Purchase of structured settlement payments denied

It is not in petitioner’s best interest to approve the sale of her structured settlement payments, which have a present value of $140,738, for $10,000.

“The Court cannot determine that Petitioner’s best interests are served by her relinquishing to a factoring company 93% of the value of her structured settlement payments. The petition will be denied.”

Background

The underlying litigation was in this court. “Ms. Lancaster suffered lead poisoning as a child. Her mother brought suit against the property owner where the family had lived, claiming that Shwanda had suffered neurocognitive injuries from the lead poisoning.

“The settlement in that case in 2000 included a transfer of $400,000 to AIG Life Insurance Company for the purchase of an annuity that would make lifetime payments to the child. Shwanda did receive, through her guardian ad !item, monthly and lump sum payments until her 21st birthday.

“The Order approving settlement, dated July 7, 2000, recites that monthly payments of $1,979.18 would continue for the child’s life; but Ms. Lancaster stated in Court that she has sold the payment stream that began on her 21st birthday in 2008 and has not received any monthly payments since then.

“The Court has no information about the details of those sales other than what the Petition recites in paragraph 9: ‘A transfer was approved in April of 2020 in the total amount of $356,252.40 in exchange for $17,500.’

“The reported sum of $356,252.40 equals 180 payments, or fifteen years of the $1,979.18 monthly sum. That suggests to the Court that the sale represented the fifteen years beginning in 2020 through 2035, but the parties did not provide details about the payments that were sold.

“This Petition seeks approval of a sale of 132 life contingent monthly payments, beginning on August 1, 2055 (Ms. Lancaster will be 68) and ending on July 1, 2066. The aggregate amount of the payments is $261,251.76. Petitioner has increased its offer from $4,500 to $5,000 and now to $10,000 for these payments.

“The parties appeared at a hearing on March 10, 2022 and presented very little evidence. The Court acknowledges, as Petitioner argues, that Ms. Lancaster might not live until age 68 and that the purchaser is taking the risk that she will die and the payments will cease.”

Relevant statute

“Negative media attention about abusive practices surrounding the purchasing of structured settlement payments prompted the Virginia General Assembly in 2016 to tighten some of the requirements contained in the Virginia Structured Settlement Protection Act, Va. Code § 59.1-475 et. seq. …

“The 2016 changes to the Virginia Structured Settlement Protection Act provide, inter alia, that purchasing companies must provide additional disclosures, including an identification of prior transfers by the person seeking to sell her payments.

“The petition must be filed where the owner of the payment lives, to avoid the practice noted in the some of the articles regarding forum-shopping these petitions to receptive jurisdictions.

“Finally, the payee must appear in court, which rarely happened before 2016.

“Nothing in the updates to the law, however, addresses the often shocking disparity between the value of the payments being transferred and the very minimal prices that are proposed to be paid to the owner-persons who are often vulnerable, virtually never represented, and sometimes still suffering effects from the injuries for which they received the settlement.”

Best interests

“Parties in Virginia have the autonomy to enter into contracts freely, be they prudent or imprudent; but the General Assembly specifically charged circuit courts with protecting those who seek to contract away their right to settlement payments.

“Va. Code § 59.1-476 prohibits the transfer of structured settlement payment rights ‘unless the transfer has been authorized in advance in a final court order based on express findings by such court that … the transfer is in the best interests of the payee, taking into account the welfare and support of the payee’s dependents.’

“The term ‘best interests’ is vague. Neither the statute nor any controlling case authority enumerates factors that would guide courts in making this analysis.”

Petition denied

“Although the Petitioner complied with the statutory requirement to provide specific disclosures to Ms. Lancaster, this Court has serious doubts about her level of comprehension of the nature of these transactions.

“An experienced person with an advanced education would find these transactions complicated. Ms. Lancaster’s history of lead poisoning and neurocognitive impairments increase the Court’s concern.

It is difficult to fathom many circumstances in which a person’s best interests are advanced by relinquishing $261,251 in future payments having a present value of $140,738, for $10,000 – 7% of that present value.

“In the case of a lead-poisoning victim whose mother asserted that she had cognitive impairments as a result of the poisoning, together with the very little evidence presented in court, the Court has no basis to conclude that this transaction is in her best interest.

“The monthly payment stream that her mother and her lawyers set up for her were in her best interest, and that has largely been plundered by factoring companies. What does remain should be protected.”

In Re: Approval for Transfer of Structured Settlement Proceeds by and Between Shwanda Lancaster, Payee and Peachtree Settlement Funding, LLC, Transferee, Case No. CL22-185, April 1, 2022, Norfolk City Circuit Court (Hall). VLW 022-8-021, 5 pp.