Photo: Flickr user hyku via Wikimedia Commons.

A litigation funding company is facing off in federal court against attorneys representing class counsel in the NFL concussion litigation, the Consumer Financial Protection Bureau and New York State Attorney General Eric Schneiderman over whether retired players should be able to sell their stakes in the $1 billion settlement.

The parties filed briefs to the U.S. District Court for the Eastern District of Pennsylvania outlining their positions on whether the retired players should be allowed to sell portions of their expected settlement proceeds in exchange for immediate cash. A federal judge in New York overseeing a related litigation referred the issue to the Eastern District in early September, after it was revealed that RD Legal Funding had contracted with seven former professional football players expected to receive benefits under the National Football League’s concussion-related settlement.

Schneiderman, who sued RD Legal in federal court in New York over its funding practices, said the Eastern District should void any agreements that RD Legal entered into with former players.

“The settlement agreement contains clear and legally enforceable language precluding assignments of rights and claims,” the brief, filed Monday by Benjamin Konop of the CFPB on behalf of both the CFPB and Schneiderman, said.

U.S. District Judge Anita Brody of the Eastern District of Pennsylvania had called for briefing on the controversial issue following a hearing last month where attorneys representing the class of retired players described allegedly usurious rates and misleading practices several litigation funding companies have been using in connection with the litigation.

Class counsel argued in a brief filed Sept. 29 that a provision in the settlement agreement titled “No Assignment of Claims” expressly bars claimants from selling their stakes, but New Jersey-based litigation funding company RD Legal Funding argued that it provides a much-needed service for cash-strapped former players, and, although the language bars claimants from selling their claims, it does not prohibit third parties from purchasing anticipated proceeds.

“This distinction between barring assignment of the underlying tort claims, and allowing assignment of the settlement proceeds (a contract right) is consistent with [New York's Uniform Commercial Code], as well as other provisions of New York law that prohibit the assignment of tort claims, but allow for the assignment of the proceeds from a tort claim,” the brief, filed by Boies Schiller Flexner attorney Jeffrey Hammer, said. “It is also consistent with common sense: the players should be free to use the money they receive in this action as they deem appropriate.”

RD Legal Funding is facing a related dispute in federal court in New York after Schneiderman filed a complaint against the company in February. The suit charged RD Legal Funding with violations of the Consumer Financial Protection Act, alleging the company scammed victims of the September 11, 2001, terrorist attack, as well as seven former NFL players by charging usurious rates in exchange for anticipated settlement proceeds.

Last month, the judge handling that litigation referred to the Eastern District the question of whether the NFL settlement agreement specifically bars claimants from selling their interests.

Along with arguing that the agreement does not bar claimants from selling anticipated proceeds, RD Legal Funding also said it has only purchased portions of the amounts claimants are expected to receive, noting that the seven retired players the company has contracted with are expected to receive $8 million more than the $3.4 million RD Legal Funding is set to receive under the agreements.

RD Legal Funding’s brief noted it has paid seven players more than $1.6 million in exchange for the future proceeds, with at least $500,000 of that expected go toward paying off state and federal tax liens against the claimants.

Class counsel, however, has said that, aside from the clear language barring these types of agreements, the courts have a fiduciary duty to protect class members.

“That duty is heightened here, where the class is composed of cognitively impaired, vulnerable individuals who are easy prey for unscrupulous lenders eager to swoop in and make an easy (and here quite substantial) buck,” class counsel’s brief, filed by Seeger Weiss attorney Chris Seeger, said.

Hammer and Konop did not return a call for comment, and a spokeswoman for Seeger also did not return a message seeking comment.