PHILADELPHIA (CN) – In a reversal where the court itself noted the potential for exploitation by usurious lenders, the Third Circuit ruled Friday that NFL players were entitled to trade their shares of a $1 billion concussion settlement for a quick cash payout.
Writing for a three-judge panel in Philadelphia, the decision by U.S. Circuit Judge D. Brooks Smith says third-party lenders cannot seek settlement proceeds directly from the claims administrator in the case but can collect directly from players.
Whether those lenders will collect, however, remains unclear.
“The Third Circuit’s ruling is a significant win for former NFL players who were targeted by predatory funding companies,” Christopher Seeger, an attorney for the players with the firm Seeger Weiss, said in a statement. “For funding companies that maintain the cash advances they provided are not assignments, we will argue that those agreements are not enforceable, particularly as many former NFL players are cognitively impaired and lacked the capacity to enter these contracts.”
The ruling comes four years after the NFL settled long-running claims from former professional football players that it actively concealed evidence linking the violent sport to a type of brain damage known as chronic traumatic encephalopathy.
CTE has been blamed for dozens of deaths, as well as depression, anxiety, and a number of other health problems in former players.
Though a CTE diagnosis is definitive only in an autopsy, the NFL’s settlement pays up to $5 million to players who have been diagnosed with certain qualifying illnesses.
Since that fund began paying out in mid-2017, however, a number of players involved in the class have expressed frustration at the bureaucratic red tape that the process entails. Meantime some news outlets are reporting that the fund is already beginning to dry up. For those who can collect, USA Today found in October that many players have seen their payouts reduced to zero as the result of legal fees and liens by insurers and credit card companies due to massive medical bills.
Against that backdrop, the federal judge overseeing the case appointed a special investigator to review the settlement for potential fraud by opportunistic lawyers claiming exorbitant legal retainers.
In late 2017, the court went a step further and issued an order that purported to void the assignment agreements some players had reached with third-party lenders. With medical bills mounting, many opted to forfeit their rights to the settlement in exchange for a cash advances.
U.S. District Judge Anita Brody cited a need to protect the players from predatory funding companies, but the Third Circuit ruled Friday that she went too far.
Siding with the companies RD Legal Funding, Thrivest Specialty Funding and Atlas Legal Funding, the court found that it is out of the court’s power to undo some of the advances that have already been made to players.
“Going forward, the litigation funding companies will be able to pursue, outside of the claims administration process, whatever rights they may continue to have under their cash advance agreements with class members,” Smith wrote.
The ruling emphasizes that the lenders are on their own when it comes to enforcing their agreements.
Given their mental disabilities, Smith noted that some with CTE may not have been able to negotiate fair arrangements with the lenders, and that any predatory loans would need to be hashed out in court or in arbitration.
As of April 22, 2019, 842 claims have been approved totaling more than $659 million. The settlement became effective on Jan. 7, 2017.
Regulators have taken a hard look at lenders like RD Legal Funding. In one case dismissed by a federal judge in September, the New York attorney general and Consumer Financial Protection Bureau accused the company of loaning money at predatory rates to terrorism victims. That case is currently being appealed to the Second Circuit.
Boies Schiller attorney Michael Roth, who represents RD Legal Funding and argued the issue before the Third Circuit, said his clients are reviewing the opinion but declined to comment further.