Opinion
703635/2020
10-06-2020
In the Matter of the Petition of STONE STREET ORIGINATIONS, LLC, Petitioner, v. Chee—Chee PETERSON, Metropolitan Life Insurance Company and Brighthouse Life Insurance Company, Respondents. As Interested Persons Pursuant to GOL § 5-1701 (c).
Pursuant to an order of the undersigned dated August 7, 2020, a hearing was held on this matter, in which the petitioner, Stone Street Originations, LLC seeks an order approving the transfer of structured settlement rights as per a February 24, 2020 transfer agreement between Petitioner and Chee-Chee Peterson. The hearing was held on August 25, 2020.
Petitioner was represented by Ian Chaikin, Esq. of Paris & Chaikin; Chee-Chee Peterson was self-represented.
Petitioner's application is denied, and the within Petition is dismissed.
In this matter, petitioner seeks court approval to transfer certain future structured periodic payments from Ms. Peterson. The total of future payments, scheduled to occur between 2047 and 2055, have an estimated value of $733,249.20. Petitioner seeks to purchase those future payments for $4,000.00. In explaining the huge discrepancy in the purchase price and the value of the future payments, counsel contended there is an "inherent risk" in the transaction. He further analogized the large difference in the sale amount and the value of the settlement payments to having a credit card with $4,000 due, with 18% interest, and the first payment due in 27 years. He said the 18% interest amount was assigned "because it's a high risk deal given the fact that [she is] not going to start seeing a penny until she is 69 years old...[a]nd a lot can go wrong...in the next 27 years..."
Article 5, Title 17 of the New York State General Obligations Law (GOL), entitled the Structured Settlement Protection Act (SSPA), states the following in relevant part in Section 5-1706:
Approval of transfers of structured settlement payment rights. No direct or indirect transfer of structured settlement payment rights shall be effective and no structured settlement obligor or annuity issuer shall be required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been authorized in advance in a final order of a court of competent jurisdiction based upon express findings by such court that:
(a) the transfer complies with the requirements of this title;
(b) the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependants [sic]; 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. Provided the court makes the findings as outlined in this subdivision, there is no requirement for the court to find that an applicant is suffering from a hardship to approve the transfer of structured settlement payments under this subdivision...
"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..." ( In re J.G. Wentworth Originations, LLC , 33 Misc 3d 1234[A], 2011 NY Slip Op 52239 [U] [Sup Ct, Queens County 2011] ).
Petitioner attached to its papers as Exhibit F a 2007 decision on another petition for a transfer of funds involving the same respondent, then known as Chee Chee Taylor. In a February 13, 2007 decision, the Honorable Alexander W. Hunter, Jr. of Supreme Court, Bronx County denied a request for a structured asset transfer of $587,164.72 of future monthly annuity payments in exchange for $151,000, finding that the transfer would not be in the best interest of either respondent Taylor or her children. Justice Hunter further found that the discount rate of 17.76% was not fair and reasonable in comparison to similar cases ( In re Structured Asset Funding, LLC, 836 NYS 2d 495, 2007 Slip Op 50221 [U] [Sup Ct, Bronx County 2007] ).
Justice Hunter's decision also provides the history of respondent's settlement. It states that a settlement amount of $475,000 was obtained in May 1991 as a result of a lead paint poisoning case, with $375,000 placed in a structured settlement. Respondent was to receive monthly payments of $1,372 beginning on June 9, 1996, when she reached eighteen years of age. Payments were to have been for thirty years, ending in 2026, with a final payment of $3,233.21.
Further history elucidating the circumstances causing payments to be delayed to 2047 is unclear; and petitioner's counsel was unable to provide any information at the hearing, except to note that there had been previous structured settlement transfers.
Respondent testified that she was aware that she was "selling a lot to get a little bit," but that she was just concerned with getting her family out of the shelter system and buying furniture and food (tr at 17, lines 1-14):
I mean I understand that I am selling a lot to get a little bit. But it's like...right about now, I wasn't...worried about that. I was just worried about making sure when we left from the situation that we were in that...there is furniture, there is food. Prior, I was pregnant. I had lost the baby or whatever. But it's just...trying to get out of the shelter system because I went into the shelter system with me, my husband and my daughter. That was the only reason why I had wanted to do the deal, so that I can get my family out of the situation. Because I wouldn't want this for nobody. It's not peaches and cream in here. So I mean whatever you feel that if it's a good deal or a bad deal, I'm a hundred percent with you...
Even if the transfer amount could somehow be deemed "fair and reasonable," the Court cannot see how it can be considered in the best interests of the respondent or her dependents, as the paltry sum she would be receiving would not be anywhere near the amount needed to accomplish her goal.
Not only has the petitioner failed to show that the proposed transfer terms are in the best interests of the respondent, it has failed to establish that the transaction--particularly the interest rate, and the determination of the net advance amount of $4,000—is "fair and reasonable." It is of significance that a transfer of nearly $600,000 in exchange for a sale amount of $151,000 at an interest rate of nearly 18% (17.76%) was deemed to fail the SSPA's "fair and reasonable" standard in 2007 ( In re Structured Asset Funding, LLC, 836 NYS 2d 495 ). The proposed transfer in 2020 of $4,000 in exchange for a future estimated value of $733,000 falls abysmally short of the figures from thirteen years ago.
Counsel for the petitioner compares the 18% interest rate to a credit card interest rate in the same amount (tr at 8, lines 4-13):
...it's a lot more shocking than if I told you to look at it like this: She has a credit card right now with let's call it Chase, let's call it bank X, that's charging her 18 percent and change a year on any of her running balances. She is charging today $4,000 and she does not have to make a single payment on that balance until 2055. And if you track those bills as they come in monthly over the next 35 years, you would see the numbers going up the same way.
Two decades ago, in national politics, the term "fuzzy math" became a catch phrase. Counsel's claim that the proposed transfer interest rate is akin to that of a credit card—arguing that at 18% with the first payment due in 27 years, an outstanding $4,000 would become $733,000 due—falls squarely in that category. Further, the analogy of credit card interest to a structured settlement sale is not apropos:
Wikipedia contributors. (2020, March 4). Fuzzy math (politics). In Wikipedia, The Free Encyclopedia. Retrieved 19:43, October 6, 2020, from https://en.wikipedia.org/w/index.php?title=Fuzzy_math_(politics) & oldid=943868050
--------
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 [the payee] under any rational interpretation of the best interest standard ( In re Prudential Ins. Co. of America, 29 Misc 3d 1203 [A], 2010 Slip Op 51677 [U] [Sup Ct, Steuben County 2010] ) .
Counsel's contention that the deal is "high risk" also falls flat:
While Petitioner has gone to great lengths in its attempt to rationalize the high discount rate offered to [the payee], 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 (Prudential Ins. Co. of America, 29 Misc 3d 1203 ) .
Based on the foregoing, the Court finds that petitioner has failed to establish that the proposed structured settlement transfer conforms to the requirements of the SSPA; it has failed to show that the terms of the transfer are in the best interest of the transferee and her dependents, and that it is fair and reasonable.
Accordingly, it is hereby
ORDERED, that Petitioner's application is denied, and that the within Petition is dismissed; and it is further
ORDERED, that any future applications made on behalf of Chee-Chee Peterson seeking the transfer of any of her future structured settlement proceeds include a copy of the within Decision and Order.