NCAA Agrees to $209M Settlement in Scholarship Antitrust Case

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By Jon Steingart

The National Collegiate Athletic Association and 11 athletic conferences agreed to pay $208.7 million to settle claims that they colluded to suppress athletes’ scholarships, according to a motion filed Feb. 3 in a federal court in California ( In re: National Collegiate Athletic Association Athletic Grant-In-Aid Cap Antitrust Litigation , N.D. Cal., No. 4:14-md-02541, motion for preliminary settlement approval 2/3/17 ).

“It’s the first time that the NCAA has been forced to pay hundreds of millions of dollars to athletes in compensation,” Steve Berman, an attorney for the 50,000-member class, told Bloomberg BNA Feb. 6. “Although the general public likes NCAA sports, there’s a growing awareness that there’s an unfairness when coaches are being paid millions, schools are taking in millions in TV revenue and athletes are left in the dust.”

The agreement is intended to compensate college athletes who received “grant-in-aid,” which is a form of financial aid that may not account for all expenses, said Justin Sievert, a former Division III athlete who advises college sports departments on compliance with Sievert Collegiate Consulting in Knoxville, Tenn. “Whether it’s some additional food money or money to go home and see your friends, things like that weren’t covered by grant-in-aid,” Sievert, who also teaches sports, business and labor and employment law at Davenport University, told Bloomberg BNA Feb. 6.

“The agreement maintains cost of attendance as an appropriate dividing line between collegiate and professional sports,” the NCAA said in a statement Feb. 3. “In fact, the NCAA and conferences only settled this case because the terms are consistent with Division I financial aid rules, which allow athletics-based aid up to the full cost of obtaining a college education.”

College, Professional Sports Distinct

A federal appeals court ruled in September 2016 that track athletes at the University of Pennsylvania weren’t employees entitled to pay in part because of “the long tradition of amateurism in college sports.” The amateur nature meant the “economic reality of the relationship between student athletes and their schools” means they aren’t employees, the court said.

The antitrust settlement’s connection to the Penn case may be limited. “Allegedly anticompetitive conduct doesn’t bear on whether the economic reality of a relationship is employment,” Paul DeCamp, an attorney for several universities in the Penn case, told Bloomberg BNA in a Feb. 6 e-mail. He’s a principal in the Washington, D.C., Region office of Jackson Lewis PC and didn’t represent either Penn or the NCAA, which was also a defendant.

“It’s purely an antitrust case and doesn’t involve assertion of employment law-based claims,” DeCamp said about the scholarship lawsuit. “Remember that antitrust liability doesn’t have to have any tie to employment. In fact, it usually doesn’t.”

What Payments Are Allowed?

The proposed settlement, which requires court approval before it goes into effect, follows a U.S. Court of Appeals for the Ninth Circuit decision that said payments to collegiate athletes must be “tethered to education,” Berman said. The question is whether they can go beyond covering an undergraduate education.

“Schools should be allowed to pay for graduate school, or medical expenses when athletes leave with injuries,” Berman said. Colleges and universities could compete for star athletes by offering incentives that go beyond a free undergraduate degree.

The NCAA said in a statement that it “prefers to provide benefits to student-athletes rather than incur the ongoing cost of lawyers and legal processes” whenever possible and appropriate. “The Association and its members, not plaintiffs’ lawyers or courts, are best positioned to shape the NCAA’s rules and processes to better serve student-athletes.” An NCAA spokeswoman didn’t respond to Bloomberg BNA’s request for additional comment.

Berman anticipated a 2018 trial. “The first part is the settlement,” he said. When the next phase goes to trial, “the fight there is how much more can student-athletes get paid above the cost of attendance,” he said.

The lawsuit already produced a victory for college athletes, Berman said. As a result of the litigation, the NCAA and its five biggest conferences agreed in January 2015 to change bylaws to allows schools to provide the full cost of attendance.

Berman, Craig Spiegel and Ashley Bede with Hagens Berman Sobol Shapiro LLP in Seattle represent the athletes. Bruce Simon, Aaron Sheanin and Benjamin Shiftan with Pearson, Simon & Warshaw LLP in San Francisco also represent the athletes. Jeffrey A. Mishkin of Skadden, Arps, Slate, Meagher & Flom LLP in New York City represents the NCAA.

To contact the reporter on this story: Jon Steingart in Washington at jsteingart@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com; Christopher Opfer at copfer@bna.com

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