November 18, 2019
While the issues surrounding dementia claim difficulties continue to be shrouded in mystery, settlement funder issues in the NFL Concussion Settlement have presented a more visible face, and the face at the center of the drama is that of William White.
White was an Ohio State standout who began his NFL career with the Detroit Lions in 1988 where he remained through 1993. His eleven-year career as an NFL safety concluded starting Super Bowl XXXIII with the Atlanta Falcons in 1999. Upon retirement, White returned to Columbus and worked in Ohio State’s football program until he was diagnosed with the devastating neuromuscular disease, ALS, in 2016. It was in December 2016, the same month that the concussion settlement became final after the Supreme Court declined to hear an appeal, that White took a $500,000 advance from Thrivest, a sum that eventually cost him $1.25 million.
As players were encouraged to enroll in the settlement as to be eligible for compensation and led to believe if they had already been diagnosed with a qualifying condition they would receive compensation very quickly, White probably didn’t feel he had much to lose by taking the loan. | Link to Thrivest Contract |
The claims administrator began accepting claims in March 2017 and as such, White probably figured he’d receive his award in April or May of that year. Unfortunately, nothing about the claims process turned out to be quick and easy and even players with ALS experienced long delays in gaining approval of their awards, which for White, was estimated at $3.5 million.
In December 2017, White was still waiting for his settlement award when Judge Anita B. Brody issued an order voiding all contracts between settlement funders and retired players. This must have been viewed as cause for celebration by White and many others who’d accepted high-interest funding loans. Per Brody’s order players would be required to pay back the principal of their loans and nothing more.
Most of the funders balked at this idea and refused to accept rescission, and this led to a deal brokered by Locks Law Firm in which funders could receive the principal plus 10 percent interest. Some funders agreed to the terms but three of the larger funders, RDLegal, Atlas, and Thrivest refused rescission and appealed to the Third Circuit.
On April 26, 2019, the appeals court reversed most of Judge Brody’s order, finding that she had abused her discretion in voiding all but “true assignments” that allow a funder to step into the shoes of a player and collect directly from the claims administrator. It held that contracts for advances in which the terms only permitted the funder to collect from a player after his award had been issued were still valid and outside the authority of the district court, and specifically noted that William White’s contract with Thrivest was not a “true assignment.”
In addition to the legitimacy or lack thereof regarding Judge Brody’s order voiding funding agreements, she had denied Thrivest’s motion to compel William White to arbitration in accordance with contract stipulations as interest continued to accumulate on the loan White believed had been voided by the court. Brody was also reversed on this decision and arbitration commenced.
An emergency preliminary arbitration ordered White to place the disputed funds of $1.25 million in escrow until a final determination was made. White refused and the matter returned to Judge Brody’s court, where on June 14, Thrivest filed under seal, an emergency motion to confirm the emergency arbitration award. (Yes, Thrivest labeled almost every action an “emergency.”)
Through his attorney, Robert Wood, White responded on June 25 opposing the sealing of the motion.
White claims that his privacy had already been breached by Thrivest in 2018 when they publicly filed the initial action against him, but since his name was already out there, he “posits that good cause exists not to seal the Emergency Motion,” as a matter of information, transparency, and fairness to other class members.
On the same day, White also filed an application asking the court to vacate the emergency arbitrator’s interim award.
On July 1, Judge Brody ruled on all pending motions. She denied Thrivest’s motion to file under seal but granted their motion to confirm the arbitration award as well as stay district court proceedings in favor of arbitration. She ordered that status reports of the ongoing arbitration be filed with the district court.
On July 9, Thrivest filed another emergency motion asking the court to hold White in contempt because he had not yet placed the disputed funds in escrow. The sanctions Thrivest sought to impose were daunting:
- For every subsequent day that White fails to comply, to pay a fine of $500 per day to the District Court
- Order any bank, financial, or brokerage institution or other person or entity holding any funds, securities, or other assets to prohibit the withdrawal, removal, transfer or other disposal of funds or assets.
- Pay Thrivest’s attorney fees in connection with filing the motion for contempt.
