NCAA antitrust lawsuit settlement terms revealed in court filing

Lawyers representing the NCAA, the five major conferences and Division I players filed detailed terms of an antitrust lawsuit Friday that has the potential to change the college sports industry.

The parties agreed in late May to settle three lawsuits (House v. NCAA, Hubbard v. NCAA and Carter v. NCAA) over various ways schools compensate athletes. The lawsuit filed Friday is the first of several important steps toward formalizing the settlement. The new details outline how former athletes will share in the $2.78 billion in damages the NCAA agreed to pay, set a new system for revenue distribution and outline new roster caps for college sports, among other items.

“This is another important step in our ongoing effort to create a stable, sustainable model for the future of college sports while also providing greater benefits to our student-athletes,” the NCAA and its power conferences said in a statement Friday evening. “While there is still much work to be done in the settlement approval process, this is a critical step toward establishing clarity on the future of all Division I athletics while maintaining a sustainable, education-based model for college sports and ensuring student-athletes have the opportunity to earn a degree and the tools they need to succeed in life after sports.”

Under the terms of the agreement, schools will be able to pay players directly for the first time through name, image and likeness (NIL) deals. Each school can provide up to 22% of the average revenue a power conference school generates from media rights, ticket sales and sponsorships. The agreement is expected to be worth between $20 million and $22 million per school when it takes effect at the start of the 2025-26 school year.

Athletes can still make money from NIL deals with third parties, but the NCAA said the agreement would allow it to put in place a “more robust and effective enforcement and oversight program” to ensure that third-party deals are “legitimate NIL activities.” Many athletes (especially in football and basketball) currently receive money from booster collectives, which have evolved into outsourced salaries to attract top players rather than payments for the athlete’s actual sponsor value. The NCAA hopes the new system will reduce these types of arrangements.

The NCAA plans to create a database of NIL transactions to objectively assess whether agreements between athletes and third parties are considered legitimate sponsorship deals. Several coaches and athletic directors told ESPN last week that they expect some form of NIL payments from the group to continue.

The agreement allows the court to appoint a “special administrator” to decide disputes over the new rules regarding athlete compensation, a notable shift from the NCAA’s history of using its own enforcement department to determine whether athletes or schools have violated compensation rules. The agreement also establishes an arbitration process for athletes and schools to appeal penalties under the new rules.

The two sides have yet to decide who will be the new enforcement body and who will oversee the arbitration process for future disputes.

In fact, the $20 million to $22 million figure used as a salary cap would increase over time as the league’s revenues grow. Experts cited in court documents said they expect the cap to be closer to $33 million per school by the end of the 10-year term of the agreement. The NCAA and plaintiffs’ attorneys said that when combined with tuition and other benefits athletes already receive, it would create a system in which many schools would share nearly half of the revenue they generate with athletes. That figure is similar to revenue-sharing agreements in professional sports.

Steve Berman, who represented the players, said the intention during negotiations was for the revenue split to be roughly 50/50.

“Yeah, that’s what we were thinking,” Berman said.

The 50/50 split calculation considers all athletes at a school as a single group, rather than on a sport-by-sport basis. For example, it is highly unlikely that a football player, who generates the majority of a school’s revenue, would receive 50 percent of the money the football team generates. Some of these benefits must be shared equitably under Title IX regulations. The settlement does not provide specific guidance on how to apply Title IX to these new benefits, leaving some of the difficult decisions up to individual schools.

The law firm run by Berman and his co-lead counsel, Jeffrey Kessler, will be responsible for auditing the NCAA schools’ financial statements during the 10-year agreement period to ensure the schools are properly reporting their earnings.

For past damages, plaintiffs’ attorneys have submitted a proposed formula to determine how to distribute money to eligible players. Any Division 1 player who played a sport from 2016 to the present is eligible for past damages. The 2016 threshold is due to the statute of limitations for the original House v. NCAA lawsuit, which was filed in 2020. The formula considers several factors, including the school the player attended and how many snaps or minutes he played.

Berman said football and men’s basketball players at power conference schools could be eligible for an average of $135,000. Women’s basketball players at power conferences could receive an average of $35,000. Expected payouts for players in other sports would vary depending on how many people participate in the claim.

In some cases, a portion of the payout will be based on the athlete’s potential earning power if they were able to sign a NIL contract while attending school. The highest individual payout estimate for an athlete would be $1.8 million, Berman said.

As part of the agreement, the NCAA agreed to remove the cap on the number of scholarships schools can offer to athletes. Previously, NCAA rules set a cap on the number of scholarships per sport. If the agreement is approved, there will instead be a cap on the total number of players each team can have on their roster, and each school will decide how many players they want to include on scholarships.

Judge Claudia Wilken is expected to review the terms of the proposed settlement over the next few weeks and decide whether to accept it preliminarily in early September or sooner. The settlement proposes that players be notified of the details of the settlement on October 1, and players will have 105 days to object to the terms of the settlement until January 14, 2025.

Berman said the plaintiffs plan to launch a website where all players can find out how much they could receive in damages.

After the players have had a chance to review the terms, Judge Wilkens will make a final ruling on whether to accept the settlement. That decision is not expected until late 2024 or early 2025.