Opinion
EFCV-20-158813
07-16-2021
ASHLEE CALENDAR, LLC, Petitioner, v. B.M., Travelers Casualty & Surety Company, f/k/a Aetna Casualty & Surety Company, and Genworth Life Insurance Company of New York, As Interested Parties.
Jensen & Jensen (Donald W. Jensen, Esq., of counsel); attorneys for Petitioner.
Jensen & Jensen (Donald W. Jensen, Esq., of counsel); attorneys for Petitioner.
This special proceeding was commenced by Order to Show Cause ("OSC") (NYSCEF Doc. 22) pursuant to the Structured Settlement Protection Act ("SSPA"), General Obligations Law ("GOL") §§ 5-1701 — 5-1709. Petitioner Ashlee Calendar, LLC ("Ashlee" or "Petitioner") seeks judicial approval of a proposed transfer of structured settlement payment rights ("Proposed Sale") from Billy Jack Miller ("Miller" or "Payee"), in exchange for a $ 138,300.00 one-time payment to Miller. In support, Petitioner submits: (1) a Second Amended Petition dated February 11, 2021 (NYSCEF Doc. 1) ("Petition"), with supporting exhibits (Docs. 4-8, 13-16); (2) Second Supplemental Attorney Affirmation and CPLR 2217 (b) Statement of Donald W. Jensen, Esq. dated February 11, 2021 ("Jensen aff.") (Doc. 3); Affidavit of Petitioner's Chief Operating Officer Leonard Elder ("Elder") dated January 7, 2021 (Doc. 15) ("Elder aff."); and, (4) Miller's three affidavits dated November 12, 2020 ("First Miller aff.") (Doc. 16); February 10, 2021 ("Second Miller aff.") (Doc. 5); and, April 23, 2021 ("Third Miller aff.") (Doc. 18), with supporting exhibits (Docs. 19-21).
The Jensen affidavit and Second and Third Miller affidavits were submitted in response to specific issues raised by the Court with respect to Miller's initial submissions for an OSC. See Third Miller aff. at ¶¶ 3-7.
The OSC being returnable during the COVID-19 pandemic, the Court resolves Petitioner's application on submission of papers alone. After careful review of the foregoing, the Court denies Ashlee's application, and dismisses the Petition.
SUMMARY OF FACTS
Before analyzing the legal and factual issues, it is important to outline Miller's four prior Court-approved sales of structured settlement proceeds; this Court's denial of one proposed sale; and, dismissal of three prior attempts. The Court next describes the Proposed Sale in detail. Finally, the Court closely reviews Miller's three successive affidavits, which show the evolving and inconsistent nature of Miller's circumstances and claimed bases for sale.
1. Background
Miller is married, 43 years old (born September 1977), and lives with his wife (now age 39). He has three dependent minor children (now ages 10, 11 & 16) who live with his ex-wife, and for whom he has been ordered to pay child support. First Miller aff. at ¶¶ 3-4. His submissions to this Court include his "Monthly Budgets" prepared November 12, 2020 ("November 2020 Budget") and April 13, 2021 ("April 2021 Budget") (Doc. 19), both of which itemize "Recurring Monthly Expenses" totaling $ 2,036.00: rent ($ 700.00); child support ($ 676.00); "food/groceries/other necessities" ($ 400.00); utilities ($ 175.00); "Clothing/Dry-Cleaning/Laundry" ($ 25.00); "Medical and Dental Expenses — recurring prescription costs" ($ 35.00); and, transportation ($ 25.00). Miller avers he had monthly household earnings of $ 500.00 between July 2020 and November 2020, when he began seasonal employment for United Parcel Service ("UPS") earning $ 16.00/hour (see First Miller aff. at ¶ 7, Second Miller aff. at ¶ 6 & November 2020 Budget), which increased the household monthly earnings to $ 3,666.00. At some point before April 2021, Miller's seasonal work for UPS ended, leaving him unemployed (see Third Miller aff. at ¶ 6). His April 2021 Budget states his monthly household income (after taxes) -- all from his wife's employment at Dollar General -- totals $ 1,280.00.
Although attached to Miller's First Affidavit as initially submitted to (and returned by) the Court via NYSCEF, the November 2020 Budget is not attached to Miller's re-submitted affidavit, and not now in the NYSCEF file. A copy is in Chambers’ file, and the Court takes judicial notice thereof. See Casson v. Casson , 107 AD2d 342, 344 (1st Dep't 1985), appeal dismissed , 65 NY2d 637 (1985).
2. Court-Approved Structured Settlement
In July 1989, a jury awarded damages in favor of Miller, then an infant, in the amount of $ 1,633,000.00. Order dated October 24, 1989 ("1989 Order") at pg. 1. Miller's parents then entered into a structured settlement agreement, approved by this Court (Duskas, J.S.C.), providing the following payments to their son:
The 1989 Order is not attached to Miller's re-submitted First Affidavit, and not now in the NYSCEF file. It is, however, is on file with the St. Lawrence County Clerk ("Clerk"), and the Court takes judicial notice thereof. "It is well settled that a court may take judicial notice of its own prior proceedings and orders." Matter of Shirley v. Shirley , 101 AD3d 1391, 1394 (3d Dep't 2012) ; Matter of Sabrina B. v. Jeffrey B , 179 AD3d 1339, 1441 (3d Dep't 2020) (quoting Matter of Shirley ).
