiate athletes’ ability to be compensated for their name, image, and likeness (NIL), international student-athletes in F-1 status continue to be at risk if they pursue these economic opportunities. On April 29, 2024, a bipartisan group of U.S. senators penned a letter to Department of Homeland Security (DHS) Secretary Alejandro Mayorkas to push the agency to bring international athletes into the fold.

According to Senators Richard Blumenthal (D-Conn.), Christopher Murphy (D-Conn.), Pete Ricketts (R-Neb.), and Shelley Moore Capito (R-W. Va.), DHS can provide a simple solution:

While many students have rightfully benefitted from these new [NIL] opportunities, international college athletes and college athletic programs face a credible risk that even the most basic NIL deal could violate the work restrictions of the F-1 visa. DHS could clarify that the F-1 visa program does not prevent a student from engaging in NIL related activities ….

As Jackson Lewis’ Immigration Practice Group previously discussed, NIL deals likely do not qualify as on-campus employment authorized for most foreign students in F-1 visa status. Alternatives to F-1 visas for international student-athletes are difficult to obtain. As a result, while their American teammates cash in, international student-athletes cannot market themselves without risking being removed from competition and the country.

According to the senators, Secretary Mayorkas promised swift action to provide clarity to tens of thousands of international student-athletes during Senate oversight hearings over a year ago; but DHS has failed to deliver. With another academic year coming to a close, the senators seek to spur DHS to act as promised. Should DHS update its regulations, international student-athletes may be able to economically “benefit from the blood, sweat, and tears they put into their sport” come the fall. Jackson Lewis’ Sports Industry Group and Immigration Practice Group will continue to monitor NIL developments and the potential impact on college sports and international student-athletes. Please reach out to members of either Group with questions.

Tennessee Senator Marsha Blackburn (R) and New Jersey Senator Cory Booker (D) have reintroduced the “NCAA Accountability Act.”  This follows multiple hearings held over the past few years on NCAA operations, including how the NCAA handles investigations and enforcement of its bylaws.

The bipartisan bill seeks to enhance due process protections for intercollegiate athletic programs under investigation for potential rule violations by the NCAA. Under the proposed legislation, investigations by the NCAA Enforcement staff would involve greater transparency, expediency, and consistency. Because of the increase of name, image, and likeness (NIL) arrangements and their use as a recruiting tool, combined with several states passing their own NIL-related legislation, there are many questions and concerns about the NCAA’s parameters and protocols for conducting investigations and how penalties are imposed by the NCAA Infractions Committee, especially in the context of NIL-related recruiting violations.

NCAA Accountability Act: Key Proposals

The bill calls for the NCAA to expedite investigations in a consistent manner:

  • Under the bill, the NCAA must complete the investigation within a one-year period after providing notice to the institution of an alleged infraction.
  • The bill imposes a limitation period, barring the NCAA from investigating alleged violations that may have occurred beyond two years from the date notice was sent to the school.

Arbitration as a potential remedy for dispute resolution:

  • If there is a dispute over the NCAA’s recommendation for punishment, the member universities may compel arbitration.
  • Arbitration must be conducted by a three-person panel. The arbitrators will provide an independent review and binding decision.

The Attorney General can ask NCAA for reports about investigations:

  • The Attorney General can direct the NCAA to submit an annual report to the Department of Justice summarizing its enforcement proceedings.  The NCAA must also submit separate reports to each state’s attorney general summarizing its interactions with member universities headquartered in their respective states.
  • The bill provides the Department of Justice reasonable access to examine evidence of any person or covered athletic association being investigated.

While it is unlikely to pass in an election year, ultimately, the bill seeks to generate increased fairness, uniformity, and transparency in the NCAA’s process for investigating and litigating potential rule violations.

Jackson Lewis’ Collegiate Sports Industry Group is available to assist universities, conferences, or other stakeholders in dealing with infractions investigations, hearings, appeals, and other matters involving alleged violations of NCAA bylaws.

The U.S. Department of Justice, alongside the District of Columbia and states of Mississippi, Virginia, Minnesota, joined seven other states in their antitrust challenge against the NCAA’s transfer eligibility rule.

The rule blocks some student-athletes from immediately competing after transferring between colleges and has been a recent source of contention in the world of college athletics.

