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NCAA, Power Five conferences vote to approve $2.8B settlement in House, Hubbard and Carter cases

NCAA, Power Five conferences vote to approve $2.8B settlement in House, Hubbard and Carter cases

In the spring of 2021, attorneys for the NCAA, appearing before the U.S. Supreme Court, argued vehemently against providing each college athlete with additional cash annually.

The amount: $5,980.

Three years later, in a landmark agreement that will transform the course of major college athletics, the organization left behind its archaic rules, shook off its long-time amateurism argument and thrust the industry into an era of direct athlete compensation.

The amount: more than $15 billion in new cash is expected to funnel to athletes over the duration of the 10-year agreement.

The NCAA and power conferences cast votes this week in support of settling three antitrust cases (House, Hubbard and Carter), approving terms that feature nearly $2.8 billion in back damages; a future athlete revenue-sharing model that will cost major conferences a cumulative $1 billion-plus annually; and other potential changes to the association’s governance, enforcement and scholarship structure.

While expected for weeks now, the vote is a historic moment, a groundbreaking and seismic shift for an organization that has, for decades, fought against direct athlete pay despite the billions earned from its major football and men’s basketball powers. The result of nine months of negotiations with plaintiff lawyers, NCAA president Charlie Baker and conference commissioners usher into the industry a new age that they hope brings stability to the current unruly recruiting landscape.

Caught in a purgatory between amateurism and professionalism, major college sports is springing forward — though not by its own volition. Begrudgingly forced into this semi-professional world by state laws and the court system, the industry still clings to a shred of amateurism, as the new model is expected to still prohibit pay-for-play and booster payments.

However, college leaders believe the agreement staves off future legal challenges, binds at least for another decade the power leagues with the NCAA, and brings more regulation to the recruiting environment.

“This would be the biggest change in the history of college sports. Period,” said Gabe Feldman, a sports law professor at Tulane and leading voice in NCAA litigation matters. “There have been significant changes and incremental changes. The NIL era has opened a lot of doors, but to have athletes share revenue with the schools would be not only monumental but would be contrary to what the NCAA has espoused for a century.”

All five power conference presidential boards — the Big Ten, SEC, Pac-12, Big 12 and ACC — voted in favor of the settlement this week. The Pac-12, despite its near dissolution, voted as originally structured. The league provided the final vote Thursday evening on a landmark day.

However, a finalization of the settlement may not happen for many months. The agreement will need approval from a judge and is available for objections from individual plaintiffs — at least a five-month haul, according to experts.

However, within 14 months, at the start of the 2025 fall semester, the industry’s new model is expected to be implemented permitting schools — but not requiring them — to share revenue with athletes up to a certain quasi-salary cap.

The revenue-sharing deals with athletes will be classified as NIL agreements, with schools providing funds for the use and broadcast of a players’ name, image and likeness — a concept at the heart of the House case. Other non-NIL forms of payments are an option.

Though plenty of questions linger around this new system, institutions will be permitted to share with athletes as much as $22 million per year. That figure, still very much in flux, was derived from 22% of an average of power conference revenues. The cap includes exceptions as a combined $5 million in Alston-related money and additional scholarships can be counted toward the total.

NCAA president Charlie Baker has lobbied for congressional help on NIL several times. (Matthew J. Lee/The Boston Globe via Getty Images)

A new model is expected to eliminate scholarship restrictions while implementing roster limits, a move to avoid more legal fights but one that could cost schools millions more in additional financial aid amid a hotly recruiting landscape.

At the end of it all is a steep price tag — $200-$300 million per school over the 10-year settlement agreement, or about $15 billion among all power schools. That figure assumes a school meets the revenue-distribution cap annually and expands scholarships by at least $3-5 million.

For many school administrators, sticker shock exists as they dig for extra cash in unusual ways, such as tapping into private equity and capital. A $30 million annual price tag coupled with $20 million in total scholarships is about 40-45% of the average athletic department budget of public schools in the ACC, Big Ten, SEC and Big 12.

