Judge warns Flint water claimants not to take advances on settlement money
U.S. District Judge Judith Levy warned Flint claimants in a Thursday order against partnering with companies offering what amounts to a cash advance on their portion of the $641 million water crisis settlement.
Levy noted in her order that part of the settlement agreement, which has yet to receive final approval, prohibits the buying and selling of claims to any third parties "including pre-settlement funding companies or post-settlement factoring companies."
Levy's order came after Special Master Deborah Greenspan expressed concerns to the judge at a Wednesday hearing about a website informing claimants they could "get paid now" instead of waiting for their portion of the settlement.
As of Friday, a website for MC Law Funding, the site offering the advance, was the first ad result that appeared after a search for "Flint Water Crisis" on Google. The site features an application portal for individuals damaged by the Flint lead-contaminated water crisis who want to "get paid now."
A call and message to MC Law were not immediately returned.
MC Law Funding also has been reaching out directly to Flint claimants via text message, said Michael Pitt, co-lead class counsel for plaintiffs in case.
The practice is fairly common and particularly profitable for the litigation funding companies, which often charge well in excess of the money advanced, said Pitt, who added he universally counsels clients against selling their claim.
"You’re giving the litigation funding outlet a considerable piece of your settlement," he said. "I’ve seen a number of these contracts, and some really ask people who are desperate to enter into oppressive contracts. Almost every person who’s done it who I’m familiar with has regretted doing it.”
Attorney General Dana Nessel in a statement Friday urged claimants to ignore the ads for advances, arguing they would "only inflict more hardship while being disguised as additional support."
"Seeing that a company views this historic settlement as a business opportunity is deeply troubling, but not surprising," Nessel siad. "We anticipated this and prepared accordingly by ensuring there are provisions in the settlement agreement itself that prohibit payments from going to these types of companies."
The home page of MC Law's website offers "quick and convenient lawsuit funding."
"Pre-settlement and post-settlement advances puts money in your pocket right away," the site said. "No need to wait for your case to settle and pay out. And because the money is repaid from your settlement, you can get it now, with no risk, no out-of-pocket costs, and your credit score is not a factor."
Aside from the prohibition in the settlement, advances on the Flint payments are risky because each person's eventual payout will differ depending on age, place of residence or level of injury.
The settlement has not received final approval nor is it clear how much each claimant will be paid, but it's likely any claimant attempting to receive an advance will surrender to the funding outlet far more than they get, Pitt said.
"And if the settlement doesn’t come as soon as you expect you’re going to be charged extra money for the delay," Pitt said.
Additionally, advances to or on behalf of minors — who will receive roughly 80% of the Flint settlement — are likely to compromise or complicate their eventual payout since many of the kids involved in the case will receive money through trusts or structured settlements that don't lend themselves easily to cash advances.
"The judge was familiar with the issue and familiar with the prohibitions in the master settlement agreement," Pitt said of Wednesday's hearing. "On her own, she issued the order.”