Judge: Michael P. Linfield, Case: 24STCP00001, Date: 2024-01-31 Tentative Ruling

Case Number: 24STCP00001    Hearing Date: January 31, 2024    Dept: 34

SUBJECT:        Amended 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 12.22%, 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 determine that it does not violate Insurance Code section 10138, subdivision (a)(4).

BACKGROUND:

On January 2, 2024, 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 Rene Rigard (“Transferor”) to Petitioner.

On January 5, 2024, Petitioner filed: (1) Amended Petition for Approval for Transfer of Payment Rights (“Amended Petition”); and (2) Notice of Hearing on Petition.

On January 9, 2024, Petitioner filed: (1) Declaration of Payee (“Declaration of Transferor”); and (2) Amended Exhibit “A”.

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: $96,000.00, which is comprised of sixty-four monthly payments of $1,500.00 each, beginning on April 7, 2028 and ending on July 7, 2033 (Amended Exhibit A, p. 3.)

        Petitioner has proposed a total payment to Transferor of $44,000.00. (Amended Exhibit A, p. 9.)

        Using a federal discount rate of 5.80%, the discounted present value of the future payment is $65,287.16. (Amended Exhibit A, p. 9.) The rate used in determining the purchase price is 12.22%. (Ibid.)

        According to the Declaration of Transferor, Transferor is an unmarried 32-year-old adult with no children and no court-ordered child support obligation. (Decl. ¶ 8.) Transferor is currently experiencing financial hardship and is planning to use the money to pay off credit cards and put a down payment on a truck or sports utility vehicle, both of which would assist his business endeavors. (Id. at ¶ 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 12.22% discount rate. The Court wonders if Petitioner would have increased the payout to Transferor if Transferor had been represented by counsel in these negotiations?  The Court also notes that the Petitioner would have had to pay $1,500 for the Rigard’s legal fees and wonders if that unused money is being offered to Rigard or is simply added profit to the Petitioner?

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 12.22%, 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 determine that it does violate Insurance Code section 10138, subdivision (a)(4).