Class-Action Complainant Alleges Scheme By Factoring Companies, With Virginia Judges, To Deprive Structured Settlement Payees of Rights to Counsel, Rights to Future Payments

Class-Action Complainant Alleges Scheme By Factoring Companies, With Virginia Judges, To Deprive Structured Settlement Payees of Rights to Counsel, Rights to Future Payments

A putative class-action plaintiff filed a complaint last week alleging that some Virginia judges were complicit in a scheme, arranged by factoring companies and their lawyer, that was designed to deprive structured settlement payees of their rights – namely, their rights to get legal advice about proposed sales of payment rights to the companies, their rights to having an impartial arbiter decide whether sales of the payees’ payments met statutory standards, and their rights to the payments themselves.

The lawsuit alleges that trial court judges in Portsmouth, Virginia, were part of the scheme designed by several factoring companies and their lawyer, Steven Heretick, who is also a Virginia legislator.

Under the scheme, as alleged by structured settlement payee Larry Dockery (the would-be class representative), the defendants in the lawsuit conspired to deprive him, and other structured settlement payees, of their due process rights, in judicial proceedings concerning proposed sales of structured settlement payment rights.

“Each of these Defendants and persons acted under color state of law to deprive the Plaintiff, and each member of the proposed class, of his or her rights to due process pursuant to the United States Constitution, Amend. XIV,” the Plaintiff alleged.

That claim, under 42 U.S.C. § 1983, for deprivation of civil rights under color of law, is one of ten counts in the complaint filed September 14, in the case captioned Dockery v. Heretick, et al., Civil Action No. 1:17cv4114 (E.D. Pa.).

Other counts allege violations of the Racketeer Influence and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962, as well as for conspiracy to violate RICO, for unjust enrichment, and for a constructive trust.

The constructive trust count is the sole count where the Plaintiff seeks relief against parties that the complaint describes as “Nominal Defendants” – the structured settlement obligors and annuity issuers that have payment obligations under the relevant structured settlements – who the plaintiff names so as to have payments held or paid into court; he seeks no damages from the Nominal Defendants.

The deprivation of rights primarily occurred in the two ways, according to Plaintiff Dockery’s Complaint: by preventing payees from obtaining independent professional advice about the proposed transfers, and by falsely alleging that payees lived in Virginia – where their pending transactions could be reviewed by “complicit” judges – when many lived elsewhere.

The complaint also alleges that the scheme deprived the payees of their right to have the proposed transactions reviewed by an impartial judge, and also alleges that payees were induced to place a fiduciary-style trust in the factoring companies notwithstanding that such companies’ interests conflicted with the payees’ interests.

The factoring companies – J.G. Wentworth and its affiliate, 321 Henderson Receivables, as well as Seneca One Finance, and Structured Settlement Investments, L.P. – hired Heretick to file petitions seeking court approval of proposed transfers under the Virginia Structured Settlement Protection Act (SSPA).

The Virginia SSPA – like SSPAs in most states – provides that individual personal injury victims may sell the rights to future structured settlement payments only if a court reviews and approves of the transaction.

The Virginia SSPA also says that such judicial approval can be given only if the court can make certain judicial findings about the transfer; one such finding is that the payee has either received independent professional advice about the transfer from a lawyer or accountant, or waived the right to receive such advice.

The complaint alleges that the factoring companies had payees each sign a document stating that they had been advised of the right to receive independent professional advice about the transfer, but then “[s]imultaneously . . . also informed each and every [payee] . . . that in fact they could not exercise this right in any way, because if they did, then the transfer would not take place “or would take immeasurably longer to close.”

Because the payees had been advised not to exercise their right to obtain independent professional advice, and because further the payees were advised not to show up in court at the hearings on the proposed transfers, the plaintiff alleges that there was “absolutely nothing in the record from which the Court could have concluded that” the payee had come to “an informed judgment” about whether to proceed with the transfer or whether the terms of the transfer were fair – other than the representations made by Heretick, who was “counsel for an adverse party which the Court had no reason to rely on.”

Had the payees obtained independent advice “of an objective person, charged with protecting the interests” of the payee, then the transfer would not have occurred or there would have been “a demand that the sale take place on terms that were actually fair” to the payee, the Plaintiff alleges.

A different part of the scheme involved the “many instance[s]” where the factoring companies “paid to have the [payee] . . . brought to Virginia” to “execute papers stating, falsely, that the [payee] . . . was a resident” of Virginia.

The factoring companies would then file petitions in Portsmouth, Virginia, Circuit Court, seeking approval of transfers by the payees, notwithstanding that those payees did not live in Virginia.

Although the court-filed papers would sometimes include documents showing that the payees lived in Virginia, the fact that the documents would “bear a date very close to the date on which the hearing was being held” did not raise any concerns, but should have, the Plaintiff alleges.

“[B]ecause there was never any meaningful judicial review of these Petitions, there is not a single instance in any of these hundreds of cases in which the Court noticed that the [payee’s] . . . evidence of residence in Virginia was so recently minted as to give reason to doubt its veracity,” the Dockery Plaintiff alleges.

In such cases where the payees did not reside in Virginia, the Virginia courts were “without jurisdiction to adjudicate the Petition,” the Plaintiff alleges in the Complaint.

The Plaintiff also alleges that the Defendants engaged in fraudulent concealment of their actions by, among other things, “strongly” encouraging payees not to appear in court.

“By successfully preventing [payees] . . . from coming to court, Defendants also made it far more difficult for the [payees] . . . to realize what was happening – and in particular, made it impossible for them to know that they were not in fact submitting their Petition to an impartial arbiter who would enforce the law and protect their rights, but instead to a judge who was in the pocket of the [factoring companies] and of their counsel . . . and that the judge would rubber stamp petitions . . . placed in front of him.”

As for the judges, described by the Plaintiff as the “Complicit Judges”, they, too – along with the factoring company defendants and their lawyer – “developed and executed the . . . scheme to profit from the breach of these state laws, and from the exploitation of the [payees] . . . which is possible when these state law protections are defeated,” the Plaintiff alleges.

According to the Plaintiff, the “Complicit Judges enabled the scheme” through “acts and intentional omissions and intentional complete abrogation of their obligations as judicial officers” by (1) granting Heretick “a special block of time during which the Complicit Judges gave Heretick the exclusive right to present petitions to one of the Complicit Judges, seeking approval” of the transfers, (2) being aware that in every transfer, the payee “was not represented by counsel”, (3) knowing that in every transfer, the payee “was not even in the courtroom when the petition was presented and adjudicated”, (4) having the knowledge “that the record in each Petition afforded absolutely no basis for an independent assessment of the fairness of the terms of sale, or of the [payee’s] . . . need for the funds or whether the sale was actually in the best interest of the [payee]”; and (5) granting approval of every transfer, “within a few days” and “within a matter of moments and without any meaningful consideration at all.”

The “Complicit Judges”, according to the Complaint, include judges currently serving on the Portsmouth, Virginia, Circuit Court.

The Complaint seeks the following relief:

  • an order certifying the class;
  • an award of class damages as well as treble damages;
  • establishment of a constructive trust, “into which shall be paid all payments due now and in the future, pursuant to the annuities at issue in this case”;
  • And order directing payments into the registry of the court;
  • Disgorgement by the factoring companies of all profits “approrpriated by operation of the scheme”;
  • An award of punitive damages; and
  • An award of all class action attorney’s fees and costs.

The an article about the complaint (“Financing Companies, Lawyer Accused of Preying on Disabled SSA Beneficiaries“), accompanied by the full complaint, is available here.




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