Matter of Settlement Funding of NY LLC v Assigned Settlement, Inc.

[*1] Matter of Settlement Funding of NY LLC v Assigned Settlement, Inc. 2009 NY Slip Op 51212(U) [24 Misc 3d 1201(A)] Decided on June 10, 2009 Supreme Court, Broome County Lebous, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on June 10, 2009
Supreme Court, Broome County

In the Matter of the Petition of Settlement Funding of New York, LLC, for Judicial approval of Absolute Assignment Agreement with MICHELLE D. LONGE a/k/a MICHELLE LONGE pursuant to Article 5 Title 17 of the New York General Obligations Law, Petitioner,

against

Assigned Settlement, Inc. and GENWORTH LIFE INSURANCE COMPANY OF NY, Respondents.



2009-1076



Counsel for Settlement Funding of

New York, LLC:

The Law Offices of Ian M. Chaikin, PLLC

By: Ian M. Chaikin, Esq., of Counsel

17 State Street

Suite 2000 - Box 169

New York, NY 10004

Ferris D. Lebous, J.

Petitioner, Settlement Funding of New York, LLC, moves for judicial approval of

the proposed transfer of certain future payment rights of Michelle D. Longe a/k/a Michelle Longe due under a structured settlement agreement in exchange for the present payment of a discounted lump sum (General Obligations Law § 5-1701 et seq.).

BACKGROUND

Ms. Longe is the recipient of certain guaranteed payments under a structured settlement agreement as follows:

$ 1,524.39 monthly payments starting July 1, 2005 guaranteed for 360 payments (June 1, 2035) and life thereafter;

$ 20,000 lump sum payment due on April 17, 2010;

$ 40,000 lump sum payment due on April 17, 2015;

$ 60,000 lump sum payment due on April 17, 2020;

$ 80,000 lump sum payment due on April 17, 2025;

$100,000 lump sum payment due on April 17, 2030.

Ms. Longe is a 29 years old, single mother of two dependent children. Ms. Longe is currently employed by Adecco as a material handler earning approximately $2,000 per month.

Petitioner and Ms. Longe seek approval of an Agreement in which Ms. Longe would transfer her right to 96 out of the 360 monthly payments from January 1, 2026 through December 1, 2033, $10,000 out of the $60,000 lump sum payment due on April 17, 2020, as well as $35,000 out of the $80,000 lump sum payment due on April 17, 2025. In total, Ms. Longe would be transferring a total of $191,341.44 in future payments for a current gross payment of $10,000.

PAST APPLICATION

This is not Ms. Longe's first request to sell a portion of the above-referenced structured settlement agreement.[FN1] In 2007, a prior petition on Ms. Longe's behalf was submitted by then petitioner 321 Henderson Receivables Origination, LLC and assigned to the Honorable Jeffrey A. Tait and designated Broome County Index No. 2007-1927.

The prior petition sought approval to exchange $613,263.37 of Ms. Longe's future payments in exchange for a gross lump sum payment of $87,000 using a 14.20% discount rate. More specifically, Ms. Longe sought approval to transfer $333,263.37 in monthly payments (too numerous to detail here), as well as the full amount of the following lump sum payments: $40,000 due on April 17, 2015; $60,000 due on April 17, 2020; $80,000 due on April 17, 2025; [*2]and $100,000 due on April 17, 2030. At that time, Ms. Longe represented to Justice Tait that she sought to use a majority of the money to purchase a home.

Justice Tait denied the petition in a Decision & Order dated October 15, 2007. Justice Tait found that petitioner had not satisfied the court that the exchange was either in Ms. Longe's best interest or fair and reasonable. More specifically, Justice Tait noted that the proposed net payment was a mere 13.9% of the $613,263.37 in aggregate future payments that Ms. Longe would be transferring. Additionally, Justice Tait found that there was nothing in the record demonstrating Ms. Longe was unable to reasonably live on her then monthly income from Wal-Mart of $1,666 per month, her monthly annuity payments of $1,524.39 per month, together with the anticipated periodic lump sum payments.

