PHILADELPHIA – A federal judge has upheld a $2.9 million arbitration award against an attorney who represented hundreds of players in a $1 billion concussion settlement with the National Football League, after abandoning his quest to oppose repayment of roughly $2.3 million in high-interest loans from a litigation funder.
New Jersey attorney Craig Mitnick had initially asked a federal judge to vacate the award to Balanced Bridge Funding, formerly known as Thrivest, a finance company that also extended loans to former NFL players in anticipation of settlement proceeds.
In a prior filing with U.S. District Court for the Eastern District of Pennsylvania Judge Gerald McHugh in Philadelphia, Mitnick accused Balanced Bridge and its lawyers at Fox Rothschild of taking advantage of him and violating “the canons of ethics.”
Before representing Balanced Bridge, Fox Rothschild also represented Mitnick for several years in fights over fees in the NFL concussion litigation, including a dispute with his co-counsel at Locks Law Firm.
Fox Rothschild had opposed Mitnick’s petition, having noted that the arbitrator rejected most of his arguments already.
Mitnick’s legal action was an attempt to reduce or eliminate his firm’s fast-growing debt to Balanced Bridge, a firm owned by Joseph Genovesi which also extended high-interest loans to NFL players. The practices of RD Legal Funding and others drew the wrath of the Consumer Financial Protection Bureau, former New York Attorney General Eric Schneiderman and ultimately the judge overseeing the concussion settlement, who declared the funding agreements invalid under a settlement clause prohibiting the assignment of benefits.
The U.S. Court of Appeals for the Third Circuit reversed that finding in 2019, ruling the federal judge overstepped her authority by invalidating all financing contracts and not just prohibited assignments of settlement benefits.
But the controversy over litigation finance affected other plaintiff lawyers including Seeger Weiss, where name partner Chris Seeger was accused of encouraging class members to take out high-interest loans from Esquire Bank, where he was a director.
Seeger once accused Mitnick of steering clients to Thrivest, now Balanced Bridge. In response, Mitnick said only two of his more than 1,000 clients borrowed with the firm.
Mitnick was one of the first lawyers to line up former NFL players to sue the league for failing to inform them about the risks of permanent brain damage. In his filing against Balanced Bridge, Mitnick said he hired Fox Rothschild in 2012, soon after the lawsuits were consolidated in multidistrict litigation before U.S. District Court for the Eastern District of Pennsylvania Judge Anita B. Brody.
Mitnick hired the firm to protect his interests in expected common-benefit fees – legal fees that are awarded to law firms that perform work that helps all the plaintiffs in a case – as well as a dispute with Locks Law Firm, with which he had a fee-sharing agreement. Fox Rothschild ultimately billed Mitnick less than $30,000, much of which the firm said remains unpaid, and officially ended their relationship in 2019.
In an Oct. 25 filing, Mitnick said Fox Rothschild sent a demand letter in November 2019, despite having a conflict of interest as his firm’s former attorneys. The dispute ultimately went to arbitration, where on Sept. 1 of last year, Mitnick was ordered to pay Balanced Bridge $2.3 million in back interest, plus almost $150,000 in legal and administrative expenses.
“Petitioner was at a complete disadvantage from day one of the arbitration proceedings and undoubtedly the prior documentation in possession of Fox Rothschild was used to the advantage of its client, respondent Thrivest,” Mitnick said in his motion to reverse the arbitration award.
“The arbitrator’s decision to casually deny petitioner’s request that Fox Rothschild be conflicted out of the matter was blatantly a legally incorrect decision for which the arbitrator was aware of the law and familiar with the ethical cannons that existed.”
In a filing with the arbitrator, Fox Rothschild said Mitnick signed an acknowledgement when he hired the firm that it might go on to represent other parties opposing him. The law firm also said it didn’t represent Mitnick on any matters that are related to its work for Balanced Bridge.
The dispute between Mitnick and Balanced Bridge illustrated how lucrative the litigation finance industry can be, as Genovesi first contacted Mitnick about lending to NFL players against their recoveries, then the two discussed financing Mitnick’s firm.
In their first transaction in 2015, Mitnick “sold” expected fees for $900,000 and agreed to pay Thrivent $1.4 million by 2018. He borrowed another $1.1 million in 2016 and rolled the loans into a single balance of $2.2 million in 2017, agreeing to repay $3.9 million by May 2020 at an annual interest rate of 19 percent, compounded monthly.
Litigation funders typically describe their loans as “sales” or other types of transactions in order to avoid usury laws setting maximum interest rates.
Mitnick anticipated earning $5-10 million in common benefit fees from the NFL settlement, but ultimately only received $674,000. In the arbitration, Balanced Bridge said Mitnick charged the players he directly represented another $1.9 million in fees, assuming a 17 percent rate on tax forms the settlement administrator sent to his law firm.
The arbitrator called that a “gross overreach,” and cited fees of 5 percent to 10 percent Mitnick received in other NFL settlements, estimating his take at only $735,000 from about a dozen clients. The arbitrator said he received another $1.9 million in referral fees from the Locks Law Firm.
Mitnick repaid $1.9 million in in seven installments from July 2018 to March 2019, but the unpaid balance has since ballooned to more than $2 million, leading Mitnick Law to argue the contracts were unenforceable – because at least one of them described the terms as non-recourse, but included conditions, including liability for the full amount if the firm defaulted, that were inconsistent with non-recourse loans.
The arbitrator agreed the first $500,000 loan was secured only by NFL fees and non-recourse. But he also ruled that if Mitnick breached the others, “the creditor is entitled to pursue any of the debtor’s assets to make itself whole.”
UPDATE
U.S. District Court for the Eastern District of Pennsylvania Judge Petrese B. Tucker upheld the petition to grant the arbitration award, as a result of Mitnick Law Office having informed the Court of its desire to withdraw its petition to vacate the same award. As such, the petition to vacate was dismissed with prejudice.
“The arbitrator’s Sept. 1, 2021 final award is confirmed, and judgment is hereby entered in favor of Balanced Bridge Funding, LLC and against Mitnick Law Office, LLC in the total amount of $2,889,875.00, comprised of the following:
• $ 2,742,313, representing the $2,307,119 stated in the final award, plus contract interest accrued from Aug. 1, 2021 through June 30, 2022 per the final award;
• $102,605.01, representing Balanced Bridge Funding LLC’s reasonable attorney’s fees and costs awarded by the arbitrator;
• $44,957, representing the administrative fees and expenses of the arbitration advanced by Balanced Bridge Funding, LLC and awarded by the arbitrator, which shall bear post-judgment interest under 28 U.S.C. Section 1961 from the date of this order,” Tucker ruled.
“The judgment shall bear interest at the statutory rate of five percent under 28 U.S.C. Section 1961 from the date of this order. Mitnick Law Office’s motion to quash is denied as moot. The Clerk of Court shall mark both cases as closed for statistical purposes.”
U.S. District Court for the Eastern District of Pennsylvania cases 2:21-cv-04073 & 2:21-mc-00075
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com