• $ 2,229.50 monthly guaranteed for 40 years and life thereafter beginning September 1995 (age 18), increasing 4 % compounded annually
• $ 25,000.00 lump sum guaranteed at age 18 (1995)
• $ 50,000.00 lump sum guaranteed at age 21 (1998)
• $ 75,000.00 lump sum guaranteed at age 25 (2002)
• $ 100,000.00 lump sum guaranteed at age 30 (2007)
• $ 150,000.00 lump sum guaranteed at age 35 (2012)
• $ 175,000.00 lump sum guaranteed at age 40 (2017)
• $ 175,000.00 lump sum guaranteed at age 45 (2022)
• $ 200,000.00 lump sum guaranteed at age 40 (2027)
• $ 250,000.00 lump sum guaranteed at age 55 (2032).
1989 Order at pg. 2.
This structured settlement guaranteed payments to Miller in the amount of $ 3,742,769.00, and estimated lifetime payments of $ 6,057,071.00. Id. at pg. 3. Importantly, the guaranteed periodic "lump sum" payments at age 18, 21, 25, 30, 35, 40, 45, 50, and 55, provided ample cash at set intervals, thereby preventing or lessening any perceived need to "cash out" the monthly payments. It also guaranteed monthly payments to increase 4 % compounded annually until September 2035, with monthly life-contingent payments thereafter, again increasing 4 % compounded annually.
According to Miller, the verdict and resulting structured settlement were the result of a farming accident he had as a child, in which his "left hand was mangled", but he "did not lose any fingers and retain[s] functional use of [the] hand." First Miller aff. at ¶ 2. Miller avers he does not require any medical treatment for the hand. Id. at ¶ 12. The amount of the verdict -- payable through structured settlement means -- leaves no doubt as to the severity of his injury.
3. Prior Sales and Attempted Sales of Structured Settlement Proceeds
This Court (Demarest, J.S.C.) previously approved, pursuant to the SSPA, three earlier applications to sell structured settlement proceeds. See Petition at ¶ 7; First Miller aff. at ¶ 19 and Orders (on file with the Clerk) dated May 12, 2003 (Index No. CV-2003-114007), October 14, 2004 (Index No. CV-2004-117547), and March 20, 2008 (Index No. CV-2007-124008) ("2008 Order"). As summarized in the 2008 Order, Miller sold his right to receive all guaranteed lump sum payments after the payment due at age 21 (1998) and a portion of his guaranteed monthly payments following September 2000 through June 21, 2020; and, the entirety of his guaranteed monthly payments from July 21, 2020, through August 21, 2035. See 2008 Order at ¶¶ 3-7; see also First Miller aff. at ¶ 19 & Jensen aff. at ¶ 5. It is notable that prior to the July 2002 effective date of the SSPA, Miller also made two sales of portions of his structured settlement payments. See 2008 Order at ¶ 2. Miller has no proceeds remaining from his multiple prior sales. See First Miller aff. at ¶ 7; Third Miller aff. at ¶ 3.
By Order and Judgment dated May 1, 2006, in Index No. CV-2006-121187 ("2006 Order") (on file with the Clerk), this Court (Demarest, J.S.C.) denied a petition to sell structured settlement proceeds totaling $ 251,000.00, for a net payment to Miller of $ 60,000.00, as "not in [Miller's] best interest and [the] rate deemed unfair and unreasonable." First Miller aff. at ¶ 20; see Petition at ¶ 7 & Jensen aff. at ¶ 5. Three other applications to sell structured settlement proceeds (Index Nos. CV-2006-123357, CV-2009-132011 and EFCV-19-156358) have been discontinued and/or dismissed as abandoned. First Miller aff. at ¶ 20; see Petition at ¶ 7; see also April 14, 2021, Order in Index No. EFCV-19-156358 (on file with the Clerk).
See 2006 Order at 2; see also Petition filed January 20, 2006, with the Clerk in Index No. CV-2006-121187, at ¶ 19 (a).
4. Pending Application to Transfer Structured Settlement Payments
Having previously sold his remaining guaranteed lump sum payments and life contingent monthly payments through August 2035, in this proceeding Miller seeks Court approval to sell 264 monthly life-contingent payments from September 2035 (age 58) through August 2057 (age 80). See Petition at ¶ 6; Elder aff. at ¶¶ 8-10. Because of the 4 % annual increase in payments, the initial (September 2035) monthly payment to be sold will be $ 10,705.80. Petition at ¶ 6; Jensen aff. at ¶ 4. The monthly life-contingent payments (if Ashlee's Petition is denied) in 2056-2057 are $ 24,396.04 (annual total $ 292,752.48). See Elder aff. at ¶ 10 & Exhibit A thereto at pg. 12.