DISCUSSION

General Obligations Law § 5-1701 et seq., also known as the "Structured Settlement

Protection Act" or "SSPA", was enacted in 2002 due to the concern that structured settlement

payees, such as Ms. Longe, are particularly prone to being victimized and quickly dissipating their assets and to protect them from the growing number of companies using "'[a]ggressive

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 their structured settlements were designed to provide' (Mem. in

Support, NY State Assembly, 2002 McKinney's Session Laws of NY, at 2036)" (Singer Asset

Finance Co., LLC v Melvin, 33 AD3d 355 [2006]). This legislation "[d]iscourages such transfers

by requiring would-be transferees to commence special proceedings for the purpose of seeking

judicial approval of the transfer [citations omitted]" (Settlement Funding of New York, LLC

[Cunningham], 195 Misc 2d 721, 722 [Rensselaer County 2003]). "The SSPA clearly reflects

the Legislature's dissatisfaction with the structured settlement transfer market rates, and its

conclusion that payees cannot protect their best interest and thus require judicial supervision"

(Settlement Funding [Cunningham], 195 Misc 2d at 724). "Clearly, the New York State

Legislature in enacting [the] 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" (Settlement Capital Corp. [Ballos], 1 Misc 3d 446, 461

[Queens County 2003]).

As such, this court's judicial function under the SSPA requires an evaluation of a variety

of factors, but particularly: (1) whether the transaction is fair and reasonable; and (2) whether the

transfer is in the best interest of the payee, taking into account the welfare and support of the

payee's dependents, if any. In determining whether the transaction is fair and reasonable, the court should examine the discount rate used to determine the gross advance amount and the fees and expenses used to determine the net advance amount.

Here, petitioner determined the gross advance amount of $10,000 by applying an annual discount rate of 17.16%. The court notes that similar rates have been deemed unreasonable (Cunningham, 195 Misc 2d at 724 [15.46%]; Settlement Capital Corp., [Ballos], 1 Misc 3d 446 [*3][19.82%]; and Settlement Capital Corp. ["Y"], 194 Misc 2d 711 [18.621%]). Further, the $9,800 net advance amount proposed to be paid to Ms. Longe represents 5% of the future payments of $191,341.44 that Ms. Longe would transfer to petitioner. Based on the foregoing, the court finds said transaction is not fair and reasonable.

The next consideration is whether the proposed transfer is in Ms. Longe's "best interest."

Ms. Longe avers that she seeks to use the $9,800 net payment for the following purposes:

a.$2,000 to Meta Bank MasterCard;

b.$6,000 to pay off medical bills; and

c.$1,800 to pay off a past bill for my electric and water.

(Longe Affidavit, ¶ 10).

According to Ms. Longe, the first proposed use of the money is to pay off a $2,000 debt to Meta Bank MasterCard. As is so often the case in structured settlement petitions presented to the court, there is a no supporting documentation. Petitioner does not submit account statements from Meta Bank MasterCard documenting the existence of this debt in the first instance or any explanation by Ms. Longe as to when these debts were incurred, by whom, or for what purpose.

The second proposed use of the money is to pay off $6,000 in unpaid medical bills. Again, petitioner does not submit any statements of unpaid accounts from any medical provider nor any explanation by Ms. Longe. On this record, it is not clear what, if any, health insurance Ms. Longe possesses for herself and her children. Obviously, unpaid medical bills that may have accrued for an uninsured applicant would be worthy of consideration, but the court has not been presented with sufficient documentation to make an informed determination on this issue.

The third proposed use of the money is for Ms. Longe to pay off $1,800 in unpaid electric and water bills. Again, petitioner has not submitted any statements documenting the amounts due nor any explanation by Ms. Longe.

With respect to all three outstanding debts, the court notes that there is no explanation as to why Ms. Longe has fallen behind in her bills given the combined monthly earnings from her employment and monthly annuity payments. Frankly, the paucity of information and/or documentation included with structured settlement petitions such as this continues to amaze this court. The court does not take its statutory obligation in these cases lightly and will continue to require at least a basic level of details and proof relative to the representations and estimated costs and expenses.

Quite simply, given this record, the court finds that agreeing to give up the right to $191,341.44 in future payments in exchange for a payment today of $9,800 is not in Ms. Longe's best interest. The court notes that on April 17, 2010, less than one year's time from now, Ms. Longe is due to receive a $20,000 lump sum payment. There is nothing in this record demonstrating any urgency in paying off the debts listed or why she can not wait the one year for [*4]the $20,000 lump sum payment (which would be more than double the $9,800 Ms. Longe would receive were this petition to have been approved).

CONCLUSION

Based on the foregoing, the court finds that petitioner has failed to demonstrate to the

court's satisfaction that the transaction is fair and reasonable and that the transfer is in Ms.

Longe's best interest (GOL § 5-1706 [b]). Consequently, the Petition is denied.

Dated:June 10, 2009

Binghamton, New York

s/ Ferris D. Lebous

Hon. Ferris D. Lebous

Justice, Supreme Court Footnotes

Footnote 1:Petitioner did not inform this court of Ms. Longe's past application, but rather it was discovered by the court on its own initiative. In this court's view, there is a glaring gap in current legislation that does not require a petitioner to disclose past applications.