A federal judge on Thursday rejected a key element of a proposed $2.8 billion settlement of an antitrust lawsuit against the N.C.A.A. and the major athletic conferences, throwing into uncertainty an agreement that had been largely seen as ushering in a new era in college sports.
The judge, Claudia A. Wilken of the Northern District of California, said in a preliminary hearing that she was troubled by a provision that would restrict payments to athletes from booster-run collectives, groups of donors that funnel millions of dollars to athletes at colleges they support.
Although the proposed agreement would allow colleges to pay their athletes up to about $20 million per year, she thought the restriction on collectives would reduce the money some athletes would make under the new deal.
She instructed the parties to go back to the drawing board.
“Some people getting large amounts will no longer be able to get them,” she told lawyers for the N.C.A.A. and the plaintiffs, essentially a group of thousands of athletes, who had come to a compromise in the lawsuit, House v. N.C.A.A. “That’s my concern.”
But Rakesh Kilaru, the N.C.A.A. lawyer, said there would be no deal without a provision that allowed the N.C.A.A. to prohibit third-party payments that they saw as pay-for-play compensation under the guise of fair-market endorsement deals.
“For us, it’s an essential part of the deal,” he said.
Judge Wilken also told Mr. Kilaru and the plaintiffs’ lawyers, Jeffrey Kessler and Steve Berman, to report back to her in three weeks with a revised agreement. If they could not, she said, she would be prepared to set a trial date in the case, which charges that the N.C.A.A. and five major conferences illegally withheld television broadcast revenue that came from using athletes’ names and images.
If a deal is ultimately approved — or if the N.C.A.A. is dealt a defeat at trial — it could be the most decisive blow yet to the amateurism model that has been central to the growth of a now multibillion-dollar industry in which the primary compensation for players has been limited to athletic scholarships.
There are two major parts of the proposed settlement: one that would compensate players for income they have already foregone, and another that would allow colleges to pay their players directly from now on through revenue sharing, a first in the nearly 120-year history of the N.C.A.A.
A significant delay in finalizing the agreement, which had been on track to be completed in the first quarter of next year, would affect plans to implement the new model for the 2025-26 academic year.
Supporters of the agreement say the new model would finally allow athletes to share in the colossal profits that their games generate. It would also strengthen the N.C.A.A.’s hand in fighting additional antitrust suits, which have hampered the organization’s ability to make and enforce its own rules. Critics say the deal still vastly undervalues athletes’ worth and would treat men’s and women’s sports unequally.
Judge Wilken also expressed reservations about another key component of the deal: capping the amount that colleges could pay athletes. The agreement calls for that to be 22 percent of the average athletic department revenue from the five conferences named in the lawsuit — the Big Ten, the Southeastern, the Atlantic Coast, the Big 12 and the Pac-12.
Even though the cap of more than $20 million represented a huge increase, she suggested it was still a cap.
“Is that still wrong?” the judge asked.
Mr. Kessler responded by noting that in an earlier case, Judge Wilken had implemented caps on how much athletes could receive in educational benefits at $5,980 — the so-called Alston payments. Mr. Kessler, who has negotiated changes to N.B.A. and N.F.L. labor agreements, said that while he preferred an uncapped system, incremental change is sometimes necessary.
“Every settlement is a compromise,” he said.
But Steven Molo, a lawyer representing a group of female athletes opposed to the settlement, argued: “This is still a restraint on trade. The act that somebody is getting more money under a cap doesn’t make it any less of a cap and any less a restraint of trade.”
Judge Wilken’s questions in the two-and-a-half-hour hearing echoed her measured approach in two other consequential cases she has heard involving college athletes’ rights — N.C.A.A. v. Alston and O’Bannon v. N.C.A.A. — in which she delivered victories to the plaintiffs, albeit ones with few or narrow remedies.
Despite the concerns she raised with the House agreement, Judge Wilken did not appear to reject in principle one cornerstone of the settlement: the concept of colleges paying athletes directly.
Her trouble with reining in collectives, though, cut deeply for the N.C.A.A.
When the N.C.A.A. investigated the University of Tennessee this year over whether a star quarterback and his family had traveled on a private jet provided by a collective for a recruiting visit, a Tennessee state judge granted an injunction prohibiting the N.C.A.A. from punishing the football program over the case, asserting that the N.C.A.A. had no right to stop boosters of college sports teams from paying players.
Mr. Kilaru told Judge Wilken that the new rules laid out in the settlement banning pay-for-play payments from boosters were little different from the current ones. “Under current rules, all this is prohibited,” he said.
But the judge was not persuaded. In sending the parties back to the negotiating table, she wondered about athletes at colleges that chose not to pay their athletes — or could not afford to do so — and whether tightening the screws on collectives would restrict a source of revenue.
“Taking things away from people is usually not too popular,” she said.
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