Judge Thomas D. Long, Case Number: 23STCP01690, Date: 2023-06-22 Tentative Ruling

On May 17, 2023, Petitioner J.G. Wentworth Originations, LLC filed this petition for approval of transfer of structured settlement payment rights. The petition seeks transfer of certain structured settlement payment rights held by Christopher O’Connor (“Payee”) under a settlement in connection with a wrongful death claim. (Petition ¶ 3.) If approved, Payee will transfer to Petitioner one payment of $25,000.00 on November 5, 2026 and one payment of $25,000.00 on November 5, 2036. (Petition ¶ 4.) In exchange, Petitioner will pay Payee $18,000.00. (Petition at p. 4.)

A direct or indirect transfer of structured settlement payment rights is not effective unless the transfer has been approved in a final court order based on certain express written findings by the Court. (Ins. Code, § 10139.5, subd. (a).)

The transfer must be in the best interest of the payee, taking into account the welfare and support of the payee’s dependents. (Ins. Code, § 10139.5, subd. (a)(1).) When determining whether the transfer is fair, reasonable, and in the payee’s best interests, the Court must consider the totality of the circumstances, including but not limited to: (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; (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; and (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. (Ins. Code., § 10139.5, subd. (b).)

Payee is a single 26-year-old with no child support obligations. (O’Connor Decl. ¶¶ 1, 8.) He currently cares for a close friend who is sick. (O’Connor Decl. ¶ 8.) Payee is experiencing a financial hardship: he does not have a home and resides at different motels, and it is very difficult to get a job when he tells the interviewer his situation. (O’Connor Decl. ¶ 11.) Payee will use the money received from the proposed settlement towards permanent housing. (O’Connor Decl. ¶ 11.)

The original settlement was not intended to pay for future medical care or necessary living expenses. (O’Connor Decl. ¶¶ 6-7.) Payee has not completed or attempted any previous transactions. (O’Connor Decl. ¶¶ 9-10.) Payee acknowledges that he was advised of his right to seek independent counsel and financial advice, and he knowingly waived that right. (O’Connor Decl. ¶ 12.) Payee understands the terms of the transfer agreement and does not want to exercise his right to cancel the agreement. (O’Connor Decl. ¶ 13.)

Under the terms of this transaction, Payee will transfer one payment of $25,000.00 on November 5, 2026 and one payment of $25,000.00 on November 5, 2036, and he will pay no expenses. (Petition, Ex. A, ¶¶ 2(B), 10.) The transfer and payment of $18,000.00 was calculated using a discount rate of 16.1%. (Petition, Ex. A, ¶ 10.) The Petition states that “[t]here are future payments.” (Petition at p. 7.)

Considering all the factors, the Court finds that the transfer is in Payee’s best interest.

B. Payee Knowingly Waived His Right to Receive Independent Professional Advice.

The payee must be advised in writing by the transferee to seek independent professional advice regarding the transfer and either receive that advice or knowingly waive, in writing, the opportunity to receive the advice. (Ins. Code, § 10139.5, subd. (a)(2).)

The Transfer Agreement advises that Payee may receive independent legal and financial advice, but Payee knowingly waived the right. (Petition, Exs. A, E; O’Connor Decl. ¶ 12.)

The transferee must provide the payee with a disclosure form that complies with Insurance Code section 10136. (Ins. Code, § 10139.5, subd. (a)(3).) The disclosure form must contain specific text, and the transferee must provide the disclosure form at least ten days before the payee executes a transfer agreement. (Ins. Code, § 10136, subd. (b).)

The disclosure form here contains the required text and form. (Petition, Ex. B.) Payee received and read the disclosure form at least ten days before signing the transfer agreement. (See Petition, Exs. A-B.)

The transfer agreement must comply with Insurance Code sections 10136 and 10138. (Ins. Code, § 10139.5, subd. (a)(3).)

