Judge Fumiko Wasserman, Case Number: 23CMCP00114, Date: 2023-09-27 Tentative Ruling

Judge: Fumiko Wasserman, Case: 23CMCP00114, Date: 2023-09-27 Tentative Ruling

“INSTRUCTIONS:
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TENTATIVE RULINGS -- http://www.lacourt.org/tentativeRulingNet/ui/main.aspx?casetype=civil

Case Number: :23CMCP00114 Hearing Date: September 27, 2023 Dept: B

I. BACKGROUND

Petitioner DBR Capital LLC (“Petitioner” or “Transferee”) filed the First Amended Verified Petition for Approval for Transfer of Structured Settlement Payment Rights on July 3, 2023. Petitioner field the Second Amended Verified Petition for Approval for Transfer of Structured Settlement Payment Rights (“Petition”) on August 15, 2023. Petitioner seeks to have the structured settlement payments made by Prudential Assigned Settlement Services Corporation (“Obligor”) to Bianca Perez (“Transferor”) assigned to Petitioner. Transferor entered into an agreement to settle a personal injury claim when she was a minor under which Transferor was receiving monthly payments. (Petition, ¶¶ 6, 8.) Transferee and Transferor now wish to enter into an agreement by which Transferee purchases, for a current lump-sum payment, the right to the monthly payments being received by Transferor. (Petition, ¶ 9.)

II. LEGAL STANDARDS

The transfer of structured settlement payment rights is governed by Insurance Code, sections 10134 – 10139.5. The transfer of any structured settlement payment rights is not effective unless the transfer has been approved in advance by the court. (Ins. Code, § 10139.5, subd. (a).) The express written findings that the court must make to approve the transfer of structured settlement payments are as follows:

“(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, in writing, the opportunity to receive the advice.

(3) The transferee has complied with the notification requirements pursuant to paragraph (2) of subdivision (f), 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 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, subds. (a)(1) – (a)(6).)

To determine if the transfer should be approved, including if the transfer is fair, reasonable, and in the transferee’s best interest, the court shall consider the totality of the circumstances including, but not limited to, the 15 factors as stated in Insurance Code, section 10139.5,

subdivision (b).

III. DISCUSSION

A. Factor One: The transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependents.

The declaration of Transferor states that she is a single woman without any minors or dependents and no child support or spousal support obligations. (Decl. of Bianca Perez, ¶¶ 3, 5, 6.) Transferor states that the purpose of the periodic payments was not intended for medical care or treatment as a result of injuries sustained from the incident giving rise to the settlement. (Decl. of Bianca Perez, ¶¶ 7(d), 7(e).) Transferor states that she would like to use the proceeds from this transaction to pay off debt, a car note, and to put a down payment on a house. (Decl. of Bianca Perez, ¶ 9.) Without this transaction, Transferor represents that she will not have the financial resources to pay off the debt, car note, or put a down payment on a house. (Ibid.) Transferor is agreeing to sell future payments totaling $173,500.00, a present value of $97,122.72, for the purchase price of $38,946.98. (Petition, Exhibit C, p. 1.)

Taking the totality of the circumstances into consideration, Transferor would be receiving 347 monthly payments of $500.00 commencing on or about July 15, 2024, and ending on or about May 15, 2053, under the settlement agreement. (Petition, Exhibit A, p. 1.) This payment structure would not allow Transferor to fully pay off her debts and place a down payment on a house for many years. The lump-sum payment that Transferor will be receiving would allow her to immediately pay off debts, that are likely incurring interest, and possibly place a down payment on a house. Additionally, Transferor does not have any dependents, minors, child support payments, or spousal support payments so the welfare and support of Transferor’s dependents is not a limiting factor. What the Court cannot determine is Transferor’s current employment status. In the Petition, it represents that Transferor is both employed full time and

also unemployed. The Court cannot fully consider the totality of the circumstances with this discrepancy.

