On the heels of the NCAA and power conferences reaching a settlement in the landmark Housecase, college sports’ governing body will continue lobbying to secure its long-sought antitrust exemption from Congress.
Only now the NCAA will soon have an unlikely advocate: the high-profile plaintiffs’ attorneys in the House case.
In a wide-ranging interview with On3 on Friday, Steve Berman, co-lead counsel for plaintiffs in the House case, confirmed that the plaintiffs will indeed cooperate with the NCAA’s lobbying efforts to secure a limited antitrust exemption that would protect the association from further lawsuits.
That element detailed in settlement documents – a copy obtained by On3 – has raised eyebrows among many within college sports over the last week. Why would the plaintiffs’ attorneys – Berman and co-lead counsel Jeffrey Kessler – cooperate with the NCAA efforts on Capitol Hill, which have long proven unsuccessful?
“Because it is a limited protection,” Berman told On3. “It is just to give them immunity for the rules that are now part of this settlement. In other words, if they are sharing revenues with the athletes, up to 22%, and they are paying damages, they shouldn’t be sued again next year over the same contract.”
Berman said the named plaintiffs in the case – former Arizona State swimmer Grant House, former Illinois football player Tymir Oliver and TCU basketball player Sedona Prince – understand that Berman and Kessler may travel to Capitol Hill to meet with federal lawmakers on the NCAA’s behalf.
“If they asked me to go and talk to Senators and Congresspeople and explain why I think the [House] deal is a good deal for the athletes, and why they shouldn’t be able to be sued again, I will do that,” Berman said.
Change awaits college sports after House v. NCAA
The House v. NCAA settlement has been widely hailed as ushering in the most consequential changes in college sports history.
The NCAA and all 32 Division I conferences will pay thousands of athletes almost $2.8 billion in damages over a 10-year period. And schools will be permitted, at their discretion, to pay athletes as much as $22 million annually, as a historic revenue-sharing model takes hold, perhaps as early as fall 2025.
On the heels of the case’s defendants – the NCAA and power conferences – approving the agreement, the industry was abuzz Friday with important questions that linger:
- How should revenue be distributed among a school’s athletes?
- How may schools circumvent the salary cap?
- What are Title IX implications?
- Does this settlement provide any legal protection to the NCAA, which has confronted a growing number of legal threats?
- And while this agreement will settle three cases – House, Carter and Hubbard – how significant of a threat does the Fontenot v. NCAAantitrust lawsuit pose?
Berman acknowledged the only way for the NCAA to completely insulate itself from further antitrust lawsuits is by opening the door to athlete collective bargaining or by securing an antitrust exemption from Congress. The NCAA won’t do the former and is aggressively pursuing the latter.
But what this settlement does provide is an annual mechanism for future college athletes to opt-out from or object to settlement terms. That is designed to prevent future large-scale class-action suits that, like the House case, posed an existential financial threat to the NCAA.
“They [the NCAA] want the settlement to go forward and for there to be stability,” Berman said. “And in order to do that, we have to somehow get future athletes to agree to this. But every future athlete is entitled under the law not to be bound without notice. So every year they’ll get a notice, and then they have the opportunity to object.”
What is significance of Fontenot v. NCAA
One a day when the NCAA secured final approval to the House settlement terms, it fell short on another front – its attempt to have the Fontenot case consolidated with the House settlement. In Colorado, U.S. District Judge Charlotte N. Sweeney ruled that the Fontenot case would proceed separately from the House case.
Berman stressed he has no concerns that athletes in the represented classes will opt-out of the House settlement to join plaintiffs in the Fontenot case. In addition, he said he was confident that when the House settlement is ultimately certified by U.S. District Judge Claudia Wilken in Northern California, the certification would resolve the Fontenot case.
“You can’t have conflicting orders by a judge,” Berman said. “So, Judge Wilken is going to say, ‘Everyone in this class has now released these claims.’ Some other judge can’t say, ‘No, I don’t agree with that.’ It is comedy. It’s just the fundamental bedrock principle of how courts operate. So it just can’t happen.”
In terms of the order of operations, we still have a ways to go.
