NFL Concussions, Settlement and Litigation Funding - Is It Over or What?

When a federal judge spiked litigation funding agreements in a $1 billion settlement of NFL concussion cases, a lot of people thought it was over.

The litigation funders, in particular, held their breath while the case went up on appeal. Luckily for them, the U.S. Third Circuit Court of Appeals said the trial judge was out of bounds. It was close, but apparently the litigation funding game is still in play. As Yogi Berra said, it ain't over till it's over.

It Ain't Over

In post-settlement funding agreements, plaintiffs typically assign a portion of their potential recovery to third-party lenders in exchange for money while they wait for recoveries. Pre-resolution funding agreements are different; they finance the litigation.

In the NFL concussion cases, Judge Anita Brody voided all post-litigation funding agreements between the football players and lenders. She said the agreements were unenforceable, in part because the players were "obviously cognitively impaired." Plus, she said, the settlement agreement "clearly" said class members were unable to make assignments. "Thus, the Court as little sympathy for a Third-Party Funder that will not a receive a return on its 'investment,'" she said.

That decision hurt the industry more than a quarterback getting sacked by a 400-pound defensive lineman, so the Third Circuit called foul. A unanimous panel said the judge did not have the authority to void the contracts because they were independent from the settlement. "The district court's authority certainly does not extend to how class members choose to use their settlement proceeds after they are disbursed," they said.

'Necessary or Appropriate'

The Third Circuit commended Brody for her work in the "extraordinarily complicated" case, but said she had other options. For example, she could have voided the assignments and ordered the class administrator not to recognize them. Lenders, in the meantime, could enforce their contracts directly with players.

Legal observers say the ruling is narrow, but litigation funding in general is facing more scrutiny. Maya Steinitz, a professor at the University of Iowa's College of Law, said parties and class counsel are arguing that certain funding practices are inappropriate. That can guide courts, legislators, and lawyers in the field. "It's helpful to see how third-party funding of class actions comes up in the real world and in contexts where there is, at least, alleged abuses," Steinitz said.

Related Resources:

• 3rd Circuit Hears Battle of the Banana Costumes (FindLaw's U.S. Third Circuit Blog)
• 2nd Judge Rules Against Male-Only Draft (FindLaw's U.S. Third Circuit Blog)
• United States Third Circuit Cases (FindLaw's Cases & Codes)