In December, a federal district court held the rule likely violated the Sherman Antitrust Act and temporarily suspended its enforcement for 14 days.  Soon after, the NCAA agreed to suspend enforcement of the rule through the end of the 2023-24 season, ensuring that all winter and spring transfer athletes are eligible to complete while the suit is pending.

The NCAA argues that the ending the rule would upend the amateur nature of college athletics, replacing it with “a system of perpetual and unchecked free agency.”  The plaintiff states argue the rule illegally restrains college athletes’ ability to engage in the labor market, monetize their image and likeness, and control their education.

The lawsuit is now backed by the federal government, the nation’s capital, and the attorneys general of 10 individual states.  This diverse coalition, representing a variety of geographical regions and political leanings, appears to signal a formidable alignment against the NCAA’s transfer eligibility rule.

Please contact the attorneys in the Jackson Lewis Sports industry group with any questions.

NCAA President Charlie Baker penned a letter to student-athletes, asking for feedback on his proposal to allow Division I (D-I) schools to pay student-athletes directly.

In the December 19 letter, Baker emphasized that schools and student-athletes need to partner with Congress in seeking a federal law with an antitrust exemption preventing college athletes from being considered employees of the schools they attend.  He encouraged student-athletes to join the conversation, stressing the importance of their voices in shaping the future of college sports.

Earlier this month, Baker proposed a new system, a significant departure from the current NCAA structure.  The novel proposal centered around allowing D-I schools to directly compensate athletes through an enhanced educational trust fund and creating a new D-I football subdivision for schools that choose to participate.  The proposed educational trust fund would pay at least $30,000 annually to half of the institution’s eligible student-athletes.  The proposal intends to enable D-I schools to provide financial support directly to athletes, addressing concerns related to name, image, and likeness (NIL) opportunities and NIL collectives.  Under the plan, Baker envisions an in-house revenue-sharing mechanism to handle NIL, reducing the role of third-party collectives. 

With the NCAA facing potentially existential threats from ongoing litigation, Baker’s proposal aims to balance liberating major conference programs with avoiding a complete breakaway from the existing NCAA structure.  In the letter, Baker notes that the proposed changes will enhance opportunities for all D-I student-athletes and promote gender equity, as schools must adhere to existing regulations in their athletic program investments.  He emphasized the importance of flexibility for colleges and universities and for the NCAA to adapt to the evolving landscape of college sports. 

However, while Baker argues that this plan enhances financial opportunities for all D-I student-athletes, critics raise questions about the impact on Title IX compliance, the potential reduction of Olympic sports, the widening gap between major conferences and others, and the potential consequences for student-athletes in non-revenue sports.  Baker acknowledges that the proposed model challenges traditional notions of amateurism, aiming to offer student-athletes a fair share of the financial benefits associated with their skills and institutional value.  He encourages a shift toward more flexible rules and frameworks across the NCAA that prioritize student-athletes’ well-being.

The letter also discusses the NCAA’s ongoing “endless legal challenges,” acknowledging lawsuits like Johnson v. NCAA and In Re College Athlete NIL Litigation, which collectively demand significant compensation for college athletes.  Undoubtedly, Baker recognizes the significance of litigation over athlete compensation.

Baker’s letter serves as a call to action, urging student-athletes to engage in the conversation and partner with the NCAA in directing the future of college sports.  It signals a significant shift in the NCAA’s approach to compensation and regulation, aiming to find a middle ground between the interests of major conferences and the overall stability D-I sports.  The future of college athletics hangs in the balance, with potential consequences for student-athletes, universities, and the structure of the NCAA itself.

The Jackson Lewis Sports Industry group represents colleges and universities involved in NCAA infractions investigations, waiver requests, NIL issues, and other matters.

A federal court ruling has forced the NCAA to suspend its transfer eligibility rule, bringing temporary relief to college athletes seeking to transfer schools without sitting out a year of competition.

The rule, which requires certain Division I athletes who transfer schools to defer a year of competitive eligibility, was challenged in a federal lawsuit filed by several U.S. states. The states allege the rule violates Section 1 of the Sherman Antitrust Act and harms student-athletes in the market for their athletic services.

On Dec. 13, 2023, U.S. District Judge John Preston Bailey issued a temporary restraining order (TRO), preventing the NCAA from enforcing the transfer eligibility rule until a hearing scheduled for Dec. 27. The hearing will determine whether Judge Bailey issues a preliminary injunction, which could suspend enforcement of the rule until the lawsuit is resolved.

