Even non-lawyers should start caring about House v NCAA

Good morning, and thanks for spending part of your day with Extra Points.

Two quick housekeeping notes:

First, I will be in New Haven this Sunday, Monday, and Tuesday. I will be speaking at the Allen Sack Lecture series at the University of New Haven, discussing the potential implications of college athletes becoming directly compensated by athletic departments. I should have free time on Sunday evening and most of Monday during the day, if you’re in the neighborhood and want to say hello (or want me to swing by your campus). I think this is going to be my last road trip of 2023 unless I end up going to a bowl game or something crazy in December.

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After trying to follow the Michigan/Big Ten sign-stealing saga over the last few weeks, I think my brain has reached an absolute critical mass of “Lawyer Stuff.” But alas, while all of college football internet frantically tries to become an expert on conference bylaws, antitrust, and administrative due process, an actually important legal development happened.

Last week, federal judge Judge Claudia Wilken granted class certification to three different groups in the House v NCAA case. If reading that sentence made your eyes glaze over, I understand. Let me try to explain why this could be a big deal.

First, what’s the House case all about?

Unlike pending NCAA litigation surrounding athlete employment status, like in the NLRB complaint with USC, and Johnson, House is about athletes potentially being owed damages due to lost income thanks to previous NCAA NIL regulations. Via ESPN:

Remember how NCAA regulations kept us from enjoying annual copies of EA Sports College Football over the last decade, even when EA wanted to pay athletes to participate? Well, in House, the plaintiffs are trying to recoup some of those lost earnings.

The suit also aims at NCAA policies that prohibit athletes from sharing in the revenue of university media deals, sponsorship deals, and apparel contracts.

By granting class certification to those three groups, the NCAA’s total risk exposure may have substantially grown. Via this analysis from Bradley Arant Boult Cummings LLP, that means “the NCAA and defendant conferences potentially face staggering damages of nearly $1.4 billion, which could triple to over $3 billion if the plaintiffs prevail.”

For some perspective here, as a whole, the NCAA took in $1.14 Billion in total revenue last fiscal year. You can see why a penalty of that size and scope, plus being required to more directly share significant revenue streams with athletes, would be highly, highly disruptive.

So what happens next?

Well, a lot. For one, House isn’t scheduled for trial until January of 2025. The two sides could potentially settle before then (I’ve been told that will be harder for the NCAA now that the classes have been certified, but certainly not impossible), leaving everybody to haggle over a different amount of money. Developments in Johnson, the NLRB, Congress, the White House, and elsewhere, could also shift which side has the proverbial upper hand. Suits like this, after all, are exactly what the NCAA is asking Congress to help protect them from.

It’s also possible that after the legal dust settles, and the courts rule against the NCAA, the plaintiffs could have trouble collecting everything. Matt Cowan, a partner at O’Melveny, told me that if the plaintiffs are successful and monetary damages are awarded, individual institutions could start asking questions about whether conference liabilities should be transferred to the school level. Unanswered questions about what parties have what insurance policies, or who is a necessary party vs a named party, would all need to be resolved. Schools, or even conferences, that are not part of these lawsuits could also start to wonder if they could prevent their NCAA dues from being used towards paying for say, the ACC’s settlement obligations.

These are important questions, since, as Jason Belzer of Student Athlete NIL points out…

The NCAA itself doesn’t have that kind of money, even if you garnish their future earnings from the NCAA Tournament TV deals. If the burden for that penalty falls more on the shoulders of conferences and individual institutions, you could potentially see a contraction of other components of the college sports industry. If athletic department revenues suddenly drop by 60% (or get garnished), and you’re say, a SAAS company that sells to athletic departments, or an MMR firm, or a travel company…you could get swallowed up in this too.

I’m not saying it’s time for 70% of my readership to update the ol’ LinkedIn page and find a new job. There are a gazillion unknowns left to navigate in this case.

But it does have the potential to be as disruptive as the NCAA’s other major legal challenges. Losing even one of the NLRB/Johnson/House would force massive changes in the industry…and while I’m neither a lawyer nor in the Crystal Ball business, I don’t think the odds are very good that the NCAA goes 3-0 against this schedule.

Here’s what else we did this week:

• I called up my friendly neighborhood private investigator to try and better understand how the industry actually works, and shared a few thoughts on the Big Ten’s list of terrible choices in how they address Michigan’s sign stealing.

• I visited Washington State University and talked to a variety of folks to better understand how the school, and town, are navigating significant financial and structural uncertainty.

• And I bought a book about mascot nickname history, read the whole thing on my flight home, and put together a fun little quiz about it.

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I’ve got conference realignment updates coming on Monday, along with (hopefully) some EA Sports news very, very soon, plus more reporting.

I’ll see you on the internet!

If you’d like to buy ads on Extra Points OR in ADS3000, good news! They’re affordable, and we still have openings for this year. Drop me a line at [email protected]. If you have news tips or FOIAs you want to share, I’m at [email protected]. Otherwise, I’m at [email protected], @MattBrownEP on Twitter, @ExtraPointsMB on Instagram, and @MattBrown on Bluesky