Opinion
No. 2010–1233CV.
2010-09-27
In the Matter of the Transfer of the Structured Settlement Proceeds Owed or Owing by PRUDENTIAL INSURANCE COMPANY OF AMERICA and LM Property and Casualty Insurance Company f/k/a Prudential Property and Casualty Insurance Company to Tyler Davis Pursuant to General Obligations Law 5–1705 and 5–1706.
Melvin & Melvin, PLLC, Louis Levine, Esq., for Petitioner. Tyler Davis, pro se.
Melvin & Melvin, PLLC, Louis Levine, Esq., for Petitioner. Tyler Davis, pro se.
PETER C. BRADSTREET, J.
Tyler Davis is the beneficiary of a structured settlement agreement, executed in April 1989, based upon a wrongful death action. Pursuant to the terms of the Agreement, Mr. Davis was to receive payments of $17,500 on June 1, 2004, his eighteenth birthday; on June 1, 2005; on June 1, 2006; and on June 1, 2007; $25,000 on June 1, 2011; $25,000 on June 1, 2016; $50,000 on June 1, 2021; and a final payment of $125,000 on June 1, 2025. Mr. Davis has received all of his $17,500 payments.
In July 2009, Petitioner made application to the Court to approve a transfer to it of the $25,000 payment due on June 1, 2011, and the $25,000 payment due on June 1, 2016, in return for the net sum of $22,125. In his affidavit in support of the application, Mr. Davis alleged that he needed immediate funds to purchase a vehicle and insurance and to pay tuition at a local community college. By an Order and Judgment, dated August 24, 2009, Petitioner's application was granted.
In February 2010, Seneca One, LLC (Seneca) made its own attempt to secure a portion of Mr. Davis' structured settlement proceeds by seeking approval of the transfer to it of the $50,000 payment due on June 1, 2021, and $100,000 of the $125,000 payment due on June 1, 2025, for the sum of $12,529.92.
In his affidavit, dated January 31, 2010, in support of this application, Mr. Davis alleged that he needed the funds to help him rent a new apartment, buy furniture and pay off a credit card debt.
In its application, Seneca failed to disclose to the Court Petitioner's prior application seeking a transfer of the two $25,000 payments.
By a Decision and Order, dated April 30, 2010, Seneca's application was denied. The Court found that the proposed transfer would not be in Mr. Davis' best interests; that the discount rate of 19.180% was exorbitantly high and well in excess of rates previously rejected as unreasonable by several New York Courts; and that the amount Mr. Davis would be receiving, less than 13% of even the discounted present value of the transferred payments, was a paltry sum which could not be considered fair or reasonable under any statistical measurement.
In the current application, Petitioner, by a Notice of Petition and Petition, dated July 11, 2010, now seeks the rest of Mr. Davis' structured settlement, proposing the transfer to it the $50,000 payment due on June 1, 2021, and the entire $125,000 payment due on June 1, 2026, for the sum of $19,150, using a discount rate of 16.89%. The proposed amount would be less than 11% of the total amount transferred, $175,000, and 17.78% of the present value of the transferred payments.
In his affidavit, dated June 2, 2010, in support of this application, Mr. Davis now claims he needs immediate funds to prevent a foreclosure. When asked by the Court why he would need money to prevent a foreclosure of his ownership interest in real property when, less than six months before, he claimed to be in need of funds to rent an apartment, Mr. Davis gave conflicting answers.
He first indicated that his father had transferred property to his name and he needed money to pay the back taxes. He then indicated that he, in fact, paid all of the taxes, but needed funds to pay for college and to relocate from the area. Mr. Davis did not explain why he would need money for tuition when the August 2009, transfer was for that very same purpose or why he would leave a home, just given to him by his father, for which he had just paid a substantial sum to save from a tax sale.