As initially submitted, Ashlee's Petition sought Court approval of the transfer of Miller's payments for $ 100,000.00. See First Miller aff. at ¶ 5. The proposal now before the Court offers an increased sale price of $ 138,300.00. See Jensen aff. at ¶ 4; Elder aff. at ¶ 9. According to Ashlee's required "Offer Disclosure" (Doc 7), the aggregate amount of payments to be sold is $ 4,399,822.92; the "current value [ ] under federal standards for valuating annuities [is] $ 3,943,366.20, determined by applying the applicable federal rate of 0.4 %"; and, the "annual discount rate used to determine the advance amount: 14.99 %." Id. at pg. 1; see Elder aff. at ¶ 10 & Exhibit A thereto. "Price quotes from the original annuity issuer or (if not readily available) from two other annuity issuers that reflect the current cost of purchasing a comparable annuity for the aggregate amount of payments to be transferred [are] $ 1,972,530.00 and $ 2,000,145.42." See Offer Disclosure at pg. 1.
Miller's First, Second and Third Affidavits demonstrate his changing circumstances and proposed uses of funds over time. Overall, these affidavits show that, although Miller's ostensible primary use of the proceeds from the Proposed Sale is to fund or support his landscape business, he intends to pay off past-due debts and otherwise shore up his precarious financial situation. The Court now reviews Miller's successive submissions in detail.
a. First Miller Affidavit (Doc. 16)
Miller's First Affidavit sought Court approval to sell the payments now at issue for $ 100,000, and proposed the following uses of funds: (1) pay overdue child support of $ 2,028.00; (2) pay "overdue rent" (amount not stated); (3) pay "fines" (nature and amount unstated); (4) purchase "reliable transportation" (price, make, model of proposed vehicle not stated); (5) purchase snow-plowing equipment (description or purchase price of equipment not stated) to "supplement my freelance [landscaping] work by offering snow-plowing services"; and, (6) purchase a life insurance policy (cost not stated) to support his wife and three minor children. First Miller aff. at ¶ 9. Miller acknowledged he had been advised to seek independent professional advice concerning the legal, tax and financial implications of the proposed sale. Id. at ¶ 18. Believing he "fully understand[s] the transaction" and desiring not to incur any additional expenses, he expressly waived his right to such advice. Id.
In addition to listing his proposed uses of funds, Miller's First Affidavit made clear his then-current financial situation was dire (see id. at ¶ 7): he had no assets other than his future right to life-contingent structured settlement payments (id. ); he lacked "creditworthiness necessary to secure a loan to catch up on [ ] financial obligations" (id. ); and, he had entirely used up the payments made to him as a result of his prior, multiple, sales of structured settlement proceeds (id. at ¶ 19). He requested Court approval "to address [my] debts and alleviate [my] increasing perilous [ ] financial situation" (id. at ¶16); Court approval is necessary "to resolve my current financial problems [and] regain my financial footing" (id. at ¶¶ 14-15).
Miller stated he had used the proceeds from 2003 and 2004 sales of structured settlement payments to "pay outstanding debts" and replace an automobile. Id. at ¶ 19. Although the 2008 sale netted proceeds of nearly $ 190,000.00, which he had "intended to use to purchase a house, relocate, pay debts and school tuition", his first marriage dissolved, as a result of which he "wound up losing everything." Id.
Miller averred that he has worked for "more than five years" as a freelance landscaper, earning $ 600.00 per month. Id. at ¶¶ 7-8. This income stopped as a result of the COVID-19 pandemic (id. at ¶ 7), and monthly guaranteed structured settlement payments of $ 5,715.91 ended July 2020 (id. ; see November 2020 Budget). Miller stated his monthly expenses totaled $ 2,036.00. First Miller aff. at ¶ 8 & November 2020 Budget. His household income pre-pandemic and before cessation of monthly structured settlement payments was $ 6,322.70, which then fell to "only approx. $ 500" between July 2020 and November 2020. See November 2020 Budget. In November 2020, Miller started work for UPS earning $ 16.00 hourly, and his wife began work at Dollar General earning $ 11.00 per hour, resulting in combined monthly earnings from wages of $ 3,666.00. First Miller aff. at ¶ 7; see November 2020 Budget. Miller stated he received free medical insurance through Fidelis (id. at ¶ 13); did not need medical treatment for his hand (id. at ¶ 12); but, suffered from high blood pressure, anxiety, and diabetes (id. at ¶ 11). On November 24, 2020, the Court, through NYSCEF returned, unsigned, Ashlee's initial proposed Order to Show Cause.
b. Second Miller Affidavit (Doc. 5)
In his Second (February 2021) Affidavit, Miller "provide[d] further detail" concerning how he intended to spend the increased proceeds ($ 138,300.00) from the Proposed Sale. Second Miller aff. at ¶¶ 2-3. He described his proposed uses of funds as follows:
| Item | Amount |
| 2018 Bobcat T595 2018 Compact Track Loader | $44,000 |
| Single Premium Ten-Year Life Insurance | $19,000 |
| Truck (for landscape/snow plow business) (2008 Ford Super Duty F-250) | $17,980 |
| Big Mow Commercial Pro 31hp Riding Lawnmower | $14,300 |
| Family Car (2012 Ford Flex) | $12,190 |
| Child Support Arrearage | $5,500 |
| Late Rent | $5,200 |
| American Trailer Pros Equipment Trailer | $4,270 |
| Husqvarna ST 430T Snow Blower | $2,999 |
| Husqvarna Log Splitter | $1,900 |
| Fines | $1,810 |
| Husqvarna Stump Grinder | $1,399 |
| Husqvarna 580BTS II Backpack Blower | $570 |
| Husqvarna 536Ii XP Chain Saw | $400 |
| Working capital and accrued interest on existing obligations | $5,382 |
| Total | $136,900 |
Id. at ¶ 5.
