A 2018 law review article poses the question of whether structured settlement factoring transactions by lead-poisoning victims should be permissible under the law – and concludes “that allowing such sales is unjustifiable”.
The article, “Structured Settlement Sales and Lead-Poisoned Sellers: Just Say No”, by University of Maryland School of Law Professor Karen Syma Czapanskiy, appears in a recent edition of the Virginia Environmental Law Journal (36 Va. Envtl. L. J. 1).
Professor Czapanskiy begins her article describing the most famous lead-paint poisoning victim who sold structured settlement payment rights: Freddie Gray. “An unexpected consequence of the tragedy surrounding Freddie Gray’s death in Baltimore in 2015 was a series of newspaper articles about Gray’s sale of an income stream to which he was entitled under a structured settlement,” writes Professor Czapanskiy at the outset of her piece.
She recounted how Gray, whose structured settlement derived from childhood lead-paint poisoning claims, sold one payment stream, with a face value of $72,970.80, for $28,720.50, and another one with a face value of $145,941.60 for the purchase price of $18,257.70. Gray, the law review article says, entered into the two transactions against the advice of his mother and step-father.
Gray did not attend the hearings on the two proposed transfers – hearings that occurred in Prince George’s County, Maryland, “which is about forty miles from the Circuit Court for Baltimore where the Grays lived,” wrote Professor Czapanskiy. She also pointed out that the factoring company, Access Funding, not only chose to file in that venue but also did not provide notice of the hearings on the proposed transfers to the mother and step-father. Moreover, she wrote, each of the hearings “lasted under three minutes.”
Each transaction received court approval pursuant to petitions filed by Access Funding invoking the Maryland Structured Settlement Protection Act. The Maryland SSPA, like all 49 state SSPAs, provides that a sale of structured settlement payment rights, to a factoring company by a payee who is entitled to receive them, is not effective unless court approved. The article refers to the litigation – still pending – where those orders, as well as more than 100 others, have been challenged by the Maryland Attorney General. The article also refers to changes in the Maryland SSPA, as well as changes to Maryland judicial rules to address what some said were shortcomings in SSPA procedures. These criticisms followed the significant media attention brought on the issue beginning with articles in summer of 2015, first appearing in the Washington Post, on how victims of lead paint poisoning – including Freddie Gray – had entered into such transactions.
In her law review article, Professor Czapanskiy described the pros and cons of a ban on factoring by lead-paint poisoning victims in light of four concerns: autonomy of the victim, taxpayer resources, cost of judicial supervision, and fairness to third parties. She also analyzed alternatives to a ban on such sales – alternatives that included treating “the sale like any other contract”, or maintaining the current system of structured settlement protection act petitions, or allowing sales only with the supervision and consent of a guardian.
“After considering each alternative in light of the autonomy of sellers, consequences of lead poisoning for the competency of sellers, the preferences of their parents, the costs to those parents, the practices of factoring companies, the capacities of courts, the limits of guardianships, and the costs to taxpayers, parents, and communities, I argue that none of the alternatives is an adequate substitute for a ban on sales,” writes Professor Czapanskiy. She concludes that “the best solution is to just say no” to such transactions.
The article is available at here.