B. Factor Two: 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, in writing, the opportunity to receive the advice.

The Absolute Sale and Security Agreement, signed by Transferor, states in item 3(j) and 4(f) that Transferor was advised to seek independent professional advice from an attorney, accountant, or other professional. (Petition, Exhibit A, pgs. 2-3.) Transferor also declares that she was advised to seek independent professional advice. (Decl. of Bianca Perez, ¶ 11.) The California Transfer Disclosure, Disclosure Notice Required by Law, items 3, 4, and 5 all advise Transferor to seek independent professional advice. (Petition, Exhibit C, p. 2.) Finally, Transferor executed an Acknowledgment of Waiver of Independent Professional Advice in which Transferor states that Transferee advised her to seek independent professional advice and that Transferor has knowingly waived the right to receive independent professional advice for the legal, tax, and financial implications of the transaction. (Petition, Exhibit D.) The Court finds that Transferor was properly notified, in writing, by Transferee to seek independent professional advice about the transaction and Transferor knowingly waived such right in writing.

C. Factor Three: The transferee has complied with the notification requirements pursuant to paragraph (2) of subdivision (f), 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.

Insurance Code, section 10139.5, subdivision (f)(2), states “Not less than 20 days prior to the scheduled hearing on any petition for approval of a transfer of structured settlement payment

rights under this article, the transferee shall file with the court and serve on all interested parties a notice of the proposed transfer and the petition for its authorization.” Transferee shall also include copies of several documents in the notice as listed in Insurance Code, section 10139.5, subdivisions (f)(2)(A) – (f)(2)(L).

On August 9, 2023, Transferee filed Notice of Continued Hearing for Approval for Transfer of Structured Settlement Payment Rights Pursuant to California Insurance Code §10134 Et Seq (“Notice”), The Notice was served on Transferor, Obligor, and Prudential Insurance Company of America, the annuity insurer, on August 8, 2023. (Notice, p. 3.) The Petition was served on August 15, 2023. Because the Petition was only served 13 court days before the August 28, 2023, hearing the Court continued the hearing to September 26, 2023. Transferee notified Transferor, Obligor, and Prudential Insurance Company of America, the annuity insurer. (NOTICE OF CONTINUED HEARING FOR APPROVAL FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS PURSUANT TO CALIFORNIA INSURANCE CODE §10134 ET SEQ, p. 3.) Transferee has complied with Insurance Code, section 10139.5, subdivision (f)(2).

Insurance Code, section 10136, subdivision (b), provides that a transferee shall provide to the transferor a separate written disclosure statement 10 or more days before the transfer agreement is executed. A template and language that must be used for the separate written disclosure statement are provided. Here, Transferee provided the California Transfer Disclosure Disclosure Notice Required by Law to Transferee. (Petition, Exhibit C.) Insurance Code, section 10136, specifically provides what words in the notice should be bolded. Here, the entirety of the California Transfer Disclosure Disclosure Notice Required by Law to Transferee is written in bold-face type. (Petition, Exhibit C.) The disclosure statement must be “in substantially the following form, in at least 12-point type unless otherwise indicated (bracketed instructions shall not appear in the form).” (Ins. Code, § 10136, subd. (b).) The Court finds that the separate

written disclosure statement provided to the Transferee is defective because it is not in compliance with the type-face requirements of Insurance Code, section 10136, subdivision (b).

Insurance Code, section 10136, subdivision (c), lists 13 required items that must be set forth clearly and conspicuously in the transfer agreement. Here, the Absolute Sale and Security Agreement is provided in the Petition. (Petition, Exhibit A.) Section 3 of the Absolute Sale and Security Agreement makes 12 of the 13 required disclosures and, in accordance with Insurance Code, section 10136, subdivision (c)(13), a box directly above the section for Transferor to sign states “You have the right to cancel this agreement without any cost or obligation until the date the court approves this agreement. You will receive notice of the court hearing date when approval may occur. You must cancel in writing and send your cancellation to the Purchaser at 1625 S. Congress Ave., Suite 200A, Delray Beach, FL 33445.” (Petition, Exhibit A, p. 10.)