Miller "intend[ed] to invest in [his] existing landscape business and supplement [his] offerings with snowplow services." Id. at ¶ 6. He planned to work around his 7:00 a.m. to 2:00 p.m. "seasonal schedule" at UPS by providing snowplowing services in the evenings or early mornings. Id. Miller did not submit any supporting documents with his Second Affidavit.
The Court again returned, unsigned, Ashlee's proposed Order to Show Cause, advising its counsel that a written business plan; statement of current household income and expenses (with supporting documentation); and, documentation of current child support and arrears must be submitted.
c. Third Miller Affidavit (Doc. 18)
Miller's Third Affidavit is notable for two reasons. First, he acknowledged that his financial situation has substantially worsened since February 2021. He stated: "my seasonal work with [UPS] ended and I am not currently scheduled to resume season[al] work with UPS." Third Miller aff. at ¶ 6. At that point, Miller's "financial situation [ ] became even more perilous as my previously identified indebtedness continues to grow." Id. at ¶ 10. "[A]ll of my debts are seriously past due and I have zero credit available to me." Id. at ¶ 13. "I am in dire straits and the only asset [ ] that would allow me to resolve my current situation is my rights to the future non-guaranteed payments that are subject [of the Proposed Sale]." Id. (emphasis added). When he prepared his Third Affidavit in April 2021, his monthly household income was only $ 1,280.00. His recurring monthly expenses remained $ 2,036.00. Id. at ¶ 13 & April 2021 Budget.
Secondly, Miller's Third Affidavit is notable for the undated "Business Plan -- Miller Garden Design ["MGD"]" ("Business Plan") (Doc. 20) -- referenced in ¶ 15 and attached thereto. The Business Plan describes the "vision" of MGD as "creating award winning landscapes [ ] with a signature aesthetic[;] [y]our lawn looks like Wrigley Field [; and] [y]our garden looks like Keenland." Business Plan at pg. 3. Inconsistent with his reported work history of more than five years as a freelance landscaper, earning $ 600.00 per month, as described in ¶¶ 7-9 of his First Affidavit, the Business Plan's "Executive Summary" describes his business as a "one-year-old landscaping and snow-removal company." Business Plan at pg. 3 (emphasis added). Although his First Affidavit clearly indicates he worked alone, without employees or independent contractors, the Business Plan describes MGD as a "five-star, four season, three employee , family owned outdoor solutions company [ ]." Id. (emphasis added). Under the heading "Company Summary", the Business Plan states he "has established" a "strong team", comprising an office supervisor with a $ 20,000.00 salary; "Owner/Field/Project Manager" (presumably Miller himself) earning about $ 20,000.00 annually; and, 3-5 part time workers earning minimum wage. Id. at pg. 5 (emphasis added). Miller makes no attempt to square the $ 600.00 monthly revenue described in his First Affidavit with the monthly payroll of over $3,000 described in the Business Plan. He also provides no documentation whatsoever concerning this claimed business, such as tax returns, financial statements, balance sheets, business records, client lists, or, indeed, anything else.
This appears to refer to "Keeneland", an "internationally renowned" racetrack and auction house for Thoroughbred horses, located in Kentucky. See https://www.keeneland.com.
The Business Plan projects that, with use of the funds from the Proposed Sale, MGD will "service[ ] at least 50 different residential homes"; "[i]ncrease our number of clients by 20 % annually"; and, ultimately "grow our customer base by 50%." Id. at pg. 4. The Business Plan refers to a "market analysis summary" (id. at pg. 7), but does not provide a copy. Although the Business Plan describes the market which his company would service as including "[r]esidential homes in mid- to high-income areas" and "[l]arge corporate accounts or condo complexes [ ] rang[ing] from 60K to 350K per year" (id. at pp. 8-9), this does not accurately characterize the "village of Governeur [sic] and surrounding areas" (id. at pg. 3) in which his business will operate. The Business Plan projects future ongoing expenses of $ 8,800/month. Id. at pg. 14. Notably, other than "working capital or repairs" of $ 1,652.16, the only "Assets" described in the Business Plan are the very items which Miller seeks to purchase with the proceeds of the Proposed Sale. Compare Business Plan at pp. 14-15 with Miller Second aff. at ¶ 5. Stated differently, the only conclusion that may be drawn from the Business Plan is that his current operations are essentially assetless.
