Payments Under the NFL’s Brain Injury Settlement Are Held Exempt on Appeal

In the first-ever appeal from the first decision on the question, a district judge in Florida upheld Bankruptcy Judge John K. Olson of Fort Lauderdale by ruling that payments under the National Football League Players’ Concussion Injury Litigation Settlement are exempt assets under Section 522(d)(10)(C).

The chapter 7 debtor was a retired 10-year veteran of the NFL. The former All American was a

first-round pick in the 1992 NFL draft. On account of neurocognitive impairment, he claimed that whatever he receives under the concussion settlement will be exempt.

The trustee objected to the claimed exemption. Although Florida does not allow its citizens to take federal exemptions, state law allows Floridians to claim exemptions under Section 522(d)(10). Subsection (C) allows debtors to exempt the right to receive “a disability benefit, illness, or unemployment benefit.”

Judge Olson upheld the exemption claim on June 27, 2018, ruling that the payments are exempt assets under Section 522(d)(10)(C). To read ABI’s discussion of Judge Olson’s decision, click here.

The trustee argued that the concussion settlement was nothing more than a non-exempt litigation settlement of a tort claim. In her March 26 opinion, District Judge Kathleen M. Williams of Fort Lauderdale agreed with Judge Olson that the concussion settlement is an exempt asset, even though it resulted from litigation.

Regardless of whatever led to the concussion settlement, Judge Williams framed the question as whether the payments are a “disability benefit.”

According to Judge Williams, there are only three remotely relevant decisions, all from bankruptcy courts. Two favored the debtor. A Florida decision relied upon by the trustee, she said, “is not determinative, or even persuasive.” That case involved a $1.2 million payment to settle claims arising from an auto accident that did not involve an employer/employee relationship.

Judge Williams said that Judge Olson was correct in concluding that the “‘overall structure [of the concussion settlement] is undeniably indicative of a disability policy.’” Again quoting Judge Olson, she said the settlement “‘proceeds are not simple, guaranteed payments, but rather carefully tailored compensation schemes, consistent with and indicative of disability policies.’”

Judge Williams also agreed with the conclusion by Judge Olson that the concussion settlement “‘is vastly different from a traditional class action tort settlement.’” The genesis of the settlement in class litigation “is not dispositive because . . . the real issue is whether ‘his recovery actually represents a disability payment.’”

As support from her conclusion that it “does not matter that the ‘disability benefits’ arose from litigation,” Judge Williams cited a Michigan bankruptcy court decision holding that a $193,000 lump-sum worker’s compensation payment for the accidental amputation of a hand was exempt under Section 522(d)(10)(C).