Third Circuit Finds Class Members’ Cash Advance Agreements May Fall Short of a True Assignment
On April 26, 2019, the Third Circuit Court of Appeals reversed in part and affirmed in part a district court order purporting to void cash advance agreements entered into by and between class members and litigation funding companies in In re National Football League Players’ Concussion Injury Litigation.
Following settlement of the underlying litigation, hundreds of class members entered into cash advance agreements with various litigation funding companies, including the three appellant companies. Under the agreements, class members assigned their rights to settlement proceeds to the companies in exchange for cash payments. In certain instances, the companies only received the right to receive settlement funds after the claims administrator had paid out the awards to the class member. In other instances, the company obtained both the right to collect directly from the claims administrator and the right to receive settlement funds after the claims administrator had paid out awards to the class member.
The settlement agreement in the underlying litigation contained an anti-assignment provision, which invalidated any assignment by class members. On December 8, 2017, based on the language of the anti-assignment provision, the district court entered an order voiding all assignment agreements, stating “[t]o the extent that any Class Member has entered into an agreement that assigned or attempted to assign any monetary claims, that agreement is void, invalid and of no force and effect.” The district court’s order was broad and did not make any factual findings as to any specific cash advance agreement.
After determining that it had jurisdiction under the collateral order doctrine to hear three of the four timely appeals made by the appellants, the Third Circuit held that any true assignments in the cash advance agreements were void ab initio under the anti-assignment clause of the settlement agreement. However, the court further held that, while the district court had authority to void true assignments, the district court went beyond its authority when it purported to void the cash advance agreements in their entirety, as something less than a true assignment may not violate the anti-assignment clause.
The Third Circuit reversed the district court’s order to the extent the district court purported to void the cash advance agreements in their entirety and void those contractual provisions that went only to a lender’s right to receive funds after the class member acquired them. The court affirmed the district court’s ruling that contractual provisions that permit the lender to seek funds directly from the claims administrator were void as true assignments.
In re Nat’l Football League Players’ Concussion Injury Litig., No. 18-1040, 2019 WL 1868828 (3d Cir. Apr. 26, 2019).