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May 21 — A $42 million settlement between the National Football League and thousands of ex-football players gave substantial benefits to the retired players, the U.S. Court of Appeals for the Eighth Circuit ruled May 21.
Rejecting an appeal by only six of the 25,000-or-so retired players, the court said that just because the $42 million was going into a third-party fund for the retirees instead of directly to the class members didn't mean that the class members weren't benefiting from the settlement.
Thus, the court found that a federal district court had not abused its discretion in finding that the settlement was fair, reasonable and adequate for the members of the class, as required by the Federal Rules of Civil Procedure.
In 2009, several former NFL players filed claims alleging that the league had engaged in commercial misappropriation of their identities.
Specifically, they alleged that the use of their “names, images, symbols, and likenesses, to promote the NFL, sell NFL-related products, and otherwise generate revenue for the NFL” violated their rights under state right of publicity law and the Lanham Trademark Act of 1946.
The complaint alleged that the NFL had continued to use the retired players' identities to “trade[ ] on the ‘glory days' of the NFL as a marketing and advertising technique to convey authenticity, enhance the NFL's brand awareness and increase its revenue” through the sale of promotional videos and other products.
The complaint contrasted this stream of revenue with the much-publicized physical and mental afflictions suffered by many former NFL players.
In March 2013, the parties filed a joint motion seeking approval of a settlement agreement.
A few weeks later, the court granted preliminary approval of the settlement, which required the NFL to put $42 million in a fund to be used to benefit retired players and another $8 million to be put into escrow for payment of attorneys' fees and costs.
In November 2013, Judge Paul A. Magnuson of the U.S. District Court for the District of Minnesota granted final approval for the settlement, finding it to be “fair, reasonable, and adequate” under Federal Rule of Civil Procedure 23(e). About 2,000 class members opted out of the settlement.
The district court overruled objections to the settlement by a small proportion of the 25,000 class members that the court characterized as acting from their “baser instincts, namely the lure of what their attorneys promise is lucrative financial payouts from the NFL” if they refused to settle and continue to fight the case (Dryer v. Nat'l Football League, No. 09-2182 (D. Minn. Nov. 4, 2013). Six of these dissenting plaintiffs appealed.
In the meantime, the Eighth Circuit ruled that three players who had opted out of the settlement couldn't pursue their personality rights claims because they were, among other things, blocked by the NFL's free speech rights and the NFL's ownership of copyright interest in the films.
On appeal, the court rejected as “wholly without merit” the dissenters' argument that the settlement offered no benefits to the class members but instead was “simply giving away their proceeds to a third-party charity.”
The court said that a licensing agency established by the settlement agreement that was set up to assist retired players in commercializing their publicity rights did constitute a “substantial and direct” benefit to class members as well as the $42 million fund.
The court said that it was not required that such benefits be directly paid to class members rather than through the third-party funds.
Even if there had been an open question as to whether it was legitimate to pay benefits of a settlement to a third-party fund, the court said that “the financial payment to the third-party organization is not the only, or perhaps even the primary, benefit of the settlement agreement. All class members receive a direct benefit from the settlement: the opportunity to license their publicity rights through the established Licensing Agency, as well as the payments by the NFL to the Licensing Agency.”
Indeed, the court said, “if the players' publicity rights are as valuable as Appellants claim, the players should be able to realize the value of their publicity rights through the Licensing Agency.”
Furthermore, the $42 million fund was “clearly designated for the benefit of the class,” the court said, and compared it to a trust, which is a common structure for such class action settlements.
In weighing the fairness of the settlement, the court focused on the district court's evaluation of the strength of the original case against the NFL, noting that the claims of the three players who had opted out of the settlement had been entirely dismissed.
Taking into account all the factors addressed by the district court, the appeals court found no abuse of discretion in the conclusion that the settlement was fair, reasonable and adequate with respect to the class.
The court's opinion was issued by Judge Kermit E. Bye and joined by Judge Jane Kelly.
Judge Lavenski R. Smith filed a brief concurring opinion addressing a question that was not brought up on appeal, that of whether the settlement constituted a cy pres distribution.
The dissenting class members were represented by Ciresi & Conlin LLP, Minneapolis. The settling class members were represented by Gustafson & Gluek PLLC, Minneapolis. The National Football League was represented by Faegre Baker Daniels LLP, Minneapolis.
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