DISCUSSION
The purchase of structured settlement payments from personal injury victims is a practice that has taken place for years, and has "receive[d] universal legislative attention." Robin S. Kelner & Gail S. Kelner, Protecting Personal Injury Victims in the Sale of Structured Settlement Payments , NYLJ, September 22, 2020 at 3, col 1. Businesses seeking to purchase structured settlements advertise aggressively on television and the internet. For example, one such company (J.G. Wentworth) employs self-described "famous commercials" using a catchy jingle with actors singing "I have a structured settlement, but I need cash now", "It's my money, I need cash now," or the like. YouTube videos depict performances in the styles of opera buffa featuring Wagnerian singers -- http://youtu.be/pdPM6j1Q4sg, or city bus passengers -- http://youtu.be//bkORcziEx6g, as well as in the style of a "boy band" -- http://youtu.be/2PDyELj6xoE, and others. See https://www.jgwentworth.com/about/videos and https://www.youtube.com/channel/UC5d4mlV0zWDL0rHBpYT38mw. Petitioner's website offers quotes for sales of structured settlements, lottery proceeds, and annuities. See https://risingca.com.
In 2002, New York enacted the SSPA to address concern that structured settlement payees were especially prone to being victimized and quickly dissipating their settlement proceeds. Matter of Settlement Funding of NY [Cunningham] , 195 Misc 2d 721, 722 (Sup Ct Rensselaer County 2003). The statute's primary purpose is to shield the recipients of long-term structured settlements from being preyed upon by companies aggressively seeking the acquisition of their rights to guaranteed structured settlement payments. See e.g. , Matter of 321 Henderson Receivables L.P. v. Martinez [Martinez] , 11 Misc 3d 892, 895 (Sup Ct New York County 2006). Proposed sales of structured settlement proceeds "now are heavily scrutinized under the [Act]." Singer Asset Fin. Co., LLC v. Scott , 38 AD3d 1120, 1120, n 1 (3d Dept 2007). "Under [the SSPA], transfers [ ] are prohibited unless approved by a court of competent jurisdiction based upon express findings, inter alia, that the transfer is in the best interest of the payee and that the discount rate, fees and expenses used to determine the net amount advanced are fair and reasonable." Singer Asset Fin. Co., LLC v. Melvin , 33 AD3d 355, 357 (1st Dep't 2006) (addressing pre-SSPA sale).
The legislative history of the SSPA makes clear it was enacted to "protect recipients of structured settlements and to maintain the integrity of structured settlements for use in settling personal injury lawsuits and workers’ compensation law claims and to defend the public policies that favor structured settlements." Sponsor's Memorandum, Bill Jacket, L 2002, ch. 537. The bill sponsors explained:
"Recently a growing number of factoring companies have used aggressive advertising, plus the allure of quick and easy cash, to induce settlement recipients to cash out future payments, often at substantial discounts, depriving victims and their families of the long-term financial security of their structured settlement payments were designed to provide ... This market in the buying and selling of injured individuals’ payment streams can pose a hazard to existing recipients of structured settlements and to the public assistance programs on which recipients must often rely, once they have traded away secure income from structured settlements." Id. (quoted in Matter of RSL Funding, LLC & M.G.N. (M.G.N.) , 71 Misc 3d 1205(A), 2021 NY Slip Op. 50279(U), * 6 (Sup Ct Rensselaer County 2021)).
"It has been the intent of the Legislature ... to place the court in a position of in loco parentis to ... payees, so as to ensure that the transactions are ... fair and reasonable [ ]." Matter of Stone St. Originations, LLC v. Peterson , 69 Misc 3d 1206(A), 2020 NY Slip Op. 51199(U), * 2 (Sup Ct Queens County 2020) (cleaned up ). "[T]he SSPA is a ‘paternalistic statute’ requiring the courts to engage in a fact-based inquiry and not merely serve as a rubber stamp." Matter of 321 Henderson Receivables, L.P. [Lemanski] , 13 Misc 3d 526, 531 (Sup Ct Erie County 2006) (citations omitted). "Courts do not want payees to be lured into giving up their future financial security in order to pursue a short term remedy of a lump sum payment." Advance Funding, LLC v. Brennan , 44 Misc 3d 1223(A), 2014 NY Slip Op. 51280(U), * 2 (Sup Ct Queens County 2014).
In Brownback v. King , 141 S.Ct. 740, 748 (2021), United States Supreme Court Justice Clarence Thomas departed from ‘Bluebook’ form by using a single parenthetical -- "cleaned up" -- to signal extraneous material was removed from a quotation without changing the underlining text, and, thereby, convey what the court being quoted actually said. See Debra Cassens Weiss, Justice Thomas Goes Rogue on the Bluebook with ‘Cleaned Up’ Citation - to the Delight of Appellate Lawyers , ABAJ (March 15, 2021) [note: online edition]. The Second Circuit has employed this usage. E.g. Pharoahs CL, Inc. v. United States Small Business Administration , 990 F.3d 217, 227 (2d Cir. 2021). This Court adopts Justice Thomas’ innovation.
