Judge calls for reconsideration of House v. NCAA settlement on hold

A federal judge has ordered attorneys to negotiate a larger settlement that could send the college sports business model “back to the drawing board” to address concerns that the deal would limit the ways in which athletes can be paid.

Judge Claudia Wilken on Thursday declined to grant preliminary approval of the House v. NCAA antitrust settlement. He said he was concerned about several parts of the terms of the contract. Chief among his concerns was a clause that would require any financial support given to athletes for “legitimate business purposes.”

Over the past several years, booster collectives have evolved into payments to athletes that on paper are payments for the use of the player’s name, image and similar but in reality act as actual salaries. The terms of the settlement will make it easier for the NCAA to eliminate those payments.

“What are we going to do with it?” Wilken asked. “I’ve found that taking things away from people is generally not very popular.”

Wilken gave attorneys representing the NCAA and the plaintiff class of Division I athletes three weeks to decide whether they can revise the language or void the pending contract. NCAA Chief Attorney Rakesh Killaroo told the judge that the revised rules for how collegiates operate are “a central part of the agreement.”

“Without that, I’m not sure there will be a settlement,” Killaroo said.

Jeffrey Kessler, co-lead attorney for the plaintiffs, told ESPN Thursday night that he was comfortable with the judge’s suggestion to remove the new language about the NIL sum from the settlement.

“We’re absolutely fine with these changes. It’s up to the NCAA now. Hopefully, they’ll agree to them,” Kessler said. “If the deal falls through, we’ll go back to trial. That’s a decision they’ll have to make if they want to face it.”

The NCAA, its power conferences and attorneys representing all Division I athletes agreed in May to settle three major antitrust lawsuits that threaten to upend the business model of college sports. The defendants agreed to pay nearly $2.7 billion in damages to current and former athletes. The teams agreed to a pioneering system that would allow schools to pay athletes directly through name, image and similar contracts up to a limit, which is expected to be $20 million to $23 million per school next year and increase annually. In a base exchange, the NCAA will have more leeway to enforce rules it says are designed to maintain a competitive balance between schools and preserve what makes college sports unique.

Killaroo told Judge Wilken that the restrictions placed on Booster Collective in the settlement are not significantly different from the association’s current rules, which prohibit paying athletes for performance or using NIL payments as an inducement to recruit an athlete.

“At any moment that rule can be enforced by the NCAA,” he said.

However, a federal judge in Tennessee granted an injunction earlier this year that prohibits the NCAA from punishing boosters or athletes for negotiating a NIL contract as part of the recruiting process. In that case, the attorneys general of Tennessee and Virginia argued that the NCAA was unlawfully limiting opportunities for student-athletes by preventing them from negotiating the terms of NIL contracts before deciding where they wanted to attend school.

It’s unclear whether the Tennessee order applies nationwide or just to Tennessee and Virginia, but the NCAA said in a letter to its members after the ruling that it had decided to “cease and not initiate investigations involving third-party participation in Neal-related activities.” The ban remains in place. According to the association, the moratorium on the investigation remains in place.

An NCAA spokesman said the proposed settlement was “the product of hard-fought negotiations that will bring stability and stability to college sports” and that the defendants “will carefully consider the court’s questions, which is not unusual in the context of a class action settlement.”

Conglomerates associated with the nation’s most prominent football and basketball programs currently distribute $10 million to $20 million per year to their players, according to multiple industry sources. If these activities are significantly curtailed by the settlement, those team players could potentially make less money through the proposed revenue sharing agreement than they currently do through the NIL agreement.

Wilken also told attorneys he was concerned about future college athletes who are not yet members of the class action lawsuit but will be limited by the terms of the 10-year-long settlement when they begin their college sports careers. Kessler said that if future athletes believe the revenue agreement is an unfair limitation on their earning potential after they begin their college careers they will be free to file a new antitrust lawsuit.

The two sides agreed to discuss possible revisions to the terms next week. If the parties cannot reach an agreement, all three cases will proceed to trial as part of the proposed settlement The House v. NCAA case was scheduled to go to trial in January 2025 before the parties announced a settlement

College sports leaders, including NCAA President Charlie Baker, have previously championed the pending settlement as a fundamental part of solving the industry’s myriad legal problems. NCAA leaders hoped that a settlement that provided new benefits for athletes would help them persuade Congress to pass legislation that would add more stability to the business of college sports.