(Reuters) - The 3rd U.S. Circuit Court of Appeals apparently believes that U.S. District Judge Anita Brody of Philadelphia has some explaining to do.
On Monday, the appeals court directed Judge Brody, who is presiding over multidistrict litigation in which retired NFL players blame the league for their neurological impairment, to file an answer to a Sept. 20 mandamus petition by the litigation funder Thrivest. As I’ll explain, Thrivest believes Judge Brody is allowing the claims administrator in the NFL concussion case to issue misleading information to players about their funding agreements. The litigation financier is asking the 3rd Circuit to direct Judge Brody to overturn determinations that its funding agreements are invalid, per the appellate court’s ruling last April.
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Thrivest’s counsel, Peter Buckley of Fox Rothschild, told me it’s significant that the 3rd Circuit has ordered a response from Judge Brody. The three judges who entered Monday’s order, he said, are the ones who issued last April’s ruling defining the limits of Judge Brody’s authority over players’ funding agreements, so they’re clearly familiar with the issues in the Thrivest petition. And under the appellate rules of procedure, the 3rd Circuit could have dismissed the petition without any response from Judge Brody. So, Buckley said, he regards the order directing a response as a sign that the 3rd Circuit judges “are taking the matter seriously.”
To understand what’s at stake in the mandamus proceeding for litigation funders – and for plaintiffs’ lawyers whose clients have received money from funders – you have to look back to the 3rd Circuit’s ruling from earlier this year. The decision, as you probably recall, addressed an order by Judge Brody that essentially invalidated all agreements between plaintiffs in the NFL case and most litigation funders. Thrivest and two other funders protested that the judge exceeded her authority. The 3rd Circuit ruled that Judge Brody had the power to invalidate funding agreements structured as true assignments - in which the funder stepped into a plaintiff’s shoes to demand repayment directly from the settlement administrator – because she has authority over the administration of a settlement she approved.
But the appeals court also said that once settlement money is disbursed to plaintiffs, Judge Brady's authority ends. As I’ve written, the 3rd Circuit held that Judge Brody exceeded her power when she acted to stop proceedings outside the boundaries of the NFL case by funders demanding repayment from players who received cash advances.
Thrivest contends that its funding contracts were not structured as assignments but as agreements entitling Thrivest to repayment after plaintiffs received payouts from the settlement. (The 3rd Circuit’s ruling in April seemed to agree with Thrivest’s interpretation of its contracts.) The funder has launched arbitrations against players who have received settlement proceeds but have declined to repay Thrivest and has obtained interim orders in two cases directing players to put the disputed money in escrow.
Meanwhile, however, the administrator of the NFL settlement has continued to issue notices to ex-players that their agreements with Thrivest are invalid – even though, Thrivest argues, the 3rd Circuit’s ruling in April expressly said that Judge Brody did not have the authority to strike down agreements requiring players to pay back funders after they’ve received settlement money. According to Thrivest, these notices have prompted funding recipients to balk at repayment demands. Ultimately, the funder argues, the notices will only cost ex-players money because interest on their cash advances continues to accrue while Thrivest litigates repayment.
Thrivest asked Judge Brody in July for a conference to discuss its assertion that the settlement administrator’s notices did not reflect the 3rd Circuit’s ruling on the limits to her authority. The judge denied that request. Thrivest told the 3rd Circuit in last week’s mandamus petition that the trial judge has left the funder no alternative but to seek mandamus.
“Thrivest has exhausted its avenues of relief below, and continued implementation of the assignment rules is likely to cause irreparable injury to Thrivest, class members or both,” the petition said.
Judge Brody has until Oct. 4 to submit her response.
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