TAKEAWAYS

• U.S. District Judge Clifton Corker issued an injunctive order prohibiting the NCAA from enforcing its name, image or likeness (NIL) rules to the extent those rules prohibit prospective or existing student-athletes from “negotiating compensation for NIL” with third parties, including boosters.
• In response, the NCAA has paused investigations into “third-party participation in NIL-related activities” and will not penalize conduct consistent with the injunction.
• The NCAA will continue to enforce rules prohibiting direct institutional NIL payments, “pay-for-play” compensation and “payment for specific athletics performance.”

On February 23, 2024, U.S. District Judge Clifton Corker issued a preliminary injunction that prohibits the National College Athletic Association (NCAA) from enforcing any rules to the extent those rules “prohibit[] student-athletes from negotiating compensation for [name, image, or likeness (“NIL”)] with any third-party entity,” including boosters and booster-led collectives.

On March 1, 2024, NCAA President Charlie Baker issued an open letter to all member institutions acknowledging the decision and stating that the NCAA would not punish conduct consistent with the court’s injunction. Baker informed the membership that the Division I Board of Directors directed the NCAA’s enforcement staff to pause investigations “involving third-party participation in NIL-related activities” and expressed that the NCAA was “eager” to work with the plaintiff attorneys general for the Commonwealth of Virginia and State of Tennessee to “reach a common understanding[.]”

Baker’s letter implicitly acknowledged that Judge Corker’s injunction suspends existing NCAA rules that prohibit third parties and/or boosters from communicating with prospective or current student-athletes or from negotiating NIL compensation before players commit to a certain school. However, Baker also asserted that Judge Corker’s ruling was limited and in fact “upheld” other long-standing NCAA rules that prohibit direct institutional payments, “pay-for-play” or NIL compensation for specific athletics performance. Baker’s characterization of the ruling “upholding” the rules is a misnomer—the rules were not challenged.

The injunction is likely to remain in place for months and the NCAA is unlikely to regain the ability to enforce its NIL recruiting rules. In granting the injunction, Judge Corker found that Virginia and Tennessee demonstrated a “strong likelihood of success” in proving that the NCAA’s rules violated federal antitrust law. Congress also appears unwilling to pass legislation exempting the NCAA from federal antitrust law, and the NCAA’s amateur athletics model faces numerous other challenges without a clear path to victory.

Unlikely to be able to enforce its NIL recruiting rules, the NCAA will move forward with a diminished capacity to regulate the actions of its membership or impose sanctions in response to behavior the NCAA has long considered to be prohibited.

Tennessee and Virginia’s Antitrust Lawsuit against the NCAA
On January 31, 2024, the attorneys general for the Commonwealth of Virginia and the State of Tennessee filed a civil complaint in the Eastern District of Tennessee alleging that the NCAA’s promulgation and enforcement of rules regulating and restricting how and when student-athletes and prospective student-athletes can receive compensation for NIL constituted an unreasonable restraint on trade, in violation of Section 1 of the Sherman Antitrust Act (Act).

In particular, the complaint focused on the rules’ impact on prospective student-athletes and current student-athletes who had decided to transfer to a new school. NCAA rules had prevented those players from communicating with boosters or third-party collectives about potential NIL compensation until after the player agreed to attend the school. The plaintiffs likened it to a job seeker interviewing with multiple potential employers, but only being allowed to negotiate or discuss the salary after accepting a job offer.

Virginia and Tennessee primarily sought injunctive relief: (i) a short-term order prohibiting the NCAA from enforcing its NIL rules (a temporary restraining order or “TRO”), (ii) a preliminary injunction that would prevent the NCAA from enforcing its NIL rules during the pendency of the litigation, and (iii) a permanent injunction that would bar the NCAA from enforcing such rules.

Previously, Judge Corker had denied the states’ request for a TRO. In that decision, Judge Corker found that Tennessee and Virginia did meet their burden to show a “strong likelihood of success” in proving that the NCAA’s NIL rules violate the Act. However, one of the requirements for a TRO is that a party show that it would be “irreparably harmed” if injunctive relief is not granted. Judge Corker’s ruling on the TRO concluded that the states had failed to show that their citizens would be “irreparably harmed” if the NCAA continued to enforce its NIL rules. Monetary damages were available to remedy the harm suffered by players making less because of the NCAA’s NIL rules, thus negating the need for a TRO.

