Petition for Approval for Transfer of Structured Settlement Payment Rights in Texas

What Is a Petition for Approval for Transfer of Structured Settlement Payment Rights?

Background

The Structured Settlement Protection Act (SSPA), requires a court to approve the transfer of structured settlement payment rights. (Metro. Ins. & Annuity Co. v. Peachtree Settlement Funding, LLC (2016) 500 S.W.3d 5, 9.)

The Structured Settlement Protection Act (SSPA) (Tex. Civ. Prac. & Rem. Code Ann. §§ 141.001 to 141.007) was enacted to protect unwary tort claimants from potential abuse in their transactions with companies that buy tort claimants' future payment rights in exchange for a present lump sum. (See Rapid Settlements, Ltd. v. Green, 294 S.W.3d 701 (Tex. App. Houston 1st Dist. 2009).) The purpose of the Texas SSPA is to protect the recipients of structured settlement payments who are in need of cash from exploitation by factoring companies (See Transamerica Occidental Life Ins. Co. v. Rapid Settlements, Ltd., 284 S.W.3d 385 (Tex. App. Houston 1st Dist. 2008).)

A structured settlement is a device used to negotiate the disposition of a personal injury case that is more beneficial in some respects to each side than the more traditional judgment or settlement for a lump sum. Typically, under the terms of a structured settlement, the settling defendant agrees to purchase a one-time premium annuity in favor of the plaintiff. This annuity is payable over the plaintiff's lifetime and will generate an income flow sufficient to provide for those future needs of the plaintiff necessitated by the injuries inflicted by the defendant. (See Celanese Chemical Co., Inc. v. Burleson, 821 S.W.2d 257 (Tex. App. Houston 1st Dist. 1991).)

The term "structured settlement" is defined as an arrangement for periodic payment of damages for personal injuries or sickness established by settlement or judgment in resolution of a tort claim or for periodic payments in settlement of a workers' compensation claim. (Tex. Civ. Prac. & Rem. Code Ann. § 141.002(13).)

Structured-settlement payment rights cannot be transferred without an agreement among the parties. (RSL–3B–IL, Ltd. v. Prudential Ins. Co. of Am. (2015) 470 S.W.3d 131, 136.) “Standing alone, however, those agreements cannot transfer settlement rights in Texas—they are unenforceable unless a Texas trial court has approved the proposed transfer in an order that complies with the SSPA's requirements.” (Id., citing Tex. CIv. Prac. & Rem. Code Ann. § 141.004 [Vernon 2011.])

Following a transfer of structured settlement payment rights under the SSPA:

The structured settlement obligor and the annuity issuer are, as to all parties except the transferee, discharged and released from any and all liability for the transferred payments;
The transferee is liable to the structured settlement obligor and the annuity issuer (a) if the transfer contravenes the terms of the structured settlement, for any taxes incurred by the parties because of the transfer; and (b) for any other liabilities or costs, including reasonable costs and attorney's fees, arising from compliance by the parties with the court order or arising as a consequence of the transferee's failure to comply with the SSPA;
The transferee is liable to the payee: (a) if the transfer contravenes the terms of the structured settlement, for any taxes incurred by the payee because of the transfer; and (b) for any other liabilities or costs, including reasonable costs and attorney's fees, arising as a consequence of the transferee's failure to comply with the SSPA;
Neither the structured settlement obligor nor the annuity issuer may be required to divide any periodic payment between the payee and any transferee or assignee or between two or more transferees or assignees; and
Any further transfer of structured settlement payment rights by the payee may be made only after compliance with all of the requirements of the SSPA.

(See Tex. Civ. Prac. & Rem. Code Ann. § 141.005.)

How to Structure the Motion

The application must be filed at least 20 days before a hearing for approval of a transfer, and the transferee shall file and serve on all parties copies of the application, transfer agreement, disclosure statement, listing of the payee's dependents and their ages, notices to any interested party, and notices of the hearing and the manner and time by which written responses must be filed with the trial court. (Freelon, 446 S.W.3d at 431 citing Tex. CIv. Prac. & Rem. CODE ANN. § 141.006(b)(1)–(6) ). “Written responses to the application ... must be filed on or after the 15th day after the date the transferee's notice is served.” (Tex. CIv. Prac. & Rem. CODE ANN. § 141.006(c).)

The SSPA requires that the transferee provide to the payee a disclosure statement setting forth the primary financial terms of the completed transaction at least three days before the payee may sign a transfer agreement contract. (Freelon, 446 S.W.3d at 431 citing Tex. Civ. Prac. & Rem. Code Ann. § 141.003 [Vernon 2011].)

Under Tex. Civ. Prac. & Rem Code Ann. § 141.004, the transferee must file with the court and must serve on all interested parties a notice of the proposed transfer and the application for authorization. The notice must include or be accompanied by:

(1) A copy of the transferee's application;
(2) A copy of the transfer agreement;
(3) A copy of the disclosure statement required under Tex. Civ. Prac. & Rem. Code Ann. § 141.003;
(4) A listing of each of the payee's dependents, together with each dependent's age;
(5) Notice that any interested party is entitled to support, oppose, or otherwise respond to the transferee's application, either in person or by counsel, by submitting written comments to the court or by participating in the hearing; and
(6) Notice of the time and place of the hearing and notification of the manner in which and the time by which written responses to the application must be filed to be considered by the court.

