Photo: Flickr user hyku via Wikimedia Commons.

The federal judge overseeing the implementation of the $1 billion concussion-related settlement involving the NFL has barred third-party litigation funders from entering into assignment agreements with retired players.

U.S. District Judge Anita Brody of the Eastern District of Pennsylvania on Friday ruled that settlement language specifically forbids lenders from entering into loan agreements that require ex-players to assign over their monetary claims. The ruling rejected arguments from funders that the language only forbid assigning a claimant’s tort claims, rather than 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.

Judge Anita Brody

According to Brody, all contracts assigning or attempting to assign the claims are “void, invalid and of no force and effect.” She said class members should return the money paid to them under the principle of rescission, or the funders could execute a waiver relinquishing the assignments and then the settlement claims administrator would withhold the amount from the class member’s monetary award.

“The anti-assignment language in the settlement agreement clearly states the intent that class members are unable to make assignments,” Brody said. “Thus, the court has little sympathy for a third-party funder that will not receive a return on its ‘investment.’”

Brody’s decision came to the court by way of a referral from U.S. District Judge Loretta Preska of the Southern District of New York, who is presiding over an action that the Consumer Financial Protection Bureau and New York Attorney General Eric Schneiderman brought against the third-party litigation funder RD Legal.

After RD Legal, which allegedly purchased assignments of some class members, told Preska that assignment agreements were allowed in the NFL settlement, Seeger Weiss attorney Chris Seeger asked Preska to transfer the issue to Brody. He also filed a motion seeking to have the claims administrator withhold funds from several litigation funders who had entered agreements with claimants.

Seeger, however, later came under fire for failing to disclose his ties with Esquire Bank, a litigation funding company that also provided loans to ex-NFL players. Until May 2016, Seeger was a director at Esquire Financial Holdings, a holding company for Esquire Bank, which has provided some loans to ex-players. The bank was not included as one of the funders that Seeger brought to the court’s attention.

Although Seeger later filed a declaration with the court outlining his history with Esquire Bank and his reasons for not including that company on the list of funders to the court, one of the funding companies he criticized recently called that disclosure into question.

On Thursday, Atlas Legal Funding said Seeger downplayed the relationship between Esquire Bank and LawCash, another litigation funding company that was not included in the list of funders Seeger brought to the court’s attention. Atlas Legal further said any representation that LawCash had not entered into agreements with former players was not true, saying one of its contracts with a former player was purchased by LawCash.

“There is no indication in the record as to whether LawCash designates its funding agreements as assignments or loans,” Atlas said in the motion, which ultimately asked the court to deny the motion seeking to withhold the funds. “All of these facts raise questions about the role that LawCash may have in funding agreements for class members.”

In an emailed statement about that dispute, Seeger said he would continue to present his findings regarding litigation funding agreements to the court.

“We have aggressively investigated and brought to the court’s attention any evidence of third-party lenders preying on retired NFL players,” he wrote. “We appreciate the court’s swift action on this issue, and will continue to present our findings and ask for any necessary relief to ensure class members receive these important and hard-earned benefits.”

New Jersey attorney Raul Sloezen, who represents Cash4Cases and Atlas Legal Funding, said he was disappointed with the ruling Friday, and that he believes the issue should be decided in arbitration. He noted that neither Cash4Cases, nor Atlas Legal were involved in the motion decided Friday, and said he was not sure how the ruling would impact that issue.

“We still have to make a decision about how to proceed,” he said.

Jeffrey Hammer of Boies Schiller Flexner, who is representing RD Legal, did not return a message seeking comment.