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The NCAA News -- March 15, 1999

Restricted-earnings case settled for $54 million

The NCAA and plaintiffs in the restricted-earnings coaches case announced a $54.5 million settlement agreement March 9.

Charles T. Wethington, chair of the NCAA Executive Committee, said the Association will drop its appeal of a trial decision in the case and will pay the plaintiffs in cash. Wethington, who also is president of the University of Kentucky, said payment will occur 60 days after the date of the agreement.

The agreement was reached as a result of mediation service provided through the 10th Circuit Court of Appeals. Both parties had asked for the mediation service and had participated in good faith since February 24 to reach an agreed upon figure.

"This figure more than doubles the $22 million in damages found by the jury in this case and compensates the 2,000 coaches identified by the plaintiffs as those who were affected by the restricted-earnings legislation," Wethington said. "Although the NCAA disagreed that the actual number of coaches who lost compensation was as large as the plaintiffs argued, it always has been the NCAA's desire to see that those who were injured were fairly compensated."

Wethington said the NCAA continues to maintain that the legislation did not violate federal antitrust law, that errors were made by the courts in the damages trial, and that the facts in the case were misconstrued and that the law was misapplied.

"The Executive Committee was prepared to continue the appeals process," he said. "However, there comes a time when you must weigh your opinions and judgment of the law against the best interests of the common good.

"This has been a long and -- unfortunately -- divisive issue that has pitted employee against school and sometimes friend against friend.

"The settlement to which we have agreed meets the best interests of intercollegiate athletics and allows us to focus our efforts on the task of providing athletics opportunities for student-athletes."

The case was a consolidation of three lawsuits that were brought against the Association in response to legislation passed by the membership in 1991. The legislation limited earnings for specific coaches to $12,000 during the academic year and $4,000 during the summer.

In 1997, a federal judge in Kansas City entered a summary decision against the NCAA, declaring that the legislation indeed violated federal antitrust law. The Association lost its appeal of that summary judgment in the 10th Circuit Court of Appeal, and its petition to have the U.S. Supreme Court hear the case was denied last fall.

A trial on damages was conducted in the Kansas City federal court in the spring of 1998, and a jury found in favor of the plaintiffs and awarded them in excess of $22 million. The court trebled the damages because it was an antitrust case to approximately $67 million. Earlier this year, the judge in the case granted the plaintiffs' motion to increase the damages to nearly $75 million to adjust for inflation to the current value of the damages.

The NCAA had filed an appeal with the 10th Circuit Court of Appeals on what it argued were mistakes made by the court in the damages trial. The mediation services of the court became available when the petition for appeal was entered.

Cedric W. Dempsey, NCAA president, said that Division I schools will bear the brunt of the payment.

"Although the NCAA will make a cash payment," he said, "those are funds that would have gone to Division I colleges and universities for the operation of their athletics programs."

Dempsey said the NCAA governance structure has approved a number of cost-savings and cost-avoidance measures that are projected to save about $22 million over the next three years. The balance of the settlement, he said, has to come from Division I.

The Division I Budget Subcommittee, which includes representatives from the Management Council and Board of Directors, will begin developing recommendations for the allocations now that the amount of the settlement has been determined.

"We're not going to speculate on what the school-by-school allocation will be," Dempsey said. "There are two extremes that have been presented in preliminary recommendations -- equal allocation for every Division I school or allocation based on the revenue-distribution plan. It is not likely that the budget subcommittee's recommendation will embrace either of these solutions."

Dempsey said he expects the budget subcommittee to act quickly on determining the method of payment.