The NCAA, four states (Tennessee, Florida, New York and Virginia) and the District of Columbia jointly announced in a court filing on Friday that they have tentatively resolved an antitrust lawsuit against NCAA rules restricting how athletes commercially use their NIL in the recruiting process.
The filing, made in a Tennessee federal district court, says the parties have “reached a settlement in principle and have signed a term sheet.” The filing also indicates the parties expect to finalize their settlement by March 17 and that it will include a request for a permanent injunction.
No additional terms of the settlement were released, and the settlement must be approved by U.S. District Judge Clifton Corker in Tennessee to go into effect. The settlement is expected to remove a potential complication for the NCAA as it seeks to convince U.S. District Judge Claudia Wilken to grant final approval of the settlement resolving the House, Carter and Hubbard antitrust litigations.
In Tennessee et. al v. NCAA, a group of attorneys general maintain that NCAA member schools and conferences have illegally conspired through NCAA rules to restrain how recruits can discuss opportunities with NIL collectives. At issue is the so-called “NIL recruiting ban” wherein the NCAA prohibits the use of NIL contracts as a recruiting inducement. As a practical matter, a recruit can’t negotiate deals with collectives before committing to a school.
Last February, Corker issued a preliminary injunction barring the NCAA from enforcing rules that restrain recruits and college athletes from negotiating compensation for NIL with collectives and boosters. Corker regarded the rules as tantamount to price fixing by competing businesses, since in a more competitive market, recruits (and potential transfers) could land more money if NIL collectives were allowed to compete for them with fewer constraints.
A week after Corker’s ruling, the NCAA suspended enforcement of those rules. Until Friday’s settlement announcement, the parties had continued to litigate. The NCAA insisted its rules comply with antitrust law and pointed out that states’ laws, including those in Tennessee, forbid pay-for-play arrangements.
“We’ve been fighting hard to protect Tennessee student-athletes,” said Tennessee Attorney General Jonathan Skrmetti in a statement. “Last year, we blocked the NCAA’s unlawful enforcement against Tennessee students and schools, and now this settlement in principle lays the groundwork for a permanent solution.”
Among the range of objections and criticisms of the House settlement is that it features restrictions on NIL collectives and, more broadly, on NIL that could run afoul of laws and court rulings. Of particular note is that NIL deals with certain boosters and all collectives will be permitted only if the NIL money is “paid for a valid business purpose to promote goods and services provided to the general public for profit, with payments at fair market value rates.” Several states, including Texas and Oklahoma, have laws that limit the NCAA’s ability to regulate collectives.
Corker’s ruling is also potentially problematic for the House settlement, since it restrains the NCAA from enforcing rules—albeit current rules, not foreseeable rules forecasted by the House settlement—limiting collectives. The NCAA settling with the states will, with Corker’s blessing, end the litigation and stop the impact of the judge’s ruling.
An NCAA spokesperson said in a statement that the settlement “resolves the issues Tennessee and the other involved states raised without posing an obstacle to completing the House, Carter and Hubbard settlements.” The official added that the NCAA anticipates full terms will be released later in the spring.
Wilken will hold a fairness hearing on April 7. Although a number of objections have been filed, and the Department of Justice has criticized the settlement’s cap on athlete compensation, most of the arguments raised by them were already before Wilken last October when she granted preliminary approval. Meanwhile, the NCAA and president Charlie Baker continue to push for Congress to consider legislation that would shield NCAA rules impacting athlete compensation and eligibility from antitrust scrutiny.
Daniel Libit contributed to this report.
(This article has been updated to include statements from Tennessee Attorney General Jonathan Skrmetti and the NCAA.)
