US Government Structured Settlements - Part 2

The Legal Broadcast Network interviewed me in a follow-up to my June 17th article, concerning the unfair treatment of structured settlement payees who were injured at the hands of the United States government.  Click below to watch this short interview by Scott Drake.  As always, I welcome your comments.  Thank you, Matt Bracy, General Counsel, Settlement Capital Corporation.   mbracy@setcap.com

Unequal Rights for Those Injured by the US Government

In the absence of justice, what is sovereignty but organized robbery? ~ St. Augustine

You are driving through an intersection, and you have the green light. Half-way through a car runs the corresponding red light and plows into you, causing severe and life-long injuries. The driver who hit you is working at the time, meaning that his company will be responsible for your damages.

The good news: You survive and are able to settle with the other driver’s employer for a fair amount to compensate you for your injuries. Wisely, you choose a structured settlement and will now have all the wonderful advantages that brings: Predictable and secure payments over time that are tax free. The driver’s employer buys an annuity to make the payments over time.

The bad news: The driver who hit you was a US Postal Worker driving a mail truck. Therefore, you will not have the same rights to your future structured settlement payments as you would have if, for instance, he had instead been employed by Fedex.

How could this possibly be?

The US Department of Justice decided several years ago that it does not like structured settlement factoring, and will not “allow” structured settlements it owns to be factored. Exactly who made that decision, and why, has been hidden behind the “executive privilege”. In resisting attempts to factor payments, the Department of Justice invokes the ancient concept of “sovereign immunity” – the sovereign, or in our case, the US government, cannot be sued unless it has consented to be sued.

Leaving aside whether sovereign immunity itself is out-dated, worn out, and has no proper place in modern society, what is it about structured settlement factoring that gives rise to the doctrine to begin with? After all, no one in the court ordered factoring process is “suing” anyone, let alone the owner of the annuity (in this case, the US). The government has contended in lawsuits over this issue that a factoring approval order impacts its rights as the owner of the annuity, by directing to whom the payments will go. That’s it. The government technically owns the annuity, but has no rights to the payments (they belong to the former plaintiff). Courts reviewing this, sadly, have decided that this thin thread of ownership over the annuity itself is sufficient to implicate the sovereign immunity doctrine. Being thus implicated, and there being no law wherein the United States has expressly consented to be “sued” in this way, sovereign immunity bars any such factoring transaction.

John Darer calls this “the great thing about structured settlements from the US Department of Justice.”  (Mr. Darer's May 21, 2009 article is here). Great for whom? Not great for the structured settlement recipient who wanted to sell payments to pay for his daughter’s wedding, but couldn’t because he had been run over by a National Guard truck, instead of by a bus. Not great for the widow of a man who had been hit by a Postal truck instead of a Fedex truck, and was therefore told she could not sell future payments when she needed. Just who is this “great” for? These are real examples of real people who have been treated differently in trying to conduct a commercial transaction – the sale of some future payments to which they are entitled – exclusively because of who had caused their injuries, how ever many years ago.

You cannot choose your tortfeasor. In contract and business disputes, you choose to do business with a certain person or entity, the federal or state government for instance, and limits on your ability to sue and recover in the case of a breach come into the category of caveat emptor (not exactly, but close). Not so in personal injury cases. Moreover, the fact that this unselected defendant injured you or your family member years ago, and because of the mere identify of that defendant you are now precluded from enjoying the same rights to factor payments if and when needed (with court approval, etc.), is ludicrous. Why should these former tort victims and their families be discriminated against?

And the big question: Why does the government care? Transfers of payment rights have absolutely no impact on the government. It’s not their money, and such transfers require them to do absolutely nothing. Why is the Department of Justice so opposed, and why is this a “great thing”? I think it is an outrage.

As always, we appreciate your comments or questions about this article, or structured settlement factoring in general.  You may post comments here, or contact the author, Matt Bracy, General Counsel for Settlement Capital Corporation at mbracy@setcap.com. 

Suze Orman (and the NSSTA) on Factoring

“Partial truths or half-truths are often more insidious than total falsehoods.”

Samuel P. Huntington

Several weeks ago reknown financial advisor Suze Orman wrote a short article for Oprah Winfrey's magazine, wherein she offered advice to a structured settlement recipient on factoring.  The NSSTA (the predominant trade group for structured settlement brokers and insurance companies) immediately seized on some of Ms. Orman's comments and issued a press release.  The press release focused on this statement by Ms. Orman:

“In many states, you can sell your rights to periodic payments to a company that will pay you a lump sum today. Doing so, I realize, is tempting, but it's typically not smart.”
   

