I think if players don't like the way these processes are conducted, the players should: 1)not engage in behavior that is against the rules, or 2)not engage in behavior that could be perceived to be against the rules, thus requiring an investigation, or 3) if 1 or 2 occurs, transfer to another institution that is willing to pay their full tuition, or 4) if 1 or 2 occurs, accept the consequences of the school and move on like a responsible human being.
Suing ND for damages is utterly absurd.
Not saying there is anything that can be used in court for this,
However, there is a lot of grey area in your argument. You say the players should not engage in behavior that "could be perceived" to be against the rules, but the fact is, not a lot of people know what that is. Who knows how involved Player A was in seeing student A cheat. Maybe he walked in while they were cheating, but didn't know anything about it and/or were told something other than the truth, for example:
Student A: Hey what you doing? (Student on computer, currently copy/pasting paper)
Student B: Oh you know, just finishing up a mid-term paper.
Player A: Oh, cool.
There really isn't any grounds to punish a player/student for "possibly" knowing about cheating, because it's not his responsibility to do so, no matter how gung-ho we want to be about academic honesty. It's just not within reason to put that on a student, especially when there is way too much grey area where that conviction can go. He's got his own shit to deal with, and you expect him to drop that just because he MAY have seen cheating? I mean, these so-called "educated professionals" can apparently tell when a paper is plagiarized, so why is it so important that they tattle on them when it's obvious they'll most likely get caught anyway? If he was directly involved in the cheating, then okay, that has legs, but if they're going off, well Student A was in the same room as Student B when he cheated, that's just not good enough.