"The heart of the [SSPA] ... lies in the courts’ independent discretionary determination whether or not the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependents; and whether the transaction, including the discount rate used to determine the gross advance amount and the fees and expenses used to determine the net advance amount, are fair and reasonable." Matter of Settlement Funding of NY, 195 Misc 2d 721, 723 (Sup Ct, Rensselaer County 2003) (emphasis added) (cleaned up); accord : Matter of Settlement Capital Corp. v. Yates , 12 Misc 3d 1198(A), 2006 NY Slip Op. 51616(U), * 3 (Sup Ct, Kings County 2006). GOL § 5-1706, titled "Approval of transfers of structured settlement payment rights", sets forth the factors the Court must address. In pertinent part, this section requires the Court make three findings to approve a proposed transfer: (1) it complies with the procedural requirements of the SSPA; (2) it "is in the best interest of the payee , taking into account the welfare and support of the payee's depend[e]nts"; and, (3) the transaction, "including the discount rate used to determine the gross advance amount and the fees and expenses used to determine the net advance amount, [is] fair and reasonable ". Id. (emphases added); see J.G. Wentworth Originations, LLC v. Genworth Life Ins. Co. , 61 Misc 3d 1215(A), 2020 NY Slip Op. 50874(U), * 2 (Sup Ct Kings County 2018) (applying statutory factors). If Petitioner does not satisfy its burden on application, the Court must disapprove the proposed transfer.
Judicial consideration of each proposed transfer is necessarily fact-specific. "[T]he New York State Legislature in enacting SSPA and in empowering the courts with the discretion to determine whether the terms of a proposed transfer of future payments are fair and reasonable did not intend for the courts to be mere rubber stamps." Matter of Settlement Capital Corp. (Ballos) , 1 Misc 3d 446, 455 (Sup Ct Queens County 2003). "[T]he Legislature in enacting the SSPA did not intend for the courts to be mere rubber stamps for the proposed sale." Matter of J.G. Wentworth Originations, LLC (Allstate Life Ins. Co. of N.Y.--Kwant) , 61 Misc 3d 1224(A), 2018 NY Slip Op. 51730(U), * 1 (Sup Ct Duchess County 2018). As noted in one recent decision, "structured settlement payees are especially prone to being victimized and quickly dissipating their awards." Sempra Finance, LLC v. Wilton Re Annuity C.I.R. Corp. , No. 516276/2018, 2019 WL 934915, at * 1 (NY Sup Ct Kings County 2019). This Court is unaware of any appellate decisions addressing these SSPA factors. Accordingly, the Court looks to trial court opinions.
A. Procedural Requirements
The Court first considers whether the Proposed Sale meets the SSPA's procedural requirements. Here, the SSPA specifies the proper venue of the action; that the necessary papers be served upon interested parties at least twenty (20) days prior to its return date; and, that those papers include: a copy of transfer agreement; disclosure statement; listing of dependents; and, a statement setting forth whether there have been any previous transfers or applications for transfer of structured settlement payment rights, with details of all such transfers or applications for transfer. GOL § 5 1705; see Platt, 2 Misc 3d at 875-76. The payee must be provided advance notice 10 days prior to the date on which the transfer agreement is signed. GOL § 5 1703. Further, the Court must review the transfer agreement to be certain no prohibited provisions are contained therein; that certain mandatory language is included; and, that the agreement is written in plain language as required in consumer transactions. GOL §§ 5 1704, 5 1706 (e) & 5 1708. The payee must be properly advised in writing to seek independent professional advice regarding the legal, tax and financial implications of the settlement including any adverse consequences, and must acknowledge having received or waived such advice. GOL § 5 1702(e). The Court finds Petitioner has satisfied the above procedural requirements.
B. Best Interest of Payee
The Court next addresses whether Ashlee satisfies the second element, requiring the Court find the Proposed Sale is in Miller's best interests, taking into account his welfare and the support of his dependents. GOL § 5-1706 (b). "[T]he ‘best interest’ standard under the SSPA requires a case-by-case analysis to determine whether the proposed transfer of structured settlement payments, which were designed to preserve the injured person's long-term financial security, will provide needed financial rescue without jeopardizing or irreparably impairing the financial security afforded to the payee and his or her dependents by the periodic payments." Ballos, 1 Misc 3d 446 at 455 ; accord: Matter of J.G. Wentworth Originations, LLC v. Genworth Life Ins. Co. of New York [Johnson], 68 Misc 3d 1206(A), 2020 NY Slip Op. 50874(U), * 2-3 (Sup Ct Kings County 2020); accord: Matter of J.G. Wentworth Originations, LLC v. McDonald, 67 Misc 3d 1239(A), 2020 NY Slip Op. 50790(U) (Sup Ct Warren County 2020).