White replied on July 23, stating, “compliance with the Confirmation Order is not possible,” while providing notice of intent to appeal.
For the first time, publicly, White’s attorney indicated the severity of his physical deterioration due to the ravages of ALS.
The very next day, Thrivest replied. With no acknowledgment of White’s physical condition, Thrivest wrote, “He offers no reason why he should not be held in contempt, except his unsupported assertion that compliance is ‘not possible.’” Thrivest requested a hearing and on July 30, White filed his notice of appeal to the Third Circuit that was docketed on August 2, seeking to vacate the arbitration award. On August 20 a sealed “attorneys of record only” document was filed.
Back at the District Court, on August 16, Judge Brody ordered Thrivest to respond as to why the motion for contempt was before her as opposed to the arbitrator.
The day after the sealed filing at the Third Circuit and nine days before the deadline to reply, on August 21, Thrivest filed its response to Judge Brody’s order, writing, “Consistent with settled law, the American Arbitration Rules do not contain contempt procedures and the AAA makes clear, in its published guidance to neutrals, that ‘arbitrators do not
have the authority to hold a person in contempt’ …Indeed, the FAA specifically defers enforcement to the courts.” White submitted a response and Judge Brody scheduled a contempt hearing for October 10. On October 8, the Third Circuit affirmed Judge Brody’s escrow order. At the conclusion of the October 10 hearing, the court issued an order prompting him to submit to Thrivest’s interrogatories proving his inability to comply with the escrow order.
White submitted a single bank statement reflecting an account holding less than $500, but did not submit evidence as to the disposition of his settlement award. While declining to incarcerate White, on November 8, Judge Gerald McHugh, acting in Judge Brody’s absence held White in contempt, restating the sanctions freezing White’s assets and giving a deadline for White to provide the requested information. It became moot, however on November 11, when arbitrator Nancy F. Lesser issued a final opinion holding that White was responsible for his debt as well as numerous other costs, fees, and penalties totaling over $1.25 million.
A look at the Arbitration that Determined William White’s Fate
Arbitrator Lesser, after recapping a brief history of the dispute, zeroed in on the written terms of the contract between White and Thrivest, noting that prior to entering into the agreement Thrivest sought medical information to prove his qualifying condition for an award and mental capacity to enter into a contract.
While the argument of mental incapacity to enter into a contract didn’t hold up for White, there are some narrow circumstances where it may benefit other players. ALS is a horrific neuromuscular disease that ravages the body but leaves the mind intact. Players with a confirmed diagnosis of Alzheimer’s disease or advanced dementia might be able to use the argument under limited circumstances. If a lender made no attempt to confirm the player’s mental capacity AND no family member or power of attorney co-signed or attested to the player’s capacity to enter into a contract then the argument might hold up.
Insights for Other Players
In earlier filings Thrivest referred to White’s case a bellwether of sorts to determine how it’s other claims might unfold and when Thrivest filed a motion to seal, White opposed it so that players would have access to the developments of his claim in order to make informed decisions as to how or if to challenge advances they might have taken, so in essence, at great cost to himself, he has provided a roadmap of sorts.
One of the main considerations that seemed to influence Arbitrator Lesser’s decision making was the fact that the advance was a non-recourse loan, and had White not received an award or had he received an award insufficient to repay Thrivest the principal and interest at term, Thrivest would not have been able to collect. She felt the risk justified the high interest charged.
Is it a “true assignment” per the Third Circuit Definition?
As I’ve written numerous times since the Third Circuit issued its precedential opinion, on the matter the district courts authority comes down to only one factor, and that is if the contract constitutes a “true assignment” permitting the lender to step into a player’s shoes and seek payment from the defendant through the claims process. If the answer to that question is “yes,” then the district court has the authority to void any provisions of the contract that enforce this assertion, but not the contract in its entirety. If the answer is “no” then the district court does not have that authority.
White argued that the following language in his contract equated to a “true assignment.”
Lesser disagreed, pointing that the rights conferred in Section 2(a) define Thrivest’s right to collect from a player and not the settlement itself. She pointed to Section 2(c) which stipulates payment after the player receives his award.
She also references Section 2(g).
