State Case You Need to Know – At Alston’s Frontier: Tennessee and Virginia Challenge the NCAA’s Name, Image, and Likeness Rules

State of Tennessee and Commonwealth of Virginia v. National Collegiate Athletic Association

On January 31, 2024, the Attorneys General of Tennessee and Virginia filed a complaint in the U.S. District Court for the Eastern District of Tennessee challenging the National Collegiate Athletic Association’s (“NCAA”) recent restrictions on Name, Image, and Likeness (“NIL”). The states call its rules an illegal restraint of trade under federal antitrust laws.

The defendant is the leading nonprofit organization for the regulation of college athletics and around 500,000 athletes at over 1,100 institutions across the United States. Before the 2021 decision in NCAA v. Alston, the NCAA had prevented college athletes from profiting from their NIL. Alston held that the NCAA's rules limiting compensation for college athletes violated Section 1 of the Sherman Act. In the post-Alston world, the NCAA has struggled to manage the rapidly changing landscape, facing several legal challenges with little relief from Congress. 

Most relevant here, the NCAA re-evaluated its rules, allowing college athletes to receive compensation for the use of their NIL. With the increase of NIL opportunities, independent NIL collectives, formed by alumni and donors to act as a pool of funding for college athletes, have been formed to facilitate deal making between students and corporations interested in licensing those students’ NIL. While the collectives are separate from the NCAA institutions, they generally support college athletes at a specific institution. However, the NCAA has adjusted its NIL rules to prohibit any dealmaking before commitment to an institution.  Thus, during recruiting, students are unable to negotiate NIL deals with collectives in advance of committing, limiting a student's knowledge of their potential NIL valuation.

The states, on the heels of other state-initiated NCAA litigation, allege that the NIL collectives recruiting ban is functionally an "illegal agreement to restrain and suppress competition" for the labor market of Division I athletes. Plaintiffs initially sought a temporary restraining order in advance of National Signing Day, the first Wednesday of February where high school seniors across the country sign a Letter of Intent, signaling the end of their recruiting cycle.

Judge Corker denied the motion for a temporary restraining order on February 6, 2024. The Court found that plaintiffs showed a likely substantial anticompetitive effect in the relevant market and that plaintiffs would likely succeed on the merits of their claim. Despite this finding, however, the Court concluded that the harm to affected students was not irreparable, but rather fully compensable via monetary damages.

Despite this initial setback, on February 13, 2024, after a brief hearing, the Court granted a preliminary injunction freezing the NCAA's rule. The Court issued this preliminary injunction—unusual in non-merger antitrust cases—despite rejecting the TRO motion due to supplemental briefing provided that illustrated harm to students beyond lost money. This decision has the potential to create massive waves in college sports as it will be upheld nationwide until the litigation concludes and affects numerous college athletes. The NCAA is facing potentially billions in damages between this case and cases like House v. NCAA, which focuses on the money owed to past college athletes who were unable to utilize their NIL prior to the lift of the ban in 2021.This is the most far-reaching litigation against the NCAA since the decision in Alston, so it is one to watch.