The settlement will be submitted to Judge Wilken in the next 30-45 days. Then athletes in the represented classes will have the opportunity to opt-out of the settlement.
Then Wilken will have the opportunity to ultimately approve the agreement, which could happen this fall.
How will salary cap increase?
The salary cap of 22% is based on the combined Power Five revenues from media rights, ticket sales and sponsorships, divided by the number of Power Five schools, according to settlement documents.
That equates to as much as $22 million. And over the first three years, the cap figure will rise 4% each year.
“It goes up 4% each year, and then there is a look-back, where we will look at the actual numbers and match it up,” Berman said. “So, we’re assuming a 4% revenue growth. If the revenue growth is higher than that, it will be a true-up, right? So 4% is just an estimate. The point is that we are going to capture any increases in revenue.”
Legal experts have told On3 that the establishment of a salary cap without collective bargaining opens the NCAA up to legal challenges. Salary caps in professional sports are established through collective bargaining.
But Berman said a cap was necessary because “if we didn’t have a cap and just said, ‘OK, we’ll settle, you just strike these rules,’ every school could do what they want. Who knows what would happen? And it could take quite a while for the market to get to the point where student-athletes were getting a fair share.
“So that is really one reason why we did it this way. And, two, a court is going to rule whether it is fair or not. Judge Wilken has to consider – Is the 22% a fair price for this? If she finds it is, there’s nothing wrong with the cap.”
Where does Title IX fit into revenue-sharing world?
Berman is confident that Wilken will approve the settlement.
“I think the judge is going to be completely shocked by these numbers,” Berman said. “Because if you remember, in the O’Bannon case, she thought $5,000 was the most that students could get without changing college sports. So now she’s going to hear that there are billions of dollars going out every year. I think she’s going to find it mind-blowing.”
On another front, a hot debate is intensifying in college sports circles over how Title IX fits into a revenue-sharing world.
Does revenue shared with athletes need to be distributed proportionally among male and female athletes? Or can schools share more dollars with the athletes who generate that revenue, particularly in football and men’s basketball?
There is no consensus among legal experts.
Asked to weigh in, Berman said: “I think there’s been inequity in the way they’ve treated female athletes. So I’m hoping, going forward, they do a better job.”
What’s future hold for NIL collectives?
As schools begin to assess how best to distribute dollars to athletes in a revenue-sharing model, there have been discussions among stakeholders related to the settlement about determining the “fair market value” for athletes. At least one conference broached the possibility of using “Q scores” for athletes, sources told On3.
Some sources expressed skepticism because of the subjectivity of such an evaluation.
“That’s up to them [college sports leaders],” Berman said. “There was a [settlement] provision about that. And we’ll watch how they do it and see if they go overboard on what they consider to be fair market value.”
Moving forward, industry sources said athletes would typically receive compensation from three channels: the revenue-sharing bucket; true commercial NIL opportunities; and third-party collectives.
Much to the chagrin of the NCAA, donor-funded collectives are not going anywhere.
Sources say they will be around to help circumvent the salary cap and operate outside the governance of Title IX, with the ability to put significant dollars into the pockets of marquee athletes. It’s a topic On3’s Pete Nakos examined in-depth on Friday.
What about enforcement in post-House v. NCAA world?
As part of this settlement, the NCAA also aims to create an enforcement arm, potentially separate from the NCAA, to assist in policing the NIL collective space. Several sources expressed skepticism that the enforcement mechanism would have teeth.
“That is their problem – I don’t care,” Berman said.
Also among the interesting facets of the settlement: Athletes will need to report all third-party NIL deals to their schools, Berman said.
There are countless details to be worked out. Schools are assessing how much they are willing and able to share with athletes, and how those dollars will be dispersed among their pool of athletes.
This much is certain: After this week, college sports have fundamentally changed, with an agreement in place to usher in a landscape-shifting revenue-sharing model. For generations, that sentence was completely implausible, impossible to comprehend.
“It is just a seismic change,” Berman said. “Just coincidentally, I filed my first compensation case 20 years ago this month. It was called the walk-on case. I was challenging the walk-on restrictions. So it’s taken 20 years to basically knock these rules down.”
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