NCAA’s Billion Dollar Settlement Faces Google Book Deal Hurdles
The future of college sports hinges on whether a 74-year-old judge approves or rejects a multibillion-dollar settlement to transform college sports into a pro sports model, with students paid to play, along with salary caps and other features that would fade whatever line still exists between college and the pros.
Don’t expect U.S. District Judge Claudia Wilken to instantly grant approval.
More from Sportico.com
In fact, there’s a real chance she could reject the deal.
Wilken likely won’t review the NCAA’s settlement of the House, Carter and Hubbard litigations for months, as there is no agreement yet to review. Attorneys for the NCAA, power conferences and players have negotiated a term sheet—a compact on big picture items—but still need to sort out details and communicate them to member schools and thousands of former and current DI athletes.
The details matter, too. Whether the new model could unwittingly spawn new legal problems under Title IX, immigration, employment and other laws implicated by colleges paying athletes has sparked confusion and uncertainty. Schools are wondering how much money they would lose because of revenue withheld to compensate college athletes for earnings they could have made had NCAA rules allowed for NIL, video game and telecast compensation. There is also a similar case in Colorado, Fontenot v. NCAA, that is not (yet) part of the settlement. And even if the settlement is approved, it would not foreclose athletes who are outside the class from filing their own antitrust lawsuits.
But when there is a final proposed agreement, perhaps by this fall or early 2025, Wilken will have the obligation under Federal Rule of Civil Procedure 23(e)(2) to determine if the agreement is “fair, reasonable and adequate.”
For the attorneys involved—some of whom stand to make a fortune if the approximately $2.7 billion amount for retroactive compensation is approved and they receive a cut—meeting that broad standard won’t be a layup. Wilken could identify several problems.
One is whether the settlement would too extensively restructure college sports. As some courts have held, a settlement shouldn’t reshape an entire industry.
Just ask Google.
In 2011, U.S. District (now Second Circuit) Judge Denny Chin, whose name might be familiar from Deflategate, rejected the “Google Book Settlement” on grounds it “would simply go too far.”
Attorneys for Google, authors and publishers negotiated what they thought was a fair resolution to Google scanning, delivering and archiving millions of books from libraries without copyright owners’ permission. Google was accused of violating the Copyright Act, which gives authors the exclusive right to control their books’ reproduction and distribution. Google insisted its actions were protected by fair use, which means unauthorized, but lawful, copying of another’s copyrighted work. Google also stressed it had expanded public access to books while creating new opportunities for copyright owners to generate sales. The settlement envisioned Google paying for books it had already scanned and for books it would scan but allowing authors and publishers to opt out of scanning.
Chin was troubled by this arrangement. He worried it would “give Google a significant advantage over competitors” and “reward” Google “for engaging in wholesale copying of copyrighted works without permission.” Although Chin acknowledged the “creation of a universal digital library would benefit many,” he found it problematic that Google was sued for scanning books and displaying snippets for online searching and yet the proposed settlement called for Google to continue a business model built on scanning without permission.
The judge also found problematic that approximately 6,800 individuals (mainly authors and writers) opted out of the agreement, and a comment period yielded hundreds of critical comments about the deal. These were large numbers of naysayers and suggested those who would be governed by a so-called resolution regarded it as problematic.
The Department of Justice also weighed in with an influential amicus brief for Chin’s consideration. The DOJ rebuked what it called “an attempt to use the class action mechanism to implement forward-looking business arrangements that go far beyond the dispute before the court in this litigation.” It also worried the settlement would undermine the Copyright Act’s “core principle” that copyright owners control whether and how their works are used.
With the settlement rejected, the litigation resumed. It proceeded to a trial and later an appeal to the U.S. Court of Appeals for the Second Circuit. The case, which began in 2005, lasted more than a decade, with Google ultimately coming out on top.
David Drummond, the chief legal officer of Google/Alphabet from 2002 until his retirement in 2020, told Sportico there are analogous concerns with the NCAA antitrust settlement.