Mr. Davis made these comments during oral argument on the motion on September 13, 2010. The matter was originally noticed to be heard on August 30, 2010, but was adjourned at the request of Petitioner's counsel. Notwithstanding such request, neither a representative of Petitioner, nor its counsel, appeared in Court on the new return date.
As the Court noted in its previous Decision and Order, the Structured Settlement Protection Act (SSPA), General Obligations Law (GOL) 5–1701 et seq. , was enacted to protect structured settlement recipients from companies using aggressive advertising to induce these recipients to cash out future payments at substantial discounts depriving them of the long-term financial security their structured settlements were designed to provide. Matter of 321 Henderson Receivables Origination, LLC [Welch], 20 Misc.3d 1143(A) (Supreme Ct., Bronx Co., 2008); Matter of Petition of Settlement Capital Corporation [Yates], 12 Misc.3d 1198(A) (Supreme Ct., Kings Co., 2006). Dissatisfaction with the structured settlement transfer market rates and concern that payees could not adequately protect their best interests led the Legislature to require judicial approval of any proposed transfer of future payments. Matter of 321 Henderson Receivables Origination, LLC [Taro], 22 Misc.3d 1106(A) (Supreme Ct., Broome Co., 2009); Matter of Settlement Capital Corporation [Ballos], 1 Misc.3d 446 (Supreme Ct., Queens Co., 2003).
A review of a proposed transfer of structured settlement payments entails an evaluation of a variety of factors, but most significant is a determination of whether the transfer is in the best interests of the payee. GOL 5–1706(b). Such a best interest standard requires a case-by-case analysis to determine whether the proposed transfer will provide needed financial rescue without jeopardizing or irreparably impairing the financial security afforded to the payee by the periodic payments. Matter of Petition of Settlement Capital Corporation [Yates], 12 Misc.3d 1198(A).
In the instant case, the conflicting and inconsistent information Mr. Davis has provided to Court with respect to the reasons for the various transfers leads the Court to the conclusion that he is not able to adequately protect his best interests. Matter of Petition of Settlement Capital Corporation [Yates], 12 Misc.3d 1198(A). Matter of 321 Henderson Receivables Origination, LLC [Welch], 20 Misc.3d 1143(A). Permitting Mr. Davis to give away substantial future payments for such a nominal amount without a clear plan for how the money is to be spent would run contrary to the intent of establishing structured settlement agreements: to prevent recipients from making rash decisions upon their receipt of large lump sum payments and to safeguard their future financial security. Matter of 321 Henderson Receivables, LLC [Walker], 20 Misc.3d 1114(A) (Supreme Ct., Kings Co., 2008); Settlement Funding of New York, LLC v. Brown, 11 Misc.3d 1059(A) (Supreme Ct., Bronx Co., 2006). A review of Mr. Davis' actions demonstrate that he is exactly the type of structured settlement recipient our laws were designed to protect. Petition of 321 Henderson Receivables, LP v. Martinez, 11 Misc.3d 892 (Supreme Ct., N.Y. Co., 2006).
The Court also finds the proposed pay-off amount of less than 18% of the discounted present value of the transferred payments and a discount rate of nearly 17% to be as unconscionable as those rejected in the Court's April 2010 Decision and Order as well as in the decisions of numerous New York Courts. Settlement Funding of New York, LLC v. Hartford–Comprehensive Employee Ben. Svc. Co., 25 Misc.3d 1220(A) (Supreme Ct., Queens Co., 2009); Imperial Structural Settlement v. Angelillo, 24 Misc.3d 1226(A) (Supreme Ct ., Queens Co., 2009); Settlement Funding of New York, LLC v. Assigned Settlement, Inc., 24 Misc.3d 1201(A) (Supreme Ct., Broome Co., 2009); Matter of Petition of Settlement Funding of New York, LLC [Cunningham], 195 Misc.2d 721(Supreme Ct., Rensselaer Co., 2003); Matter of Settlement Funding of New York, LLC [Asproules], 1 Misc.3d 910(A) (Supreme Ct., Ontario Co., 2003); Matter of 321 Henderson Receivables Origination, LLC [Taro], 22 Misc.3d 1106(A); Matter of 321 Henderson Receivables Origination, LLC [Welch], 20 Misc.3d 1143(A); Matter of Petition of Settlement Capital Corporation [Yates], 12 Misc.3d 1198(A); Matter of Settlement Capital Corporation [Ballos], 1 Misc.3d 446;Matter of Stone Street Capital, LLC [Taylor], 2008 WL 4829147 (Supreme Ct., Greene Co., 2008).
