On Friday, February 23, 2024, the United States District Court for the Eastern District of Tennessee (the "Court") issued a major decision granting a request from the State of Tennessee and the Commonwealth of Virginia (the "States") to enjoin a key NCAA rule in connection with student-athlete Name, Image and Likeness ("NIL"). Specifically, the States had filed suit about a month prior, challenging what they refer to as the NCAA's "NIL-recruiting ban," i.e., the NCAA's current policy that prevents student-athletes and prospective student-athletes from having any discussions with any booster or NIL collective regarding what NIL opportunities are available to them before they enroll in the school or sign their letter of intent. Although the Court previously denied the States' request for a temporary restraining order ("TRO") in a February 6, 2024 decision, the Court held a preliminary injunction ("PI") hearing one week later on February 13, 2024, and it has now ruled that the States are entitled to a PI preventing the NCAA from enforcing the NIL-recruiting ban.
The Court's decision explains that the States are likely to succeed on the merits of their claim that the NIL-recruiting ban constitutes a horizontal restraint on trade in violation of Section 1 of the Sherman Antitrust Act of 1890 (the "Sherman Act"). Departing from its prior conclusion that the NIL-recruiting ban has certain procompetitive benefits—i.e., promoting the balance of academics and athletics, and promoting amateurism (the distinction between collegiate and professional athletics)—the Court's PI decision states that, " while the NCAA permits student-athletes to profit from their NIL, it fails to show how the timing of when a student-athlete enters such an agreement would destroy the goal of preserving amateurism." Moreover, the Court agreed the States are correct that such procompetitive efficiencies (even if accepted) could be reasonably achieved through less anticompetitive means. In particular, the Court focused on how less restrictive rules already in the NCAA bylaws—such as NIL rules prohibiting agreements without quid pro quo, athletic performance as consideration, and compensation directly from member institutions—are "arguably more effective in preserving amateurism than the NIL-recruiting ban."
The key change between the Court's TRO and PI decisions, however, was the Court's analysis of irreparable harm with respect to student-athletes. As the Court's PI decision explains, "although the Court previously held [in its order denying a TRO] that [the States] could not prove irreparable harm because the asserted harm (suppressed NIL compensation) was compensable by monetary damages, it is now clear that the harm is not strictly monetary. To be sure, it is pure speculation to assume that student-athletes would receive more lucrative NIL deals in an open market. Fair market value may be equal to or less than the NIL deals student-athletes can currently receive after selecting a school. But without the give and take of a free market, student-athletes simply have no knowledge of their true NIL value. It is this suppression of negotiating leverage and the consequential lack of knowledge that harms student-athletes." As such, any judgment against the NCAA at the conclusion of the suit would not make student-athletes whole, and this irreparable harm thus supported a PI. With the Court also finding that (i) the balance of equities weighs heavily in favor of the States because neither the NCAA nor any other affected individual or entity will face substantial harm with the issuance of an injunction, and (ii) injunctive relief will serve the public interest because it will prevent anticompetitive behavior, the Court granted the States' request for a PI and ordered that the NCAA is enjoined from enforcing the NIL-recruiting ban effective immediately nationwide.
Another key aspect of this ruling is that the NCAA is enjoined from enforcing its "Rule of Restitution" against any student-athlete or prospective student-athlete that begins discussions of NIL opportunities prior to their enrollment in a college or university or signing their letter of intent. Under the NCAA's Rule of Restitution, the NCAA can retroactively punish a student-athlete that competes in NCAA competition based on an injunction that is later overturned. The Court's restraint of the NCAA's imposition of its Rule of Restitution ensures that student-athletes and prospective student-athletes can freely discuss NIL opportunities without having concerns that the NCAA will try to punish them after the fact, allowing them to fully explore the free market value of their NIL.
So, where does this litigation go from here? The NCAA can seek to stay the Court's order until an appeal is heard by the 6th Circuit Court of Appeals; if a stay is granted, the PI is lifted until the 6th Circuit hears the appeal and issues its order. The NCAA could look to immediately file an appeal with the 6th Circuit, or the NCAA could see the writing on the wall and start to reassess and revise its NIL Interim Policy to align itself with the Court's PI. Another item worth watching is whether Florida State will seek to have its recent enforcement action by the NCAA vacated, given that it was punished for the very conduct that is now permitted by the Court's PI ruling.
Although the Court's decision is not a final ruling in the case, its immediate impact cannot be overstated. High school student-athletes being recruited to play collegiate sports, as well as college student-athletes who are in the NCAA's transfer portal, now have the ability to negotiate directly with boosters and NIL collectives to realize their true NIL value. The era of student-athlete empowerment only continues to gain more traction at an increasingly rapid pace, and practically speaking, it is becoming more difficult reverse course the further it gets down the road.
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