Matthew I. W. Baker, Esq., is a partner in the Newark, New Jersey office of Genova Burns LLC, and is a member of the Complex Commercial Litigation practice group. – Genova Burns LLC.
The settlement in House v. NCAA will transform and modernize college sports … if it is promptly accompanied by federal legislation codifying the terms of the settlement. Otherwise, state name, image, and likeness (“NIL”) laws will still govern how most states approach this new NIL era, and those laws may conflict with the settlement in very important ways.
To review, in October 2024 a federal court granted preliminary approval to a revised version of the multi-billion-dollar settlement agreement in the House antitrust litigation as well as two other similar consolidated litigations. The settlement will resolve claims brought by several classes of former and current Division-I athletes against the NCAA and its “Power” or “Autonomous” conferences. The proposed settlement is best understood as providing two distinct forms of relief: (i) a fund of about $2.7B in back-damages paid by the NCAA to current and former Division-I athletes, primarily for the NCAA’s use of their NIL since 2016; and (ii) a ten-year revenue-sharing agreement going forward between athletes and the NCAA that would allow schools to distribute a capped amount of revenue to their athletes, totaling around $22M for the largest athletic departments.
Much of the commentary about the House settlement has understandably focused on the revenue-sharing framework and how it marks the end of decades of NCAA orthodoxy that schools cannot compensate their athletes with anything beyond scholarships. Still more commentary has focused on the numerous objections to the settlement – for example, that any cap on shared revenue still violates antitrust law, or that the court needs to resolve Title IX concerns regarding how both back-damages and future revenues are distributed between male and female athletes. And there will certainly be much more written about the settlement, especially as we approach the final Fairness Hearing where the settlement is likely, though not certain, to obtain final approval, currently scheduled for April 7, 2025 (coincidentally also the date of the NCAA men’s basketball national championship game).
But a federal class-action settlement agreement does not carry the same force as a federal law. When federal law conflicts with state law, federal law is supreme. But when a federal class-action settlement conflicts with state law, state law governs. That means even if we assume the House settlement will be fully and finally approved in its current form, schools can only implement the House settlement so long as it does not conflict with the NIL law of that state. And several states have passed NIL-related laws that would make full compliance with the House settlement difficult if not impossible.
For example, one part of the House settlement requires athletes to disclose any third-party NIL contracts that exceed $600 in value so that a newly formed enforcement entity can evaluate whether the deal is within a reasonable compensation range and “for a valid business purpose.” This is part of an attempt by the NCAA and its member schools to root out what they consider to be illegitimate third-party NIL deals that are really pay-for-play in disguise. An athlete that accepts an impermissible deal or payment could be ruled ineligible or face other discipline.
However, several states, including West Virginia, Missouri, New York, Oklahoma, and Texas, have either introduced or have already passed bills effectively prohibiting the NCAA or any similar enforcement entity from investigating individual athletes or penalizing them for receiving NIL compensation. Some of these bills, including one recently introduced in the Oregon legislature, would even prevent schools from requiring disclosure an NIL contract of any value as long as the contract has a non-disclosure or confidentiality provision. So even if the House settlement is approved in full, schools in these states would not be able to implement a key provision of the agreement, thereby preserving the uneven NIL playing field that the House settlement is intended to remedy.
New Jersey’s NIL law, the Fair Play Act, has a similar provision as well. The Act prohibits the state’s four-year colleges and universities from upholding “any rule, requirement, standard, or other limitation that prevents a student of that institution participating in intercollegiate athletics from earning compensation as a result of the use of the student’s name, image, or likeness.” It is not a stretch to view the House settlement’s disclosure and disciplinary provisions as a “rule” or “limitation” prohibited by the Act. Some may say that an NIL deal would only be considered improper under this framework if it provides compensation beyond the fair market value of the athlete’s NIL – i.e., if it is really pay-for-play in disguise. That said, this provision of the Act hasn’t been tested through reported litigation yet, and there is a strong argument that it was meant to keep the NCAA or a similar enforcement entity from having any oversight or input regarding third-party NIL deals, regardless of the value of those deals.
In fact, the Fair Play Act may prevent New Jersey schools from complying with the most notable part of the House settlement – the school-based revenue sharing framework. Remember, New Jersey passed the Act way back in September 2020 as part of a wave of state NIL laws that ultimately forced the NCAA the following year to scrap its longtime NIL compensation ban. But the Act, like most state NIL laws of its time, only permits NIL deals between athletes and third parties, meaning that it still expressly prohibits schools from compensating any “current or prospective student-athlete participating in intercollegiate athletics for use of the student’s name, image, or likeness.” The House settlement, as currently drafted, provides that the payments by schools to athletes are for “NIL, institutional brand promotion, or other rights,” which may be broad and vague enough for New Jersey schools to get around the Act by claiming their payments are for “institutional brand promotion” or “other rights”. However, if New Jersey schools plan to market their athletes by using their NIL – which the schools assuredly do – the Act currently prohibits schools from compensating their athletes for it, which is a problem likely shared by any state that has not revised its NIL law in the past few years.
Ultimately, while state legislatures may revise their NIL laws to allow their schools to share revenue with athletes, it will likely be up to Congress to codify the House settlement if they do not want states cherry-picking which parts of the settlement they do not want to follow. Moreover, the NCAA’s continued grip on athletes’ compensation under the settlement may be vulnerable to additional litigation, absent federal antitrust protection – a subject I will cover in more detail in a forthcoming article.
Matthew I. W. Baker, Esq., is a partner in the Newark, New Jersey office of Genova Burns LLC, and is a member of the Complex Commercial Litigation practice group. He also leads a firm initiative created to advise clients on emerging sports and entertainment law matters and was recently named to the Law360 Editorial Advisory Board for Sports & Betting Law. He is a former football player at Yale University.
The views and opinions expressed in this editorial are those of the author and do not necessarily reflect the official policy or position of ROI-NJ.
