Matter of J.G. Wentworth Originations LLC (Lynn)
Annotate this CaseDecided on June 25, 2012
Supreme Court, Queens County
In the Matter of the Petition of J.G. Wentworth Originations, LLC, f/k/a 321 HENDERSON RECEIVABLES ORIGINATION, LLC, Petitioner, - and - Rymell Lynn, AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK, n/k/a UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK, and AMERICAN HOME ASSURANCE COMPANY, As Interested Persons Pursuant to GOL § 5-701(c).
27694/2011
For the Petitioner: Lum, Drasco & Positan, LLC, by Michael F. Nestor, Esq., 460 Park Avenue, New York, NY 10022
Charles J. Markey, J.
Petitioner commenced this special proceeding pursuant to General Obligations Law, Title 17, known as the Structured Settlement Protection Act ("SSPA"), for approval of the transfer of certain structured settlement payment rights to it from Lynn.
The SSPA requires that certain procedural and substantive safeguards be followed before a structured settlement payment may be transferred (General Obligations Law § 5-1705). Specifically, the procedure mandates that a copy of a disclosure statement, as required under General Obligations Law section 5-1703, be attached to the petition and that proof of service [*2]upon the payee be provided (id.). Additionally, pursuant to General Obligations Law section 5-1706:
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 depend[e]nts; 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;
(c) the payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received such advice or knowingly waived such advice in writing;
(d) the transfer does not contravene any applicable statute or the order of any court or other government authority; and
(e) is written in plain language and in compliance with section 5-702 of this article.
In the case at bar, a careful review of the submissions accompanying the petition demonstrates that the application complies with the procedural mandates of General Obligations Law sections 5-1703 and 5-1706(a), (c), (d), and (e). Having satisfied the procedural requirements of the SSPA, this Court must determine, pursuant to General Obligations Law section 5-1706(b), whether the proposed transfer is in the best interests of the payee and whether the transaction is fair and reasonable.
The funds that are the subject of this petition represent a portion of structured settlement payments due to Lynn in accordance with the settlement of a wrongful death action. Pursuant to the terms of the structured settlement agreement, Lynn became the recipient of certain structured settlement payment rights which provided for a series of deferred cash payments as follows: one payment of $125,000.00 on December 6, 2014, one payment of $50,000.00 on December 6, 2019, and one payment of $10,325.00 on December 6, 2024.
In return for selling his right to receive these payments, Lynn will receive immediate compensation in the gross amount of $85,000.00. In this proposed transfer, the aggregate amount [*3]of the structured settlement payments to be transferred is $185,325.00. The discounted present value of the payments to be transferred is $172,922.57 (using the applicable federal rate of 1.40%). The net advance amount is $85,000.00, which, according to the "New York Transfer Disclosure" submitted in support of the petition, represents an annual discount rate of 19.23% assuming monthly compounding.
This Court finds that petitioner has failed to meet its burden of establishing that the transaction is in Lynn's best interests (see, Matter of Wentworth Originations, LLC v Ferrer, 2012 WL 1854926, 2012 NY Slip Op 31294[U] [Sup Ct Queens County 2012] [Lane, J.]; Settlement Funding of NY, LLC v Hartford-Comprehensive Empl. Ben. Serv. Co., 25 Misc 3d 1220[A], 22009 WL 3630802, 2009 NY Slip Op 52201[U] [Sup Ct Queens County 2009] [decision by the undersigned]; Matter of 321 Henderson Receivables Origination, LLC [Logan], 19 Misc 3d 504 [Sup Ct Queens County 2008] [decision by the undersigned]).
In his affidavit, Lynn averred that he is 21 years old and has two minor children, ages one and three. He further stated that, from the lump sum payment he would receive, it is his intention to use $65,000.00 for a down payment on a house in Sanford, Florida, $4,000.000 for moving expenses, $5,000.00 to furnish the house, $10,000.00 for mortgage payments and utility bills, and $1,000.000 for clothing, diapers, formula, and gifts for his children. However, Lynn's request lacks foundational and evidentiary support in the petition because he has not presented any documentation to justify the amounts he claims are needed for these expenses.
Lynn, in addition, has not identified the property he intends to purchase, and it is unknown how much Lynn's mortgage payments would be and how he would make those payments. Although the court lauds his intention to purchase a home for his family, it is not clear that such a purchase is in the best interests of Lynn and his children. Lynn is currently unemployed and has not supplied any information about his education, skills, or job search, other than stating that he is actively seeking employment.
Besides the enumerated structured settlement payments, Lynn does not have any other source of income or assets to finance his stated goals. Approval of this transfer would place Lynn in a position whereby he would be unemployed and incapable of financially handling the enormous responsibility of being a homeowner, especially after moving to a new state with two minor children. Under these circumstances, the Court is concerned that Lynn elected not to consult with an independent professional advisor regarding the proposed transfer. This Court, therefore, is not persuaded that Lynn fully appreciates the financial consequences of the transaction.
The petitioner, furthermore, has not demonstrated that the 19.23% discount rate applied against the funds sought to be transferred is fair and reasonable within the meaning of the SSPA (see, Matter of Hanks v Transamerica Annuity Serv. Corp., 2011 WL 4528672, 2011 NY Slip Op 32512[U] [Sup Ct Nassau County 2011] [19.99% discount rate not accepted as fair and reasonable]; Settlement Funding of NY, LLC v Hartford-Comprehensive Empl. Ben. Serv. Co., 25 [*4]Misc 3d 1220[A], 22009 WL 3630802, 2009 NY Slip Op 52201[U], slip op. at 3 [14.99% discount rate not accepted as fair and reasonable]; Matter of Settlement Capital Corp. [Ballos], 1 Misc 3d 446 [Sup Ct Queens County 2003] [Satterfield, J.] [15.591% discount rate not accepted as fair and reasonable]; Matter of Settlement Funding of NY [Cunningham], 195 Misc 2d 721 [Sup Ct Rensselaer County 2003] [15.46% discount rate not accepted as fair and reasonable]).
Accordingly, the petition for approval of the transfer of certain structured settlement rights is denied in its entirety.
The foregoing constitutes the decision, order, and opinion of the Court.
Dated:June 25, 2012
J.S.C.
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