In an affidavit, dated June 9, 2010, from Doug Hoffman, Chief Accounting Officer of J.G. Wentworth Organizations, LLC, submitted in support of the current application, Petitioner attempts to explain the various factors taken into account when determining market rates by listing the numerous costs incurred in making these types of transactions and the “significant risk” taken by financing its business through selling to investors bonds backed by structured settlement payments.
None of these factors are relevant to the Court's determination. In reviewing applications under the SSPA, the Court's primary obligation is to determine whether
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. (emphasis added). GOL 5–1706(b).
Petitioner's comparison of the proposed discount rate offered to Mr. Davis with prevailing cash advance rates for credit card companies as evidence of the fairness and reasonableness of the proposed transaction is wholly unconvincing. Having a recipient of a significant structured settlement borrow against his own award at credit card-type rates may be a boon to Petitioner, but it cannot possibly be considered fair and reasonable to Mr. Davis under any rational interpretation of the best interest standard. While Petitioner has gone to great lengths in its attempt to rationalize the high discount rate offered to Mr. Davis, it has failed to explain adequately why the guaranteed nature of the annuity payout and the minimal risk involved for Petitioner justifies such an exorbitant interest rate. New York, LLC v. Transamerica Annuity Service Corporation, 23 Misc.3d 1111(A) (Supreme Ct., Kings Co., 2009); Settlement Funding of New York, LLC v. Allstate Assignment Company, 21 Misc.3d 1138(A) (Supreme Ct., Kings Co., 2008); 321 Henderson Receivables Origination, LLC v. Williams, 20 Misc.3d 1101(A) (Supreme Ct., Kings Co., 2008); Matter or 321 Henderson Receivables Limited Partnership [DeMaille], 2 Misc.3d 463 (Supreme Ct., Monroe Co., 2003); Matter of Petition of Settlement Funding of New York, LLC [Cunningham], 195 Misc.2d 721;Matter of Petition of Settlement Capital Corporation [Yates], 12 Misc.3d 1198(A).
Moreover, that Petitioner incurs what it considers to be significant administrative and legal costs when entering into these transfer agreements is of little concern to the Court. The General Obligations Law, as well as the statutory intent of the SSPA, require this Court to protect the best interests of the recipient of a structured settlement award, not the profit margins of a company seeking access to its proceeds. New York, LLC v. Utica Mutual Insurance Company, 16 Misc.3d 1124(A) (Supreme Ct., Suffolk Co., 2007).
Finally, as noted above, this is the third application made on behalf of Mr. Davis to transfer his future structured settlement payments. As also noted above, the second application failed to apprise the Court of the first while the third application failed to disclose the denial of the second. To prevent any more failures to disclose to the Court relevant information concerning past attempts to secure Mr. Davis' settlement proceeds, the Court will direct that any future application brought on behalf of Mr. Davis include copies of the within Decision and Order, as well as the Decision and Order, dated April 30, 2010.
Accordingly, it is hereby
ORDERED, that Petitioner's application be and the same hereby is denied and that the within Petition be and the same hereby is dismissed; and it is further
ORDERED, that any future applications made on behalf of Tyler Davis seeking the transfer of any of his future structured settlement proceeds include a copy of the within Decision and Order as well as the Decision and Order of this Court, dated April 30, 2010.