By Dan Cohen and Priscilla Szeto, of Nelson Mullins
Just a few weeks after the NCAA lost the Alston case 9-0 at the U.S. Supreme Court and thereafter issued its interim NIL policy on July 1, 2021 to voluntarily suspend its NIL rules, the Plaintiffs’ attorneys were back again.
By July 26, 2021, the Plaintiffs’ attorneys from Alston had already filed an amended class action complaint alleging that the NCAA’s prior NIL rules violated antitrust law by inhibiting student-athletes’ abilities to profit from their NIL while in college. That case, In re College Athlete NIL Litigation, Case No. 4:20-cv-03919-CW, is currently pending in the United States District Court in the Northern District of California before Judge Claudia Wilken – the same judge who decided Alston and O’Bannon beforehand.
The current litigation, which is also known as the House litigation, should continue to draw the active attention of athletics departments and campus general counsel.
This article provides a brief history of recent antitrust litigation filed on behalf of student-athletes and how these cases continue to pose risk to university athletics departments.
Seeking new (or no) House rules
In Alston, the Supreme Court unanimously struck down NCAA caps on education-related benefits and ruled that the NCAA’s limits on payments for academic-related costs violated federal antitrust law. Following Alston, the NCAA released an interim NIL policy that allowed college athletes to benefit from NIL activities without harming their eligibility. Although the interim policy outlines certain restrictions, such as a prohibition on using NIL transactions as recruiting inducements and a prohibition on pay-for-play, it does not provide a uniform set of NIL rules.
The House lawsuit seeks to obliterate any NCAA regulation of NIL activities and to hold the NCAA financially accountable – to the tune of billions of dollars – for prohibiting student-athletes from profiting from their NIL in the past. The crux of the litigation is that, although the NCAA suspended its NIL rules, which Plaintiffs allege unreasonably restrained trade, “none of the NIL rules have been repealed.” Plaintiffs take issue with select prohibitions still in place, including those prohibiting member schools from compensating student-athletes for the use of their NIL, and those prohibiting NIL compensation from being contingent on athletic participation, performance, or enrollment at a particular school.
Plaintiffs seek relief in several forms, including an injunction permanently restraining the NCAA and other Defendants from enforcing NIL rules that restrict student-athletes from sharing college athletics revenues. Further, Plaintiffs seek damages going back four years for Defendants’ alleged deprivation of “the opportunity to market [Plaintiffs’] NILs for broadcasts, video games, and other third-party NIL opportunities.” The potential damages, which are estimated to be in the billions, would have cataclysmic effects on the collegiate sports industry.
Importantly, although no NCAA schools are named as Defendants in the litigation, Plaintiffs have unequivocally and specifically called out member schools as participating co-conspirators. With quotes from athletics coaches and employees, Plaintiffs’ consolidated amended class action complaint expressly alleges that “the NCAA’s member-schools and other NCAA Division I athletic conferences not named as defendants in this Complaint” are among those that “have participated as unnamed co-conspirators.” Plaintiffs specify that “[r]epresentatives of those schools and conferences serve on NCAA committees which promulgate rule changes. Representatives of those schools and conferences voted to adopt the rules prohibiting NIL compensation and thus agreed to impose the restraint on trade described herein.” Plaintiffs allege that “[a]ll Division I schools and conferences continue to benefit from those restraints.”
These allegations indicate that Plaintiffs are actively paying attention to how member schools and their athletics employees communicate about NIL opportunities in this evolving landscape.
Where The Litigation Stands
On April 7, 2023, Judge Wilken issued an Order granting the Parties’ proposed scheduling for upcoming matters. Within the Order, the Court reiterated its earlier admonition that the Court “is not inclined to modify the trial date currently set for January 27, 2025.” The Court’s statement seems to indicate a growing impatience with the pace of the case, which we expect to quicken. The discovery process – and, particularly, third-party document requests to universities and deposition requests to university representatives – may pick up speed throughout the country. Plaintiffs now face a July 21 deadline to file a reply brief in support of class certification, and the parties have until October 27 to complete fact discovery.
On the point of class certification, which is the technique by which Plaintiffs could secure massive damages on behalf of student-athletes across the country, Defendants filed their opposition brief on April 28, detailing various ways in which the damages model proposed by Plaintiffs would be unwieldly, replete with individualized issues, and nearly impossible to implement in a real-world competitive labor market. Defendants discussed the impracticalities of requiring equal payments to student-athletes for broadcast NIL rights regardless of other factors, including talent, which runs antithetical to the concept of competitive sports and is contrary to Plaintiffs’ position on individual student-athletes’ rights to profit from their NIL.
Defendants also asserted that Plaintiffs “ignore basic labor economics,” as schools (not Defendant conferences) compete with each other in recruiting, and schools (not conferences) individually decide how to allocate their scholarship awards, which Plaintiffs’ proposed model wrongfully assumes would be homogenous.
Defendants also asserted that Plaintiffs’ approach “ignores legal roadblocks,” including but not limited to Title IX considerations under federal law: “while Plaintiffs’ motion is filled with lofty rhetoric about fairness for student-athletes, Plaintiffs seek [to] award … $1.3 billion to male student-athletes (96% of the total alleged damages)—but just $50 million for female student athletes (4%).”
What Might Happen Next
As noted, Plaintiffs’ deadline to reply to Defendants’ arguments is July 21, and the parties’ deadline to complete fact discovery is October 27. For those member schools who were subpoenaed in the past by Plaintiffs for documents and information, Plaintiffs could return for a supplemental production. Some schools can expect deposition subpoenas and additional document subpoenas before discovery closes.
Further, we know that Plaintiffs’ attorneys are monitoring coaches’ and schools’ public comments about NIL developments and potential reforms to potentially use in the litigation against their own schools. Seemingly off-hand statements by coaches could be enticing for Plaintiffs to explore under oath at future depositions.
It matters how coaches and athletics administrators represent themselves, their athletics programs, and their schools, as demonstrated by the sort of information sought in Plaintiffs’ prior subpoenas. School representatives should be careful with their public comments regarding NIL developments.
And Plaintiffs’ litigation efforts are only expanding.
On April 4, 2023, Plaintiffs’ counsel in the NIL Litigation filed yet another class action lawsuit along the lines of Alston. The new case, Hubbard, et al. v. NCAA, et al., Case No. 4:23-cv-01593, is now pending before Judge Wilken in the Northern District of California as well. In referencing Alston’s holding that the NCAA violated antitrust laws by prohibiting NCAA schools from offering education-related compensation, the new complaint seeks to recover damages for Division I athletes who were purportedly impacted by the NCAA’s “anticompetitive restrictions on Academic Achievement Awards.” Though Hubbard pertains to education-related compensation and benefits, not NIL, the litigation is related insofar as Plaintiffs’ counsel continues to pursue the NCAA for additional damages under expanding theories of recovery.
Conclusion
Universities should expect discovery requests related to their student-athletes’ NIL deals, and some school representatives may be deposed in the relatively-near future related to their universities’ NIL programs. In the meantime, stay tuned … and take care in issuing public statements.
For more information on the Nelson Mullins Collegiate Athletics Team’s guidance on NIL topics, please contact Dan Cohen or visit our website.
