The Florida court that recently rejected a proposed transfer of structured settlement payment rights because the transaction violated New York’s structured judgment law also addressed the fact that the proposed contract did not contain a provision required under Florida law.
In the opinion in 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), the Florida Circuit Court held that the New York structured judgment law, Article 50-B of New York’s Civil Practice Law & Rules § 5041 et seq., barred the transfer because the structured settlement was an Article 50-B settlement and the transfer did not fall within any of the exceptions to 50-B’s statutory prohibition against transfers. For more about the ruling on this issue, see this Secondary Market Blog Post: New York’s Structured Judgment Law Bars Settlement Factoring Deal, Says Court.
The factoring company, JLC Capital Funding, had commenced its judicial proceeding pursuant to the Florida Structured Settlement Protection Act, which provides that such a transfer is ineffective without court approval of the transaction.
The court, besides holding that New York’s Article 50-B prohibited the transfer, also said that JLC Capital Funding failed to comply with the disclosure requirements of the (also applicable) New York Structured Settlement Protection Act. For more about this issue, see this Secondary Insurance Market Blog post: New York’s Structured Settlement Protection Act Falls Within Scope Of ‘Applicable Law’ In Florida Protection Act Proceeding, Says Court.
Another issue the court addressed was whether JLC’s proposed contract with the structured settlement payee, Pablo Ortega, met the Florida SSPA’s requirements concerning required terms in such a contract (or, in the SSPA’s terms, a “transfer agreement”). Again, the court said JLC failed to comply with SSPA requirements, saying that the “proposed contract between JLC and the Payee . . . fails to provide ‘that the domicile state of the payee is the proper venue to bring any cause of action arising out of a breach of the agreement'” as required by Florida Statutes § 626.99296(3)(a)(5). Therefore, the court said, “the Proposed Transfer cannot be approved under the Florida SSPA.”
Other courts in Florida – as well as those in Georgia, Texas, and Virginia, and elsewhere – have rejected proposed transfers of structured settlement payment rights under the SSPAs of other states, due to lack of compliance with the choice-of-venue provision.
Some judges have also commented that the provision is designed to prevent factoring companies from inserting venue provisions in their transfer agreements that would allow them to sue payees in far-off forums where the payees would believe that they would be unable to adequately defend themselves.
Such practices had been common before the enactment of SSPAs. With courts – like the Ortega court – enforcing SSPA venue requirements, such practices have become infrequent at most.
(Reardon Scanlon LLP Partner Pete Vodola represented the annuity issuer and structured settlement obligor in the Ortega matter.)