Judge Ralph C. Hofer, Case Number: 23GDCP00161, Date: 2023-09-29 Tentative Ruling

Judge: Ralph C. Hofer, Case: 23GDCP00161, Date: 2023-09-29 Tentative Ruling

Case Number: 23GDCP00161 Hearing Date: September 29, 2023 Dept: D

TENTATIVE RULING

Calendar: 2

Date: 9/29/2023

Case No: 23 GDCP00161

Case Name: Apollo Mathers, LLC v. Certain Statutory Interested Parties, etc.

PETITION FOR APPROVAL FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS

Moving Party: Petitioner Apollo Mathers, LLC

Responding Party: No Opposition

RELIEF REQUESTED:

Approve transfer of structured settlement payment rights by and between Kyla Johnson, as payee, and Apollo Mathers, LLC, as transferee.

ANALYSIS:

Procedural

Copies of Documents

Under Insurance Code § 10139.5:

“ (f)

(1) A petition under this article for approval of a transfer of structured settlement payment rights shall be made by the transferee and brought in the county in which the payee resides at the time the transfer agreement is signed by the payee, or, if the payee is not domiciled in California, in the county in which the payee resides or in the county where the structured settlement obligor or annuity issuer is domiciled.

(2) 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, and shall include the following with that notice:

(A) A copy of the transferee's current petition and any other prior petition, whether approved or withdrawn, that was filed with the court in accordance with paragraph (6) of subdivision (c).

(B) A copy of the proposed transfer agreement and disclosure form required by paragraph (3) of subdivision (a).

(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.”

Here, the petition fails to include a copy of the underlying Settlement Agreement. The petitioner submits a copy of the Order Approving Compromise of Minor’s Claim. [Grace Decl., Ex. D]. There is submitted a Declaration in Lieu of Settlement Agreement of Kyla A. Johnson, in which Johnson indicates that the assigned payments are due as a result of a settlement with respect to a personal injury claim made on plaintiff’s behalf after plaintiff was involved in a car accident in 1999, when she was a minor. [Decl. in Lieu, para. 2]. Johnson indicates that she has diligently searched for the underlying settlement agreement, contacted the annuity issuer and structured settlement obligor, and searched her own records, but does not have a copy of the settlement agreement. [Johnson Decl., para. 3]. The Court finds that reasonable efforts have been made to locate and secure a copy of the missing document.

Moreover, the petition fails to submit documents concerning the transferor’s four previous transfers.

As set forth above, under Insurance Code § 10139.5:

“(f)

(A) A copy of the transferee's current petition and any other prior petition, whether approved or withdrawn, that was filed with the court in accordance with paragraph (6) of subdivision (c).”

(Emphasis added).

Paragraph (6) of subdivision (c) of Insurance Code § 10139.5 provides:

“(c) Every petition for approval of a transfer of structured settlement payment rights, except as provided in subdivision (d), shall include, to the extent known after the transferee has made reasonable inquiry with the payee, all of the following:…

(6) Information regarding previous transfers or attempted transfers, as described in paragraph (11), (12), or (13) of subdivision (b). The transferee or payee may choose to provide this information by providing copies of pleadings, transaction documents, or orders involving any previous attempted or completed transfer or by providing the court a summary of available information regarding any previous transfer or attempted transfer, such as the date of the transfer or attempted transfer, the payments transferred or attempted to be transferred by the payee in the earlier transaction, the amount of money received by the payee in connection with the previous transaction, and generally the payee's reasons for pursuing or completing a previous transaction. The transferee's inability to provide the information required by this paragraph shall not preclude the court from approving the proposed transfer, if the court determines that the information is not available to the transferee after the transferee has made a reasonable effort to secure the information, including making an inquiry with the payee.”

Petitioner submits the declaration of its customer service representative, which describes the previous transfers, including the payments sold and the use of the funds. [See Grace Decl., ¶ 7].

The Court finds that the descriptions of the previous transfers set forth in the Grace Declaration are sufficient.

Substantive

The petition seeks approval of a transfer of certain structured settlement payment rights held by transferor Kyla Johnson pursuant to a structured settlement entered into on behalf of Johnson by her GAL, intended as compensation for a personal injury claim, as when Johnson was in her mother’s womb, her mother was involved in a car accident that resulted in Johnson’s premature birth and a fractured skull. [Johnson Decl., para. 3]. Johnson indicates that there are no longer any reoccurring medical problems related to the original injury and as such no continuing need to provide for future medical expenses. [Johnson Decl., para. 3].