Drummond suggested Wilken might question whether a settlement should entail “such an extensive restructuring of college sports.” Wilken will surely observe that the settlement reimagines college sports in a way the NCAA and schools had long and vehemently opposed, including that it could make college sports seem like minor league pro sports.
Drummond also noted that approval could be seen as undermining core principles of antitrust and labor laws in ways that—as Chin worried with core copyright law principles—will dissuade Wilken from saying yes.
Although the NCAA antitrust settlement is a work-in-progress and could change, the deal envisions colleges that opt into a new model being able to pay athletes up to a salary cap of approximately $21 million. That amount reflects a 22% share of revenue of the average power league college, a percentage sizably lower than those found in pro leagues where athletes collectively bargain to receive about 50% of revenue. The settlement also calls for non-Power Five conferences, which were not named defendants for monetary damages, to nonetheless absorb a cost of about $990 million over a 10-year period.
Drummond, who went to Santa Clara University on a full-ride football scholarship and later graduated from Stanford Law School, wonders how the settlement “is supposed to bind other Division I schools who aren’t even named in the complaint and who are perfectly capable of complying with antitrust law by negotiating with their players on their own?”
It’s a good bet Wilken will ask that question. She could further wonder whether attorneys negotiating what is tantamount to a CBA on behalf of college athletes is problematic from a labor law perspective. Those athletes can’t currently negotiate a CBA since unions negotiate CBAs. Unions are composed of employees, and save for Dartmouth college men’s basketball players, college athletes have not (yet) been recognized as employees. But with several legal efforts afoot for college athletes to gain employment recognition, Wilken might query if a settlement expected to last a decade is too lengthy and too encompassing.
To that point, Wilken will be poised to ask what happens after the 10-year settlement period ends? Presumably the NCAA will change its rules to conform to the settlement, but once the settlement is no longer in force, the NCAA could restore old rules. The NCAA likely would not take that step since it would invite antitrust lawsuits. But the possibility highlights the oddity of a settlement functioning as a labor agreement in a college sports world where labor has been denied a collective voice.
Wilken will also consider how many players object or opt-out of the settlement. As seen in the Google Book Settlement, the more objections and opt-outs, the more it will be seen as failing to adequately represent class members and satisfy other legal goals. She’ll likely also weigh if NCAA member schools oppose the settlement or sue the NCAA for alleged defects in how the settlement was approved and how it imposes unwanted financial burdens on them.
The attorneys pushing the settlement will stress several points in hopes of convincing Wilken to approve.
The NCAA will contend all its D1 members, including those outside the power conferences, have been subject to and benefited from the rules challenged by the players and thus all are accountable. The NCAA will also emphasize the settlement would mitigate, if not end, the legal chaos stemming from continuous and destabilizing antitrust litigation. There would be a broad release of claims wherein players agree to drop lawsuits and potential claims in exchange for money. If instead the NCAA continues to litigate House, Carter and Hubbard and loses, the players could seek to enforce judgments from any of the schools—a scenario that could potentially pit schools against each other.
As for the players’ attorneys, they’ll contend the deal is a great one for college athletes. These athletes will become paid players, including pay for the past and pay going forward, and they’ll continue to separately earn money through NIL deals. The attorneys might also contend the settlement would not foreclose a scenario where athletes are recognized as employees, unionize and then collectively bargain terms with the NCAA, conferences and schools.
One thing is for certain: Wilken is uniquely situated to review the settlement. She is arguably the most knowledgeable judge in America for NCAA antitrust issues. Wilken previously presided over Ed O’Bannon and Shawne Alston’s antitrust lawsuits. Her case docket has had NCAA antitrust cases for the last decade and a half. As NCAA, conference and athletes’ attorneys who have appeared before Wilken know well, they better bring their A games if they want their deal approved.
(This story has been updated in the headline.)
Best of Sportico.com
