PHILADELPHIA (Legal Newsline) - A lawyer who represented hundreds of players in a $1 billion concussion settlement with the National Football League is fighting an arbitrator’s order to repay some $2.3 million in high-interest loans from a litigation funder.
New Jersey attorney Craig Mitnick asked a federal judge to vacate the award to Balanced Bridge Funding, formerly known as Thrivest, a finance company that also extended loans to former NFL players in anticipation of settlement proceeds.
In his filing with U.S. District Judge Gerald McHugh in Philadelphia, Mitnick accuses Balanced Bridge and its lawyers at Fox Rothschild of taking advantage of him and violating “the cannons (sic) of ethics.” Before representing Balanced Bridge, Fox Rothschild represented Mitnick for several years in fights over fees in the NFL litigation, including a dispute with his co-counsel Locks Law Firm.
Fox Rothschild said it will file a response to Mitnick’s petition noting that the arbitrator rejected most of his arguments already.
Mitnick’s legal action is the latest attempt to reduce or eliminate his firm’s fast-growing debt to Balanced Bridge, a firm owned by Joseph Genovesi that also extended high-interest loans to NFL players. The practices of Thrivest, RD Legal Funding and others drew the wrath of the Consumer Financial Protection Bureau, former New York Attorney General Eric Schneiderman and ultimately the judge overseeing the concussion settlement, who declared the funding agreements invalid under a settlement clause prohibiting the assignment of benefits.
The Third Circuit Court of Appeals reversed in 2019, ruling the federal judge overstepped her authority by invalidating all financing contracts and not just prohibited assignments of settlement benefits. But the controversy over litigation finance touched other plaintiff lawyers including Seeger Weiss, where name partner Chris Seeger was accused of encouraging class members to take out high interest loans from Esquire Bank, where he was a director.
Seeger once accused Mitnick of steering clients to Thrivest, now Balanced Bridge. In response, Mitnick said only two of his more than 1,000 clients borrowed with the firm.
Mitnick was one of the first lawyers to line up former NFL players to sue the league for failing to inform them about the risks of permanent brain damage. In his filing against Balanced Bridge, Mitnick said he hired Fox Rothschild in 2012, soon after the lawsuits were consolidated in multidistrict litigation before U.S. District Judge Anita B. Brody in Pennsylvania. He hired the firm to protect his interests in expected common-benefit fees – legal fees that are awarded to law firms that perform work that helps all the plaintiffs in a case – as well as a dispute with Locks Law Firm, with which he had a fee-sharing agreement. Fox Rothschild ultimately billed Mitnick less than $30,000, much of which the firm said remains unpaid, and officially ended their relationship in 2019.
In his Oct. 25 filing, Mitnick said Fox Rothschild (identified as “Fox-Rothchild” in the brief) sent a demand letter in November 2019, despite having a conflict of interest as his firm’s former attorneys. The dispute ultimately went to arbitration, where on Sept. 1 Mitnick was ordered to pay Balanced Bridge $2.3 million in back interest plus almost $150,000 in legal and administrative expenses.
“Petitioner was at a complete disadvantage from day one of the Arbitration proceedings and undoubtedly the prior documentation in possession of Fox-Rothchild was used to the advantage of its’(sic) client, Respondent Thrivest,” Mitnick said in his motion to reverse the arbitration award. “The Arbitrator’s decision to casually deny Petitioner’s request that Fox-Rothchild be conflicted out of the matter was blatantly a legally incorrect decision for which the Arbitrator was aware of the law and familiar with the ethical cannons that existed.”
In a filing with the arbitrator, Fox Rothschild said Mitnick signed an acknowledgement when he hired the firm that it might go on to represent other parties opposing him. The law firm also said it didn’t represent Mitnick on any matters that are related to its work for Balanced Bridge.
The dispute between Mitnick and Balanced Bridge illustrates how lucrative the litigation finance industry can be. Genovesi first contacted Mitnick about lending to NFL players against their recoveries, then the two discussed financing Mitnick’s firm.
In their first transaction in 2015, Mitnick “sold” expected fees for $900,000 and agreed to pay Thrivent $1.4 million by 2018. He borrowed another $1.1 million in 2016 and rolled the loans into a single balance of $2.2 million in 2017, agreeing to repay $3,9 million by May 2020 at an annual interest rate of 19%, compounded monthly.
Litigation funders typically describe their loans as “sales” or other types of transactions in order to avoid usury laws setting maximum interest rates.
Mitnick anticipated earning $5-10 million in common benefit fees from the NFL settlement but ultimately only received $674,000. In the arbitration, Balance Bridge said Mitnick charged the players he directly represents another $1.9 million in fees, assuming a 17% rate on tax forms the settlement administrator sent to his law firm.
The arbitrator called that a “gross overreach,” and cited fees of 5% to 10% Mitnick received in other NFL settlements, estimating his take at only $735,000 from about a dozen clients. The arbitrator said he received another $1.9 million in referral fees from the Locks Law Firm. Mitnick repaid $1.9 million in in seven installments from July 2018 to March 2019, but the unpaid balance has since ballooned to more than $2 million.
Mitnick Law argued the contracts were unenforceable because at least one of them described the terms as non-recourse but included conditions, including liability for the full amount if the firm defaulted, that were inconsistent with non-recourse loans.
The arbitrator agreed the first $500,000 loan was secured only by NFL fees and non-recourse. But he also ruled that if Mitnick breached the others, “the creditor is entitled to pursue any of the debtor’s assets to make itself whole.”