Judge: Michael P. Linfield, Case: 23STCP03263, Date: 2023-10-20 Tentative Ruling

Case Number: 23STCP03263    Hearing Date: October 20, 2023    Dept: 34

SUBJECT:        Motion for Order Approving Transfer of Structured Settlement Payment Rights Pursuant to California Insurance Code §10134 Et Seq.

Moving Party: Petitioner Feldman Partners, LLC

Resp. Party:    None

The Court would be interested in hearing from Petitioner how it determined to use a discount rate of 13.14%, what discount rate it (or its competitors) have used in similar cases, and whether it would negotiate further with Payee to lower the discount rate and/or otherwise increase the amount paid to Payee.

BACKGROUND:

On September 7, 2023, Petitioner Feldman Partners, LLC (“Petitioner”) filed its Petition for Approval for Transfer of Structured Settlement Payment Rights Pursuant to California Insurance Code §10134 Et Seq. (“Petition”). The Petition concerns the transfer of certain structured settlement payment rights from Real Party in Interest L.C. (“Payee”) to Petitioner.

On September 19, 2023, Petitioner filed its Motion for Order Approving Transfer of Structured Settlement Payment Rights Pursuant to California Insurance Code §10134 Et Seq. (“Motion”). Petitioner concurrently filed its Proof of Service.

On October 11, 2023, Petitioner filed its First Amended Petition for Approval for Transfer of Structured Settlement Payment Rights Pursuant to California Insurance Code §10134 Et Seq. (“Amended Petition”).

On October 12, 2023, Petitioner filed Supplemental Exhibit “H” to the Amended Petition.

No opposition or other response has been filed.

ANALYSIS:

I.          Legal Standard

“‘Structured settlement agreement’ means an arrangement for periodic payment of damages established by settlement or judgment in resolution of a tort claim in which the payment of the judgment or award is paid in whole, or in part, in periodic tax-free payments rather than a lump-sum payment. A structured settlement agreement entered into pursuant to Section 667.7 of the Code of Civil Procedure or Section 970.6 or 984 of the Government Code is not subject to the provisions of this article other than the requirements of Section 10138.” (Ins. Code, § 10134, subd. (j).)

        Transfers of structured settlement payment rights are regulated by statute. (Ins. Code, §§ 10134, et seq.)

“A transfer of structured settlement payment rights is void unless a court reviews and approves the transfer and finds the following conditions are met:

“(a) The transfer of the structured settlement payment rights is fair and reasonable and in the best interest of the payee, taking into account the welfare and support of his or her dependents.

“(b) The transfer complies with the requirements of this article, will not contravene other applicable law, and the court has reviewed and approved the transfer as provided in Section 10139.5.”

(Ins. Code, § 10137.)

“The court shall retain continuing jurisdiction to interpret and monitor the implementation and closing of the transaction that is the subject of the transfer agreement as justice requires.” (Ins. Code, § 10139.5, subd. (i).)

        Additional statutory requirements can be found in Insurance Code sections 10136 through 10139.5.

II.       Discussion

Payee wants to transfer the following structured settlement payments to Petitioner:

(1)       252 monthly payments in the amount of $2,074.59 commencing on June 18, 2024 and continuing through, and including May 18, 2045, increasing 3% annually (which totals $713,903.52); and

(2)       Two lump payments, one for $300,000.00 due June 18, 2026 and another for $500,000.00 due June 18, 2031 (which totals $800,000.00).

(Amended Petition, Exh. A, ¶¶ 23a.(2)–(3), 23b.(2)–(3).)

        Petitioner has proposed a total payment of $606,230.00 (comprised of $204,230.00 for the first set of payments and $402,000.00 for the second of payments) to Payee for transfer of all the structured settlement payments to Petitioner. (Amended Petition, Exh. A, ¶¶ 23a.(5), 23b.(5).)

        The federal rate used in determining the discounted present value is 5.0%, and the equivalent interest rate Payee is estimated to pay is 13.14% per year. (Amended Petition, Exh. A, ¶¶ 23a.(7)–(8), 23b.(7)–(8).

        According to the declaration attached to the Petition, Payee is a 32-year-old single woman with no minor dependents. (Amended Petition, Exh. F, ¶¶ 2–3.) The address of her residence and the other information required by statute are also provided. (Ibid.) Payee received the structured settlement annuity in resolution of a lawsuit filed by her father, acting in his capacity as her guardian when she was a minor, after the wrongful death of her mother. (Id. at ¶ 6.) Payee is not selling all of the payments associated with her structured settlement annuity. (Id. at ¶ 5.)

        Pursuant to Insurance Code section 10137, subdivision (b), the Court first considers whether all of the procedural requirements for such a transfer have been met.

(1)       Payee received and signed a disclosure form that meets the specifications of Insurance Code section 10136, subdivision (b).

(2)       The transfer agreement meets the specifications of Insurance Code section 10136, subdivision (c).

(3)       None of the prohibited provisions listed in Insurance Code section 10138, subdivision (a) are included in the transfer agreement.

(4)       Certain requirements of Insurance Code section 10139.3 (no waiver of article provisions, compliance is the sole responsibility of Petitioner [who is the transferee], Payee shall not incur any penalty or otherwise incur any liability by failure to satisfy various requirements, and no requirement to divide any structured settlement payment in certain ways) have been followed. (Ins. Code, §§ 10139.3, subds. (a)–(c), (e).)

(5)       One subdivision of Insurance Code section 10139.3 has not been explicitly included in the transfer agreement: that “[t]he transferee and any assignee shall be liable to the structured settlement obligor and the annuity issuer for any and all taxes incurred as a consequence of the transfer or as a consequence of any failure of the transferee or assignee to comply with this article or the terms of the structured settlement agreement.” (Ins. Code, § 10139.3, subd. (d).)

(6)       The Petition includes the information required by Insurance Code section 10139.5, subd. (c).)

(7)       The Petitioner has advised the Payee in the manner required by Insurance Code section 10139.5, subd. (h).

        The Court requires Petitioner to include the language of Insurance Code section 10139.3, subdivision (d) in the transfer agreement prior to approval of any transfer of the structured settlement payment rights.

Although the Amended Petition complies with the procedural requirements of the law, the Court is concerned whether the transfer of payment rights is in Payee’s best interest.  (See Ins. Code, §§ 10137, subd. (a), 10139.5, subd. (a)(1).) 

Petitioner is using a discount rate of 13.14%.  In other words, if payee could receive a loan for $606,230.00  at less than 13.14%, it would be in payee’s interest to get the loan rather than enter into this structured settlement payment.

The Court is unaware of any evidence that Payee actually negotiated the 13.14% discount rate. The Court wonders if Petitioner would have increased the payout to Payee if Payee had been represented by counsel in these negotiations?  Would the Petitioner increase the payout to payee by the $1,500.00 that it is saving because payee has decided not to retain counsel?  (See Exh. D [“IPA Waiver”] to Petition.)

III.     Conclusion

The Court would be interested in hearing from Petitioner how it determined to use a discount rate of 13.14%, what discount rate it (or its competitors) have used in similar cases, and whether it would negotiate further with Payee to lower the discount rate and/or otherwise increase the amount paid to Payee.