To clarify the meaning of “White agreed to pay to Thrivest…before any payment is made from the Distribution to White…” stems from a general understanding to which both White and his attorney signed off that when settlement proceeds are awarded to a represented party, they are initially sent to the attorney’s escrow account. The attorney then deducts his fee and other obligations such as a settlement advance, and afterward, forwards the balance of the proceeds to his client. Lesser points to Section 6(b) in her determination that Thrivest’s contract does not constitute a true assignment.
Attorney Safeguard Removed by District Court
The district court removed an important safeguard for players when it determined that should a funder refuse rescission, the award in its entirety would be paid directly to the player, bypassing his attorney, and in essence, thwarting the funder’s ability to enforce its contract without litigation, unless the player of his own accord established an escrow account or sent the money in dispute back to his attorney.
But why would he after the court took the extraordinary measure of paying him directly and stating that his loan agreement was void? This was White’s argument in a nutshell.
It’s hard to argue with him at least insofar as he was misled by the party he perceived as most trustworthy.
Commercial or Consumer Arbitration?
In the arbitration, White raised a defense particular to arbitration, and therefore outside his arguments in district court.
White argued that the consumer, rather than commercial arbitration forum was proper, but Lesser ruled that he raised the argument too late and ultimately concluded that the commercial forum was correct due to the complexity of the contract. White would have been afforded greater protection in a consumer arbitration and this may be something for other players to consider if they decide to challenge their agreements based on usury laws or matters of competency.
The Third Circuit was Clear
Lesser pointed to a portion of the Third Circuit opinion that I’ve also found to be crystal clear, even if it’s not the desired outcome.
I really can’t understand how the words written by the Third Circuit are anything but crystal clear. It certainly wasn’t the outcome players were hoping for, but if nothing else, an appellate ruling provides clarity and guidance for decision-making.
When looking at agreements with funders such as Thrivest, time is literally money, and therefore should a player decide to dispute the validity of portions of the agreement, he should focus on areas that may be winnable. Most funding agreements are not true assignments and it would seem like a fruitless expenditure of time and money to try to portray them as such based on a neutered court order, rather than focusing on state law claims that might be found valid.
While Chris Seeger likely meant well, and his efforts were able to curtail some of the smaller funders, I can’t help but think that some of his statements following the Third Circuit’s publication of its opinion may have led to confusion.
The following is an excerpt from an article I wrote just after the opinion was issued featuring Seeger’s comments to Law360.
My immediate thought was, “This isn’t the Oprah Winfrey show.” The comments of Lead Counsel and the actions of the Claims Administrator and District Court seem apparent in White’s arguments.
Otherwise, how could he and his counsel have misread almost the entirety of the Third Circuit’s writing, while clinging only to the possibility left open because the Third Circuit “expressed no opinion as to the ultimate enforceability” of the contracts? The Claim’s Administrator’s consistent arguments stating reliance on the court’s order must have provided false hope to him.
It was a costly and tragic error.
Arbitrator Lesser’s conclusion:
Fees Add Insult to Injury
After making her conclusions as to the enforceability of the loan, Lesser turned to assess the remainder of the contract provisions regarding cost incurred by Thrivest for legal fees as well as arbitration costs. Here’s a look at the arguments in that regard.
White contested the attorney fees on these premises:
- Because Thrivest has at least 34 other transactions with other class members, he’s being asked to ‘pay the freight’ for those collections.
- “Thrivest lost virtually all of the arguments it raised at the Third Circuit.”
- Thrivest refused participation in the Third-Party Resolution Funding Protocol that would have reimbursed the principal plus 10% interest.
- The amount of interest accrued is “unconscionable.”
Arbitrator Lesser wasn’t persuaded by the “economy of scale” argument ruling that Thrivest’s actions were specific with White. Regarding the argument that Thrivest refused rescission, she wrote:
The underlined portion of her opinion may be of help to future claimants, noting that Thrivest offered to stop the clock on interest had White escrowed the funds until a final decision was rendered. Had he done so, He’d have saved over $130,000 in interest.