The Court finds that Transferee has complied with Insurance Code, section 10136, subdivision (c).

Insurance Code, section 10138, subdivision (a), provides 12 provisions that shall not be included in the transfer agreement. One provision that is void and unenforceable is “Any provision that waives the seller's right to sue under any law, or in which the seller agrees not to sue, or that waives jurisdiction or standing to sue under the contract.” (Ins. Code, § 10138, subd. (a)(1).) Included in the Absolute Sale and Security Agreement is an agreement to arbitrate disputes which states “I UNDERSTAND THAT I WILL NOT HAVE THE RIGHT TO PARTICIPATE IN A REPRESENTATIVE CAPACITY OR AS A MEMBER OF ANY CLASS OF CLAIMANTS IN ANY PROCEEDING PERTAINING OR RELATING TO A CLAIM THAT I AM HEREBY EXPRESSLY WAIVING THE RIGHT TO SEEK RELIEF IN A COURT OF LAW, AND THAT SOME RIGHTS THAT I WOULD HAVE IF I WENT TO COURT MAY NOT BE AVAILABLE IN ARBITRATION.” (Petition, Exhibit A, p. 7.) This provision is not permitted and is contrary to Insurance Code, section 10138, subdivision (a)(1),

but within the terms of the agreement, this provision is void by stating “This Section 12 does not apply to the extent it is found to be inconsistent with applicable state law regarding the transfer of structured settlement payments. In such case, any disputes between the Parties will be governed in accordance with the laws of my domicile state and Your State and the courts in Your State will be the proper venue for any such disputes.” (Petition, Exhibit A, p. 8.) Based on this provision, the Court finds that Transferee has complied with Insurance Code, section 10138.

D. Factor Four: The transfer does not contravene any applicable statute or the order of any court or other government authority.

The Court finds that the transfer does not contravene other statutes or authority.

E. Factor Five: The payee understands the terms of the transfer agreement, including the terms set forth in the disclosure statement required by Section 10136.

Transferor has declared that she received the disclosure statement required by Insurance Code, section 10136, and that she fully understands the terms. (Decl. of Bianca Perez, ¶ 10.) Transferor has not declared that she fully understands the terms of the transfer agreement.

F. Factor Six: The payee understands and does not wish to exercise the payee's right to cancel the transfer agreement.

Currently, Transferor has not filed any objections or requests to cancel the agreement.

IV. CONCLUSION

Having fully considered the arguments in support of this Second Amended Petition for Approval for Transfer of Structured Settlement Payment Rights, both written and oral, the Court

exercises its discretion and rules as follows:

The Second Amended Petition for Approval for Transfer of Structured Settlement Payment Rights is DENIED, without prejudice. It is unclear if the transfer is in the best interest of the payee because DBR Capital, LLC represents, in the Second Amended Petition for Approval for Transfer of Structured Settlement Payment Rights on page 4, that the Transferor is both unemployed and has full-time employment. The Court thus cannot accurately weigh the factors necessary to determine if this transfer is in the best interests of the payee.

Additionally, DBR Capital, LLC failed to comply with the formatting requirements of the written disclosure statement as outlined in Insurance Code, section 10136, subdivision (b). Certain sections of the notice are to be in bold, or some substantial equivalent, to alert the reader to important terms. Here, the entire disclosure statement is in bold text which does not draw the readers attention to any of the terms.

Finally, there is no declaration from Transferor that she fully understands the terms of the transfer agreement. There are several declarations that she understands the disclosure statement, but such a declaration is not sufficient to assure the Court that she understands the explicit terms of the transfer agreement itself.

The Court does not make the express findings as required by Insurance Code, section 10139.5, subdivision (a)(1) through (6). DBR Capital, LLC, may amend their petition if they choose. The Court sets a Status Conference Re: Amended Petition on [DATE]. This is not a continued hearing date. DBR Capital, LLC, must go through the reservations system to reserve a hearing date.