Relates to court approval of transfers of structured settlements

BILL NUMBER:S3681

Title of bill

An act to amend the general obligations law, in relation to court approvals of transfers of structured settlements

This is one in a series of measures being introduced at the request of the Chief Administrative Judge on the recommendation of her Advisory Committee on Civil Practice.

This measure would amend section 5-1705 of the General Obligations Law in relation to the procedure for obtaining court approval for the transfer of a structured settlement.

In a structured settlement the recipient does not receive all the proceeds at the time of settlement. Rather, all or a portion are paid out in scheduled periodic payments over a course of time. Usually a structured settlement agreement restricts the recipient from transferring the rights to the future payments. Nonetheless, a market has developed whereby entities - commonly referred to as structured settlement factoring companies - purchase the rights to future payments for a present cash payment. (See generally, Daniel W. Hindert and Craig H. Ulman, Transfers of Structured Settlement Payment Rights: What Judges Should Know About Structured Settlement Protection Acts, A.B.A. Judges' Journal, Spring 2005.)

The structured settlement recipient (referred to in GOL Title 17 as the "payee") is typically charged a high discount rate by the factoring company in exchange for the present cash payment. In order to assist the Court in determining whether the transfer is "in the best interests of the payee," (GOL §5-1706(b)) the following amendments to section 5-1705 are recommended:

First:

Section 5-1705(a) would add the requirement that the action for approval of a transfer be initiated only by order to show cause.

This addition would aid in assigning the action, particularly in counties where one judge handles all such applications. Requiring that the action be brought on by order to show cause does not reduce the minimum notice period of 20 days specified in §5-1705(c).

Second:

Section 5-1705(d)(iv) would be added to provide that the petition for approval of a transfer include: a statement setting forth whether there have been any previous transfers or applications for transfer of the structured settlement and giving details of all such transfers or applications for transfer.

This information is obviously useful to the Court, but hopefully will also have the effect of deterring the practice of filing a petition seeking a transfer in one venue after it has already been denied in a different venue. (See, e.g., In re: Angel L. Claudio, Jr., Index

7063/2006, Supreme Court, Dutchess County, Order of Hon. Christine A. Sproat, J.S.C. 01/18/07.)

Third:

Section 5-1705(e) would be added: On the hearing, the payee shall attend before the court unless attendance is excused for good cause.

This new language is adopted from CPLR Rule 1208(d). It is not intended that the "hearing" described in new subdivision (e) necessarily be a formal hearing that is "on the record" and involves the reception of evidence; rather, the term is used in the broader sense with the expectation that the court will direct such formalities as it deems advisable.

This measure, which would have no fiscal impact on the State, would take effect on the first day of January next succeeding the date on which it shall become law.

2008 LEGISLATIVE HISTORY:

Senate 8139 (Sen. DeFrancisco) (Rules) Assembly 10617 (M. of A. Weprin) (3rd Rdg., Cal. 909)