There it was.  The esteemed financial advisor backed by Oprah had spoken and condemned structured settlement factoring. 

Or had she really? 

Watch this video interview with Matt Bracy, General Counsel of Settlement Capital Corporation, to get the full story.

As always, we welcome your comments or questions about this article or structured settlement factoring in general.  You can reach me at mbracy@setcap.com.

Court Of Appeals: Public Policy Favors Court Approved Transfers

The California Court of Appeals in Fresno issued a surprising opinion this week on a group of 11 JG Wentworth factoring cases. In 321 Henderson Receivables Origination v. Sioteco, the court reversed the much publicized trial court decisions that had sent shock waves through the factoring and structured settlement worlds. Among the issues addressed by the court was the effect of contractual anti-assignment provisions on structured settlement factoring. In countermanding the trial court, which had decided that such anti-assignment clauses would render factoring transfers void even if not raised by the insurers, the unanimous panel of appellate judges found that such provision could be waived, and in fact that California public policy is against such provisions and is in fact in favor of court approved factoring.

The Sioteco decision is here. 

For more on the most significant case in structured settlement factoring in recent memory, click below to watch Scott Drake of the Legal Broadcast Network interview Matt Bracy, General Counsel of Settlement Capital Corporation.

Factoring Company Advertising

Operatic Vikings, cartoon dogs and cash cows?

Advertising practices of the structured settlement factoring business have long roiled primary structured settlement brokers and insurers.  Since the advent of peace between the two businesses in circa 2000, this one issue has persisted in feeding the animosity of the primary market against the secondary. 

Some of this criticism is well-deserved.  The underlying cause of such advertising and why it is so prevalent however may surprise you.

Watch this video discussion of structured settlement advertising between Matt Bracy, General Counsel of Settlement Capital Corporation, and Mark Wahlstrom of the Legal Broadcast Network.       

We welcome your comments on this article or on structured settlement factoring in general.  Please leave your comments here, or contact Matt Bracy directly at mbracy@setcap.com. 

47th State Enacts Structured Settlement Transfer Law

North Dakota became the newest state to add a structured settlement factoring law to its books, with the enactment of HB 1205.  Signed by Governor John Hoeven on March 24th, the new transfer law will apply to all North Dakota factoring contracts entered into after July 31, 2009. 

Click here for the full text of HB 1205.

North Dakota's structured settlement factoring law is substantially based on the model act adopted by the National Conference of Insurance Legislators (NCOIL).  The sponsors of the bill, Representatives Keiser and Wald, along with Senator Klein, are all members of NCOIL.  NCOIL adopted its first model structured settlement transfer act in July 2000.  The present version, which now forms the basis for 37 state transfer laws, was adopted by NCOIL in 2004. 

Wisconsin, Vermont and New Hampshire remain the only states without structured settlement transfer statutes.  However, residents of these states can sell some or all of their future payments pursuant to the state transfer laws in effect in the state where their annuity issuer or owner reside, as indicated in Internal Revenue Code § 5891(b)(3). 

We welcome questions or comments about this story or structured settlement factoring in general.  You may comment here, or send your comments to Matt Bracy at mbracy@setcap.com. 

Court of Appeals Reverses Controversial Fresno, California Decisions

The California Fifth Appellate District Court of Appeal has reversed highly publicized decisions by two Superior Court judges in Fresno County, California involving 321 Henderson Receivables, an affiliate of J.G. Wentworth.  In these cases, the Superior Court judges in Fresno issued quite lengthy, and unusually detailed, orders denying transfers.  Most disconcerting were the courts' suggestions that prior approved transfers could actually be void -- even though a court order had been signed. 

These orders gained significant national attention, even prompting a press release from Standard & Poors (click here to read the press release).

In the first two of several cases to be considered on appeal (known as the Red Tomahawk and Ramos cases), the Court of Appeals reversed the trial courts on procedural grounds.  However, in the Ramos decision the court also reached the issue of "voiding" of a prior approved transfer, specifically finding that:

... disagreement over prior judicial findings does not provide sufficient grounds for a superior court judge to void the final order of another superior court judge.  Thus, absent direct and affirmative evidence of fraud, a prior court approved transfer cannot be attacked as being void under [the California transfer statute] § 10139.5, subdivision (f) or § 10137 or both.  

For the full text of the Red Tomahawk opinion, click here.  For the  Ramos opinion, click here.

Matt Bracy, General Counsel of Settlement Capital Corporation, and Scott Drake of the Legal Broadcast Network discuss this significant case and its implications for structured settlement factoring.  Click below to watch this interview.

If you have any comments or questions about this article, or about structured settlement factoring in general, contact Matt Bracy @ mbracy@setcap.com.