A recent ruling by a federal judge in the NFL Concussion Case may make some waves in the litigation financing industry. The ruling by Judge Anita B. Brody voids the contracts between a number of former NFL players and litigation finance lenders. The players, who suffer from cognitive impairment as a result of football-related concussions, took out high-interest loans to finance their lawsuit against the NFL. The money advanced would be paid back from the proceeds of the settlement—which totals $1 billion.
The ruling by Judge Brody would void contracts between the retired players and a number of litigation finance firms, including Atlas Legal Funding, RD Legal Funding LLC, and Cash 4 Cases. Class counsel Christopher Seeger filed the motion asking the court to set aside the contracts. Although Seeger’s motion named only RD Legal Funding, Judge Brody’s ruling applies to any agreement “that assigned or attempted to assign any monetary claims.”
Judge Brody’s ruling could test the power of courts to regulate litigation financing agreements. Reuters reports that there is “a booming industry in advancing cash to plaintiffs expecting payouts in personal injury cases.” Litigation funding is a mechanism used by plaintiffs and their lawyers to finance their lawsuits against large defendants with deep pockets. Lawsuits may go on for years, and few plaintiffs have the resources to stay the course without some third-party financial assistance. Modern litigation funding is a way around the common law doctrines of champerty and maintenance.
Regulation of litigation funding agreements exists in some, but not all, states. Also, the Consumer Financial Protection Bureau has stepped into the field of litigation funding and has brought action against RD Legal Funding for litigation funding practices. The Trump administration may cut back the CPFB’s activities in a variety of areas, including regulation of litigation funding. However, the sweeping ruling by Judge Brody should be a wake-up call for every firm in the litigation funding industry. What will happen next in the litigation funding world is uncertain.