Tuesday, June 25, 2024
The Power-5 NIL Anti-Trust Settlement Threatens Universities' Educational Mission
The litigants have not yet filed the proposed settlement in the NIL anti-trust litigation but non-Power-5 schools are already raising concerns about the impact the settlement would have on their educational missions. By the way, The Duke Chronicle, an independent newspaper serving Duke and Durham, has a surprisingly thorough and understandable summary of the case from start to finish. In the meantime, Houston Christian University became the first institution to seek intervention since the NCAA announced the settlement. It supports the request essentially by saying the agreement is bad for education:
The proposed settlement adversely affects HCU and other similarly situated institutions of higher education in numerous ways. Moreover, although HCU has 17 NCAA Division 1 sports teams and is a member of the Southland Conference, none of the Defendants is adequately representing HCU’s interests, much less the interests of those whom HCU serves. To the contrary, as they allege in ECF No. 420, the Defendants have presented the proposed settlement to HCU and other institutions as a fait accompli, without any regard to the adverse impact to these institutions.
a. The Proposed Settlement Will Divert Funds from Academics to Athletics and thereby Institutionalize a Breach of Fiduciary Duty of Colleges and their Trustees
The proposed settlement will cause HCU and other similarly situated institutions and their officers and trustees to be in violation of their fiduciary duties. This is no small matter, for a fiduciary duty is the highest duty recognized by law. HCU, like most if not all institutions of higher education, has academics – the education of students and the conduct of research – as its core mission.
The proposed settlement will cause the diversion of funds away from the basic academic mission of HCU and other similarly situated institutions at the expense of the core educational functions of educating students and conducting research. Even now, without the proposed settlement, NCAA member institutions annually lose untold millions of dollars by participating in Division I sports. Only a select few ever generate enough revenue from athletics to cover their expenses.
The proposed settlement institutionalizes the diversion of money that would otherwise inure to the member institutions for the core mission of education and research, by requiring them to pay damages for athletes’ name, image, and likeness and establishing a continuing formula for doing so on a go-forward basis. Moreover, by formally institutionalizing the schools’ involvement in name, image, and likeness fundraising, the proposed settlement mandates that institutions divert development efforts away from core academic missions and reallocate funds to athletics programs already deeply in debt.
b. The Proposed Settlement Will Divert Higher Education Dollars from Marginalized and Underserved Populations of Students
This is why the proposed settlement will have such a devastating effect on HCU. The proposed settlement will have numerous pernicious effects. It will cause the diversion of funds from the core mission of research and education, and thereby raise costs for students and reduce institutions’ investment in higher education. That will reduce educational accessibility and lower educational opportunity, particularly for marginalized and underserved populations. This is especially egregious, coming as it does at a time when the cost of higher education has risen dramatically. Students, especially from underserved and marginalized populations, struggle to pay for educational expenses. They often require a longer number of years to complete their degree requirements and incur more and more debt. At a school like HCU, with its exceptionally diverse student population, virtually all of whom receive financial aid, the blow will be crushing. Because of the diversion of funds from academics to athletics, many of the most vulnerable, most underserved students will be forced to forego their dream of obtaining a higher education.
In sum, the proposed settlement will privilege the pursuit of big-money college sports over the needs of ordinary students whom institutions like HCU serve. It will conflict directly with the stated purpose of virtually every institution of higher education in America, which is to educate students. It forces the trustees and administrators of HCU and other similarly situated institutions to confront a Hobson’s Choice; it is a coercive take-it-or-leave-it offer that disregards the fiduciary duties trustees and others have to their institutions and stakeholders. It will divert funds from a university’s core academic mission in favor of big-time sports entertainment.
The NY Times has interesting background:
Houston Christian, formerly known as Houston Baptist University, is a Division I school and FCS football program that competes in the Southland Conference. According to the proposed settlement terms, over the course of 10 years, the NCAA would be responsible for paying out roughly $1.2 billion of the back-pay damages using reserve funds, or roughly 41 percent of the total $2.75 billion. The power conferences would be responsible for about 25 percent in withheld future revenues, the Group of 5 for about 9 percent, FCS schools — such as HCU — for about 12 percent, and non-football DI schools about 12 percent, all based on the share of DI revenue distributions conferences received from 2016 to 2024.
For non-FBS football conferences without the benefit of lucrative television-rights contracts, those percentages represent a more significant financial burden. One Division I commissioner previously estimated to The Athletic that non-FBS conferences could be on the hook for $2.5 million per year in withheld revenues to help cover the NCAA’s back-pay costs, which can amount to as much as 25 percent of the annual distributions some universities receive from the NCAA. That’s despite antitrust lawsuits such as the House case seeking damages largely as restitution for the billions of dollars collected via those power-conference media deals.
darryll k. jones
https://lawprofessors.typepad.com/nonprofit/2024/06/the-power-5-nil-settlement-threatens-universities-educational-mission.html