West Virginia is the latest state to propose legislation that could interfere with the NCAA’s legal rights to enforce policies resulting from the settlement of the House, Carter and Hubbard antitrust litigations.
Proposed West Virginia law HB 2576 would, among other things, restrain the NCAA, a conference or college from investigating or punishing an athlete for NIL-related activity. It also greenlights colleges to pay athletes for use of their NIL and to share revenue with athletes. The legislation resembles statutes and executive orders in states including Georgia, Virginia, Texas and Oklahoma that try to block the NCAA from enforcing rules related to NIL and compensating athletes.
The House settlement contains several features that restrict economic activity and present potential conflicts with state laws. It would allow colleges to pay athletes 22% of a defined formula for averaged shared revenue, with a cap of about $21 million reflecting media rights, ticket sales sponsorships and school use of NIL. Also, college athletes’ NIL deals with third parties that exceed $600 can face independent review to ensure those deals aren’t pay-for-play arrangements cloaked as NIL deals. In a setting without these restraints, colleges and third parties could pay athletes in line with a freer market, where competing businesses (be they colleges, collectives, boosters, companies and others) bid against each other for athletes.
There are at least three ramifications of HB 2576, and similar bills and laws in other states, for the NCAA.
1. Settlement could invite conflicts between the state laws and settlement terms
First, conflicts between the state laws and the settlement terms could worry U.S. District Judge Claudia Wilken as she weighs whether to grant final approval of the settlement. Wilken will hold a fairness hearing on April 7 and likely decide on final approval in the weeks that follow.
The judge could find it problematic to approve a settlement that invites conflicts with the laws of some states and could later spawn litigation. As an objection filed by athletes represented by attorneys from Hausfeld LLP has noted, there is case law standing for the proposition that in certain situations (though not necessarily the situation at issue in this settlement) a settlement involving federal claims can’t trump state law claims.
But this ramification is unlikely to dissuade Wilken from granting final approval. She was aware of those conflicts last October and yet granted preliminary approval of the settlement. Indeed, Wilken wasn’t persuaded by objections that detailed likely conflicts with state laws, Title IX compliance problems if the settlement pays male athletes more than female athletes and new antitrust problems by restricting how colleges can economically compete for athletes.
Wilken’s likelihood of approving the settlement reflects a couple of points. For one, the appropriate standard of review for a class action isn’t that it is perfect or great; it only must clear the much lower bar of being fair, reasonable and adequate. For another, a settlement must adequately resolve the legal problems presented in the lawsuit, not all plausibly related legal problems.
House, Carter and Hubbard involve federal antitrust claims that, in sum, accuse the NCAA and its member institutions of conspiring to unreasonably restrain how members can compensate athletes when recruiting and attempting to retain them. The settlement doesn’t resolve legal controversies that occupy a similar space—such as whether college athletes ought to be classified as employees who can unionize, whether colleges might run afoul of Title IX by paying male athletes more than female athletes or whether individual states’ laws are at odds. Wilken will likely consider those questions outside the scope of how the parties have resolved applicable federal antitrust issues. The fact those issues might spark future litigations is not a concern she must extinguish.
2. NCAA could see disputes involving athletes who rely on state laws to challenge the settlement
Second, while the NCAA will likely see the settlement approved, the NCAA could soon thereafter see actual disputes involving athletes who rely on state laws to challenge the settlement. For example, an athlete might challenge the review of an NIL deal in excess of $600 or the restraints imposed by the settlement on how revenue is shared as defying state law protections.
Those disputes could morph into lawsuits that involve state law claims, putting the NCAA in a defensive—and expensive—legal posture for years to come.
There is no shortage of attorneys who would bring those lawsuits, and the success of one case would incentivize other attorneys to try. Just consider the recent spate of antitrust lawsuits brought by college athletes whose NCAA eligibility has expired but who are encouraged by the success of Vanderbilt quarterback and former junior college transfer Diego Pavia’s litigation against the NCAA to keep playing. Every week more of these eligibility lawsuits are brought, forcing the NCAA to hire attorneys and play defense.
3. NCAA might adjust legal strategy for defending settlement
Third, the NCAA might want to revisit its legal strategy for defending the settlement against conflicting state laws.
The current strategy focuses on lobbying Congress to pass legislation to insulate the NCAA from facing legal claims regarding rules governing how college athletes are compensated and how long they can play. Such legislation could include a national NIL standard, a declaration that college athletes are not employees and an exemption of the NCAA from antitrust and other categories of law.
The lobbying strategy is not new; the NCAA has been trying it for years, and it has yet to yield results. While the same political party now controls the White House and both the House and Senate, that was also true from 2017 to 2019 and from 2021 to 2023 when various college sports reforms were proposed to much media fanfare only to stall and then be forgotten.
There’s another path the NCAA could take. It could sue states to block the enforcement of laws that conflict with NCAA rules on grounds those states are violating the U.S. Constitution. This idea might sound quixotic but it’s one the NCAA has successfully used before.
The key case is NCAA v. Miller (1993), which involved the NCAA suing Nevada Gov. Robert Miller after he signed into law a statute that required NCAA investigators to honor due process safeguards. The statute reflected Nevada lawmakers’ belief the NCAA unfairly went about investigating UNLV and its men’s basketball coach, Jerry Tarkanian.
The NCAA raised Constitutional claims, including one based on the Commerce Clause, which forbids states from adopting laws that unduly interfere with other states’ economies. The NCAA maintained it could not equally enforce rules for member institutions in the 50 states if it was compelled by Nevada law to preferentially treat Nevada colleges. A related problem was a “patchwork” failing, meaning other states could engineer their own state laws for investigations, making it impossible for the NCAA to rely on one standard. The NCAA also maintained Nevada’s statute violated the Contract Clause, which has played a role in ongoing litigation involving the Cleveland Browns and the City of Cleveland and which bars states from impairing contracts. The Nevada statute prevented the NCAA from relying on its contractual rights as a membership organization.
The NCAA won the Miller litigation, as federal courts concurred that Nevada, by attempting to force the NCAA to treat Nevada colleges differently, prevented the NCAA from functioning as a national, membership organization. The NCAA could challenge states along similar lines to quell efforts to stymie settlement terms and other new NCAA policies.
Some might speculate the U.S. Supreme Court would eventually look unfavorably on the NCAA if it challenged states. After all, the NCAA lost 9-0 at the Supreme Court in NCAA v. Alston. But Alston concerned a narrow topic— whether NCAA rules can limit how colleges pay for athletes’ education-related expenses. Contrary to popular misunderstandings, Alston had nothing to do with NIL or paying college athletes to play sports.
Alston is significant because as Justice Neil Gorsuch clarified in the majority opinion, the NCAA is not owed a deferential standard of review on antitrust claims. But Gorsuch and other justices emphasized the case concerned rules related to education-related expenses, not rules related to other topics, be they NIL or pay-to-play. It’s possible the Court would regard those NCAA rules as reasonable and lawful. Afterall, while Justice Brett Kavanaugh wrote a much-discussed concurring opinion in Alston that blasted NCAA rules as exploitative, perhaps tellingly none of the other eight justices joined him.