Johnson is 24, single, and has one dependent, age 3 years, who resides with Johnson. [Johnson Decl., para. 4]. Johnson is currently not working and going to school full-time at the Los Angeles Film School, in a two-year Associate of Science in Music Production program. Johnson receives $1,300 per month from her annuity and does not rely on the future structured settlement payments she is proposing to assign for her day-to-day living expenses. [Johnson Decl., para. 4]. Johnson has no court ordered child support or maintenance obligations. [Para. 5].

Johnson has made four prior attempts to transfer a portion of her payment rights, all of which were approved. [Grace Decl., para. 7; Johnson Decl., para. 6]. This petition indicates that the first transaction was ultimately approved in 2022, with payee selling 294 monthly payments of $200 beginning January 15, 2023 through June 15, 2047. [Grace Decl., para. 6]. Johnson received $10,000.00 from this transaction and used the funds for her daughter’s expenses, home furniture and personal items. [Grace Decl., para. 7].

The second transaction was ultimately approved in 2022, with Johnson selling 270 monthly payments of $500.00 beginning January 15, 2025 through and including June 15, 2047. Johnson received $30,523.39 from this transaction and used the funds to purchase a hybrid vehicle and to pay insurance expenses. [Grace Decl., para. 7].

The third transaction was ultimately approved in 2023, with Johnson selling 210 monthly payments of $300.00 beginning January 15, 2030 through and including June 15, 2047. Payee received $7,500.00 from this transaction and used the funds for dental work, school tuition and out of pocket expenses. [Grace Decl., para. 7].

The fourth and most recent transaction was also ultimately approved in 2023, with Johnson selling 210 monthly payments of $500.00 beginning January 15, 2030 through and including June 15, 2047. Payee received $14,082.31 from this transaction and used the funds for additional dental work, school tuition and childcare expenses. [Grace Decl., para. 7; Johnson Decl., para. 6].

The proposed transaction is with Apollo Mathers, LLC. Johnson is transferring 60 monthly payments of $400.00 beginning January 15, 2025 through and including December 15, 2029 and 360 monthly life-contingent payments of $1,500.00 beginning July 15, 2047 through and including June 15, 2077.

The total dollar amount of payments being sold is $564,000.00, with a discounted present value of $105,214.46. The net amount to be paid to Johnson is $18,000.00, with no deduction for expenses. The effective equivalent interest rate being paid on the transaction is 15.49% per year.

Johnson states that the funds will be used to relocate closer to the film school, purchase sound equipment, and prepay childcare expenses. Johnson indicates she has received a voucher for Section 8 housing near the school that will only require her to pay $400.00 per month. She would like to allocate $6,000.00 to cover the first and last month’s rent, security deposit, moving/transportation expenses, and the cost to furnish the new place. Another $2,000.00 will be allocated to prepay childcare expenses while Johnson goes to school. The remaining $10,000.00 will be used to purchase sound equipment and miscellaneous school supplies/books not covered by the financial aid ($10,000.00) Johnson is already receiving from the school. [Johnson Decl., para. 7].

Johnson indicates that she feels it is in her best interest to enter into this transaction so that she can have the financial means to provide for the foregoing, and also indicates that even after completing the current transfer, she will continue to receive monthly payments of $1,300.00 each through December 15, 2024 and monthly payments of $400.00 each beginning January 15, 2025 through and including December 15, 2029. [Johnson Decl., paras. 7, 8].

Under Insurance Code section 10137(a):

“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.”

Insurance Code section 10139.5 provides the factors to be considered by the court in determining whether to approve the transfer of a structured settlement. The highlighted factors are those which are of some concern in connection with this petition.

(a) A direct or indirect transfer of structured settlement payment rights is not effective and a structured settlement obligor or annuity issuer is not required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been approved in advance in a final court order based on express written 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, 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.

