Tuesday, June 25, 2024

The Power-5 NIL Anti-Trust Settlement Threatens Universities' Educational Mission

Who Put All the "Power" in College Football's Power 5? | GMTM

 

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

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