Judge Corker’s Decision and Rationale
Two weeks later, Judge Corker sided with Tennessee and Virginia and granted the preliminary injunction. Once again, the court found that the plaintiffs would likely prevail in showing at trial that the NCAA’s rules violate the Act because: (i) the NCAA’s NIL rules “suppresse[d] price competition by limiting negotiating leverage” and are facially anticompetitive, (ii) the NCAA’s goal of preserving amateurism was not a “pro-competitive rationale,” and (iii) even if it was, could be achieved through less restrictive rules.

But, with the benefit of additional briefing on the issue of irreparable harm, Judge Corker changed his earlier finding and held that student-athletes would suffer irreparable harm because monetary damages at the end of a trial would not make student-athletes whole. The court found the student-athletes’ NIL value is unique and their earning power can only truly be ascertained through negotiating with schools.

The Scope of the Injunction
Injunctive relief must be “strictly tailored” to remedy the complained-of harm. Here, this relief “require[d] no more and no less than permitting student-athletes to negotiate NIL deals with third parties prior to committing to a particular school.” The court’s formal order held that the NCAA and its agents:

are restrained and enjoined from enforcing the NCAA Interim NIL Policy, the NCAA Bylaws, or any other authority to the extent such authority prohibits student-athletes from negotiating compensation for NIL with any third-party entity, including but not limited to boosters or a collective of boosters, until a full and final decision on the merits in the instant action.

The injunction is not limited to Tennessee and Virginia—it bars the NCAA from enforcing its NIL rules in all 50 states. Indeed, the fact that many Tennessee or Virginia residents may choose to attend schools in other states (and profit from their name, image and likeness) was an important consideration of Judge Corker’s. On this basis, he rejected the NCAA’s argument that an injunction would not prevent “irreparable harm” because “Tennessee law, like the challenged rules, prohibits NIL compensation contingent on attendance at a particular school.”

The injunction broadly prohibits the NCAA from enforcing any prohibitions that impact student-athletes and prospective student-athletes from “negotiating compensation for NIL.” As a result, third parties, boosters, and collectives can now:

• Contact and communicate with prospective or current student-athletes for the purpose of negotiating NIL compensation;
• Negotiate NIL agreements with prospective or current student-athletes before they commit to a certain school, including student-athletes in the process of transferring; and
• Offering NIL compensation to prospective or current student-athletes as an inducement to commit to a particular school.

This reverses several prominent and well-established NCAA rules. In addition, the NCAA’s rule prohibiting “tampering” or communicating with a student-athlete before that player enters the transfer portal (Bylaw 13.1.1.3) could be impacted to the extent such communications concern negotiating NIL compensation.

Perhaps more noteworthy is that Judge Corker also enjoined the NCAA from enforcing Bylaw 12.11.4.2, or the “Restitution” rule. Under that bylaw, if a school violates NCAA rules that the NCAA is temporarily prohibited from enforcing by court order, and that court order is later vacated or reversed, then the NCAA can impose substantial punishments on the school. In other words, if a school’s booster-led NIL collective communicates and negotiates NIL compensation with a student-athlete before that athlete selects a particular school while the injunction remains in effect, and the injunction is later vacated, the NCAA cannot retroactively punish that school for the violation under Bylaw 12.11.4.2.

The NCAA’s Response
On March 1, 2024, NCAA President Charlie Baker sent a short open letter to all NCAA member institutions acknowledging the decision and announcing that the NCAA was pausing all investigations “involving third-party participation in NIL-related activities.” Baker also acknowledged “[t]here will be no penalty for conduct that occurs consistent with the injunction” while it remains in place.

At the same time, Baker tried to limit the impact of the court’s ruling, asserting that Judge Corker’s injunction “upheld” NCAA rules:

• Prohibiting direct institutional payment to prospective or current student-athletes for NIL;
• Prohibiting “pay-for-play” NIL compensation; and
• Prohibiting NIL “payment for specific athletics performance.”

Baker’s characterization of the injunction is not entirely accurate. The court did not uphold those rules—they were not before Judge Corker on the motion for a preliminary injunction.

Moreover, the “pay-for-play” and “athletics performance” rules may be vulnerable to a future challenge and could fall within an order using the same language as Judge Corker’s. An argument can be made that, by continuing to enforce these rules, the NCAA is still engaged in anti-competitive behavior because it is restricting what student-athletes and prospective student-athletes can discuss during NIL negotiations, thereby irreparably harming them because they are unable to realize their “true” NIL value.

