The trouble with the NFL concussion litigation settlement

I've written a little and spoken a little about the NFL concussion litigation. As someone who teaches civil procedure and complex litigation, I find the case fascinating. But there's an aspect to the proposed settlement that seems to have been lost: calculating value and assessing risk.

Settlements often arise as a mechanism not simply to avoid the costs of litigation, but also to minimize risk. And in this case, there was plenty of risk.

On the players' side, there was a real risk that many post-1994 players would have their claims dismissed outright. For those who played prior to 1994, there was the difficulty of establishing fraud on the part of the NFL, and attributing causation of injuries to the NFL as opposed to other football-related or other activity.

On the league's side, there was the risk of some claims surviving the motion to dismiss and making it to discovery, which not only exerts pressure on the defendants as the case moves closer to trial and a decision on the merits, but also risks exposing the league to embarrassing disclosures during the litigation. Further, the original actions were not filed as a class action, but mostly as individual actions--which meant that the litigation costs to the league would be extraordinarily high as it would have to litigate hundreds, perhaps thousands, of individual cases (even if pretrial proceedings were consolidated). Even if some of the cases were dismissed, there would be the risk of reinstatement of the claims on appeal.

Of course, both sides had high expected litigation costs. But money today is worth more than money tomorrow, and faster settlements help maximize value for the parties. Inherent uncertainty of litigation and juries fuel parties to find compromise.

Compromise they did, ostensibly. But several months elapsed from the announcement settlement in August to the final codification of the deal a few months ago.

The goal was to resolve the claims on a global basis through a settlement class action. The parties would agree that all former NFL players would be a part of the class, and the settlement would apply to anyone who had not opted out. The proposed sum of cash was around $765 million, parceled out in a few different ways and based on a few different metrics. While the class would include all former NFL players, individuals could "opt out" of the proposed settlement and pursue individualized litigation against the league.

A substantial number of players (and their attorneys) objected to the settlement and threatened to opt out if it went through. They complained that the total sum was too low to adequately compensate all the players under the proposed terms of the deal. The presiding judge, Anita B. Brody, agreed and declined to certify the settlement.

Admittedly, the cash total was relatively low, given the multi-billion dollar industry of the NFL. But the value of the players' litigation was relatively low, given the risk of dismissal of the bulk of the claims and the difficulty in proving the rest. But was the settlement unfair?

The objectors got what they wanted: a settlement undone and the opportunity to craft a new one (while still reserving the right to opt out later). But there's the risk of the old gypsy curse: "May you get what you want." Here are a few problems. (The original proposed settlement is available as a PDF here.)

• The risk that many players will have their claims dismissed--and receive no settlement. Suppose that, instead of reaching a new settlement, the parties attempt to move forward and litigate the mass action--or attempt to certify the entire class of former NFL players. There's a very real risk that the post-1994 players would have their claims dismissed outright. That means their litigation is worth $0--which is considerably less than the bargained-for settlement. Now, the pre-1994 players may have the stronger claims, and may get more money at the end of the day. (Indeed, it's probably not a coincidence that an attorney representing Dave Duerson, who retired in 1993, reportedly loudly opposed the proposed settlement.) It's the lack of commonality between pre-1994 and post-1994 players--and perhaps other cohorts--that may result in wildly different treatment of players, and to the severe detriment of many. (It's also, perhaps, one reason that a settlement should not be approved--if the interests of the class are too divergent, it's usually inappropriate to settle all of the claims in a single class.)
• The different economics for different attorneys. Which is more valuable: a lot of guaranteed money, right now, for an entire group of clients? Or a possibility of more money, over the next several years, for clients that come through the door one at a time? It all depends not just on your risk tolerance, but also on your position. The lead committee in the litigation would have received over $100 million in fees, while other attorneys would have received substantially less (or nothing). Unsurprisingly, attorneys within the lead committee would be inclined to support the settlement; attorneys on the outside would take their chances with piecemeal, individualized litigation that would ensure individualized attorney payments in subsequent successful cases or settlements.
• The curious blow-up provision. Most settlements have a "blow-up provision." That is, if a certain number of plaintiffs opt out of the settlement, the deal falls through. The attorneys usually have a good idea about how many they need to remain inside the settlement class in order for a settlement to be "worth it" to the plaintiffs. Here, the settlement includes no such term, except for a unilateral power left to the NFL in Section 16.1: "the NFL Parties will have the absolute and unconditional right, in their sole good faith discretion, to unilaterally terminate and render null and void this Class Action Settlement and Settlement Agreement for any reason whatsoever following notice of Opt Outs and prior to the Fairness Hearing."

The settlement also includes an important provision not so easily reducible to a bullet point. Section 18.5 includes a provision that settlement class members will "dismiss pending, and/or forebear from bringing, litigation relating to cognitive injuries against the National Collegiate Athletic Association and/or other collegiate, amateur or youth football organizations and entities."

In cases like these, the injuries could be attributable to more than one defendant. An NFL player suffering from cognitive injuries may blame his Pop Warner league, and his high school league, and the NCAA, and the NFL all for a portion of his brain damage. Settling with the NFL would only solve one part of that puzzle; he could still sue the others. But if he does sue the others, they could also implead the NFL and say that the NFL is actually liable for a portion of the damage. It's no defense for the NFL to say that it's settled with the player. That's because they're drawn in by the NCAA or some other defendant, not the player.

Yes, the NFL could, at the end of the day, explain that they paid out a sum of money to the players. But a jury may conclude that the damages are much greater than the NFL paid out in settlement, and that the NFL's proportional liability is such that it would still need to pay more. And, of course, it would implicate the NFL in still another round of litigation, something it wants to avoid.

That's another reason that the total settlement value means a lot in this case. In order for the NFL to get away free and clear, they need to ensure that all other similar litigation goes away. But that means that they'll need to compensate players an even higher amount--after all, getting them to promise not to sue anyone else is pretty valuable.

Originally, a global settlement was proposed around the time the season began. But the parties dragged their feet in presenting the actual text of a proposed settlement to the judge. And the judge denied preliminary approval of the settlement. Again, the district court judge has reflected that they're still working on a deal.

Originally, I found it curious that the judge would be so careful to scrutinize a settlement when she indicated she was likely going to dismiss the majority of the claims anyway. That suggested the value of the litigation wasn't necessarily very high. But the more provisions one reads about the settlement agreement, the more one can understand why there is a great deal at stake for any potential member of the settlement--and why extra scrutiny is particularly appropriate.