South Dakota’s Lawsuit Against NCAA to Proceed in State Court

A federal judge has ruled that South Dakota’s lawsuit challenging the NCAA’s handling of a $2.8 billion antitrust settlement will proceed in state court, denying the association’s attempt to move the case to federal jurisdiction. According to Sportico, the decision marks a significant development in the ongoing legal battle over the settlement’s financial impact on non-Power 4 Division I schools.

South Dakota Attorney General Marty Jackley filed the lawsuit in September on behalf of the University of South Dakota (USD) and South Dakota State University (SDSU), contending that the NCAA breached its own constitution and fiduciary duties by approving the massive settlement without a membership-wide vote. Per Sportico, the state’s argument centers on the claim that schools like USD and SDSU, which were not named defendants in the antitrust cases—House v. NCAA, Hubbard v. NCAA, and Carter v. NCAA—are unfairly shouldering the financial burden under the settlement’s damage allocation model.

The NCAA’s settlement proposal is set for a final fairness hearing next week before U.S. District Court Judge Claudia Wilken. If approved, approximately 60% of the settlement’s back-pay damages would be covered by reductions in annual revenue distributions to member schools. This has raised concerns among institutions that rely heavily on these funds, particularly publicly funded universities like USD and SDSU.

In a 12-page order issued last week, U.S. District Court Judge Karen E. Schreier remanded South Dakota’s case to the state circuit court, where it was initially filed. Following the ruling, Jackley took further action, filing a motion on Monday for a preliminary injunction in Brookings County to prevent the NCAA from withholding revenue from USD and SDSU to offset the settlement costs. The motion argues that major Power 4 programs, which have significantly profited from student-athlete performances, are in a better financial position to absorb the settlement costs than smaller state-funded institutions.

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“Having profited handsomely from their student athletes for decades, the Power 4 schools can better afford their proportionate share of the damages than publicly funded state universities like the University of South Dakota, South Dakota State University and hundreds of other state schools,” the motion stated.

The NCAA has not yet publicly responded to the latest legal developments.

South Dakota’s Division I programs compete in the Football Championship Subdivision (FCS), where they have achieved notable success. Both USD and SDSU reached the FCS semifinals last season, and SDSU’s women’s basketball team recently secured an upset victory over Oklahoma State in the first round of the NCAA tournament.

Per Sportico, the NCAA initially sought to move the case to federal court, arguing that certain state law claims presented significant federal issues, including a Title IX-related count. In response, South Dakota amended its complaint to remove the gender-equity argument, bolstering its case for a return to state jurisdiction, where it stands a stronger chance of avoiding dismissal.

Source: Sportico