An Alabama court this month rejected a factoring company’s attempt to obtain judicial approval of a transfer of structured settlement payment rights – in a deal that would have traded more than $800,000 in settlement payments for an immediate payment of $4,000 – and awarded attorneys’ fees to the insurers that pointed out to the court how the factoring company failed to comply with applicable law.
In CBC Settlement Funding, LLC v. Scott, Case No. CV-2017-092576.00, 2018 Ala. Cir. LEXIS 1, 2018 WL 1449178 (Ala. Cir. Ct. Mar. 12, 2018), Mobile County, Alabama, Circuit Court Judge Sarah Hicks Stewart denied the request from CBC Settlement Funding, LLC, to approve a proposed transfer from a payee to CBC.
Judicial approval is required for the transaction to become effective, as per the terms of the Alabama Structured Settlement Protection Act (SSPA).
Judge Stewart found that the transfer was not in the payee’s best interest, noting that “[u]nder the terms of the transfer, the Payee would receive only $4,000.00 in exchange for payments with a face value of $843,799.92 and a disclosed discounted present value of $342,874.60, resulting in an unfair disclosed effective interest rate of 15.34%.”
The transfer, Judge Stewart also concluded, would contravene the order that approved the structured settlement and governs the structured settlement payment rights.
In addition, Judge Stewart determined that CBC failed to comply with the Alabama SSPA in other ways, such as that the statutorily-required dependents list provided by CBC was incomplete or inaccurate, and that the terms of the proposed transfer agreement purported to bind the payee prior to the hearing “notwithstanding that provisions of the Alabama SSPA establish that a payee has a non-waivable right to oppose a transfer unless and until a court approves a transfer”.
In awarding attorneys’ fees and costs, Judge Stewart said that the insurers that objected to the proposed transfer “incurred attorneys’ fees and costs . . . in connection with reviewing and responding to the Petition, and informing the Court that the Proposed Transfer did not comply with the Alabama SSPA in the aforementioned, and other, ways.” The Alabama SSPA, she said, “provides that a transferee ‘shall be liable to the structured settlement obligor and the annuity issuer . . . [f]or any . . . liabilities or costs, including reasonable costs and attorneys’ fees, . . . arising as a consequence of the transferee’s failure to comply with’ the Alabama SSPA, Ala. Code (1975) § 6-11-54(a)(2).” Based on that provision, she concluded, the insurers are “by right under the Alabama SSPA entitled to . . . attorneys’ fees and costs . . . .”
The ruling in the Scott case means that, for the second time in less than a month, judicial opinions have held that insurers are entitled to attorneys’ fees in a state SSPA proceedings – a trend described in a Secondary Market Blog Post from earlier this month, Michigan Courts Join Those From Other States In Awarding Attorneys’ Fees Based On Failure Of Factoring Company To Comply With Structured Settlement Protection Act (available here). In fact, with the Scott opinion, there are now opinions awarding or affirming awards of such fees under the SSPAs of Alabama, Michigan, New Mexico, New York, Texas, and Washington.