Superior Court of California

County of Los Angeles

Department 26

In re Petition of:

J.G. WENTWORTH ORIGINATIONS, LLC,

PETITIONER,

AND

RODERICK KING,

Real Party-In-Interest/ Transferor

Case No.: 22STCP02510

Hearing Date: September 12, 2022

[TENTATIVE] order RE:

Second amended PETITION FOR APPROVAL OF TRANSFER OF STRUCTERED SETTLEMENT PAYMENT RIGHTS

Background

On July 5, 2022, Petitioner J.G. Wentworth Originations, LLC (“Petitioner”) filed the instant petition seeking the Court’s approval of the transfer of certain structured settlement payment rights by Roderick King (“Payee”) to Petitioner.

On July 6, 2022, Petitioner filed a notice of the hearing for the petition for approval of transfer of structured settlement payment rights. On August 19, 2022, Petitioner filed a first amended petition. On August 30, 2022, Petitioner filed the operative second amended petition.

No opposition has been filed.

Legal Standard

“‘Structured settlements are a type of settlement designed to provide certain tax advantages. In a typical personal injury settlement, a plaintiff who receives a lump-sum payment may exclude this payment from taxable income under [the Internal Revenue Code]. However, any return from the plaintiff's investment of the lump-sum payment is taxable investment income. In contrast, in a structured settlement the claimant receives periodic payments rather than a lump sum, and all of these payments are considered damages received on account of personal injuries or sickness and are thus excludable from income. Accordingly, a structured settlement effectively shelters from taxation the returns from the investment of the lump-sum payment.’” (321 Henderson Receivables Origination LLC v. Sioteco (2009) 173 Cal.App.4th 1059, 1064.)

Under federal law, the transferee of the structured settlement payment rights must pay a federal tax on the transaction, unless the transferee obtains court approval of the transfer in advance in a qualified order. (26 U.S.C. § 5891(a), (b).) A “‘qualified order’ [is] a final order, judgment, or decree which [¶] (A) finds that the transfer ... [¶] (i) does not contravene any Federal or State statute or the order of any court or responsible administrative authority, and [¶] (ii) is in the best interest of the payee, taking into account the welfare and support of the payee's dependents.” (26 U.S.C. § 5891(b)(2)(A).)

The qualified order must be issued “under the authority of an applicable State statute by an applicable State court.” (26 U.S.C. § 5891(b)(2)(B)(i).) In California, the Structured Settlement Protection Act (Ins. Code § 10134 et seq.) is the applicable state statute.

Insurance Code section 10139.5 provides that a transfer of structured settlement payment rights is not effective unless the transfer has been approved in advance in a final court order based on the following express findings by the court that:

(1) The transfer is in the best interest of the payee, taking into account the welfare and support of the payee’s dependents.

(2) The payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received that advice or knowingly waived that advice in writing.

(3) The transferee has provided the payee with a disclosure form that complies with Section 10136 and the transfer agreement complies with Sections 10136 and 10138.

(4) The transfer does not contravene any applicable statute or the order of any court or other government authority.

(5) The payee reasonably understands the terms of the transfer agreement, including the terms set forth in the disclosure statement required by Section 10136.

(6) The payee understands and does not wish to exercise the payee’s right to cancel the transfer agreement.

(Ins. Code § 10139.5(a).)

“When determining whether the proposed transfer should be approved, including whether the transfer is fair, reasonable, and in the payee’s best interest, the court shall consider the totality of the circumstances, including, but not limited to: (1) the reasonable preference and desire of the payee to complete the proposed transaction, taking into account the payee’s age, mental capacity, legal knowledge, and apparent maturity level; (2) the stated purpose of the transfer; (3) the payee’s financial and economic situation; (4) the terms of the transaction, including whether the payee is transferring monthly or lump sum payments or all or a portion of his or her future payments; (5) whether the future periodic payments were intended to pay for future medical care of the payee related to the incident that was the subject of the settlement; (6) whether the payee has other means of income or support sufficient to meet the payee’s future financial obligations for support of payee’s dependents, such as child support; (7) whether there were previous transactions involving payee’s structured settlement payments; and (8) whether the payee and his or her dependents are facing a hardship situation.” (Ins. Code § 10139.5(b).)

