PHILADELPHIA – Third-party litigation funders scored a touchdown on Friday, when the U.S. Court of Appeals for the Third Circuit vacated an order prohibiting ex-NFL players from utilizing their assistance to receive advance payments in the league’s billion-dollar concussion settlement.
The ruling served as a reversal of fortune for third-party litigation funders such as RD Legal Funding, Atlas Legal Funding, and Thrivest Specialty Funding, the last of which to this point had not met with success in the U.S. District Court for the Eastern District of Pennsylvania in attempting to arbitrate and enforce its legal funding agreements.
Third Circuit Judge D. Brooks Smith authored the Court’s opinion on the consolidated appeal, explaining Philadelphia judge Anita B. Brody has had a “steadfast commitment to protecting class members’ rights,” during her presiding over the NFL Concussion Litigation – but also that the “District Court went too far in voiding the cash advance agreements in their entirety and voiding contractual provisions that went only to a lender’s right to receive funds after the player acquired them.”
Brody oversees the NFL Concussion Litigation proceedings, the multi-district lawsuit connected to neurocognitive impairments said to be suffered by ex-NFL players during their athletic careers.
In December 2017, Brody ordered that class participants in these cases were forbidden from using third-party litigation funders to finance their claims, citing an anti-claims assignment provision in the settlement agreement.
Further, Brody said a May 2018 ruling disallowing Thrivest from arbitrating its dispute with ex-NFL’er William E. White was made through the All Writs Act to “effectuate” the prior December ruling.
The action brought by Thrivest against White was later dismissed, leading to the appeal of it and other cases before the Third Circuit.
Smith said analysis of the Dec. 8, 2017 order was “complicated," as it “went beyond pure issues of settlement administration to adjudicate the third-party contract rights of litigation funding companies.”
On the subject of voiding “true” claim assignments in order to enforce the settlement agreement, the Third Circuit concurred with Brody.
“We adopt the District Court’s interpretation and conclude that any true assignments contained within the cash advance agreements – that is, contractual provisions that allowed the lender to step into the shoes of the player and seek funds directly from the settlement fund – were void. We will therefore affirm the District Court’s Dec. 8, 2017 order to the extent it voided any true assignments set forth in the cash advance agreements,” Smith said.
There was a caveat though, in that the Third Circuit felt that the agreements should not have been voided in their entirety.
“In the end, however, we must conclude that the District Court went beyond its authority when it purported to void the cash advance agreements in their entirety. Some of the agreements contained severance clauses or alternative loan agreements, and there is a dispute as to whether the purported assignments in the funding agreements were true assignments at all…there are portions of the cash advance agreements that may be enforceable even after any true assignments are voided,” Smith continued.
“Of course, once the funds are disbursed to the players, the District Court’s power over the funds – and any contracts affecting the funds – is at an end. The cash advance agreements remain enforceable – outside of the NFL claims administration context – to the extent the litigation companies retain rights under the agreements after any true assignments are voided.”
Notably, the Third Circuit expressed “no opinion as to the ultimate enforceability of any of the cash advance agreements” and deferred their being resolved in other “appropriate” forums, such as another court or arbitration.
“For the reasons given, we will reverse in part and affirm in part the District Court’s Dec. 8, 2017 order. We will reverse to the extent the District Court purported to void the cash advance agreements in their entirety and void contractual provisions that went only to a lender’s right to receive funds after the player acquired them,” Smith concluded.
“We will affirm as to the District Court’s ruling that any true assignments – contractual provisions that permit the lender to seek funds directly from the Claims Administrator – are void. We will vacate the District Court’s May 22, 2018 order enjoining Thrivest from pursuing arbitration and the District Court’s order dismissing Thrivest’s complaint in Thrivest v. White, and remand for further proceedings.”
The NFL’s concussion settlement program is an uncapped 65-year term and to the present, has registered more than 20,000 class members, issued notices of claims determinations for over 400 retired NFL players and given out well over $200 million to players given a qualifying diagnosis.
Such qualifying diagnoses are for neurocognitive illnesses, such as Chronic Traumatic Encephalopathy (CTE), Amyotrophic Lateral Sclerosis (ALS, a.k.a. Lou Gehrig’s disease”), Alzheimer’s disease, Parkinson’s disease and others.
However, some plaintiffs’ lawyers contend the NFL’s claims review process is too slow and is not processing settlement claims and distributing the related funds quickly enough.
U.S. Court of Appeals for the Third Circuit case 18-1040 Et.Al
U.S. District Court for the Eastern District of Pennsylvania case 2:12-md-02323
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com