By Paia LaPalombara
In the ongoing saga of the House vs. NCAA class-action lawsuit, a pivotal moment has emerged with the announcement of a proposed settlement agreement. This agreement, if approved, promises to reshape the landscape of college athletics and address long-standing issues surrounding athlete compensation and the structure and future viability of amateurism. With significant implications for student-athletes, universities, and the NCAA, the proposed settlement marks a crucial turning point in the evolution of collegiate sports.
At the heart of the House vs. NCAA case, which also resolves Carter v. NCAA and Hubbard v. NCAA, is to what extent former, current, and future student-athletes will gain access to a myriad of financial resources and revenues coursing through college athletics. These financial pipelines include whether student-athletes should receive a share of the athletically-related revenue they generate, whether former student-athletes within the statute of limitations should qualify for Alston backpay, and whether student-athletes should be compensated for the lost potential of name, image, and likeness (NIL) revenue. The comprehensive settlement aims to provide litigation relief for the NCAA, although other legal challenges remain. Once the preliminary settlement agreement is submitted to the court for approval, and if Judge Claudia Wilken preliminarily approves the terms, the appropriate classes would be notified of their opportunity to either opt out or object to the terms of the agreement. That’s followed by a final approval hearing at which point, if approved by Judge Wilken, the settlement agreement goes into effect.
Key Settlement Details
The proposed settlement includes key terms that are not overly prescriptive, but rather provide institutions with the discretion to provide more benefits to student-athletes:
- Back-Pay Damages: The NCAA will pay over $2.75 billion in back-pay damages to former Division I athletes over a 10-year period. This figure, if contested at trial, could have had financially devastating implications for the NCAA.
- Funding Breakdown: The NCAA will cover roughly $1.2 billion (42%). The remaining 58% will be distributed among the Division I conferences based on their NCAA distributions over the past nine years, with Power Five conferences contributing 24%, FCS conferences contributing 13%, and non-football conferences contributing 12%. Lower-resourced Division I programs expressed concerns about the disproportionate financial burden this model imposes on them.
- Revenue Sharing: Beginning in 2025-26, 22% of the average revenues of Power Five programs will be allocated for revenue sharing, translating to over $20 million per school per year. This percentage is expected to increase over time. The model is optional, allowing schools to decide which athletes in which sports will receive payments. This revenue sharing is in addition to scholarships, NIL payments, healthcare, and other benefits.
- Scholarship Caps: The settlement will eliminate NCAA scholarship limits, replacing them with roster limits per sport. The specifics of this new system are yet to be detailed but are expected to offer flexibility in scholarship distribution.
Broader Impact and Unresolved Issues
The proposed settlement raises numerous questions and concerns for institutions, conferences, and student-athletes, including:
- Revenue Distribution: The 22% revenue share is significantly lower than what professional athletes receive, potentially fueling continued unionization efforts and debates about student-athletes’ employment status.
- Fontenot vs. NCAA: This anti-trust case, filed in Colorado, seeks damages for the restrictions on student-athlete compensation beyond NIL. There was a motion to transfer this case to California, which was denied. As such, this case currently exists outside of the House vs. NCAA proposed settlement structure and is a reminder that the NCAA is still not immune to anti-trust litigation. This also raises general questions about whether this proposed settlement itself provides long-term stability for the NCAA.
- Financial Strain on Programs: New financial obligations may lead to schools cutting or financially tiering varsity sports, reclassifying varsity sports to club level, cutting athlete resources, or reducing administrative positions. The proposed settlement could also widen the gap between high-revenue and lower-revenue programs, possibly accelerating the creation of super conferences or a super league in high-revenue football programs. If institutions consider cutting sport programs, resources, and personnel, Title IX compliance should be at the forefront of those conversations.
- Title IX Compliance: It is unclear whether the revenue-sharing model and settlement distribution formula must comply with Title IX, and no guidance has yet been provided by the Department of Education. The debate centers around whether the distribution of revenue-sharing dollars is considered “athletic financial assistance” or a “treatment area” under Title IX, which could necessitate proportional payments to male and female student-athletes, potentially sparking further litigation.
- Congressional Involvement: The NCAA will seek federal and state support to codify the settlement provisions, believing the settlement framework provides sufficient anti-trust protections and advantages. The Protect the Ball Act has been introduced that would provide the NCAA, conferences, and member schools federal protection from specific legal challenges.
- NIL Collectives: The impact on third-party NIL collectives, which currently operate outside athletic departments, is uncertain. With increased institutional involvement soon being permitted through NCAA legislation, this may lead to further integration of NIL collectives into the university fabric. This entanglement of third-party organizations with institutions can open additional risks of Title IX compliance.
The proposed settlement agreement in the House vs. NCAA case represents a significant step towards reforming college athletics and addressing long-standing issues surrounding student-athlete compensation and treatment. If approved, the settlement has the potential to usher in a new era of transparency in college sports, empowering student-athletes to receive fair compensation from their universities for their contributions. However, the proposed reforms are not without their challenges and controversies, and the ultimate impact of the settlement remains to be seen.
LaPalombara is a partner at Church, Church, Hittle and Antrim. She has extensive experience working at a Power 5 University as well as the NCAA National Office. Her comprehensive expertise includes NCAA investigations, student-athlete eligibility matters, and NCAA compliance reviews.