Procedurally, Insurance Code section 10136 provides that ten or more days before the payee executes a transfer agreement, the transferee shall provide the payee with a separate written disclosure statement, accurately completed with the information that applies to the transfer agreement in at least 12-point type or 14-point font as specified in the example given in the section. (Ins. Code § 10136(b).)

The court-approval process requires the transferee to file a petition in the county in which the transferor resides for approval of the transfer. (Ins. Code § 10139.5(f)(1).) In addition, the following elements are required to be served and filed not less than 20 days prior to the scheduled hearing on any application for approval of a transfer of structured settlement payment rights:

(A) A copy of the transferee’s current and any prior petitions.

(B) A copy of the transfer agreement.

(D) A copy of the disclosure required in subdivision (b) of Section 10136.

(E) A copy of the annuity contract, if available.

(F) A copy of any qualified assignment agreement, if available.

(G) A copy of the underlying structured settlement agreement, if available.

(H) If a copy of a document described in subparagraph (E), (F), or (G) is unavailable or cannot be located, then the transferee is not required to attach a copy of that document to the petition or notice of the proposed transfer if the transferee satisfies the court that reasonable efforts to locate and secure a copy of the document have been made, including making inquiry with the payee. If the documents are available, but contain a confidentiality or nondisclosure provision, then the transferee shall summarize in the petition the payments due and owing to the payee, and, if requested by the court, shall provide copies of the documents to the court at a scheduled hearing.

(I) Proof of service showing compliance with the notification requirements of this section.

(J) Notification that any interested party is entitled to support, oppose, or otherwise respond to the transferee’s application, either in person or by counsel, by submitting written comments to the court or by participating in the hearing.

(K) Notification of the time and place of the hearing and notification of the manner in which and the time by which written responses to the application must be filed, which may not be less than 15 days after service of the transferee's notice, in order to be considered by the court.

(L) If the payee entered into the structured settlement at issue within five years prior to the date of the transfer agreement, then the transferee shall provide notice to the payee’s attorney of record at the time the structured settlement was created, if the attorney is licensed to practice in California, at the attorney’s address on file with the State Bar of California. The notice shall be delivered by regular mail.

(Ins. Code § 10139.5(f)(2))

Lastly, the court shall retain continuing jurisdiction to interpret and monitor the implementation of the transfer agreement as justice requires. (Ins. Code § 10139.5(i).)

Discussion

Petitioner seeks the transfer 228 monthly Life Contingent payments of $10,959.77 each, increasing at 3% annually, beginning on January 19, 2053 and ending on December 19, 2071. In return for these structured settlement payments totaling $3,303,300.96, Payee would receive $26,000.00.

Procedural Requirements

Venue is proper. Payee is domiciled in Lakewood which is in Los Angeles County. (See Proof of Service.) However, the Second Amended Petition indicates that it was served by overnight mail on August 30, 2022 – only 13 days before the hearing. This is improper. A petition for approval of a transfer of structured settlement payment must be filed and served 20 days prior to the hearing. (Ins. Code, § 10139.5(f)(2).) In addition, the Second Amended Petition indicates that Payee has two minor children that do not live with him, but the Second Amended Petition does not indicate whether the minor children are dependents. Further, there is no indication as to whether there are other dependents. Rather, there is a reference to a declaration which is not attached. Nor has a declaration been filed. (Second Amended Petition at p.5:13-14.) Finally, there is no evidence – such as a declaration of Payee – indicating that the transfer is in the best interest of Payee. Without such evidence, the Court cannot determine whether “[t]he transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependents.” (Ins. Code, § 10139.5(a)(1).)

CONCLUSION AND ORDER

Based on the foregoing reasons, Petitioner CBC Settlement Funding, LLC’s petition approving transfer of structured settlement payment rights is DENIED WITHOUT PREJUDICE. Petitioner may file a new petition curing the defects identified above.

Petitioner is ordered to provide notice of this order and file proof of service of such.

DATED: September 12, 2022 ___________________________

Elaine Lu

Judge of the Superior Court