Film Room: NCAA Bylaws, CSC policies and contractual terms thrust into focus by transfer activity

NCAA Bylaws govern both institutional and third-party NIL

As the news reports eye-popping payments rumored to be associated with student-athlete transfer decisions, keep in mind the following: The rules cap institutional payments to the entirety of its student-athletes (across all programs) at $20.5 million on an annual basis. See Bylaw 16.13.1. Unlike uncapped third-party NIL payments, institutional payments do not include additional regulatory hurdles beyond cap compliance. However, the rules require the reporting of all institutional payments and an attestation from institutional leadership. Specifically, Bylaw 16.13.3 provides: 

"An institution shall attest to the designated benefits cap management entity the total amount and types of benefits the institution provided during the preceding July 1 through June 30 period by September 1 of each calendar year. The institution’s president/chancellor, athletics director and each head coach shall complete the attestation. The attestation, in addition to other elements addressed by policies and procedures, shall require confirmation of the following:

1. The information in the system of record is complete, accurate and compliant with the benefits cap rules and policies. The institution must report benefits countable against the benefits cap provided to any individual who participated in athletically related activities (countable, voluntary, required) during the applicable year, regardless of whether the individual was on a sport’s submitted roster;
2. All countable benefits provided to student-athletes were included in written agreements and the agreements were uploaded into the system of record; and
3. Student-athletes were not guaranteed payments or benefits that were not included in a written agreement and entered into the system of record.”

(Emphasis added.) 

Third-party NIL deals in which an Associated Individual/Entity is the counterparty in the contract with the student-athlete are subject to CSC review to determine whether the agreement is for a valid business purpose and fits within a reasonable range of compensation. See Bylaw 22.2.4. 

Regarding third-party NIL, institutions are permitted to have a role: They can facilitate deals between student-athletes and third parties—in other words, the institution can be a dealmaker. See Bylaw 22.1.1. However, that role has limits. The institution cannot backstop or guarantee a third-party deal. Specifically, Bylaw 22.1.1.1 provides: 

“An institution shall not provide a written or oral guarantee of a third-party NIL contract or payment. A guarantee is any written or oral statement that the institution will be responsible for such contract or payment if not fulfilled by the third party.”

Relevant CSC cooperation and dispute resolution policies 

Whether rules are broken in a given NIL deal will be determined by the CSC, which recently updated its Cooperation Policy. Of note, it obligates institutions and institutional officials in a CSC investigation to: 

• Make devices available for forensic inspection. See Section 1(c).
• Produce records, including cell phone, text message and electronic communication records. See Section 1(d).
• “[D]irect, and use best efforts to cause, their Institutional Officials, student-athletes, license holders, and Associated Entities and Individuals to provide documents and information relevant to investigations to the CSC investigators.” Section 1(e).
• Make institutional officials available for interviews in which they can be represented by counsel. See Section 2(a-b). 

The Cooperation Policy also provides for discipline and adverse inferences for failure to cooperate in a CSC investigation. Additionally, the Cooperation Policy sets forth a forked path to challenging discipline issued for failure to cooperate, which can be done: 

“(a) in accordance with the arbitration rules and procedures for disputes with Institutions set forth on the CSC’s website; or (b) by requesting the Chief Executive Officer of the CSC to reconsider the decision or penalties imposed, and such mutually exclusive options (a) and (b) shall be the sole recourse available to challenge any such discipline.” Policy at p. 4 (emphasis added). 

The CSC also recently revised its Arbitration Rules and Procedures for Disputes with Member Institutions, which guide the course for disputes in which an institution elects the Section (a) path referenced above. 

The CSC’s website includes a link to the similar Arbitration Rules and Procedures for Disputes with Student-Athletes. 

A potential penalty for a violation is student-athlete ineligibility—a harsh result that institutions and their student-athletes should seek to avoid. Careful consideration of the bylaws noted above can help guide institutions and their student-athletes away from violations and subsequent disputes.

Institutional NIL agreements come under the microscope

Student-athlete movement also brings into focus existing agreements between transferring student-athletes and the institution from which they are transferring. 

Specifically, the application of termination provisions and related terms regarding rights to reimbursement and/or liquidated damages can result in sizable potential claims. 

These issues implicate well-established bodies of law that can feature key differences in enforceability from state to state. Those complicated bodies of law, potentially significant claims and the ongoing eligibility cases that address related issues render these contractual considerations imperative for campus lawyers and risk managers.
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