Litigation companies fighting to enforce agreements they entered into with ex-NFL players seeking claims from the estimated $1 billion concussion settlement scored a partial win Friday when a federal appellate panel ruled that portions of the companies’ lending agreements may be enforceable.
A unanimous three-judge panel of the U.S. Court of Appeals for the Third Circuit ruled Friday that the district court judge overseeing the settlement implementation went beyond the court’s reach when she nullified the lending agreements in their entirety.
According to the panel, the court had broad authority to protect the integrity of the settlement and was therefore within its power to bar portions of any agreements that allowed the companies to seek funds directly from the claims administrator, which is the entity tasked with making payments to the players. However, the Third Circuit panel said the district court went too far in voiding the contracts entirely, and said the court did not have the authority to void contracts in which the companies sought to seek funds from the players directly.
“The district court’s authority certainly does not extend to how class members choose to use their settlement proceeds after they are disbursed. The district court made no findings indicating that any aspects of the cash advance agreements, other than assignments, impaired the integrity of the settlement process,” Judge D. Brooks Smith said in the 34-page opinion. “As such, to the extent the district court’s Dec. 8, 2017, order voided the cash advance agreements in their entirety, the order was not narrowly tailored to the court’s findings regarding the impact of the agreement on the settlement.”
In late 2017, U.S. District Judge Anita Brody of the Eastern District of Pennsylvania, who is overseeing the settlement, barred third-party litigation funders from entering into assignment agreements with retired players. Brody specifically pointed to language in the settlement agreement that forbids lenders from entering into loan agreements that require ex-players to assign over their monetary claims.
“A third-party funder that failed to perform proper due diligence before deciding to enter such an agreement is prohibited from now reaping the benefit of the contract,” Brody said.
Three lending companies, RD Legal Funding LLC, Atlas Legal Funding and Thrivest Specialty Funding LLC, eventually sought appeals to the ruling, arguing, among other things, that Brody lacked jurisdiction to oversee the agreements, since they were independent from the settlement.
In its Friday holding, the Third Circuit panel “commend[ed]” Brody for handling the “ extraordinarily complicated class action and settlement.” The further said that, pursuant to the All Writs Act, which allows court to do what is “necessary or appropriate” to enforce a court’s prior order, and its duty as a fiduciary to the class under the Federal Rule of Civil Procedure 23, the district court had broad authority over the claims administration.
However, the court said Brody’s December 2017 order “went beyond pure issues of settling administration to adjudicate the third-party contract rights of litigation funding companies.” That finding led the panel to question whether the order was properly tailored, which the court determined it was not.
Smith also said that, although contracts seeking money from the class administrator are void, the companies can now try to enforce contracts it has directly with the players, and disputes over enforceability, including a particular claim involving Thrivest, can now proceed through the courts, or arbitration.
Raul Sloezen, who is representing Atlas, said the Third Circuit, “gave Atlas everything they asked for.”
Fox Rothschild attorney Peter Buckley, who is representing Thrivest, said in an emailed statement he and the company were “pleased” and felt “vindicated” by the decision, “especially as it concerns our client’s contract and arbitration rights.”
“We are optimistic that the panel’s clear guidance will end the ongoing disputes and smooth the process ahead for the benefit of everyone involved—especially the class members for whose benefit our client entered this market offering the lowest non-recourse rates of any funder,” he said. “In the end, all of this fighting gets in the way of helping the players, which is a goal shared by all sides.”
Boies Schiller Flexner attorney Michael Roth, who is representing RD Legal Funding, did not return a call seeking comment.
Co-lead counsel for the class, Seeger Weiss attorney Christopher Seeger, however, said that, although the lending companies “live to fight another day,” the ruling was also a win for the plaintiff, and that language in the opinion bolsters arguments the ex-players may have in fighting enforcement of these loan agreements.
Seeger has long contended that many of the funding agreements are “usurious” and are particularly problematic given that many of the players suffer cognitive impairments from concussions they sustained as players. Speaking Friday, he noted that at several points in the opinion, Smith referred to the agreements as loans and that Smith said contract defenses, including “unconscionably, fraud or usury,” could come into play if and when the assignments are disputed.
It’s this language that Seeger pointed to in saying the decision will ultimately result in a win for the players.
“I’ve looked at enough of these to know that most, if not all, are assignments that, based on the ruling today, might end up voided,” he said. ”The fight’s not over. … There’s a lot there to work with for retired players. It’s a victory for the class.”