The Ruling Explained

In granting the TRO, Judge Bailey found the seven states were likely to prove that the transfer eligibility rule violates the Sherman Act.

Judge Bailey wrote that the rule brings three primary harms to college athletes. First, the rule imposes a one-year ineligibility penalty that may discourage student-athletes from transferring even when another school better suits their academic, mental, or economic well-being.

Second, transferring student-athletes face a competitive disadvantage because many schools may hesitate to offer scholarships to athletes who will not be eligible immediately.

Third, the rule hinders student-athletes’ economic opportunities by limiting their ability to secure name, image, and likeness (NIL) endorsement deals and restricting their exposure to professional sports leagues.

Judge Bailey also noted that the inability to play their respective sports negatively affects athletes’ mental health.

Judge Bailey cited the examples of Southern Illinois University football transfer Noah Fenske and West Virginia University basketball transfer RaeQuan Battle, both of whom missed all or portions of their respective seasons. He wrote that the rule impeded Fenske’s and Battle’s ability to pursue NIL money, harmed their professional prospects, and may have detrimentally affected their mental health.

Impact of the Ruling

Following the ruling, the NCAA announced it would comply with the court’s decision by suspending enforcement of the transfer eligibility rule. Consequently, athletes previously affected by the rule are immediately eligible to return to competition, at least until the Dec. 27 hearing.

This decision is a significant, yet controversial, development in the world of collegiate athletics. While some feel that permanent elimination of the transfer eligibility rule would be progress for the rights and opportunities of college athletes, others fear its demise will lead to unrestricted free agency and signal the end of amateurism in college sports.

Please contact the Jackson Lewis Collegiate & Professional Sports industry group with any questions.

The National Collegiate Athletic Association (NCAA) faces a new legal challenge as seven U.S. states have filed a federal lawsuit alleging the NCAA’s student-athlete transfer eligibility rule violates U.S. antitrust law.

Transfer Eligibility Rule

NCAA rules currently permit undergraduate college athletes to transfer once with immediate eligibility to compete at their new university. However, subsequent transfers require the athlete to sit out a year of competition, unless the NCAA grants the athlete a discretionary waiver. Waiver requests are evaluated on a case-by-case basis and are granted infrequently.

The rule ostensibly aims to safeguard the amateur nature of college sports by dissuading universities from “poaching” each other’s athletes. In practice, it discourages athletes from transferring between schools.

Antitrust Allegations

In the new lawsuit, the state attorneys general of Ohio, Colorado, Illinois, New York, North Carolina, Tennessee, and West Virginia argue that the transfer eligibility rule violates Section 1 of the Sherman Antitrust Act, which prohibits agreements that unreasonably restrain market competition.

The state attorneys general argue that the transfer rule effectively constitutes an illegal agreement between the NCAA’s member schools to artificially restrain college athletes’ ability to participate in the market for their labor. Additionally, they assert that, by discouraging athletes from finding ideal matches with schools and imposing a one-year eligibility loss on those who transfer, the rule harms the future earning potential of college athletes.

The attorneys general seek a permanent injunction blocking enforcement of the transfer rule.

Growing Opposition to NCAA’s Policies

This lawsuit is the latest in a barrage of legal attacks against the NCAA. In 2021, the U.S. Supreme Court ruled that NCAA rules restricting education-related compensation and benefits for athletes violated the Sherman Act. Other lawsuits brought on behalf of athletes against the NCAA are pending.

The lawsuit signifies a new willingness by elected officials of both political parties to champion their states’ student-athletes against the NCAA. Shortly before joining the lawsuit, North Carolina Attorney General Josh Stein, a Democrat, penned a letter to the NCAA opposing its denial of a transfer waiver for University of North Carolina football player Devontez “Tez” Walker. The NCAA later reversed its decision and granted Walker a waiver. Similarly, Virginia Attorney General Jason Miyares, a Republican, plans to write the NCAA objecting to its denial of a waiver for Virginia Commonwealth University basketball transfer Joe Bamisile. Virginia has not yet joined the federal lawsuit.

While the outcome of the suit filed by the state attorneys general is uncertain, one thing is clear: there is a noticeable surge in bipartisan opposition and judicial skepticism toward the NCAA’s policies governing college student-athletes. The NCAA faces considerable pressure to enact significant policy changes, pointing toward an imminent transformation in the landscape of college athletics.

