State Seeks to Derail NCAA NIL Settlement
The State of South Dakota has unleashed a two-pronged attack attempting to undo, or at least modify, the NCAA’s settlement of antitrust claims regarding its name, image, and likeness rules. In September, shortly after the $2.78 billion settlement was announced, South Dakota sued the NCAA on behalf of the University of South Dakota and South Dakota State University in a separate case, complaining that the settlement would result in non-power-conference schools losing approximately $960 million in NCAA distributions to help pay for the deal.
Then, two weeks ago, just after the federal judge hearing the main antitrust case granted preliminary approval of the settlement, the state filed a motion in that case arguing that the settlement notice provided to the various state Attorneys General did not satisfy the requirements of the Class Action Fairness Act. This is an unusual challenge to a class-action settlement, so we thought we would take a further look at what South Dakota is arguing.
What is the CAFA notice provision South Dakota is raising? CAFA requires that each defendant participating in a class-action settlement provide notice to the appropriate state official of each state in which a class member resides. 28 U.S.C. § 1715. Among the information required to be included in that notice is “if feasible, the names of the class members who reside in each State and the estimated proportionate share of the claims of such members,” or if not feasible, “a reasonable estimate of the number of class members residing in each State and the estimated proportionate share of the claims of such members.” 28 U.S.C. § 1715(b)(7). The purpose of this notice requirement is to allow states “to react if the settlement appears unfair to some or all class members.” S. Rep. No. 109-14, at 32.
What is South Dakota arguing is deficient? According to South Dakota’s motion, the notice provided to the states included neither the names of the class members who reside in the state nor a reasonable estimate of the number of class members residing in the state. Instead, the notice instructed the Attorneys General to contact a non-party vendor to obtain the required information at a later date.
What is the effect of a deficient notice? Under CAFA, the court’s final approval of the settlement — which is necessary for any settlement payments to be made and for the settlement to otherwise be effective — may not be entered until 90 days after the appropriate state officials receive the required notice. 28 U.S.C. § 1715(d). In addition, a class member may choose to not be bound by a settlement if the required notice was not provided. 28 U.S.C. § 1715(e)(1). To be clear, however, the notice requirement is not intended to undermine a settlement “based on a technical noncompliance . . . particularly where good faith efforts to comply have occurred.” S. Rep. No. 109-14, at 35.
TAKEAWAY: South Dakota’s motion highlights some of the challenges that can arise when parties are finalizing a class-action settlement, particularly one involving a mobile population like college-educated young people.