However, without a settlement, college leaders risk another loss in court, a $20 billion damages tab and bankruptcy, according to documents obtained by Yahoo Sports.

Aside from the new financials, there are other changes coming.

The settlement-related model is expected to have a new enforcement arm and governance structure for, at least, the power conference schools, allowing them to create and enforce their own rules. Finalization around those details may be months away.

For administrators, the enforcement situation is a key piece. The settlement does not eliminate booster-led collectives, but incentivizes schools to bring them within the university’s athletic department, mostly through a stronger enforcement entity — one that potentially operates outside of the NCAA and gains teeth through the settlement itself.

As part of the settlement, the judge is expected to “reaffirm” existing NCAA compensation rules, specifically those that prohibit booster payments for deals that are not “true NIL,” according to a legal document summarizing the agreement. However, few details on the enforcement entity have been shared.

The settlement is expected to also provide what documents term a “release” of antitrust compensation claims from current, former and future athletes for 10 years as part of a “substitution” system for new plaintiffs. In a story at Yahoo Sports last week, such a concept was cited by plaintiff attorney Steve Berman, who said the settlement features a built-in element by which each new class of athletes can opt into the revenue-sharing structure.

The settlement isn’t perfect. It does not protect the NCAA and conference from future lawsuits brought by state attorneys general, does not preempt state NIL or revenue-sharing laws and offers no real ruling on Title IX’s application in such a compensation model.

Title IX “remains at the campus level to be applied,” the document notes — a situation that could lead to schools circumventing the federal law by continuously using outside third parties to compensate athletes.

Jeffrey Kessler, another plaintiff attorney in the case, believes the Title IX issue will eventually be resolved in the courtroom.

“The courts will decide,” he told Yahoo Sports. “It doesn’t impact us. If we have a settlement, we’ll negotiate a system in which athletes will be compensated. The degree in which Title IX applies will be determined [by the courts].”

The vote from the Board of Governors followed a contentious approval process within the NCAA’s 32-conference Division I. Angered by the funding model used to pay the near $2.8 billion in back damages, the 22 non-FBS conferences coalesced in an effort to block the move. Despite the pushback, the NCAA Board of Directors approved the funding model on Tuesday, with five of the 21 voting members not supporting the plan. The approval sent the item to the Board of Governors, who met Wednesday for over an hour before a vote.

Under the approved framework, the NCAA will fund 41% of the damages ($1.1 billion) while the schools will fund 59% ($1.65 billion) over the 10-year payback period. At issue is the schools’ portion. The power conferences will pay about $664 million in contributions to the damages. The other 27 non-power conferences will pay $990 million — a split that has angered those from non-power leagues.

The power conference leaders and NCAA executives, deeply involved in negotiations since August, only presented the funding plan and settlement terms to the low-revenue generating leagues two weeks ago, they contend. One commissioner described the process as “not healthy.”

There is more pushback against the deal.

Leaders of player associations and college athlete advocacy groups have publicly criticized the settlement as a short-term fix. They are urging college executives to explore a collective-bargaining framework that provides a voice for the athletes themselves as well as a more long-term solution.

Meanwhile, NCAA and conference executives are expected to continue lobbying for congressional action, both to codify settlement terms as well as preempt state laws and protect them from the implementation of an employment model.

There is another wrinkle to this as well.

On Thursday, a hearing is scheduled in a separate antitrust case playing out in Colorado, Fontenot v. NCAA. The case seeks billions of dollars for college athletes in compensation from televised broadcasts. While the House settlement is expected to consolidate two other antitrust cases — Hubbard and Carter — the Fontenot case is an outlier. House, Hubbard and Carter share the same legal team. The law firms Korein Tillery and Olson Grimsley Kawanabe Hinchcliff & Murray are leading the Fontenot case.

The hearing is expected to center around the potential consolidation of the case. While the House case attorneys expect it to be consolidated with the Carter case, attorneys from Fontenot made a legal filing Tuesday with a clear message: They don’t want it consolidated. A consolidation of all four cases is ideal for the NCAA as to prevent future legal challenges.

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