Earlier this year, the parties to the consolidated antitrust litigation involving college athletes name, image, and likeness rights (NIL) entered a settlement. The settlement is generally referred to as the “House Settlement.” In the time since the settlement, there have been further developments raising questions about the settlement. Among those developments is that certain college athletes have raised objections to the settlement. In the following guest post, Sarah Abrams takes a look at the athletes’ objections and considers their management liability implications. I would like to thank Sarah for allowing me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.
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Objections by and on behalf of student-athletes continue to be made to the In Re College Athlete NIL litigation settlement (House Settlement). Recent objection letters filed by California Polytechnic State University (Cal Poly) Olympic sport athletes highlight allegations that could create management liability exposure for Member Institutions opting into the House Settlement. Specifically, former Cal Poly swimming and diving team members claim that the elimination of the swimming and diving team “violate(d) both the spirit and the letter of Title IX” and that additional funds were then donated to Cal Poly’s football program.
Given the large reported financial payments reportedly made to student athletes for their NIL in the post-House Settlement era, the potential for Title IX and financial mismanagement claims against Membership Institutions could increase. D&O Diary readers may recall that the House Settlement resolved litigation surrounding payment to student athletes for use of their Name, Image, and Likeness (NIL). NIL refers to a person’s legal right to control how their image is used, including for commercial purposes. Student-athletes had long been prohibited from making deals to profit from their NIL.
Complaints alleging Title IX violations and potential remedies may be expensive and result in follow-on administrative action and claims against Membership Institution leadership by donors, alumni, board members, and creditors. The following discusses the status of the Saving Colleges Sports Executive Order directives, specific Cal Poly objector allegations, and the impact of alleged Title IX and financial mismanagement claims.
Saving College Sports
As I recently discussed on the D&O Diary, President Trump’s July 24 Executive Order, Saving College Sports (Saving College Sports EO), stated that it would be the Administration’s policy to protect opportunities for scholarships and athletic competition in women’s and non-revenue (Olympic) sports. A Bloomberg article published weeks before the Saving College Sports EO was issued estimated that, after the House Settlement was announced, around 41 D-1 Olympic sports programs were cut across NCAA Division 1, affecting 1,000 athletes.
Notably, the NCAA responded to the President’s Saving College Sports EO that, while it appreciated the Administration’s focus on the opportunities college sports provide student-athletes, “there are some threats to college sports that federal legislation can effectively address and the Association is advocating with student-athletes and their schools for a bipartisan solution with Congress and the Administration.”
And yet, to date, there has been no movement by administrative agencies, Congress, or state governments towards accomplishing the Saving College Sports EO’s directives regarding scholarship expansion and retention offered by Membership Institution athletic departments.
Cal Poly Objections
Rather, as the recent Cal Poly objections seem to indicate, Member Institutions, defined by the House Settlement as “any college, school, or university that is a member in any sport of NCAA Division I and/or a Conference Defendant, together with any entity owned, controlled, funded, or operated by said college, school, or university (or any division or department thereof),” are beginning to reallocate financial resources in ways that appear to run afoul of Title IX and the Saving College Sports EO.
One of the Cal Poly swimming and diving team House Settlement objectors, Abigail Leight, stated in her letter that Cal Poly’s elimination of its swimming and diving team programs “raises serious” Title IX concerns. Leight indicated that, even though Cal Poly’s undergraduate student body is made up of 51% women, women make up only 38% of Cal Poly’s athletic opportunities. She also noted that Cal Poly chose to spend $6.9 million on its football program. Leight’s allegations highlight potential Membership Institution management liability exposure stemming from purported Title IX sex discrimination and financial mismanagement.
Title IX
Title IX applies to any education program or activity receiving federal financial assistance. It protects “any person” from sex discrimination in such programs, not just students. The Supreme Court has held that employees of federally funded educational institutions can sue their employers under Title IX for sex discrimination, and circuit courts have recognized Title IX claims brought by professors, teachers, coaches, and other staff. Thus, even if student-athletes are reclassified or found by a court to be “employees” by receiving compensation for being rostered with a Member Institution, Title IX claims may be brought.
Statutory remedies for failure to comply with Title IX include termination or refusal by the DOE of federal financial assistance. In addition, student athletes can file a private cause of action against a Member Institution alleging Title IX violations. A presiding court may order the Member Institution to reinstate sports, expand opportunities, or allocate funding to comply. Plaintiff student athletes are eligible to be awarded monetary relief for intentional discrimination (including lost scholarships, out-of-pocket costs, and emotional distress) and recovery of legal fees incurred in bringing the case.
Discussion
Expenses incurred in defending Title IX cases may be costly for Member Institutions and management liability insurers. Also, if Title IX violations are found, loss of federal financial assistance, reallocation of funding, and monetary relief paid to student athletes may result in executive and board liability claims against Member Institutions and their leadership.
Take, for example, the claims brought by Scott Iannaccone, a former Cal Poly swimming and diving team member. Iannaccone alleged that Cal Poly continued to spend $6.9 million annually on its football program even though the University President stated the swimming and diving program was the result of “an unfortunate reality given the approved NCAA House settlement, state budget, and the tenuous situation moving forward for both the state and the NCAA.”
According to the NCAA, in 2024, Cal Poly’s total athletic department revenue was $37,134,737, its expenses were $35,998,471, and $27,346,027 was allocated back to the university. Cal Poly opted into the House Settlement and then cited its participation in the Pool, which allows it to share revenue with our Division I schools to pay athletes, as putting a financial strain on its athletic department. Based upon the NCAA’s 2024 report, Cal Poly’s athletics generated enough gross margin to cover expenses and remit a significant subsidy to the institution. Other Member Institutions that opted in to the House Settlement showed similar financial efficiencies.
The transfer back to Cal Poly, or other similarly situated Member Institutions, may be seen by potential plaintiffs, like alumni, donors, students, or staff, as having stripped out funds that might otherwise support scholarships and non-revenue sports (like swimming and diving).
Certainly, Cal Poly is not the only Member Institution that may be facing financial strain after opting into the House Settlement. Thus, insurers of colleges and universities that are rebalancing athletic department and Pool revenue may want to evaluate whether Olympic sports are likely to be eliminated in the near term as one way to forecast the potential for future Title IX and financial mismanagement claims.
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