Judge Raises Issues as $2.8B NIL Settlement Talks Move Forward
A federal district court judge in California pushed back final approval on a settlement in the landmark name, image and likeness (NIL) class action House v. NCAA. If parties can agree to changes on roster caps and how athletes are bound to the agreement, the settlement may be one step closer to approval.
If approved, however, this settlement would not technically have precedential effect on future cases. It is an approval of a settlement, not an opinion on the merits of the claims. But as the first major case applying NIL rules, it would serve as a major touch point for future lawsuits on the many unsettled issues surrounding NIL.
In 2020, the designated class plaintiff, Grant House—a former swimmer at Arizona State—sued the NCAA and its Power 5 Conferences on behalf of student-athletes seeking compensation for use of their NIL. In July 2021, the NCAA permitted student-athletes to profit from their NIL. That policy came a week after a unanimous Supreme Court decision in NCAA v. Alston, ruling that the NCAA limiting athletes’ education-related compensation violated the Sherman Act.
Following these developments, the class plaintiffs, the NCAA, and the Power 5 Conferences entered a preliminary settlement in House v. NCAA. U.S. District Judge Claudia Wilken, in Oakland, California, granted preliminary approval of the settlement in 2024, but must enter a final approval before the terms take effect.
The settlement focuses on back pay to former athletes who lost NIL revenue prior to 2021, largely based on broadcasting and video game rights, and establishing a fund to pay current and future athletes. In all, the settlement fund was set at about $2.8 billion. The proposed future fund would cap each school’s annual payment at 22% of the Power Five schools’ average athletic revenues each year. Economists estimate this would start at more than $20 million per school in 2025 and would grow to more than $32.9 million by 2035. Further, the settlement agreement includes a reporting requirement for third-party NIL contracts to ensure that these deals are “true NIL.” This reporting requirement ensures that schools are not using third parties to pay athletes more than their share of the revenue.
On April 7, Judge Wilken held a final approval hearing in House. She heard from the parties and 14 of the 73 total athlete objectors. Although the settlement approval is in the home stretch, it is not quite over the finish line.
"Basically, I think it's a good settlement," said Judge Wilken. "I think it's worth pursuing.” However, Judge Wilken wants to see changes in a few areas of the settlement agreement. These include adding a phase-in period for the implementation of roster limits and adjusting language that binds future athletes to the 10-year settlement.
Limits to Athletic Team Rosters
The settlement would formally put roster caps on each sport and do away with the current scholarship caps. The 14 testifying current and future college athletes objected to this, emphasizing that thousands of current NCAA athletes would lose their roster spots, and high school athletes have even had their scholarship offers revoked. While not wholly opposed to roster caps, Judge Wilken preferred to see these roster limits be phased-in so that current athletes are not stripped of their roster spots and so the schools may ease the process by which roster caps are implemented.
Language Binding Athletes to the Settlement
The settlement would bind future college athletes to the terms of the agreement for 10 years. And the settlement agreement includes a clause releasing any future claims the athletes might have against the NCAA. Judge Wilken showed concern with the idea of binding future athletes to the settlement agreement. “I’m having trouble with binding people who aren’t here and releasing claims for things that haven’t happened,” she said at the hearing. She recommended the language of the agreement be adjusted to only bind future athletes after they are provided an opportunity to object to the deal when joining an athletic program.
The attorneys will report back to Judge Wilken in one week to determine if they can make the changes she requested. If the parties can mutually satisfy Judge Wilken’s preferences, then it appears likely the House settlement will be approved.
The House settlement allowing schools to directly pay their athletes might be the next domino to fall in the efforts to compensate student-athletes. But there are many dominoes left standing, likely to be addressed in the coming months or years. Questions remain on third-party NIL contribution caps, legislation on the use of NIL in recruiting, student-athletes’ designation as students or employees, Title IX implications, and NCAA transfer portal regulation.
Contact Steven Blank, Candace Gregory, Patrick Judd, Rhett Parker, Michael B. Victorian or any member of Phelps’ litigation or media, sports and entertainment teams if you have questions or need advice and guidance.