The dispute between Arkansas EDGE and Madden Iamaleava captured the attention of the college sports world when Arkansas' athletic director, Hunter Yurachek, announced on X that the collective would enforce the buyout clause of Iamaleava's NIL deal. Possibly groundbreaking, the potential lawsuit could change how NIL is handled by every athletic program in the country.
But the interest doesn't lie only with sports fans. The legal community is just as intrigued by the situation brewing in Fayetteville. One of those attorneys is Philip T. Sheng with Venable LLP. Sheng is a trial lawyer specializing in intellectual property disputes both nationally and in international forums. He also serves as an advisor on trademark, brand, and NIL protection issues.
Sheng co-authored an article for Venable LLP that argues the impact of the dispute, if it makes it to trial, could set a legal precedent for these types of cases in the future. Fortunately, we had the chance to speak with Sheng about the Arkansas EDGE's situation involving Iamaleava. He explained some of the specific challenges Arkansas may encounter as it attempts to recover its funds and shared his thoughts on the future of NIL in college sports.
Arkansas EDGE v. Madden Iamaleava Q&A with Philip T. Sheng
Q: I want to start off with a fun question before we get into the nitty-gritty of the dispute between Arkansas EDGE and Madden Iamaleava. Are you a big sports fan? If so, tell me a little about your fandom and what teams you follow.
I’m a huge sports fan. I grew up in Southern California watching the Showtime Lakers and remain a dedicated fan to this day. They’re my favorite pro sports team, but I do follow many others and not just in basketball. For college sports, I’m a diehard BYU fan. It’s an exciting time to be a BYU fan, and I’m not just talking about football and men’s basketball. Go Cougs!
Q: Many fans are not overly familiar with contract law, but it seems strange to them that when a party signs a contract—and acknowledges breaching it—but nothing is done about it. When I did some digging, it seems that if the buyout clause is framed as damages rather than penalties, the non-breaching party is more likely to be awarded compensation. Can you explain the differences between damages and penalties?
That’s what makes the dispute between Arkansas EDGE and Madden Iamaleava so interesting. Contracts get broken all the time, not just in sports, and the legal remedy isn’t to punish the breaching party, but to make the non-breaching party whole. In other words, damages are supposed to put the non-breaching party in the same financial position it would’ve been in if the contract had been honored.
So when a court looks at a buyout clause, it asks: Does this reflect a reasonable estimate of the losses suffered? If the answer is yes, it’s more likely to be enforced. But if the damages seem out of proportion to the actual harm, or if they would leave the non-breaching party better off than if the contract had been honored, then it starts to look more like a penalty—and courts generally don’t enforce penalties.
Q: Mr. Sheng, you specialize in intellectual property disputes, and in my layman's mind, NIL deals are similar to trademark licensing. Both market another’s “image” for one reason or another. Can you explain a few of the similarities and differences?
NIL deals and trademark licensing do share some similarity. Both fall under the umbrella of intellectual property and reflect a brand or image. And both can be licensed to others for commercial gain. There are some important distinctions, however. Trademarks are usually owned by companies and the primary purpose of a trademark is to identify the source of goods or services.
For example, the Nike swoosh on a pair of shoes identifies the source of goods and reflects a particular brand that may influence consumer decisions. NIL, on the other hand, is owned by an individual, where the individual’s name, image, or likeness is what is intended to influence consumer decisions. For example, a shoe company might pay an athlete to wear its latest shoe at an event in hopes that the athlete’s fame will drive more sales. Ultimately, the core idea between NIL deals and trademark licensing is the same: brand power is being used to drive commercial value.
Q: In college football, head coach contracts often have buyout language as well. Why are those buyouts more enforceable than NIL deals? When breaking coaching contracts, what kind of liquidated damage do they create that NIL deals, on average, don’t?
One reason is that coaches are employees of their universities. They’ll have employment contracts that are heavily negotiated between lawyers and agents and approved by university boards to ensure compliance with state contract and employment laws. A court is less likely to strike down a buyout clause if it is shown that it was negotiated between sophisticated parties represented by lawyers on both sides.
Also, it is easier for a school to demonstrate significant harm when a coach leaves early to join another school, such as having to hire a replacement coach, losing players to the portal, losing donor support, and diminished ticket sales. These aren’t hypothetical losses, and while it may be difficult to assign an exact dollar figure to them, a court will generally view a buyout clause as much more reasonable when the overall harm is significant. Another factor that comes to mind is that there has been a lot of prior cases involving coaches leaving early that have set some precedent as to what a court might find reasonable.
The dispute between Arkansas EDGE and Iamaleava is one of the first I’ve seen where a collective has said it will go to the mat on enforcing a buyout clause against a player. So we’re in some uncharted territory here, and the case has the potential to set some precedent for future cases.
Q: No matter the outcome, it feels like the dispute between Iamaleava and Arkansas EDGE is a turning point in college athletics. Where do you see the future of NIL headed in either scenario?
Especially if the House v. NCAA settlement is approved and NIL deals are entered into directly between schools and athletes, I suspect we’ll see more standardization and stronger legal vetting of NIL agreements. In general, such agreements need clearer terms and compliance mechanisms. But that evolution won’t happen on its own. It will require schools and collectives to actually go to the mat and attempt to enforce NIL agreements against players who breach them in order to shape and develop the law in this area.