Factoring Companies Cannot Shift Costs Under Structured Settlement Protection Act, Says Appeals Court

Factoring Companies Cannot Shift Costs Under Structured Settlement Protection Act, Says Appeals Court

As described here, the Texas Court of Appeals, Fourteenth District, issued a recent opinion that appears at odds with other authorities in structured settlement protection act (SSPA) matters.

While much of the opinion dealt with the issues of best interest and judicial authority relating to a servicing arrangement, in another part of its opinion, Metro. Life Ins. Co. v. Structured Asset Funding, No. 14-15-00584-CV, 2016 Tex. App. LEXIS 9359 (Tex. Ct. App. Aug. 25, 2016), the Texas appellate panel reached a conclusion that is consistent with other appellate authority: that the SSPA imposes the obligation, and costs, of SSPA compliance on the transferee (or factoring company) and therefore the trial court erred in taxing costs against other interested parties.

In concluding that the trial court erred in taxing costs, the Structured Asset court said that “[u]nder section 141.007(f) of the [Texas Structured Settlement Protection] Act, ‘fulfillment of the conditions in Section 141.004 are solely the responsibility of the transferee in any transfer of structured settlement payment rights” and that means that the responsibility cannot be shifted to some other person or entity.  Added the court: “[f]ulfilling the requirement to obtain a court order approving the transfer ceases to be ‘solely the responsibility of the transferee’ when the trial court shifts the financial responsibility for the court costs to the structured settlement obligor and the annuity issuer.”

The Structured Asset court did not address the possibility that, if the servicing arrangement failed in the future and the payee were to sue, the issuer and obligor might have potential court costs that may or may not be recoverable from the transferee – thereby shifting costs of compliance at a future date in this or other ways.

Nonetheless, the appellate panel’s conclusion on this issue – that the trial court erred in shifting responsibility for court costs – is in line with the other appellate authority on the issue, both in Texas and elsewhere.

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