In applying the "best interest" standards, courts have considered the payee's age; mental and physical capacity; maturity level; ability to show sufficient income independent of the payments sought for transfer; the stated purpose for the transfer; and, the payee's ability to appreciate the financial terms and consequences of the proposed transfer based on independent legal and financial advice. E.g., Matter of Peachtree Settlement Funding, LLC, 34 Misc 3d 1223(A), 2012 NY Slip Op. 50213(U), * 3 (Sup Ct Nassau County 2012) (cleaned up). The party petitioning the Court to approve a proposed sale -- here, Ashlee -- bears the burden of establishing that the transaction is in the transferee's best interests, E.g. Matter of J.G. Wentworth Originations, LLC (Pretto), 36 Misc 3d 1213(A), 2012 NY Slip Op. 51311(U), * 3 (Sup Ct Queens County 2012). Ashlee has not met this burden.
Here, although Miller asserts he intends to use the proceeds of the sale for his landscaping/snowplowing business, the Court finds this to be a mere pretext for what clearly is his actual purpose -- to satisfy existing credit card, child support, and other debts. Courts generally have found proposed transfers not in the payee's best interest when the payee intends to use the proceeds to pay back loans or credit card debts, or to purchase a vehicle. E.g., M.G.N., 2021 NY Slip Op. 50279(U), * 7; Matter of Barr v. Hartford Life Ins. Co., 4 Misc 3d 1021(A), 2004 NY Slip Op. 50980(U), * 3-4 (Sup Ct Nassau County 2004); Johnson , 2020 NY Slip Op. 50874(U), * 2; Matter of Seneca One, LLC v. Ramos , 38 Misc 3d 1225(A), 2013 NY Slip Op. 50270(U), * 3 (Sup Ct Kings County 2013); Matter of Imperial Structured Settlements v. Angelillo , 24 Misc 3d 1226(A), 2009 NY Slip Op. 51625(U), * 3 (Sup Ct Queens County 2009). As noted above, Miller's "Business Plan" contradicts his affidavit statements made under oath. His First Affidavit describes a business of more than five years’ duration; the Business Plan describes a one-year-old business. The First Affidavit clearly indicates he worked alone; the Business Plan states the firm has several employees. Further, although both the Business Plan and Miller's affidavits describe an ongoing business concern, the business lacks equipment, which the proceeds of the Proposed Sale will be used to purchase. Finally, the description of the local market in the Business Plan bears no relation to Gouverneur, New York and the surrounding area.
The decision of the Supreme Court for New York County in Martinez , supra , is illustrative. In that proceeding, the court addressed a proposed structured settlement sale by a payee (Martinez) who planned to use the proceeds to start and operate a barbershop. Citing the above-quoted Legislative Memorandum, the court in Martinez noted that the "market in the buying and selling of injured individuals’ payment streams can pose a hazard to existing recipients of structured settlements and to the public assistance programs on which recipients must often rely, once they have traded away secure income from structured settlements." 11 Misc 3d at 894. In denying the proposed sale, the court emphasized that Martinez lacked a "viable plan" for use of funds in his proposed business. Id. at 896 (emphasis added). Further, after submitting his application, Martinez lost his job, with the result that he "was no longer employed and had no source of income"; had no assets; and, the proceeds of a prior sale of structured settlement payments "had all been dissipated." Id. at 897.
Many of the circumstances upon which the court in Martinez relied in finding a proposed sale not in the payee's best interests apply to Miller: (1) a business lacking a "viable plan"; (2) loss of a job; (3) no source of income; (4) no assets; and, (5) prior sales, the proceeds of which have all been dissipated. With respect to Miller's prior sales, the Court notes that, had they not occurred, he would have received periodic, guaranteed lump sum payments continuing to age 55 totaling $ 1.2 million. Miller's past, repeated practice of selling structured settlement proceeds and ending up with nothing demonstrates poor money management. Further, that Miller's past sales have not resulted in any financial security leads to the inescapable conclusion that, in fact, he will not use the proceeds of the Proposed Sale in his best interests, "taking into account the welfare and support of [his] dependents" ( GOL § 5-1706 [b] ). The SSPA was enacted to protect beneficiaries of structured settlements from themselves -- and from predatory factoring companies. The Court will not thwart that legislative purpose. The Court concludes that Ashlee has not carried its burden of establishing the Proposed Sale is in Miller's best interests.
C. Fairness and Reasonableness of Transaction
The third element requires the Court find the proposed transfer, when viewed as a whole (including the discount rate used to determine the gross advance amount and the fees and expenses used to determine the net advance amount), to be fair and reasonable. GOL § 5 1706 (b). Petitioner bears the burden of proof on this issue. E.g., Peterson, 2020 NY Slip Op. 51199(U), * 2. It is well established that the "fair and reasonable" standard is a separate query from the "best interests" requirement, and that both must be met. E.g., Matter of Wentworth Originations, LLC v. Maurello, 2012 NY Slip Op. 30373(U) (Sup Ct Nassau County 2012) ; Matter of Pinnacle Cap., LLC v. Jones, 34 Misc 3d 1215(A), 2011 NY Slip Op. 52479(U), * 3 (Sup. Ct. Queens County 2011). As a result, Ashlee's failure to show that the Proposed Sale is in Miller's best interests is fully dispositive of its Petition, and the Court need not resolve the third required element. Nonetheless, the Court addresses whether the proposed transfer is fair and reasonable to Miller, and concludes that it is not.
