by Structured Settlement Watchdog®
Days after Judge Deborah Karalunas (Onondaga County) held factoring company Rapid Settlements, Ltd in civil contempt for violating an earlier oral decision and written order of that court in a case titled CNA Structured Settlements and Continental Assurance Company (CNA) v. Rapid Settlement LTD and Willie T. Lawrence, a June 19, 2007 decision in Staten Island, NY shows that New York Courts are becoming more sophisticated in their understanding of structured settlement factoring transactions and, at least in New York, "it's NOT just a rubber stamp".
On the heels of Judge Hunter's recent smack down of Settlement Funding a/k/a Peachtree in the Bronx, Robert J. Gigante JSC has joined "the barbecue" from Staten Island and shown that Peaches look good on skewers. Kristie Suarez wanted to raise some cash to pay legal bills, stemming from a custody battle with her ex husband, which, according to the Court's Order, saw her petition to sell $663,140 in future payments for a discounted present value of 195,897.83 that would net her $19,651.78
It is interesting to follow Judge Gigante's thinking in denying the Suarez petition. He states "The discount rate used to determine the gross advance amount of $26,630.23 here is 16.01%. This rate is not fair and reasonable when compared to other courts. Other courts have found discount rates of 15.46% (Matter of Settlement Funding of NY (Cunningham), 195 2d 721) and 18.621% (In re: Settlement Capital Corp; 194 Misc 2d 711) to be unreasonable. In essence the proposed assignor would be paying credit card-like rates for the privilege of receiving her own money in advance."
If this is any indication the Courts ARE aware of the problems, ARE talking to each other on this issue and THAT is good for New York consumers. It should also be reassuring to those attorneys who have ANY trepidation in going through with a structure due to the "ease of factoring". As long as we have the wisdom of Judge Jane Solomon (who made an excellent presentation at the NSSTA Annual Meeting), and judges like Karalunas, Hunter and Gigante showing their prowess in this area, New York consumers will be OK.
With respect to the Suarez case, the Court states that "assuming the procedural guidelines are met, the court has a greater obligation to assure 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 and fees and expenses are reasonable.
The court followed Matter of Settlement Capital Corp v Yates 12 Misc 3d 1198(A) in stating that "fair and reasonable were to be evaluated on a case by case basis and the totality of the circumstances".
I would like to add the following footnote not only for the benefit of Judge Gigante and New York judges but to the judiciary and lawyers throughout this country.
Focus on the effective discount rate as opposed to the "plain ole" discount rate. The effective discount rate in a structured settlement factoring transaction or structured settlement transfer may be the thing that turns what looks like a "credit card-like rate" into what looks like a "usury-like rate" Consider the discount rate in Suarez decision was said to be 16.01%. The effective discount rate, incorporating the legal fees and other charges, would be considerably more.
Other related posts
- Structured Settlement Transfers-What's Your Deep Discount Rate? February 17, 2006
- Discount Rate v Effective Discount Rate in "Cash Now" Transactions. June 7, 2007
- All Hail Judge "Bites Yer Legs" Hunter May 25, 2007