by Structured Settlement Watchdog
A Matter of Public Interest to Investors in Structured Settlement Payment Rights and Those Advising Them
Two senior partners of the Philadelphia law firm of Cozen O' Connor PC, have weighed in on the Genex Capital imbroglio with investors in structured
settlement factored payment streams and intermediaries. Their commentary underscores that the Genex Capital lawsuit is a matter of public interest to investors or potential investors in structured settlement payment rights. In addition to JD Supra the Cozen partners' commentary appears on the Lexology website.
Maricopa County Superior Court
CV2020-00495 Genex Capital Corporation v NEAA et al
CV2020-013796 Keefer v Genex Capital Corporation, Genex Strategies, Inc., et al.
The Michael Miller and Stephen R. Harris authored post says that " sometimes these transactions are called “retreads. And for good reason. The downstream investors, who are often unsophisticated non-accredited individual investors, may be left with no actual rights to the annuity payments and instead may be simply unsecured creditors of the factoring company — in which case these downstream investors are hoping and depending on the good faith and solvency of the factoring company to make good on these payments". [ Miller, Harris “Retread” Blowouts Create Hazards for Investors ]
"The defendants have responded to the allegations, and one of them also moved for a preliminary injunction to prevent Genex from reassigning these payment streams that they say are already owned by the downstream investors. Much to the chagrin of the defendants and the investors, however, the preliminary injunction motion was apparently filed too late — because, according to recent court filings, in response to the defendants allowing the periodic payment streams to be resold, Genex allegedly did the same thing (i.e, resold or assigned the periodic payment streams to other investors). Thus, each of the structured settlement payment streams has now gone from the payee to Genex; from Genex to the investor; and then from the investor to another investor. And now, Genex has allegedly sold or assigned those same payments to yet a different investor!" [ Cozen, Ibid]
Miller and Harris say that "the Genex cases confirm the potential hazards faced by individual investors who buy “retreads.” They say that investors run the risk that they will be deemed to be merely unsecured creditors with no actual annuity rights. Further, as the Keefers learned the hard way, if they seek to resell the payment rights they think they bought, a lot of bad things can happen, including (as they allege) the disaster scenario where the seller declares they are in breach and decides to again sell the same payment rights (whatever they are) to yet another investor". [Ibid.]
Is There a Circular "Firing Squad" in the Future Between Two Sets of Investors With Genex Capital in the Middle?
Quotable quote from the Genex Capital Receivables Purchase Agreement [Ver4 RPA 7-12 p 8 paragraph 8.5 Genex Complaint Exhibit B]
"This Agreement may be amended, modified, superseded or canceled only in writing signed by each party. Notwithstanding the foregoing, Genex may amend this Agreement or the Buyer’s Guide by giving Genex at least 30 days’ Notice of any such amendment. If Buyer continues to purchase Annuities or otherwise deal with Genex after the effective date of any amendment, Buyer will be deemed to have accepted the amendment and will be bound thereby". (emphasis added)