Judge: Structured Settlement Factoring Transaction Show ‘What Appears To Be Nothing More Than An Illusion of Good Faith and Fair Dealing’

Judge: Structured Settlement Factoring Transaction Show ‘What Appears To Be Nothing More Than An Illusion of Good Faith and Fair Dealing’

A New York trial court last month denied a request for court approval of a proposed transfer of structured settlement payment rights, as described in posts here and here.

The opinion, from Suffolk County Supreme Court Justice Jeffrey Allen Spinner, is from the case of Matter of BofI Federal Bank v. Casey, Index No.: 2013-63262, 2014 N.Y. Misc. LEXIS 281, 2014 NY Slip Op. 30197(U) (N.Y. Sup. Ct. Jan. 17, 2014), where a transferee, or factoring company, filed a petition under the New York Structured Settlement Protection Act (the “New York SSPA”) seeking judicial approval of the proposed sale of structured settlement payments.

Without such approval, as per the New York SSPA, the transfer is legally void.

Justice Spinner commented on what he saw as the one-sidedness of the proposed deal (described in this post), as well as the inconsistent evidence concerning the payee’s dependents (and see this post for more about the issue of dependents).

Another aspect of the transaction that the court focused on had to do with the payee’s waiver of independent professional advice.  Because the written waiver was prepared by the factoring company, the court said it could not accurately determine whether the payee willingly decided to waive the right to obtain the advice of an independent advisor, such as an attorney:

Respondent CASEY states that he is waiving the right to seek independent financial and legal advice in connection with this proposed transaction.  However, it is apparent to this Court that this document was prepared by Petitioner BOFI in furtherance of this proposed transaction and this Court really has no way to determine the voluntariness or lack thereof with respect to this important right belonging to Respondent CASEY.  Moreover, as Respondent CASEY is clearly not represented by counsel, this matter is moving forward upon a Petition and other documents all of which have been prepared either by Petitioner BOFI or its counsel of record.

The court concluded that the “application is motivated primarily by cupidity” and that the petition papers “portray what appears to be nothing more than an illusion of good faith and fair dealing in this proposed transaction.”

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