Please contact the Collegiate & Professional Sports industry group with any questions.

NCAA President Charlie Baker has advanced the idea of giving universities and colleges (with the most-resourced athletic departments) the option to pay student-athletes. The emergence of national, image, and likeness (NIL) deals are exerting increasing influence on the landscape of collegiate athletics (and growing the disparities between the have and have-nots of college universities). In a stunning move, the NCAA sent a letter to more than 350 college and universities presenting rule changes to allow member schools to enter into NIL deals directly with their student-athletes. The NCAA proposes to create a new subdivision, covering all sports, where the richest athletic departments can operate differently than the rest, while still competing with the rest of Division I universities.

Although not fully fleshed out yet, the proposed subdivision would follow certain parameters:

  1. To be a part of that subdivision, each school would have to put millions of dollars each year into a trust fund for athletes. The schools would be required to set aside a minimum of $30,000 per athlete for at least half of their athletes annually.
  2. The trust fund would not be tethered to educational resources and there would be no cap on the funds provided to the trust fund. An athlete would not need to finish their degree before they access that money.
  3. The subdivision will create its own set of rules for recruiting, transfers, roster size,
    and a wide range of other policies.
  4. The subdivision would have to continue to follow Title IX rules and allocate 50
    percent of the investment toward women’s sports.
  5. The member schools would have to vote to adopt the changes. The schools would be allowed to determine whether to opt in or out individually.

Broader Implications
The proposal allows certain Division I athletes to be paid directly through a trust fund. If the member schools adopt this model, the practice of compensating student-athletes seemingly will bolster the National Labor Relations Board’s expressed position that student-athletes are statutory employees. In May 2023, the Board filed a complaint against the University of Southern California, the Pac-12 Conference, and the NCAA, alleging their failure to use the term “employee” to refer to student-athletes in the university’s student-athlete handbook and related social media policies intentionally discourages student-athletes from exercising their alleged Section 7 rights as employees under the National Labor Relations Act, particularly the right to organize a union, join a union, or engage in protected concerted activity, among other rights. In light of this new proposal, combined with ongoing litigation to classify college athletes as statutory employees of their university for purposes of protections under labor laws, reform is a afoot in college athletics, so universities and college should consider taking steps now to educate and protect themselves against unfair labor practice charges.

Jackson Lewis’ Sports Industry Group is available to assist universities, conferences, or other stakeholders in dealing with matters before the Board, on NCAA infractions matters, or otherwise involving the appropriate classification of student-athletes.

November 7, 2023, may become a monumental day in the history of the National Collegiate Athletic Association (NCAA). It is the first day of a potentially groundbreaking hearing. Region 21 of the National Labor Relations Board will be hearing a case brought by members of the football, men’s basketball, and women’s basketball teams against the University of Southern California (USC), the PAC-12, and the NCAA. The crux of their argument is that the three major entities should be considered “joint employers” who have systematically misclassified the players as “student-athletes” rather than as employees.

The implications of this Board hearing could have far-reaching implications across the country. The NLRB General Counsel Jennifer Abruzzo has already signaled that, in her opinion, certain players at colleges and universities should qualify as employees of their institutions. If the administrative law judge were to agree with Abruzzo’s opinion, the impact on the national landscape of collegiate athletics would be immediate.

If these players are found to be employees, each player would be entitled to the benefits of traditionally employed individuals, such as compensation, overtime, social security, worker’s compensation, health and safety protections, protections against discrimination and harassment, and a statutory right to unionize and collectively bargain for a share of collegiate sport revenues.

While being found to be employees would be looked at as a major win for the impacted players, such a determination would cause complicated issues for colleges and universities across the country. These issues include compliance with Title IX of the Education Amendments of 1972 and the Immigration Nationality Act, among others. Further, having some teams but not others qualify likely will create a two-tier system throughout the country. This divide would be even further enhanced if the Board finds certain players, but not others, qualify as employees.

Testimony will not be heard until the week of December 18, at the earliest. Higher education institutions, players, and fans alike will be monitoring this hearing as it progresses.

Jackson Lewis’ Collegiate and Professional Industry Group is available to assist universities, conferences, or other stakeholders in dealing with matters before the Board or otherwise involving the appropriate classification of student-athletes.