Ethical vs. Legal
Ethically I’d agree with White’s assessment of the accrual of interest as “unconscionable,” but unfortunately at least in this instance, a court is governed by what is legal even if it seems unethical. Thrivest justified its interest rates by emphasizing that the advance was a non-recourse loan and that if White had not received an award as expected, White would have owed nothing, while Thrivest would have lost a substantial sum.
Predatory lending, whether in reference to a settlement funder, payday loan maker, or certain car title loans is a job for state legislators propelled by smart voters and not the courts, since they are responsible for the laws that courts are tasked to enforce. Sub-prime lenders, as they’re often referred to spend substantial time lobbying legislators for laws favorable to their interest and are often successful in their efforts. Sadly, the only remedy I see is for voters to do their homework and pressure representatives to uphold their interests and not bow to the purses of those who’d exploit them.
The final award upheld every provision of Thrivest’s contract.
Learning from History
Sadly, a man suffering from ALS has also paid a high price for the lessons that can be gleaned from his misfortune. At the time White received his settlement award, according to the contract terms, he owed about $750,000.
📌The principal should be paid as quickly as possible.
Had White repaid the $500,000 principal when his settlement award was issued, during the time his loan agreement was litigated, had the ruling gone exactly as it eventually did, he’d have saved himself over $65,000 since interest would have been accruing on $250,000 rather than $500,000.
📌Placing disputed funds in escrow can save money in the long run.
Had he escrowed the money immediately, he would have stopped the accrual of interest altogether, saving over $130,000.
📌Make viable arguments based on usury laws.
It’s also likely that had he made viable arguments to the arbitrator based on usury laws in his state, he may have been able to reduce the interest as well as some of the attorney fees, as the litigation would have been less protracted and the arguments standing a better chance of success.
📌Be specific when challenging attorney fees.
Lessor noted regarding White’s objection to attorney fees that there was “no challenge by White to the hourly rates charged by Thrivest’s counsel or the amount of time incurred for any particular task.” While there would be no guarantee of success when applying these arguments, it’s not outside the realm of reason that should a player present these arguments, the arbitrator might find the hourly rates higher than those of other similarly situated attorneys or find the time applied to certain tasks above the norm. It’s also feasible that an arbitrator might have split or reversed the application of arbitration fees if she’d found the player’s arguments at least somewhat legally meritorious and found him more willing to negotiate in good faith by escrowing the disputed funds.
📌Consumer vs. Commercial Arbitration
I called on an experienced arbitrator, David L. Evans of Murphy King, in Boston, to learn if Lesser’s ruling that commercial arbitration was the proper forum would be binding on other class members. He said the decision is not binding but declined further comment since he’d not had time to study the case in detail. Arguing from the beginning to appear in a consumer forum could ultimately lead to a more lenient ruling if a player is successful in avoiding commercial arbitration.
As I was trying to wrap up this manuscript, I took a call from the wife of a retired player and told her what I was writing about and how Mr. White, became the victim of a court’s misconstrued efforts to void advances, coupled with some judgmental errors on his part, likely prompted by the court and claims administrator’s representations.
She expressed incredulous outrage, exclaiming how lenders like Thrivest swarmed like locusts in search of the most impaired players they could find in order to take advantage of them. She was also flabbergasted that White was held totally accountable for his contract in its entirety by relying on erroneous representations on the part of the court and claims administrator. I’ve predicted this would ultimately be the result of Judge Brody’s attempt to void settlement advances, even prior to the Third Circuit ruling. This is one of those instances, in which I can take no pleasure in calling the result. I’d have much rather been proven wrong in my assessment because sadly, there will be no holding of accountability. Judge Brody can shrug her shoulders and say, “Oops! I guess I missed on that one,” while facing no consequences for her perhaps well-intended, yet poorly legally grounded decisions. The court and those tasked with the administration of the settlement are protected by quasi-judicial immunity for any actions taken while carrying out that task. Sometimes it seems like justice is a commodity in short supply.
I keep waiting to write a story with a happy ending. Hopefully, at least, the lessons Mr. White has learned and taught through observation of his ordeal may provide a less tragic ending for those who find themselves facing a similar dilemma.
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