(Tex. Civ. Prac. & Rem. Code Ann. § 141.006(b).)

After the disclosure statement is delivered and the payee and transferee sign a transfer agreement, the transferee is responsible for filing an application for approval of the proposed transfer. (Id., citing Tex. Civ. Prac. & Rem. Code Ann. § 141.006(a) (Vernon 2011).). In other words, to achieve a transfer of structured-settlement payment rights, a factoring company must initiate a proceeding in the trial court by applying for approval of the proposed transfer. (RSL–3B–IL, Ltd., 470 S.W.3d at 136 citing Tex. Civ. Prac. & Rem. CODE ANN. § 141.006 ).

Response

Under the SSPA, no direct or indirect transfer of structured settlement payment rights is effective and no structured settlement obligor or annuity issuer is required to make a payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been approved in advance in a final court order.

Meet and Confer

Under Tex. Civ. Prac. & Rem. Code Ann. § 141.004 and In re Rapid Settlements, a court approving such a transfer must make express findings that:

(1) The transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependents;
(2) The payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received that advice or has knowingly waived the advice in writing; and
(3) The transfer does not contravene any applicable statute or an order of any court or other governmental authority.

Fulfillment of the conditions in Tex. Civ. Prac. & Rem. Code Ann. § 141.004 and compliance with the requirements of Tex. Civ. Prac. & Rem. Code Ann. § 141.003 are solely the responsibility of the transferee in any transfer of structured settlement payment rights.

Neither the structured settlement obligor nor the annuity issuer bear any responsibility for, or any liability arising from, noncompliance with the requirements or failure to fulfill the conditions. (See Tex. Civ. Prac. & Rem. Code Ann. § 141.007(f).)

The Court’s Decision

The filing of an application for approval of the transfer of structured-settlement payment rights invokes the trial court's jurisdiction, and the trial court thereafter possessed plenary power over the controversy and can take such actions as are necessary to protect its jurisdiction. (See In re Rapid Settlements, Ltd., 202 S.W.3d 456 (Tex. App. Beaumont 2006).).

If the court that authorized or approved the structured settlement no longer has jurisdiction to approve a transfer of payment rights under the structured settlement under the SSPA, the application must be brought in a statutory county court, a statutory probate court, or a district court located in the county in which the payee resides. (See Tex. Civ. Prac. & Rem. Code Ann. §§ 141.002(2), 141.006(a).)

A trial court's order approving a transfer must include the following findings:

the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependents;
the payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received the advice or knowingly waived the advice in writing; and
the transfer does not contravene any applicable statute or an order of any court or other governmental authority.

(Metro. Ins. & Annuity Co. v. Peachtree Settlement Funding, LLC (2016) 500 S.W.3d 5, 14 citing Tex. Civ. Prac. & Rem. CODE ANN. § 141.004.)

Special Considerations for Annuity Issuers

The SSPA identifies the structured-settlement obligor or annuity issuer as an interested party in a proposed transfer of structured-settlement payments. (RSL–3B–IL, Ltd., 470 S.W.3d at 136 citing Tex. Civ. Prac. & Rem. Code Ann. § 141.002(7)(C) [Vernon 2011].) “Unlike the factoring company and the structured-settlement payee, [an annuity issuer] does not have any direct financial interest in the transfer. An annuity issuer does, however, have potential liabilities that could arise in connection with the transfer of a payment obligation, such as making payments to an incorrect or unauthorized payee.” (Id.)

The court of appeals has observed that, “[t]he SSPA implicitly recognizes that an annuity issuer would incur an unforeseen increase in transaction costs and responsibilities if structured-settlement transfer agreements required an annuity issuer to make periodic payments to more than one party. The statute [in Section 141.005(4)] protects an annuity issuer from having to divide payments between the payee and any transferee, or between two or more transferees or assignees.” (RSL–3B–IL, Ltd., 470 S.W.3d at 136 at 137.)

Monetary Awards

The Texas Structured Settlement Protection Act does not limit recovery of attorney's fees to state court proceedings; a party can recover in any proper forum subject to the other requirements of the Act. (See Tex. Civ. Prac. & Rem. Code Ann. §§ 141.002(18), 141.005(2)(B).)

Timeline

Written responses to the application must be filed on or after the 15th day after the transferee's notice is served. (See Tex. Civ. Prac. & Rem. Code Ann. § 141.006(c).)

At least 20 days before the date of the scheduled hearing on any application for approval of a transfer of structured settlement payment rights under Section 141.004, the transferee shall file with the court and serve on all interested parties a notice of the proposed transfer and the application for authorization.

Documents for Petition for Approval for Transfer of Structured Settlement Payment Rights in Texas

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