How the House settlement could open doors for college athletes

The excitement of college sports has transcended fields, arenas, and stadiums, with courtroom battles and boardroom decisions reshaping the sports landscape forever. For years, I have advocated for a model to fairly compensate past and present college athletes for their name, image and likeness rights (NIL) - from merchandise to television rights and everything in between. That full day of compensation is hopefully coming soon, thanks to the landmark proposed settlement of House v. NCAA class action suit announced earlier this year.

The House agreement aims to establish a novel structure that empowers colleges to distribute millions of dollars to their athletes moving forward. The impact of this settlement cannot be overstated as it involves more than 14,000 former and current collegiate athletes and billions of dollars. Furthermore, it will blaze a trail for future generations of athletes and it will soon set the table for high school and international collegiate players.

Let's review the basics of House and explore some of the major items addressed and omitted from the proposed settlement.

The Basics of House

The lead plaintiff in House v. NCAA is Grant House, a highly decorated swimmer from Arizona State University. House filed suit back in 2020, more than a year before the NCAA lifted its restrictions on college athletes' ability to initially profit from their NIL rights.

House also sought injunctive relief for current NIL policies that their attorneys argue still limit the full scope of college athletes' publicity rights. Many other plaintiffs were added to the House lawsuit, and the NCAA and other defendants like the Power 5 conferences had the foresight to recognize that losing a class action could lead to even more suits and ultimately, bankruptcy for the NCAA.

In May 2024, it was widely reported that an initial settlement had been reached. Various outlets reported that the NCAA and member conferences would pay $2.77 billion to more than 14,000 former and current student-athletes over 10 years beginning in 2025. The proposed settlement was submitted to Judge Claudia Wilken in the Northern District of California in late July 2024. Federal Judge Wilken is highly respected and has presided over cases with regard to NCAA litigation and major sports actions. Since both sides have agreed to the preliminary terms of the settlement, it's plausible that Judge Wilken will allow it, and hopefully set the groundwork for reasonable NIL governance.

What's in the House Settlement

The NCAA can afford $2.77 billion through an annual payment plan and some broad strategic cuts. This is the cost of a new direction in a future poised to be dominated by NIL deals. Some key highlights of the settlement include:

Guidance for revenue earmarking. It was reported that college athletic departments that participate in the NCAA's new compensation model would allow sharing revenue with student-athletes. Yahoo! Sports noted that 22% of the average power conference school's athletic department revenues were between $21 and $22 million annually, when considering the revenue streams of TV contracts, ticket sales and sponsorships.

"That figure, once set, will fluctuate as it includes an escalator," Yahoo! reported in May 2024 while in conversation with the House lawyers. "While the 22% will remain the same through the 10-year agreement, the money figure will change. Over the first three years of the deal, that money figure will automatically increase by 4% each year."

To date, this model is proposed guidance and not a current requirement.

Avoiding future litigation. The NCAA and Power 5's wisest move to date was to settle and try to avoid additional litigation. Two other antitrust suits filed against the NCAA were consolidated into the House *suit. Once this particular detail of NIL compensation was ironed out, the defendants had the good sense to know that resolution in *House could prevent similar lawsuits from sprouting up.

Better Equity for Women. Women have been and continue to emerge as marquee athletes in college sports and their presence is reaching the masses unlike ever before. Finally, our collegiate women athletes have a voice and growing competitive compensation.

NIL technology company and marketplace Opendorse reported in 2022 that though football generated half of all NIL compensation, more women's sports comprise the overall top 10. At number three, women's basketball was the highest-ranked of its kind. Phenoms like Caitlin Clark and Angel Reese have helped maintain our terrific women athletes' rising position. Furthermore, LSU gymnast Livvy Dunne, the most-followed woman in college athletics, has a current NIL valuation of $3.7 million. This dollar value was fueled by her appearance in Sports Illustrated's 2024 Swimsuit edition and being the spokeswoman for American Eagle and Vuori performance joggers.

The benefits for our college women athletes are not expressly detailed in the settlement, but the right perspective can empower them to seize the moment. Sports careers tend to average less than five years each and can be even less predictable for females, especially since women's pro sports do not enjoy the same hype as college athletics. Our women need to leverage the opportunities afforded by the new NIL landscape while they can and get the proper legal and business guidance to position them to be vigilant about the role sports will play in the grand scheme of their lives.

Outside of House

Though the resolution of one huge legal battle is on the horizon, other important details were not addressed in House or are still being litigated in other cases.

Restrained Competition. Though the House settlement proposal covers three antitrust lawsuits, another related case - Fontenot v. NCAA - *will proceed in Colorado and outside of the *House settlement. Fontenot alleges that the NCAA's limits on compensating players restrained competition in the labor market for players' services and prohibited athletes from receiving pay-for-play compensation. This topic is obviously a major consideration and financial sticking point for both sides.

The broader issue of "unreasonable restraint," as noted in the Fontenot antitrust suit, stands out. The DOJ notes that price fixing, bid rigging and, most importantly with regard to Fontenot, market allocation are among the group of antitrust offenses considered "per se" unreasonable restraints of trade. These acts are legally considered unlawful without much further analysis.

The plaintiff's lawyers in Fontenot amended their complaint in July and illustrated why their case should proceed in the shadow of the pending House settlement.

"(E)ven if that settlement is approved," the most recent filing noted, "it would simply usher in a new, artificially low cap that is far below the revenue sharing that a competitive market would yield. While it is an admission that amateurism is not needed, it also simply substitutes one illegal price fix for another."

Transfer eligibility. The NCAA transfer portal was introduced in 2018 and allows players to transfer to another school with varied consequences. However, the criteria for transferring can vary and, until December 2023, players who entered the portal would forfeit certain scholarships and conditions from their former school, even if they did not transfer.

The inconsistency of this process was further scrutinized in December 2023 when the NCAA announced a temporary change in policy to allow multi-time transfers to play at a new school without a waiver. This may have been an attempt by the NCAA to stay ahead of potential court rulings and was seen by many as a response to the civil antitrust lawsuit filed in the Northern District of West Virginia Clarksburg Division by 10 states and the District of Columbia and the DOJ, which joined in January 2024.

A Post- House Future in College Sports

Should the House settlement be finalized, and the NCAA implements the aforementioned terms, it would usher in a new era of collegiate competition and equity among past, present and future collegiate players. Remember, for nearly one hundred years, our collegiate players bore all the physical and financial risks and earned billions of dollars in annual collegiate sports revenue. Proper governance will result in greater transparency in the amounts and allocations and finally pull back the curtain on annual revenue.

Unfortunately, even if the many details, large and small, get resolved, it's the end of just one road. The ongoing antitrust suits could also sway policy and guidance, further complicating our players' rights. It is in the best interests of our college athletes to align with qualified and seasoned sports lawyers to help navigate this evolving area and make strategic decisions that will surely have lifelong benefits.

Frank N. Darras is founding partner at DarrasLaw.