The federal court’s ruling last week in a lawsuit captioned Wall v. Corona Capital, Civil Action No. 16-1044, 2016 U.S. Dist. LEXIS 161683 (W.D. Pa. Nov. 22, 2016), has to do primarily with whether the court has personal jurisdiction over Corona in Pennsylvania, and also whether the court should agree with a financial advisor company’s request to transfer to federal court in New Jersey.
And the decision can be summed up by saying that the court found that it did not have personal jurisdiction over Corona, because that company’s lack of sufficient contacts with Pennsylvania, and also that the matter should not be transferred to New Jersey.
But the facts reveal an important concern with the structured settlement factoring, as reflected in one of the court’s comments.
The plaintiffs in the case, Robert and Linda Wall, hired defendant Altium Group, LLC, as financial advisors, and were then connected with Corona. Corona filed a petition in a Florida court, seeking court approval of a transfer of structured settlement payment rights, from an individual named Kenneth Stevens, to Corona. The transfer involved 60 monthly payments of $3,000,00, increasing 3% each year, due to be paid from June 1, 2014, to May 1, 2019.
Corona – which filed papers that included, among other things, a transfer agreement with the signature of Stevens – was successful in obtaining court approval, and the 2012 order approving the transfer directed that the transferred payments were to go to Corona’s re-assignees, Mr. and Mrs. Wall.
In 2014, the same Florida court issued another order, this time vacating its 2012 order approving the transfer. The reason? Stevens had filed papers seeking to overturn the order and, “after extensive discovery”, the court concluded that Stevens “did not sign any of the documents submitted to this Court in support of the” Corona petition. In other words, his signature had been forged.
Earlier this year, the Walls filed suit against Altium and Corona, alleging that the court had vacated the order because “Stevens’s wife had forged his name regarding the transfer”, and that they had paid more than $150,000 for the future payments that were subject of the now-aborted transfer – but never received any of the structured settlement payments.
The Walls brought breach of contract, unjust enrichment, negligence, and other claims.
At this point, the Walls lawsuit can proceed against Altium, the financial advising company that they allege connected them, as potential investors, with Corona.
The case illustrates the potential hazards to investors posed by individual structured settlement factoring transactions as investments. To a factoring company, if it obtains payment rights in 100 transactions, and only one such transaction is later invalidated, that 1% rate of invalidated transactions appears low, and possibly within acceptable parameters of their business. To an investor, though, the results can be troubling – maybe devastating – if they happen to invest in that one transaction that is invalidated.
The court emphasized its concern in its opinion: “As a caution to those investing in these [transactions], a court can later vacate the sale of the . . . payments when the underlying plaintiff selling his . . . payments lacked authority to sell . . . leaving the eventual investors without the purchased asset.”
The court’s opinion in Wall v. Corona Capital is available here.