"[T]here is no statutory guidance, and very little consistent case law, concerning the fairness and reasonableness of the discount rate and related costs and fees utilized in transfers of structured settlement." Yates , 2006 NY Slip Op. 51616(U), * 6. "[T]he concept of fair and reasonable is left undefined in the [SSPA]." Platt , 2 Misc 3d at 876. "[T]he structured settlement payee's willingness to transfer the settlement proceeds has no bearing on this Court's determination of whether the transfer is fair and reasonable." Kwant , 2018 NY Slip Op. 51730(U), * 1; accord : Cunningham , 195 Misc 2d at 724. As noted by one court, "[f]requent resort to sale of portions of the structured settlement at a deep discount is not a good use of this valuable asset [ ]." Matter of Settlement Funding of NY, LLC (Smith) , 31 Misc 3d 1221(A), 2011 NY Slip Op. 50790(U), * 2 (Sup Ct Cortland County 2011).
Miller is now 43, and will be 58 years old when the first life contingent payment at issue in the Proposed Sale is due slightly more than fourteen (14) years hence. He will be 80 years old when the last payment is due. Miller does not indicate the severity of the current health conditions (high blood pressure, diabetes and anxiety) (see First Miller aff. at ¶ 11); whether those conditions are well or poorly managed through medications; or, whether he has other issues or factors which might affect his life expectancy. Although he states he has "functional" use of his left hand (see First Miller aff. at ¶ 2), he does not aver whether he has "full" use of the hand; state whether the injury is to his dominant or non-dominant hand; or, disclose whether he continues to have problems with it. According to tables provided with the New York Pattern Jury Instructions, the statistical life expectancy for a 43-year-old male is 33.5 years. Although Elder asserts Miller's "unique health and background" give rise to "a mortality rating of 450 % and an estimated life expectancy of 232 months [19.33 years]" (Elder aff. at ¶ 18), he does not provide the sources or bases for this assertion, and candidly acknowledges the life expectancy projections for Miller are "only educated prognostications" (id. at ¶ 7). Elder is not an actuary, physician, or health professional; does not describe Miller's "unique health and background"; and, provides no factual basis for asserting Miller has a life expectancy substantially lower than stated in those published tables. Accordingly, the Court gives no weight to Elder's assertions regarding Miller's life expectancy. See M.G.N. , 2021 NY Slip Op. 50279(U), * 10 (denying approval of proposed sale of life-contingent payments beginning 30 years in the future; court rejects assertion that settlement is "fair and reasonable" because payee "may not live long enough" to receive future payments, because petitioner offered no proof payee "suffers from any medical condition which may impact his receipt of these payments in the future").
See 1B NY PJI 3d at Appendix A (2019) (life expectancy tables).
This Court need not now decide whether, given the contingent nature of the payments at issue beginning more than a decade in the future, the annual discount rate used by Ashlee of 14.99 % (see Elder aff. at ¶ 9) is "fair and reasonable." As stated by Elder, a key determinant in determining this discount rate is the "associated mortality rate" (id. at ¶ 11), which the Court has already found deserving of no weight. Further, the fact remains that the Proposed Sale would result in Miller receiving less than four percent of the calculated current value ($ 4,399,822.92) of the payments proposed to be transferred. See id. at ¶¶ 14-15; see also Offer Disclosure at pg. 1. This is not acceptable to the Court.
D. Summary
In determining that the proposed sale is neither in Miller's best interests nor fair and reasonable, the Court notes that, had he not already made multiple sales, he would still be receiving monthly settlement payments and entitled to substantial lump sum payments every five (5) years through age 55, and would not be in a position of again seeking to sell payments to meet his current, day-to-day needs. A decision by the Supreme Court for Westchester County is particularly on point:
This Court cannot in good faith, having considered the totality of all the circumstances, approve a transfer and thereby authorize what appears to be a habitual practice of annually transferring her structured settlement rights at a substantial loss. Furthermore, her previous applications and the present application evidence an irresponsible pattern of spending remedied by regularly moving this Court to approve the transfer of settlement funds. Whitney v. LM Prop. & Cas. Ins. Co. , 32 Misc 3d 1212(A), 2011 NY Slip Op. 51268(U), * 4 (Sup Ct Westchester County 2011) (emphases added).
The SSPA was put in place to ensure advantage is not taken of vulnerable individuals, such as Miller. Accordingly, and recognizing the paternal nature (Lemanski ; see Peterson ) of the SSPA, this Court, in its discretion, declines to permit Payee to once again trade away future financial security for a quick influx of cash, with no clear, reasoned plan to use it to secure his future.
CONCLUSION
For the foregoing reasons, the application is denied, and the Petition is dismissed, with prejudice. It is hereby:
ORDERED that Petitioner serve a copy of this Decision and Order upon Miller by U.S.P.S. first class mail and by certified mail, return receipt requested, and that Petitioner file through NYSCEF affidavit of proof of such service; and it is further,
ORDERED that a copy of this Decision & Order be annexed to any future petitions brought by or on behalf of Miller in this or any other County.