Judge: Michael P. Linfield, Case: 23STCP04221, Date: 2024-01-10 Tentative Ruling

Case Number: 23STCP04221    Hearing Date: January 10, 2024    Dept: 34

SUBJECT:        Verified Petition for Approval for Transfer of Payment Rights

Moving Party: Petitioner J.G. Wentworth Originations, LLC

Resp. Party:    None

Before making the required findings on the record and ruling on the motion, the Court would be interested in hearing from Petitioner how it determined to use a discount rate of 13.10%, what discount rate it (or its competitors) have used in similar cases, and whether it would negotiate further with Transferor to lower the discount rate and thereby increase the amount paid to Transferor.

        The Court would also like to see a copy of the settlement agreement to insure that it does violate Insurance Code section 10138, subdivision (a)(4).

BACKGROUND:

On November 16, 2023, Petitioner J.G. Wentworth Originations, LLC filed its Verified Petition for Approval for Transfer of Payment Rights (“Petition”). The Petition concerns the transfer of certain structured settlement payment rights from Real Party-in-Interest Carl Todd, Jr. (“Transferor”) to Petitioner.

On November 28, 2023, Petitioner filed: (1) Notice of Hearing on Petition; (2) Declaration of Payee (“Declaration of Transferor”); (3) Amended Exhibit “A”; (4) Notice to the Settlement Attorney of Record; and (5) Proof of Service.

On December 13, 2023, Petitioner filed: (1) Supplemental Exhibit “D”; and (2) Notice of Errata.

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

Transferor wants to transfer the following structured settlement payment to Petitioner: a single payment of $100,000.00, received on December 5, 2036. (Amended Exhibit A, p. 3.)

        Petitioner has proposed a total payment to Transferor of $20,000.00. (Amended Exhibit A, p. 9.)

        Using a federal discount rate of 5.60%, the discounted present value of the future payment is $49,040.33. (Amended Exhibit A, p. 9.) The rate used in determining the purchase price is 13.10%. (Ibid.)

        According to the Declaration of Transferor, Transferor is an unmarried 21-year-old adult with no children but one child due to be born. (Decl. ¶¶ 8, 11.) Transferor is currently experiencing financial hardship and has previously transferred over structured settlement payments to Petitioner. (Id. at ¶¶ 9, 11.) Transferor did not receive independent legal or financial advice regarding the proposed transaction. (Id. at ¶ 12.)

        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)       Transferor 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 — however, Petitioner notes that the Parties’ settlement agreement “contains a confidentiality clause.” (Petition, p. 5, fn. 1.) The Court would like to see the settlement agreement to ensure it does not violate Insurance Code section 10138, subdivision (a)(4).

(4)       The requirements of Insurance Code section 10139.3 have been followed.

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

(6)       Petitioner has advised Transferor in the manner required by Insurance Code section 10139.5, subd. (h).

Aside from the confidentiality agreement, the Petition complies with the procedural requirements of the law. However, given that Transferor did not receive independent legal or financial advice regarding the proposed transaction, 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).)

The Court is unaware of any evidence that Transferor actually negotiated the 13.10% discount rate. The Court wonders if Petitioner would have increased the payout to Transferor if Transferor had been represented by counsel in these negotiations?

III.     Conclusion

Before making the required findings on the record and ruling on the motion, the Court would be interested in hearing from Petitioner how it determined to use a discount rate of 13.10%, what discount rate it (or its competitors) have used in similar cases, and whether it would negotiate further with Transferor to lower the discount rate and thereby increase the amount paid to Transferor.

        The Court would also like to see a copy of the settlement agreement to insure that it does violate Insurance Code section 10138, subdivision (a)(4).