‘Impulsive’ Transaction ‘Is Diametrically Opposed To The Very Purpose’ of New York’s Structured Settlement Protection Law, Says Court

‘Impulsive’ Transaction ‘Is Diametrically Opposed To The Very Purpose’ of New York’s Structured Settlement Protection Law, Says Court

An “impulsive transfer” of structured settlement payment rights was unrelated to any “real urgency” and, in fact, was “diametrically opposed to the very purpose of the” New York structured settlement protection act, an Empire State judge said in a recent opinion.

New York Justice Peter J. Kelly issued the opinion in Matter of J.G. Wentworth Originations, LLC (McMichael), 2000-59/A, 2017 N.Y. Misc. LEXIS 2915, 2017 NY Slip Op 50989(U) (N.Y. Sup. Ct. Aug. 2, 2017), about a payee, Nigel Criss, and a proposed transfer of structured settlement payment rights that Mr. Criss would sell to factoring company J.G. Wentworth Originations, LLC if the judge approved.

The aggregate total of the payments that would be sold was $429,780.32, and, as the court pointed out, under the proposed transaction with J.G. Wentworth, “Nigel intends to sell the payments for the net amount of $245,000.00.”

The court stated that, “as a preliminary matter, the New York Structured Settlement Protection Act (‘SSPA’) originated in response to concerns that certain structured settlement payees are vulnerable to both financial exploitation and the rapid dissipation of their awards” and so “institutions seeking to acquire a payee’s structured settlement rights are required to commence a special proceeding seeking judicial approval, irrespective of the payee’s willingness to go forward with the transaction (see id; General Obligations Law § 5-1705])”.  Added the court:

“To pass muster [under the SSPA], the proposed transfer must be in the best interest of the payee, the transaction must be fair and reasonable, and the payee must be advised in writing to seek independent professional advice regarding the transfer and has either received such advice or waived such advice in writing . . . .

Determination as to whether the transfer is in the best interests of the payee warrants a fact-sensitive and oftentimes paternalistic analysis, taking into consideration the payee’s age, maturity level, income sources independent of the structured payments, whether the payee has any dependents, the stated purpose of the transfer, the extent to which the payee appears to understand the financial consequences of the transaction, and whether the payee has received independent advice .

The court then reviewed the facts relevant to the proposed transaction.  “According to his affidavit, the payee, Nigel, is 18 years of age, single, with no dependents, and is currently a full time student” who “seeks a lump sum payment of $245,000.00 for the purpose of purchasing a home in Allentown, Pennsylvania at a cost of $210,000.00” and to use additional funds from the transaction for home improvements, the purchase of a vehicle, and day-to-day expenses.  The court also noted that the payee “plans on attending a ‘Barbering Program’ to obtain his license” but that “[n]o supporting documents have been submitted by Nigel in support of the petition.”

The court was especially concerned about the monies that the payee had already received:

It seems that at the still-tender age of 18, Nigel intends to spend the entirety of the lump sum payment immediately, in lieu of receiving payments over time that are designed to provide for his long-term financial security.  Significantly, the court observes that Nigel, upon recently reaching the age of majority, has already accessed the monies in his guardianship account which amount to approximately $186,000.00.  Nigel’s unfettered use of those funds is not described in the petition or his affidavit.  If the funds have not been spent, they can certainly assist Nigel with the purposes set forth in his affidavit.  If, on the other hand, they have already been spent, the court must presume that Nigel has little to show for it.  Either way, both scenarios militate against granting the requested relief . . . .

In conclusion, Judge Kelly said that the payee does “not fully appreciate the long-term financial consequences of selling his payments.”  Accordingly, “[t]he court cannot sanction an impulsive transfer for which there is no real urgency, particularly when it is diametrically opposed to the very purpose of the SSPA . . . .”

The full opinion is available here.


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