(b) When determining whether the proposed transfer should be approved, including whether the transfer is fair, reasonable, and in the payee's best interest, taking into account the welfare and support of the payee's dependents, the court shall consider the totality of the circumstances, including, but not limited to, all of the following:

(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, when the settlement was completed, the future periodic payments that are the subject of the proposed transfer were intended to pay for the future medical care and treatment of the payee relating to injuries sustained by the payee in the incident that was the subject of the settlement and whether the payee still needs those future payments to pay for that future care and treatment.

(6) Whether, when the settlement was completed, the future periodic payments that are the subject of the proposed transfer were intended to provide for the necessary living expenses of the payee and whether the payee still needs the future structured settlement payments to pay for future necessary living expenses.

(7) Whether the payee is, at the time of the proposed transfer, likely to require future medical care and treatment for the injuries that the payee sustained in connection with the incident that was the subject of the settlement and whether the payee lacks other resources, including insurance, sufficient to cover those future medical expenses.

(8) Whether the payee has other means of income or support, aside from the structured settlement payments that are the subject of the proposed transfer, sufficient to meet the payee's future financial obligations for maintenance and support of the payee's dependents, specifically including, but not limited to, the payee's child support obligations, if any. The payee shall disclose to the transferee and the court his or her court-ordered child support or maintenance obligations for the court's consideration.

(9) Whether the financial terms of the transaction, including the discount rate applied to determine the amount to be paid to the payee, the expenses and costs of the transaction for both the payee and the transferee, the size of the transaction, the available financial alternatives to the payee to achieve the payee's stated objectives, are fair and reasonable.

(10) Whether the payee completed previous transactions involving the payee's structured settlement payments and the timing and size of the previous transactions and whether the payee was satisfied with any previous transaction.

(11) Whether the transferee attempted previous transactions involving the payee's structured settlement payments that were denied, or that were dismissed or withdrawn prior to a decision on the merits, within the past five years.

(12) Whether, to the best of the transferee's knowledge after making inquiry with the payee, the payee has attempted structured settlement payment transfer transactions with another person or entity, other than the transferee, that were denied, or which were dismissed or withdrawn prior to a decision on the merits, within the past five years.

(13) Whether the payee, or his or her family or dependents, are in or are facing a hardship situation.

(14) Whether the payee received independent legal or financial advice regarding the transaction. The court may deny or defer ruling on the petition for approval of a transfer of structured settlement payment rights if the court believes that the payee does not fully understand the proposed transaction and that independent legal or financial advice regarding the transaction should be obtained by the payee.

(15) Any other factors or facts that the payee, the transferee, or any other interested party calls to the attention of the reviewing court or that the court determines should be considered in reviewing the transfer.”

The highlighted factors are of concern here. The main concern is that the injuries described by payee appear to include serious skull fracture injuries, and it is not entirely clear that such injuries would have completely resolved or might not require some future treatment. However, the injuries evidently were sustained in 1999, over twenty years ago. This issue will be discussed at the hearing, and it will also be discussed whether Johnson has medical insurance and medical insurance for her dependent.

It also appears that the current transfer, combined with the previous transfers, will preserve only very limited payments for the payee through December 2029, and that this transfer will exhaust the payments which Johnson could reasonably expect to transfer in the future. This issue will be discussed at the hearing, along with whether Johnson is aware of that circumstance.

This deal is not a particularly favorable transaction for the transferor. In addition to the foregoing, it is not clear that payee with the current reported sources of income, will be able to sustain the expenses which are contemplated, or to support her dependent as proposed. This matter will also be discussed at the hearing. The court recognizes that the funds are intended to be used to benefit payee and her dependent and their household in the pursuit of education and training leading to stable employment.

The annuity here expressly provides, “You may assign this contract.” [Grace Decl., Ex. A, p. 5, “Assignment.”]

RULING:

The Court has the following questions for the petitioner and transferor:

What efforts made to obtain settlement agreement, copies of previous transfers?

What is the current state of payee Johnson’s injuries, which appear to have been serious? Are any future medical expenses anticipated? Does the payee have medical insurance? Does the payee’s dependent have medical insurance? Is payee confident that expected income will cover expenses for payee and her dependent?

Are the payments being transferred practically speaking the last remaining payment rights which payee could reasonably expect to receive or transfer? Is payee aware of such a circumstance?

First Amended Petition for Approval for Transfer of Structured Settlement Payment Rights is GRANTED.

DEPARTMENT D IS CONTINUING TO CONDUCT AND ENCOURAGE

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