Judge Grants Preliminary Approval to $2.78 billion in re College Athlete NIL Litigation Settlement

Judge Grants Preliminary Approval to $2.78 billion in re College Athlete NIL Litigation Settlement

A federal court has granted preliminary approval to in re College Athlete NIL Litigation’s settlement that would require the NCAA to pay upwards of $2 billion to student athletes.^[1] In re College Athlete NIL Litigation consolidated two separate lawsuits, House v. NCAA and Oliver v. NCAA, filed in June and July of 2020, respectively.^[2] The consolidated complaint alleges two causes of action under the Sherman Act: violation of Section 1 via unreasonable restraint of trade and group boycott/refusal to deal, along with unjust enrichment.^[3]

The plaintiffs, NCAA Division I student athletes, alleged that the NCAA and Division I schools have conspired to limit compensation to student athletes for use of their name, image, and likeness (NIL), and that in a competitive market, schools would have provided greater compensation to student-athletes for their athletic services and use of their NIL.^[4] The plaintiffs defined the “relevant market” in which the NCAA was allegedly restraining trade as “the nationwide markets for the labor of NCAA Division I college athletes in the various sports in which they compete”.^[5]

On June 24, 2021, Judge Claudia Wilken partially granted and partially denied the NCAA’s motion to dismiss ^[6]. The NCAA mounted four different challenges. First, the NCAA argued that stare decisis compelled the dismissal because the Ninth Circuit had validated NCAA rules limiting student-athlete compensation in two previous cases, O’Bannon II and Alston II (hereinafter O’Bannon and Alston).^[7] Second, the NCAA challenged the “Group Licensing Damages sub-class,” which sought a share of the game telecast group licensing revenue that sub-class members allegedly would have received, but for the NCAA’s restrictions on compensation.^[8] Third, the NCAA argued that Oliver named plaintiff Tymir Oliver did not have standing for injunctive relief because he was no longer an NCAA student-athlete.^[9] Fourth, the NCAA argued that Oliver did not have standing to seek damages because he had released his claims by participating in a previous settlement, Alston v. NCAA.^[10]

Wilken granted the NCAA’s motion to dismiss Oliver’s claims for injunctive relief, but otherwise denied the NCAA’s motions to dismiss^[11] The Court held that O’Bannon and Alston did not compel dismissal. Wilken explained that the Ninth Circuit “left open the possibility for reaching a different conclusion in future litigation to the extent that the parties present a different record,” since they had made it clear that any holdings in those cases were limited to the record presented in those cases.^[12] Wilken found that the record allegations in the Consolidated Complaint raised a reasonable inference of material differences between the current cases and O’Bannon and Alston.^[13]. She noted that the plaintiffs challenged rules that were not challenged in the Ninth Circuit cases, including the rule prohibiting student-athletes from endorsing any commercial product or service while they were in school.^[14] Moreover, the plaintiffs in House and Oliver argued that the NCAA’s procompetitive justification for its compensation restrictions credited in O’Bannon and Alston—preserving consumer demand for college sports as a distinct product—was irrelevant because that procompetitive effect falls outside the relevant market (the market for the labor of Division I college athletes).^[15] This argument would force the NCAA to show how the challenged rules have a procompetitive effect specifically on the market for the labor of Division I athletes. The NCAA did not have to do this in O’Bannon and Alston, where the relevant market was the market for NCAA sports as a distinct product, already differentiated from professional sports.

On the Group Licensing Damages sub-class, Wilken noted that the plaintiffs had made allegations “sufficient to raise the reasonable inference that competition among schools and conferences would increase in the absence of the challenged rules, and that this increased competition would incentivize schools and conferences to share their broadcasting and other commercial revenue with student-athletes even if the student-athletes lacked publicity rights in broadcasts.”^[16] In other words, even though the sub-class was not legally entitled to the broadcasting revenue, the plaintiffs raised a reasonable inference that schools would have offered college athletes a portion of the broadcasting revenue, but for the NCAA’s compensation restraints.

Regarding Oliver’s standing, the plaintiffs conceded that Oliver, who graduated from the University of Illinois, was no longer a student athlete and did not have standing for injunctive relief ^[17]. However, the Court did not dismiss Oliver’s claim for damages. Wilken stated that she “cannot conclude at this juncture that Tymir Oliver’s claims for damages were released via the Alston settlement” because his current claims are based on “1) challenges to some rules that were not challenged in Alston; (2) a legal theory that was not raised in Alston, which requires different facts from those litigated in Alston; and (3) new facts that post-date Alston.”^[18].

In September 2023, Judge Wilken granted class certification of the “injunctive relief class,” defined as college athletes who competed on or will compete on a Division I athletic team between June 15, 2020, and the date of judgment.^[19] In November 2023, the Court certified three proposed damages classes: the Women’s Basketball Class, the Men’s Football and Basketball Class, and the Additional Sports Class.^[20]

In April of 2024, the plaintiffs moved for summary judgment on the defendants’ liability under Section 1 of the Sherman Act.^[21] That motion was not ruled on as the NCAA announced on May 23rd, 2024 that they had reached a settlement in the litigation.^[22] The first settlement proposal was denied, but Judge Wilken approved a revised settlement order on October 7 after the parties worked to clarify terms.^[23] The claims website is currently live, and athletes have until January 31, 2025 to submit a claim.^[24] The final approval hearing is set for Apr. 7, 2025.^[25]

The settlement makes major changes to the NCAA model. First, the settlement allows schools to opt into a revenue sharing model, which would allow schools to share revenue directly with their athletes. ^[26] Second, the settlement removes all athletic scholarship limitations, meaning that a school can give out a scholarship to all of the athletes on their roster. ^[27] The settlement also allows the NCAA to set roster limitations, which could limit the opportunities for “walk-on” student-athletes to join a Division I team.^[28].

Looking forward, this may not be the end of NIL-related antitrust litigation for the NCAA. A group of female athletes have already objected to the settlement, voicing concerns that the majority of the money will be going to male football and basketball players. ^[29] These objections leave open the possibility that the settlement is not granted final approval, or athletes drop out of the settlement and pursue their claims separately.