Ultimately, Baker’s letter struck a somewhat conciliatory tone, noting that the NCAA was “eager to work with the attorneys general who brought the suit to reach a common understanding.” Baker recognized that “pausing NIL-related enforcement” was “the only practical response to the injunction” and again invoked his proposed changes to the Division I governance model, acknowledging that he was committed to continuing to work towards building a consensus for needed change to the NCAA’s governance system.

Notably absent was any request that Congress intervene and grant the NCAA an antitrust exemption or pass any other federal legislation. Baker has vocally lobbied Congress on numerous occasions for legislative intervention. More than two dozen bills concerning collegiate athletics (largely NIL related) have been introduced over the last several years. Not one proposed bill has successfully emerged from its respective committee, and Congress appears unwilling to act at this time.

How Long Will the Injunction Last?
The injunction will remain in place during the pendency of the lawsuit.

The NCAA is entitled to seek appellate review by the Sixth Circuit Court of Appeals under Title 28 § 1292(a)(1). If the NCAA appeals, it could ask for a stay during review. However, the NCAA is unlikely to meet the substantial threshold necessary for a stay. Moreover, the Sixth Circuit will only review the decision to see if the lower court “abused its discretion” in issuing the injunction.

The NCAA could decide to rescind those NIL rules subject to the injunction. The NCAA and the plaintiffs could (in theory) agree to promulgate “new” NIL rules to settle the case. The NCAA also could (in theory) prevail at trial and establish either that the NIL rules do not violate the Act or that a permanent injunction is unwarranted. At this time, however, neither outcome appears likely.

The injunction is thus likely to last for months—and perhaps longer.

Legal Implications and Guidance for Clients
Judge Corker’s decision may be best understood in context as closing the door on an era of amateurism in collegiate athletics. Boosters communicating with prospective or current student-athletes during recruiting was banned by the NCAA for decades. So was the idea of idea of boosters discussing with prospective or current student-athletes any type of compensation as part of recruiting. Both are now permissible and NCAA President Baker has acknowledged that the NCAA will not investigate and punish such conduct.

While Baker and the NCAA have asserted that Judge Corker “upheld” rules prohibiting “pay-for-play” inducements or NIL compensation for athletics achievements, those issues were not before the court. There is also some tension with the injunction’s broad language. Moreover, continuing to enforce those rules may be counterproductive. College athletics is undeniably going through rapid and significant changes, and many legal analysts and commentators have asserted that such rules are unnecessary, counterproductive, are not being enforced, and are impossible to fairly enforce.

Regardless, the injunction still further erodes the NCAA’s ability to enforce its own rules and regulate the actions of its membership when it faces a bevy of legal claims and external pressure. The plaintiffs’ success may also embolden others to challenge additional rules as violative of federal antitrust law, such as the NCAA’s rule generally limiting a student-athlete’s athletic eligibility to four years. With the rulings in State of Tennessee and Commonwealth of Virginia v. NCAA, Case No. 3:24-cv-00033-DCLC-DCP (W.D. Ten.) and State of Ohio, et al. v. NCAA, Case No. 1:23-cv-00100-JPB (N.D. W. Va.) (enjoining the NCAA from enforcing its transfer eligibility rules), the NCAA’s athletic eligibility cap may be vulnerable to a similar attack that the cap constitutes an unreasonable restraint on players’ ability to generate compensation for services provided. Of course, any challenge would be based upon the application of the law to that rule and subject to a number of defenses.

Schools should understand that Judge Corker’s injunction is not final or permanent. Importantly, as noted above, NCAA leadership has taken the position that “pay-for-play” inducements and NIL compensation for athletics achievements are still prohibited and those rules are being enforced. Under NCAA rules, schools have an obligation to educate their boosters (which include third-party NIL collectives) and are responsible for their boosters’ actions. Moreover, Judge Corker’s order does nothing to displace state NIL laws or the obligations such laws place on member institutions or their boosters. Nor does the injunction enjoin the NCAA from enforcing existing bylaws that do not “prohibit[] student-athletes from negotiating compensation for NIL with any third-party entity[.]”

Collegiate athletics remains a profoundly unsettled environment where applicable rules, state and federal law are evolving at an extremely rapid pace. NCAA member institutions should insist upon the advice of experienced counsel on these legal matters to ensure effective compliance and to proactively protect their interests.

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