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Volume 23 No. 28
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NFL finds funds for settlement

Revenue-sharing pool tapped for concussion lawsuit

The NFL is taking $150 million out of a growing but unused revenue-sharing pool to prepare paying for the settlement in a concussion lawsuit against the league, and may continue to tap that money for the same purpose.

Owners voted at their spring meeting last week on the move, which means that, if the settlement is finally cleared through appeals courts, teams do not need to dip far into reserves to pay the former players who sued the league over their head injuries. Combined with potential insurance coverage and teams’ plans to deduct the payments from taxes, many clubs may have minimal if any long-term exposure to the settlement, which could exceed $1 billion.

The “fees are like $300 million, the first payments,” said Houston Texans owner Bob McNair, chairman of the finance committee, commenting on what the league will owe players and their lawyers initially. “We take maybe half of that — we have a lot of money in the supplemental revenue account that we don’t need — so we would just distribute that” to the teams.

“Makes sense,” finance committee chairman Bob McNair says.
“So now we would be assessed for half the amount,” McNair said. “Makes sense.”

The league could also choose not to assess teams for the remaining $150 million of the first $300 million, and go back to the SRS account, said John Mara, the New York Giants owner.

“It was about the most noncontroversial decision we have made in quite some time,” he said of the choice to tap a fund created to help teams in need. On assessing clubs for $150 million, he said, “It’s not set in stone.”

That supplemental revenue pool is now over $300 million, sources said, because no clubs need it. In the 2000s, the SRS fund, financed by a portion of club seat premiums, aided financially struggling teams. The league already shares all national revenue, but at the time, that was not enough for some teams.

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Since the 2011 collective-bargaining agreement, however, which triggered a significant shift in revenue from players to owners, the number of teams needing the fund dwindled to zero.

The league did not cease funding the SRS account, and so it has grown into a substantial asset.

The Cincinnati Bengals, sources said, voted not to use the SRS money. The team declined to comment, though team owner Mike Brown in the past strongly advocated SRS and he may feel the fund should be used only for its intended purpose.

The settlement, approved by a federal district court and a three-judge panel of the 2nd U.S. Circuit Court of Appeals, is on appeal at the 2nd Circuit. Two groups of retirees have asked for a rehearing in front of the full 2nd Circuit, and there is still a chance of appeals to the Supreme Court.

Presuming the settlement clears the final judicial hurdles, the league is required to pay at least $165 million to the players in the first six months. The league is also committed to paying around $112 million in legal fees, and other costs bring the NFL to about the $300 million figure that McNair cited.

There is no cap on the settlement, which is due to expire after 65 years. The full amount is not expected to greatly exceed $1 billion, if at all.

In addition to using SRS money, the league also is counting on insurance to cover some of the settlement. Insurers and the NFL are locked in countersuits in New York State Supreme Court, with the insurers arguing they are not bound to cover the payments because the league knew players could suffer head trauma playing football.

The NFL wants that case stayed until all appeals are done in the settlement and individual lawsuits brought by retirees against the NFL are finished. The insurers are asking to start discovery now. A hearing next week is set on the NFL’s motion to overturn the court’s order for discovery to begin.

In an April 29 hearing in the case, insurers’ lawyer Christopher Carroll said, “They want a billion dollars from our clients,” suggesting the NFL is seeking to cover most of the settlement with insurance.

The NFL lawyer, John Hall, responded in court that day that the league had not yet asked for payment because the underlying settlement is unresolved.