For Over A Decade, Lawsuits Have Focused On Jurisdiction Under The Illinois Structured Settlement Protection Act

For Over A Decade, Lawsuits Have Focused On Jurisdiction Under The Illinois Structured Settlement Protection Act

As described here and here, the focus of some litigation has been on the proper forum under the Illinois Structured Settlement Protection Act.

A few years ago, a series of two related matters, first in Illinois and then in Virginia, also turned on this same issue.Illinois[1] 

In Re: Morey, 71 Va. Cir. 435 (Va. Cir. Ct. 2005), is the Virginia matter, and the court's opinion also provides details about the earlier, related Illinois matter.

In Morey, a Virginia circuit court denied and dismissed an application for court approval of a transfer of structured settlement payment rights, on the grounds that principles of comity support the court’s respect for a court order entered in the earlier Illinois matter, because “[i]t would be inappropriate for a Virginia court to offer an opportunity to circumvent Illinois law, particularly after an Illinois court has ruled on the matter.”

The payee had entered into a proposed transfer with a factoring company, Rapid Settlements, Ltd. (RSL), which had filed an application before an Illinois court in the Illinois judicial circuit where the payee resided.

The Illinois court dismissed, with prejudice, the Illinois matter, because the Illinois Structured Settlement Protection Act provided for jurisdiction only in a court that was where the “underlying action was or could have been maintained" and the record before the court showed that the underlying action was maintained in Wisconsin and did not show that the underlying action could have been filed in Illinois.

The factoring company then began a second proceeding in Virginia, which was the home state of the annuity issuer.Virginia[1]

The Virginia court, however, concluded that the second application should also be denied.

The Virginia circuit court said there was no reason for a Virginia court "to ignore the provisions of the law of the State of Illinois or an order of a court of that state . . . .”

The court's reasoning, it said, was based on principles of comity, adding that the "substantive and procedural provisions" of the Illinois SSPA and Virginia SSPA were "reasonably comparable."

Furthermore, the court said that, although it differed from the Virginia SSPA's jurisdictional provisions, there was some logic to the Illinois SSPA's jurisdictional provision:

[T]he Illinois statute did not leave Morey and RSL without remedy.  The Illinois statute clearly directs the parties to . . . Wisconsin where the original lawsuit was filed.  Whether or not Wisconsin has a statute similar to the one in Illinois or the one in Virginia does not establish a rule that such a proceeding could not be held there.  Indeed this court could theorize several scenarios that might well allow a Wisconsin court to act upon a proper petition.  It is also important to note that the petitioner has not cited any Illinois or Wisconsin authority positing the proposition that Wisconsin courts are unable to act.

What we have is a policy decision made by the Illinois legislature requiring the court that had jurisdiction over the original subject matter to review what in most cases would be a modification of a result that was originally established under the auspices of that court.  One can argue what court could be in a better position to evaluate such a matter.

While this rule represents a different policy than that established by the Virginia legislation, this court can hardly be critical of the rule. . . . 

The court added that it viewed the Virginia proceeding “as an attempt to obtain a different result” after having lost in the Illinois case.

(My partner, Pete Vodola, argued and won on behalf of the annuity owner in both the Illinois and Virginia matters in Morey.)

It is worth pointing out that the litigation over this issue – starting with the opinion in Stokes v. Colonial Penn Insurance Company, 313 Ill. App. 3d 202, 204, 728 N.E.2d 1276 (2000) (described here) and continuing through the 2005 decisions in Morey to the 2011 Brenston v. Settlement Funding, LLC, complaint filed in 2011 (described here) – has spanned more than a decade.

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