The NCAA News - News and Features

The NCAA News -- January 18, 1999

Delegates discuss effects of litigation at Division I forum

BY JANE JANKOWSKI
STAFF WRITER

SAN ANTONIO -- Several issues surrounding the methods for funding expenses associated with the restricted-earnings case were discussed at the Division I forum January 11.

Among items that received the bulk of discussion were how to assess damages to the membership if payment in the restricted-earnings case is ultimately required and the status of settlement discussions. Also addressed were the reasons the Division I Board of Directors and NCAA Executive Committee decided to put into escrow an expected $10 million revenue distribution rather than distribute those funds to the membership.

About 300 people heard presentations on the restricted-earnings case. Other topics addressed during the forum included a review of the Division I governance structure, a report from the Division I Working Group to Study Basketball Issues, and a presentation regarding baseball bat standards from various committees and national office staff.

"The NCAA is healthy and solvent and will get through this restricted-earnings case," said Graham B. Spanier, chair of the Division I Board of Directors and president of Pennsylvania State University. "But there are significant challenges for all of us."

A Division I Budget Subcommittee, chaired by V. Lane Rawlins of the University of Memphis, has been appointed to consider restricted-earnings budget implications within the overall budget strategies for the division.

"The true range of settlement numbers is significant," said Rawlins. "We've decided the worst way to go about this is an ad hoc manner. We need to approach this in a budgetary way. The restricted-earnings settlement cannot happen without some reductions."

Equal-share and pro-rata formulas for assessment of Division I members have been discussed if a payment in the case is ultimately re- quired.

"If you can think of an argument, it has been presented," said Rawlins.

Recommendations from the subcommittee will be reviewed by the Management Council and Board of Directors. The subcommittee also will have broader responsibilities with Division I budget process.

Elsa Kircher Cole, NCAA general counsel, said settlement negotiations with plaintiffs in the restricted-earnings case have been ongoing for some time.

"Our last offer to resolve the case was $44 million. The plaintiffs have said they will not settle for less than $58 million or $59 million," said Cole. "We can't talk with the plaintiffs directly to explain why we think this is a fair number and about the risk that the judgment could be thrown out at the 10th Circuit.

"The $44 million more than compensates for the actual injury. This doubles what the jury awarded," Cole said. "We thought this was more than fair."

As the NCAA prepares financially for a possible settlement, the Board of Directors and Executive Committee in October delayed the return of $10 million in the current budget to institutions and conferences. The funds are being retained in escrow for eventual use in a settlement.

"The Board of Directors felt it would not be responsible when faced with a potential judgment," said Spanier. "We determined the solution was to put the money in escrow and credit what members would have received. It was preferable not to make a supplemental distribution than to have given it to members and then suggest to them that it flow in the other direction back."