The transfer agreement contains the required text and form. (Petition, Ex. A.) Additionally, the transfer agreement does not contain any provision (1) waiving the seller’s right to sue or waiving his jurisdiction or standing to sue; (2) requiring the seller to indemnify the buyer or to pay the buyer’s costs of defense; (3) waiving benefits or rights conferred by law with respect to garnishment of wages; (4) providing that the contract is confidential or proprietary, belonging to the buyer; (5) in which the seller stipulates to a confession of judgment; (6) requiring the seller to pay the buyer’s attorney’s fees and costs if the purchase agreement is not completed; (7) requiring the seller to pay any tax liability arising under the federal tax laws, other than the seller’s own tax liability that results from the transfer; (8) providing for brokerage fees incurred in the contract to be deducted from the purchase price disclosed; (9) providing for forum selection and jurisdiction to be in a court outside of California for any action arising under the contract, if the seller is domiciled in California at the time he signs the transfer agreement; (10) providing for controlling law to be other than California law in any action arising under the contract, if the seller is domiciled in California at the time he signs the transfer agreement; (11) providing the buyer with a security interest or collateral interest in any structured settlement payment rights that exceed the actual dollar amount of the structured settlement payment rights being transferred; or (12) creating a “buyer’s first right of refusal” to purchase any remaining structured payment rights that the payee may desire to sell in the future. (Ins. Code, § 10138, subd. (a).)

Accordingly, the Court finds that the transfer agreement complies with Insurance Code sections 10136 and 10138.

The transferee must comply with the notification requirements of subdivision (f)(2). (Ins. Code, § 10139.5, subd. (a)(3).) A notice of proposed transfer and petition must be filed and served no later than 20 days before the hearing and must include: (1) a copy of the transferee’s current petition and any other prior petition; (2) a copy of the proposed transfer agreement and disclosure form required by section 10139.5, subdivision (a)(3); (3) a listing of each of the payee’s dependents and their ages; (4) a copy of the disclosure required in section 10136, subdivision (b); (5) a copy of the annuity contract, any qualified assignment agreement, and underlying structured settlement agreement, if available; (6) proof of service showing compliance with the notification requirements; (7) notification that any interested party is entitled to support, oppose, or otherwise respond to the transferee’s petition by submitting written comments to the court or by participating in the hearing; (8) notification of the time and place of the hearing and notification of the manner in which and the time by which written responses to the petition must be filed; and (9) notice to the payee’s attorney of record at the time the structured settlement was created, if payee entered into the structured settlement at issue within five years prior to the date of the transfer agreement. (Ins. Code, § 10139.5, subd. (f)(2).)

Petitioner’s notice and petition generally comply with these requirements. Petitioner filed a proof of service on May 18, 2023. The petition includes a copy of the transfer agreement (Petition, Ex. A) and disclosure form (id., Ex. B), along with most other required information.

The original petition does not include a copy of the annuity contract, any qualified assignment agreement, and underlying structured settlement agreement. (Ins. Code, § 10139.5, subd. (f)(2)(E)-(G).) Instead, Petitioner provided a single-page letter from Prudential Insurance Company of America, dated April 28, 2023, in response to a request for verification of benefits for Contract No. SSA000002814. (Petition, Ex. C; see Ex. D, ¶ 3 [“I am entitled to the annuity payments, under annuity policy SSA000002814”].) Prudential states that it “will make Guaranteed Period Certain Annuity Payments under this Contract as follows.” The first payment date is November 5, 2014, and the last guaranteed payment date is May 5, 2019, for periodic payments of $25,000.00 on November 5 and May 5 each year, guaranteed for five years. This conflicts with the proposed transfer of $25,000.00 payments on November 2, 2026 and November 5, 2036. Payee declares that he has attempted to locate the April 2006 settlement agreement but has been unsuccessful, and he has no record of this document. (Ex. D, ¶¶ 2, 9.)

Due to this lack of information, the Court could not verify the annuity contract and propriety of the proposed transfer of future payments, so it continued the hearing.

On June 26, 2023, Petitioner filed and served an amended Exhibit C, the annuity contract. The annuity contract confirms the future November 5, 2026 and November 5, 2036 payments that Petitioner is purchasing.

The transfer must not contravene any applicable statute or the order of any court or other government authority. (Ins. Code, § 10139.5, subd. (a)(4).)

The transfer generally complies with statutory requirements, and there is no evidence that it contravenes the order of any court or other government authority.

The payee must understand the terms of the transfer agreement, including the terms set forth in the disclosure statement, and the right to cancel the transfer agreement. (Ins. Code, § 10139.5, subd. (a)(5)-(6).)

Payee declares that he understands the terms of the transfer agreement, including the terms set forth in the disclosure statement. (O’Connor Decl. ¶ 13.) Additionally, Payee signed the Transfer Agreement directly under a statement advising him of his right to cancel the agreement. (Petition, Ex. A.)

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. If all parties in the case submit on the tentative ruling, no appearances before the Court are required unless a companion hearing (for example, a Case Management Conference) is also on calendar.

Hon. Thomas D. Long

Judge of the Superior Court