Pennsylvania Record

Sunday, September 22, 2019

Philly judge voids third-party funding in NFL concussion litigation, but company hopes N.Y. colleague disagrees

By Dee Thompson | Jan 11, 2018

PHILADELPHIA – A Philadelphia federal judge says agreements in which RD Legal Funding advanced money to plaintiffs in the pending NFL concussion litigation are void, but the attorney representing RD Legal has asked a judge in New York to ignore that finding.

On Dec. 8, Judge Anita B. Brody of the U.S. District Court for the Eastern District of Pennsylvania ruled that any third-party assignments entered into by class members in the NFL concussion litigation are void because the class members are, by definition, cognitively impaired.

RD Legal Funding advances money to plaintiffs in exchange for a percentage of their recovery. Though some criticize companies like RD as "lawsuit lenders" that exceed state interest rate laws, the industry says they are not subject to those laws because their agreements aren't loans.

If the plaintiff recovers nothing, the funder recovers nothing.

In February, the Consumer Financial Protection Bureau (CFPB) and New York Attorney General Eric Schneiderman filed suit in the Southern District of New York against RD Legal Funding over allegations it scammed 9/11 first responders and NFL concussion victims.

The CFPB website quoted Schneiderman at the time suit was filed, who said “RD Legal used deceptive tactics to charge unlawfully high interest rates for advances on settlement and compensation funds, allowing them to profit off the backs of these unsuspecting individuals."

Attorney Michael Roth of Boies Schiller & Flexner, which represents RD Legal, however, thinks Brody erred in making her recent ruling. 

Brody's ruling was in response to a request from New York federal judge Loretta Preska, who wanted to know if the assignment of settlement funds to RD Legal Funding was allowed in the NFL case.

Roth asked the judge to ignore the ruling, saying “RD Legal respectfully requests that the court decline to adopt its reasoning as a ruling of this court or to apply any of its findings to the pending motion to dismiss.”

Roth made several points. He said Brody has no jurisdiction and also claimed there is a legal distinction between monetary claims and settlement proceeds. 

The anti-assignment clause of the NFL settlement agreement is not relevant, he claimed, because the funds from RD Legal were not “extensions of credit” as noted in the clause. 

He noted, “The explanation and order applies the wrong standard in analyzing the scope of the anti-assignment provision;” and he points out that “the explanation and order’s analysis of the New York Uniform Commercial Code (the 'UCC') was incorrect as it relied on only a portion of the relevant statutory language, whereas the full provision of the UCC invalidates the type of anti-assignment clause found in the NFL settlement agreement.”

Brody stated in her order that “Under the unambiguous language of the settlement agreement, settlement class members are prohibited from assigning or attempting to assign their monetary claims to third parties, and any agreement making such an assignment or attempt to assign is void, invalid and of no force and effect. 

"Additionally, under the settlement agreement, the claims administrator is prohibited from paying a class member’s monetary award to any third party that holds an assignment or an attempted assignment.”

Brody noted that she has jurisdiction, because “Judge Preska referred that question to this court because it implicates the administration of the settlement and the interpretation of the settlement agreement—over which this court has continuing jurisdiction.”

In her discussion of the law that applies, Brody pointed out that “New York law allows parties to void assignments of contractual rights so long as the anti-assignment language is unambiguous.” 

Brody also noted that the arguments about “monetary claims” raised by Roth are “linguistic backflips” and her application of New York law is correct.

Roth’s citing of the New York Uniform Commercial Code isn’t applicable, Brody explained, because “The invalidation of anti-assignment provisions does not apply to ‘a claim or right to receive compensation for injuries.’ ... Clearly, an award that pays money for suffering head concussions is ‘compensation for injuries.’ Therefore, New York’s UCC provisions allow for parties to create terms that prevent assignment of settlement claims, and RD Legal’s argument that the settlement agreement cannot restrict assignment under the UCC fails.”

Brody concluded her order by saying that any litigation loan documentation must be provided to the claims administrator, and loan monies from third parties must be repaid. She notes that third-party assignments are null and void, for good reason.

“To the extent that any class member has entered into an agreement that assigned or attempted to assign any monetary claims, that agreement is void, invalid and of no force and effect. Class members receiving awards are, by definition, cognitively impaired. A third-party funder entering an agreement with a class member would obviously know that simple fact.”  

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Organizations in this Story

Consumer Financial Protection Bureau New York Attorney General