New York’s Structured Judgment Law Bars Settlement Factoring Deal, Says Court

New York’s Structured Judgment Law Bars Settlement Factoring Deal, Says Court

New York’s structured judgment statutes are found in Civil Practice Law & Rules Sections 50-A and 50-B.  Section 50-A is entitled “Periodic Payment of Judgments in Medical and Dental Malpractices Actions”, and Section 50-B is called “Periodic Payment of Judgments in Personal Injury, Injury to Property, and Wrongful Death Actions”.  Both require, under certain circumstances, that certain awards to claimants be paid over time.  Both also provide that such payments over time are non-assignable, except in certain circumstances.  In particular, both 50-A and 50-B provide that assignments are barred except “as to amounts (a) to secure payment of alimony, maintenance, or child support; (b) for the cost of products, services, or accommodations provided or to be provided by the assignee for medical, dental or other health care; or (c) for attorney’s fees and other expenses of litigation incurred in securing the judgment.”  N.Y. CPLR §§ 5038, 5048

Pablo Ortega is a recipient of payments under a structured settlement that was approved by a New York court pursuant to Article 50-B.  After the judgment was approved, he moved to Florida, and in 2002, a court considered a proposed transaction with a settlement factoring company and decided that, under the Florida Structured Settlement Protection Act, Article 50-B’s statutory anti-assignment provision barred that proposed transaction.  In that case, the court rejected the idea that Article 50-B did not apply, and said that the Florida SSPA’s definition of applicable law includes the laws of a state whose court approved the structured settlement – therefore, Article 50-B applied and prohibited the transfer.

Fast forward sixteen years, and another Florida court reviewed another proposed transfer with another settlement factoring company – but this time, the company did not argue that Article 50-B was inapplicable, but instead argued that the transaction fit within one of the exceptions to the prohibition against assignment.  The factoring company, JLC Funding, said that it was going to arrange with a health care provider to pay for the cost of products, services, or accommodations provided for medical, dental or other health care.  The court – which from the bench noted that there were errors in JLC Funding’s application (when it said, for instance, that it would purchase a “wheelchair” when, in fact, it was proposing to purchase a scooter) – was unpersuaded, given the plain text of 50-B, which requires that the payment for such medical services be by the health care provider, and not a third party profiting from the transaction.  Said the court:

The Proposed Transfer would “contravene other applicable law” (see Fla. Stat. 5 626.99296(3)(a)(l)) and therefore cannot be approved under the Florida SSPA because the Proposed Transfer would violate the provisions of New York Civil Practice Law andRules $ 5041 et seq., Article 50-B, which created and governs the Payee’s payment rights and which (except in circumstances not present in this matter) prohibits any transfer of such rights.  Further, a transfer to a party other than a health care provider (“Health Care Provider”, that provides medical, dental, or other health care products, services, or accommodations) is proscribed by Article 50-B, as is a transfer as to any amount other than for the cost of products, services, or accommodations for medical, dentalor other health care.  Insofar that JLC is not a Health CareProvider, Article 50-B bars the Proposed Transfer.

The citation for the opinion is In Re: Approval Of Transfer Of Structured Settlement Payment Rights Between JLC Capital Funding and Ortega, Case No.: 16-CA-003649, 2018 WL 1896171, Circuit Court, Lee County, Fla. (Fla. Cir. Ct. Mar. 28, 2018).  Reardon Scanlon LLP Partner Pete Vodola represented the annuity issuer and structured settlement obligor in this matter.

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